SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For The Quarter Ended September 30, 2000          Commission File Number 0-25025


                          SEDONA WORLDWIDE INCORPORATED
             (Exact name of registrant as specified in its charter)


             Arizona                                     86-0718104
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)

                 3840 North 16th Street, Phoenix, Arizona 85016
                    (Address of principal executive offices)

        Registrant's telephone number, including area code: 602-263-9600

              Former name, former address, and former fiscal year,
                         if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter period that the registrant was
required to file such  reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]  No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.

            Class                              Outstanding at September 30, 2000
            -----                              ---------------------------------
Common Stock, without par value                         4,675,800 shares
<PAGE>
                                     PART I

ITEM I.  FINANCIAL STATEMENTS

                          SEDONA WORLDWIDE INCORPORATED
                                  BALANCE SHEET


<TABLE>
<CAPTION>
                                                                   December 31,       September 30,
                                                                       1999                2000
                                                                   -----------         -----------
                                                                                       (Unaudited)
<S>                                                                <C>                <C>
                                     ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                        $     9,564         $     2,396
  Accounts receivable                                                   12,988              17,410
  Inventories                                                          157,546             153,180
  Prepaid expenses and other current assets                             30,077              64,051
                                                                   -----------         -----------
         Total current assets                                          210,175             237,037
  Property and equipment, net                                           44,077              16,660
                                                                   -----------         -----------
         TOTAL ASSETS                                              $   254,252         $   253,697
                                                                   ===========         ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                                 $     4,523         $    48,226
  Accrued expenses                                                      24,309              12,649
  Note payable - related party                                              --              35,000
                                                                   -----------         -----------
         Total current liabilities                                      28,832              95,875
                                                                   -----------         -----------
  Common stock, no par value; 50,000,000 shares authorized;
    4,200,000 and 4,675,800 shares issued and outstanding            1,000,000           1,009,783
  Contributed capital                                                2,545,730           2,545,730
  Deficit                                                           (3,320,310)         (3,397,691)
                                                                   -----------         -----------
         Total stockholders' equity                                    225,420             157,822
                                                                   -----------         -----------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $   254,252         $   253,697
                                                                   ===========         ===========
</TABLE>
                   See notes to condensed financial statements

                                       2
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Three months ended              Nine months ended
                                                      September 30                    September 30
                                              ----------------------------    ----------------------------
                                                 1999             2000           1999             2000
                                              -----------      -----------    -----------      -----------
<S>                                           <C>              <C>            <C>              <C>
Net Sales:
  Customers                                   $    11,380      $    65,510    $    57,990      $   269,769
  Affiliates                                       81,505               --        225,488               --
                                              -----------      -----------    -----------      -----------
      Total net sales                              92,885           65,510        283,478          269,769
                                              -----------      -----------    -----------      -----------
Cost of sales                                      59,284           39,875        179,394          141,318
                                              -----------      -----------    -----------      -----------

     Gross profit                                  33,601           25,635        104,084          128,451

Selling, general & administrative  expense         80,918           74,650        256,637          205,112
                                              -----------      -----------    -----------      -----------
Income (loss) from operations                     (47,317)         (49,015)      (152,553)         (76,661)
Interest expense                                      210              719          1,154              719
                                              -----------      -----------    -----------      -----------

     Net Income (loss)                            (47,527)         (49,734)      (153,707)         (77,380)
                                              ===========      ===========    ===========      ===========

Weighted average shares of common stock
 outstanding                                    4,200,000        4,675,800      4,200,000        4,471,273
                                              ===========      ===========    ===========      ===========

Basic and diluted income (loss) per share     $     (0.01)     $     (0.01)   $     (0.04)     $     (0.02)
                                              ===========      ===========    ===========      ===========
</TABLE>
                   See notes to condensed financial statements

                                       3
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 Nine months ended September 30,
                                                                 -------------------------------
                                                                    1999                   2000
                                                                 ---------              --------
<S>                                                             <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                       $(153,707)             $(77,380)
  Depreciation and amortization                                     29,650                27,418
  Stock issued for compensation                                         --                 9,783
  Expenses paid with borrowings                                         --                    --
  (Increase) decrease in accounts receivable                           395                (4,423)
  Decrease in inventory                                              1,708                 4,366
  Decrease (increase) in prepaid and other                          (3,944)              (33,974)
  Increase (decrease) in accounts payable                          (28,994)               43,703
  (Decrease) increase in accrued expense                             4,460               (11,661)
                                                                 ---------              --------
       Net cash generated by (used in) operating activities       (150,432)              (42,167)
                                                                 ---------              --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                               (16,879)                   --
                                                                 ---------              --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock                            --                    --
  Net proceeds from note payable - related party                        --                35,000
  Principal payments on debt and leases                            (21,544)                   --
  Advances from parent                                             125,461                    --
                                                                 ---------              --------
       Net cash provided by (used in) financing activities         103,917                35,000
                                                                 ---------              --------
INCREASE (DECREASE) IN CASH                                        (63,393)               (7,167)
CASH AT BEGINNING OF PERIOD                                         68,406                 9,564
                                                                 ---------              --------
CASH AT END OF PERIOD                                            $   5,013              $  2,397
                                                                 =========              ========
</TABLE>

                   See notes to condensed financial statements

                                       4
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 1.  BUSINESS DESCRIPTION AND BASIS OF PRESENTATION

        Sedona Worldwide  Incorporated,  an Arizona  corporation  ("SWI" or the
"Company"),  was  incorporated  in 1992  under  the  name  Red  Rock  Collection
Incorporated.  In  1997,  the  Company  changed  its  name to  Sedona  Worldwide
Incorporated.  The  Company  was a  majority-owned  subsidiary  of  ILX  Resorts
Incorporated,  an Arizona  corporation ("ILX") until December 31, 1999, when ILX
effected a distribution of all of the shares of the Company's  Common Stock that
ILX held to the ILX  shareholders  of record as of December 21,  1999,  on a pro
rata basis (the  "Spin-Off").  As a result of the Spin-Off,  ILX's  shareholders
became owners of, in the  aggregate,  80% of the Company's  outstanding  capital
stock.  ILX  registered  the Company's  Common Stock  pursuant to a Registration
Statement on Form 10-SB on a voluntary  basis,  in order to effect the Spin-Off,
without the need to register the  distribution of the Company's  Common Stock to
ILX's shareholders under the Securities Act of 1933, as amended (the "Securities
Act"). In January 2000, ILX distributed an Information Statement, which contains
substantially  the same kind of  information  as is  typically  found in a Proxy
Statement,  to ILX  shareholders.  The Information  Statement  disclosed certain
material  information  about the  Company  and the shares of Common  Stock to be
distributed to ILX shareholders in the Spin-Off.

         The  Company  is  principally  engaged  in  the  development,  testing,
marketing, and distribution of its own proprietary "Sedona Spa" branded lines of
face,  hair and body  care  products  and  apparels  containing  ingredients  or
materials indigenous to, and embodying the appeal of, the Southwestern region of
the U.S. and of Sedona,  Arizona in  particular.  In  addition,  the Company has
established a marketing alliance with Robert Shields,  founder of Robert Shields
Design, a jewelry and art design company based in Sedona,  Arizona,  whereby the
Company will be able to offer a line of  Southwestern-style  jewelry and artwork
similar to Mr. Shield's existing line of products. In addition,  the Company has
developed a line of apparel under the brand name "Red Rock Gear." No significant
sales of apparel or jewelry have occurred to date.

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and the  instructions  to Form  10-QSB and Rule 10-01 of
Registration  S-X.  Accordingly,  they do not include all of the information and
notes  required  by  generally  accepted  accounting   principles  for  complete
financial  statements.  In  the  opinion  of  management,  all  adjustments  and
reclassifications  considered  necessary for a fair and comparable  presentation
have been included and are of a normal recurring  nature.  Operating results for
the three and nine month  periods ended  September 30, 2000 are not  necessarily
indicative of the results that may be expected for the year ending  December 31,
2000. The accompanying  financial  statements should be read in conjunction with
the Company's most recent audited financial statements.

INVENTORIES

         Inventories are recorded at the lower of cost (first-in,  first-out) or
market.

PROPERTY AND EQUIPMENT

         Property and  equipment  are stated at cost.  Depreciation  is computed
using the  straight-line  method over the estimated  useful lives of the assets,
which range from three to five years.  Property and equipment under  capitalized
leases are stated at the  lesser of fair  value or the  present  value of future
minimum  lease  payments  at the date placed in service,  and  amortized  on the
straight-line method over the term of the lease.

                                       5
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (CONTINUED)

INCOME TAXES

         Income taxes are accounted for using Statement of Financial  Accounting
Standards  ("SFAS") No. 109,  "Accounting For Income Taxes." Under SFAS No. 109,
deferred tax assets and liabilities are recognized for the estimated  future tax
effects  attributable to differences  between the financial  statement  carrying
amounts of existing assets and liabilities and their respective tax basis.

REVENUE RECOGNITION

         The Company recognizes sales of products when the products are shipped.
Revenue  from  consigned  goods is  recognized  when sold and is not  considered
significant to the operations of the Company.

ACCOUNTING MATTERS

         In February 1997, the Financial  Accounting Standards Board issued SFAS
No. 129, "Disclosure of Information about Capital Structure" ("SFAS 129"), which
was effective for financial  statements  for periods  ending after  December 15,
1997 and  establishes  standards for  disclosing  information  about an entity's
capital  structure.  SFAS 129 was adopted by the Company in 1997.  There were no
significant effects on the Company's disclosures about its capital structure, as
that term is defined in SFAS 129, in the nine months ended September 30, 1999 or
2000.

         In September 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting  Comprehensive Income" ("SFAS 130"), which was effective for
financial   statements  for  periods  beginning  after  December  15,  1997  and
establishes  standards for reporting and display of comprehensive income and its
components   (revenues,   expenses,   gains  and   losses)  in  a  full  set  of
general-purpose  financial  statements.  The Company  adopted  SFAS 130 in 1998.
There were no items of other  comprehensive  income,  as that term is defined in
SFAS 130, in the nine months ended September 30, 1999 or 2000.

         In September 1997, the Financial Accounting Standards Board issued SFAS
No. 131,  "Disclosure  about Segments of an Enterprise and Related  Information"
("SFAS 131"),  which is effective for fiscal years  beginning after December 15,
1997 and  establishes  standards  for the way that public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas, and major customers.  The Company has a single segment in the
personal care products industry.  Revenue from the Company's only major customer
is reported on the  Statement  of  Operations  under  Affiliates  in 1999 and in
Customers in 2000 following the Spin-Off.

         In September 1998, the Financial Accounting Standards Board issued SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS
133"),  which requires that an entity recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair value.
The standard also provides  specific  guidance for  accounting  for  derivatives
designated as hedging  instruments.  In September 1999, the Financial Accounting
Standards Board issued SFAS No. 137, "Accounting for Derivative  Instruments and
Hedging Activities - Deferral of the Effective Date of Statement No. 133" ("SFAS
No.  137"),  which  delayed the  effective  date of SFAS No. 133 for the Company
until 2001. The Company is currently  evaluating  what impact this standard will
have on its financial statements.


                                       6
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 2. BUSINESS CONDITION

         As shown in the accompanying financial statements, the Company operated
at a net loss of $49,734  and  $77,380  during the three and nine  months  ended
September 30, 2000. As of that date, the Company's  current assets  exceeded its
current  liabilities  by  $141,162  and its  total  assets  exceeded  its  total
liabilities  by $157,822  due to ILX  contributing  in excess of  $2,545,000  of
intercompany debt to capital at December 31, 1999. However, the Company incurred
net  losses  of  $376,629,  $317,084  and  $192,340  in  1997,  1998  and  1999,
respectively,  and has an  accumulated  deficit of  $3,397,691  at September 30,
2000.  Those  factors  create an  uncertainty  about the  Company's  ability  to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  that might be  necessary  if the Company is unable to continue as a
going concern.

         The Company's  continuation  as a going  concern is dependent  upon its
ability to generate  sufficient  cash flow to meet its  obligations  on a timely
basis,  to  obtain  financing  as may be  required,  and  ultimately  to  attain
profitable operations.  At the time of the Spin-Off, the Company was indebted to
ILX in an amount in excess of  $2,545,000,  which ILX  contributed to capital in
conjunction  with the  Spin-Off.  The Company has  incurred net losses since its
inception.  In order  to  achieve  profitability  it will be  necessary  for the
Company to  substantially  increase its revenue.  While there are presently some
opportunities  in progress  that may  generate  sufficient  additional  sales to
generate profits, there can be no assurance that such revenues will be generated
from current sources.  The Company may pursue debt or equity financing that will
enable it to invest in  marketing  and  distribution  geared  toward  generating
greater revenues. However, there can be no assurance that such financing will be
available or that the marketing and  distribution  efforts will be successful in
generating sufficient sales to achieve profitability.  ILX has agreed to provide
up to $200,000 of  additional  financing  following  completion  of the Spin-Off
through  November  30,  2000.  All amounts  borrowed  by the  Company  will bear
interest equal to the prime rate plus 3% per annum, and is payable monthly.  The
entire unpaid  principal will be due on December 31, 2000,  although the Company
will request an extension on the  repayment  obligation.  At September 30, 2000,
there had been $35,000 advanced under this agreement.

NOTE 3. STOCKHOLDERS' EQUITY

         During the nine months ended  September  30, 2000,  the Company  issued
60,000 shares of  restricted  common  stock,  valued at $5,625,  to employees in
exchange for services  provided.  These restricted shares of common stock issued
to employees are exempt from  registration  under Section 4(2) of the Securities
Act of 1933.  An additional  415,800  restricted  shares,  valued at $4,158 were
issued to Hudson  Consulting Group, Inc. in exchange for services to be provided
(Note 4).

NOTE 4. OTHER

         On June 1, 2000,  the Company  entered into an Advisory  Agreement with
Hudson Consulting Group, Inc., a Nevada corporation ("Hudson"),  under the terms
of which  Hudson will assist the Company in (i) its  effecting  the  purchase of
businesses  and  assets  relative  to its  business  and growth  strategy,  (ii)
preparation  of documents for its listing on the OTC Bulletin  Board,  and (iii)
its introduction to brokers and dealers,  potential investors,  public relations
firms,  consultants  and others  that may  assist  the  Company in its plans and

                                       7
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (CONTINUED)

future  developments.  In exchange  for these  services,  the Company  delivered
415,800  shares of restricted  SWI common stock,  registered by the Company with
the  Securities  and  Exchange  Commission,  to  Hudson  upon  execution  of the
Agreement.  SWI and Hudson  intend for the  agreement  to remain in effect for a
minimum  of  one  year,  with  automatic  extension  on an  annual  basis  until
termination by either party.

NOTE 5. SUBSEQUENT EVENTS

         On July  31,  2000 the  Company  entered  into a  Vendor  Participation
Agreement with Buyers  Shopping  Network  ("BSN") of Deerfield  Beach,  Florida,
under the terms of which the Company  has  engaged  BSN to render the  following
services;  to feature Sedona Spa Face, Hair and Body Care Packages in 60, 90 and
120  second  direct  response  commercials,  a  combination  of which will air a
combined total of at least two hundred (200) times, to air commercials through a
combination of any or all of the following: ABC affiliates,  NBC affiliates, CBS
affiliates,   FOX  affiliates,  WB  affiliates,   UPN  affiliates,   Independent
affiliates,  Cable  and  Cable  Networks  and  shall  have a  minimum  potential
household reach of 20 million homes, to furnish a complete  production and media
team to cover all aspects of the  pre-production,  production,  post production,
promotion and  distribution of the program.  It is expected that the commercials
will begin airing on or around November 22, 2000.

         Effective  October  6,  2000  the  Board  of  Directors   accepted  the
resignation  of  Joelle  Ciardella  as  Vice  President  and  Secretary  of  the
Corporation and elected Viki J. Nelson as Secretary of the Corporation.

                                       8
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         THE  FOLLOWING  DISCUSSION  OF THE  COMPANY'S  FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS INCLUDES CERTAIN FORWARD-LOOKING  STATEMENTS. WHEN USED IN
THIS FORM 10-QSB, THE WORDS "ESTIMATE,"  "PROJECTION,"  "INTEND,"  "ANTICIPATES"
AND  SIMILAR  TERMS ARE  INTENDED TO IDENTIFY  FORWARD-LOOKING  STATEMENTS  THAT
RELATE TO THE  COMPANY'S  FUTURE  PERFORMANCE.  SUCH  STATEMENTS  ARE SUBJECT TO
SUBSTANTIAL  UNCERTAINTY.  READERS ARE CAUTIONED NOT TO PLACE UNDUE  RELIANCE ON
THE  FORWARD-LOOKING  STATEMENTS  SET FORTH  BELOW.  THE COMPANY  UNDERTAKES  NO
OBLIGATION TO PUBLICLY  UPDATE OR REVISE ANY OF THE  FORWARD-LOOKING  STATEMENTS
CONTAINED HEREIN.

OVERVIEW

         Sedona  Worldwide  Incorporated  was formed in 1992 to  develop,  test,
market and  distribute its own  proprietary  "Sedona Spa" branded lines of face,
hair and body care  products and apparels  containing  ingredients  or materials
indigenous  to, and  embodying  the appeal  of, the  Southwestern  region of the
United States and of Sedona,  Arizona in  particular.  To date,  the Company has
generated  revenue  primarily  through the sale of its face,  hair and body care
products to ILX. ILX distributes the Company's  products as in-room amenities at
its resorts and hotels, as premiums  (incentives) to its customers for attending
vacation ownership sales presentations,  and for retail sales at its resort gift
shops,  and at the Sedona Spa at Los  Abrigados  Resort & Spa.  The Company also
generates  revenue  from  direct  mail  sales to  consumers  (many of whom  were
introduced  to the products as in-room  amenities or premiums)  and from limited
retail distribution in specialty shops.

RESULTS OF OPERATIONS

         The following  table sets forth certain  operating  information for the
Company:

<TABLE>
<CAPTION>
                                              Three Months Ended      Nine Months Ended
                                                 September 30,           September 30,
                                              ------------------      -----------------
                                              1999          2000      1999         2000
                                              -----        -----      -----       -----
<S>                                           <C>          <C>        <C>         <C>
Net sales:
Sales to ILX (1)                               87.7%        73.0%      79.5%       66.9%
Sales to customers other than ILX              12.3%        27.0%      20.5%       33.1%
                                              -----        -----      -----       -----
Total sales                                   100.0%       100.0%     100.0%      100.0%
                                              =====        =====      =====       =====

As a percentage of net sales:
Cost of sales                                  63.8%        60.9%      63.3%       52.4%
Contribution margin                            36.2%        39.1%      36.7%       47.6%
Sales, general and administrative expense      87.1%       114.0%      90.5%       76.0%
Net loss                                      (52.6%)      (75.9%)    (54.2%)     (28.7%)
</TABLE>
----------
(1)  Sales  made to ILX are made at lower  prices  (generally  cost plus a small
     mark up) than sales made to customers other than ILX.

COMPARISON  OF THE THREE AND NINE MONTHS ENDED  SEPTEMBER  30, 1999 TO THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2000

         Net sales  decreased  29% or $27,375 to $65,510 for the  quarter  ended
September 30, 2000 from $92,885 for the same period in 1999 and  decreased  4.8%
or $13,709  to  $269,769  for the nine  months  ended  September  30,  2000 from
$283,478 for the same period in 1999.

                                       9
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Cost of sales as a percentage of sales decreased to 60.9% for the three
months  ended  September  30,  2000 from  63.8% for the same  period in 1999 and
decreased to 52.4% for the nine months ended  September  30, 2000 from 63.3% for
the same period in 1999 because of a lower  percentage  of sales to ILX resorts,
which have a lower profit margin. Product costs were also reduced as a result of
discounts achieved through higher volume purchasing.

         Sales, general and administrative  expenses decreased $6,268 to $74,650
for the three months ended  September  30, 2000 from $80,918 for the same period
in 1999 and  decreased  $51,525 to $205,112 for the nine months ended  September
30, 2000 from  $256,637 for the same period in 1999,  due to decreased  overhead
expenses related to the Spin-Off.

         Interest expense was $719 for the three and nine months ended September
30,  2000 from  $210 and  $1,154  for the same  periods  in 1999,  respectively,
reflecting the fulfillment of capital lease obligations.

         The Company has  recorded a valuation  allowance  equal to its deferred
tax asset at  September  30, 2000.  Under SFAS No. 109,  deferred tax assets and
liabilities are recognized for the estimated future tax effects  attributable to
differences between the amounts of the Company's existing assets and liabilities
and their  respective  tax basis.  Because  the  Company  has not yet  generated
taxable  income,  and  therefore   sufficient   evidence  does  not  exist  that
differences in financial and taxable income and net operating loss carryforwards
will be utilized to reduce future  income taxes,  no income tax benefit has been
recorded for the three and nine month periods ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

SOURCES OF CASH

         The  Company  generates  cash  primarily  from  the  sale  of  its  own
proprietary  "Sedona Spa" branded lines of face, hair and body care products and
apparels  containing  ingredients or materials  indigenous to, and embodying the
appeal of, the Southwestern  region of the United States and of Sedona,  Arizona
in particular.  During the nine month period ended September 30, 1999, cash used
in  operations  was $150,432.  During the nine month period ended  September 30,
2000, cash used in operations was equal to $42,167.  Historically  the Company's
cash flows from product sales have not been  sufficient to fund its  operations,
and shortfalls have been funded by ILX. ILX advanced the Company $125,461 in the
nine months ended  September  30, 1999;  $35,000 was advanced in the nine months
ended  September 30, 2000.  ILX has funded the Company's cash  shortfalls  since
inception.  At the time of the  Spin-Off,  the Company was indebted to ILX in an
amount in excess of $2,545,000,  which ILX contributed to capital in conjunction
with the  Spin-Off.  ILX has  agreed to  provide up to  $200,000  of  additional
financing  following  completion of the Spin-Off  through November 30, 2000. All
amounts  borrowed by the Company will bear interest equal to the prime rate plus
3% per annum, with interest payable monthly. The entire unpaid principal will be
due on December 31, 2000,  although the Company will request an extension on the
payment  obligation.  Without  such a  commitment,  or other  sources of working
capital  financing  which at present do not exist,  the  Company's  current cash
flows  will be  insufficient  to  meet  its  liquidity,  operating  and  capital
requirements.  The Company currently has no credit facility with a bank or other
financial  institution.  The Company will attempt to obtain a credit facility to
address its cash flow needs;  however,  there can be no assurance  that any such
financing  will be  available  if  needed,  or,  if  available  will be on terms
acceptable to the Company.

         The Company  anticipates  that its expenses will increase in the future
as it attempts to expand its business by acquiring  new products and  increasing
sales and  marketing  efforts  and other  operations.  The  Company  expects  to
continue  to incur  losses  until  such time,  if ever,  as it is able to sell a
sufficient  volume of products at prices that provide  adequate  gross profit to
cover operating costs. The Company's  working capital  requirements  will depend


                                       10
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

upon numerous factors, including payment cycles for its shipped products, credit
arrangements with suppliers,  the scale-up of its sales and marketing resources,
acquisition of new products and the terms upon which such products are acquired,
competitive factors, and marketing  activities.  There can be no assurance when,
if ever,  the Company  will be able to  generate  sufficient  revenues  from its
operations to offset its expenses or to secure additional  capital  commitments.
If the Company is unable to generate more cash flows than it does currently,  it
will be insolvent and may have to discontinue its business operations.

         The Company had  historically  filed its income tax returns as a member
of its former parent's, ILX, consolidated income tax return. There was no formal
income tax sharing  agreement to allocate  income taxes among the members of the
group and, historically,  the Company had not recorded an income tax benefit for
losses it had incurred that were utilized or may be utilized by ILX.

         As part of the  consolidated  financial  statements  of ILX the Company
recorded a valuation  allowance  equal to its deferred tax asset at December 31,
1998. At December 31, 1999, as a result of the Spin-Off, the Company recorded no
deferred  tax asset nor a  corresponding  valuation  allowance  because  all tax
benefits  created by the Company's  net  operating  losses were retained by ILX.
This  treatment  results  in no income  tax  benefit  being  recorded  at either
September 30, 1999 or at September 30, 2000.

USES OF CASH

         Investing  activities typically reflect a net use of cash for equipment
purchases.  Net  cash  used in  investing  activities  in the six  months  ended
September  30,  1999 was  $16,879.  There  were no  purchases  of  property  and
equipment during the nine months ended September 30, 2000.

CREDIT FACILITIES AND CAPITAL

         The Company has never accessed commercial financing and to date, all of
its working  capital  needs have been  financed by ILX.  However,  following the
Spin-Off,  ILX does not intend to fund the  Company's  future  cash  shortfalls,
except as  follows:  In October  1999,  ILX agreed to provide up to  $200,000 of
working capital  financing to the Company through November 30, 2000. All amounts
borrowed by the Company under this  agreement  will bear  interest  equal to the
prime rate plus 3% per annum,  with  interest  payable  monthly,  and the entire
unpaid  principal  amount due on December  31,  2000,  although the Company will
request an extension on the payment  obligation.  As a result,  the Company will
need to secure  alternative  financing  sources if it  continues to operate at a
loss or,  even if  profitable,  it  pursues a growth  strategy.  There can be no
assurance  that such  resources will be available to the Company when needed and
on favorable terms. In addition,  any commercial financing obtained is likely to
impose certain  financial and other  restrictive  covenants upon the Company and
result in increased interest expense.  Although the Company anticipates the need
for additional  financing,  it does not presently have any plans to engage in an
equity or debt financing transaction.

SEASONALITY

         Presently  the Company's  revenues are only  minimally  seasonal,  with
slightly  increased  sales during the second and third  quarters  and  December,
reflecting  seasonality  in resort  guests of its major  customer,  ILX.  If the
Company is able to expand  its  customer  base and  marketing  and  distribution
methods,  it may  experience  different  seasonality  dynamics  that  may  cause
operating results to fluctuate.

                                       11
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONCENTRATION

         The  substantial  majority of the Company's  revenues to date have been
generated from ILX.  There are no long-term  commitments to purchase by ILX and,
in the event ILX  ceased to be a  customer  of the  Company,  revenues  would be
significantly  impacted.  If ILX remains a customer,  revenues  are  expected to
increase as ILX adds more resorts  (which utilize  in-room  amenities) and sales
offices  (which  offer  premiums to touring  guests),  although  there can be no
assurances in this regard.

INFLATION

         Inflation  and  changing  prices have not had a material  impact on the
Company's revenues, income or loss from operations or net income or loss for the
nine months ended September 30, 1999 or 2000.

                                       12
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                                     PART II

ITEM I. LEGAL PROCEEDINGS

         The  Company is not  currently  the  subject of any  pending or, to its
knowledge, threatened legal claims.

ITEM II. CHANGES IN SECURITIES AND USE OF PROCEEDS

         During the nine months ended  September  30, 2000,  the Company  issued
60,000 shares of  restricted  common  stock,  valued at $5,625,  to employees in
exchange for services  provided.  These restricted shares of common stock issued
to employees are exempt from  registration  under Section 4(2) of the Securities
Act of 1933.  An additional  415,800  restricted  shares,  valued at $4,158 were
issued to Hudson Consulting Group, Inc. in exchange for services to be provided.

ITEM III. DEFAULTS UPON SENIOR SECURITIES

         None

ITEM IV. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On  September  22,  2000,  the  Company  held  its  Annual  Meeting  of
Shareholders.  At this Annual Meeting the shareholders were asked to vote on the
following proposal:

         To elect five (5)  directors to serve until the next annual  meeting of
shareholders  of the  Company,  or until their  successors  are duly elected and
qualified.  Prior to the meeting  Robert  Shields  resigned as a director of the
Company  and,  by consent  action,  Saundra J.  McFadden  was  appointed  by the
Company's Board of Directors to fill the vacancy.

         The voting results were as follows:

         Nominees recommended in the Proxy Statement:

                                                    Votes Against
                                      Votes For      or Withheld       Non-votes
                                      ---------     -------------      ---------
          Todd Fisher                  3,115,051           0             81,548
          Mia A. Martori               3,113,843           0             82,756
          Saundra J. McFadden          3,109,387           0             87,212
          Patrick J. McGroder III      3,106,897           0             89,702
          James W. Myers               3,115,394           0             81,205

         As a result of the vote,  the following five directors will serve until
the next annual meeting or until his or her successor is elected and qualified:

          Todd Fisher  Mia A. Martori  Saundra J. McFadden
          Patrick J. McGroder III      James W. Myers

                                       13
<PAGE>
ITEM V. OTHER INFORMATION

         None

ITEM VI. EXHIBITS AND REPORTS ON FORM 8-K

         (i) Exhibits

             Exhibit No.       Description
             -----------       -----------
                 27            Financial Data Schedule (filed herewith)

         (ii) Reports on Form 8-K

              None

                                       14
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the Registrant has duly caused its quarterly report on Form 10-Q to be
signed on its behalf by the undersigned thereunto duly authorized.


                          SEDONA WORLDWIDE INCORPORATED
                                  (Registrant)



                           /s/ Patrick J. McGroder III
                        ---------------------------------
                             Patrick J. McGroder III
                              Chairman of the Board




                               /s/ Mia A. Martori
                        ---------------------------------
                                 Mia A. Martori
                        Director, President and Treasurer




                             /s/ Margaret M. Eardley
                        ---------------------------------
                               Margaret M. Eardley
                           Chief Financial Officer of
                            ILX Resorts Incorporated
                           (acting principal financial
                             and accounting officer)



Date:  As of September 30, 2000

                                       15