##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-KSB
 þ
    
    Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2006
or
 o
    
    Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from
_________ to _________
 Commission file number 000-15864
 SEDONA CORPORATION
 
 Pennsylvania
    
    95-4091769(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 1003 West 9th Avenue, Second Floor, King of Prussia, PA
    
    19406(Address of principal executive offices)
    
    (Zip Code)
     
 o
 þ o
 o
 o þ




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®
 2




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##### 



ITEM 1. DESCRIPTION OF BUSINESS
 Overview
 ®
   Major Accomplishments History
  Fiscal Year 2002
 
    
    Entered into a worldwide, perpetual, non-exclusive technology license agreement with
Sanchez Computer Associates, Inc. (recently acquired by Fidelity National Financial
(FNF), a core processor provider with more than 1,400 customers around the world, to
provide a new CRM product to clients and prospects as part of its suite of integrated
banking applications.
    
    Entered into a worldwide, perpetual, non-exclusive technology license agreement with
Fiserv Solutions, Inc., an information management provider for the financial industry
with 17,000 customers around the world, to provide CRM/MRM technology to Fiserv banking
and credit unions core systems customers.
    
    Entered into a worldwide, perpetual, non-exclusive technology license agreement with
Open Solutions Inc. (OSI), a software and services company servicing over 1,000
customers, to provide a fully-integrated suite of relational core data processing,
financial accounting, Internet-based financial solutions, imaging and other delivery
systems for community banks and credit unions.
    
    Announced the availability of Intarsia version 4.0, which provided multiple-language
and multiple-currency support for the international markets.
 Fiscal Year 2003
 
    
    Entered into a perpetual technology license agreement with COCC, a Connecticut-based
core processor provider for the marketing and distribution of Intarsia with COCCs next
generation enterprise banking system, INSIGHT.
 3




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 
    
    Entered into a perpetual, non-exclusive technology license agreement with ACEncrypt
SolutionsTM for the marketing, sales, and distribution of Intarsia into the
financial services and life and health insurance markets. (ACEncrypt is affiliated with
SEDONA. See Management.)
 Fiscal Year 2004
 
    
    Entered into reseller agreement with Eastpoint Technologies (recently acquired by
OSI), a New Hampshire-based core processor provider with over 100 regional banks and
credit union customers, under which Eastpoint Technologies has the non-exclusive rights
to market, sell, distribute and support Intarsia to its customers as a standalone or
integrated offer.
    
    GalaxyPlus, a business unit of Fiserv Solutions, Inc, introduced SMS, a turnkey
marketing solution for credit unions based on SEDONAs Intarsia Member Relationship
Management (MRM) technology.
    
    Announced Intarsia version 5.1, the first vertical CRM application solution
specifically designed to meet the needs of organizations with multiple
lines-of-business across multiple vertical industries.
 Fiscal Year 2005
 
    
    Entered into an agreement with Fiserv CBS Worldwide, which included CBS MarketView,
based on CRM technology from SEDONA, as a component of its business intelligence
solution, CBS Data Warehouse.
    
    Signed a worldwide, non-exclusive reseller agreement with Optria, LLC which provides
Optria with the rights to market, sell, distribute and support Intarsia to banks,
credit unions, thrifts, savings and loans and other finance markets as a standalone or
integrated offer.
    
    Announced Intarsia version 5.3 which featured enhanced reporting capabilities and
portal functionality.
 Fiscal Year 2006
 
    
    NAFCU Services Corporation (NSC), a wholly owned subsidiary of the National
Association of Federal Credit Unions (NAFCU), selected SEDONAas NSCs
Preferred Partner for MRM application and services.
    
    Announced IntegraSys, a business unit of Fiserv, Inc. selected SEDONAs MRM
technology as the foundation for its MRM solution, ProfIT360. IntegraSys serves more
than 1,500 credit unions.
    
    Announced that Data Systems of Texas, a Sharetec Systems Partner, selected SEDONA as
its MRM application and services partner.
 Fiscal Year 2007 (First Quarter)
 
    
    Entered a reseller agreement with Profit Technologies Corporation, under which Profit
Technologies has the non-exclusive rights to market, sell, distribute and support Intarsia in order
to deliver enhanced Customer Relationship Management (CRM) and Member Relationship Management (MRM)
services to financial institutions.
 4




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 
    
    Announced that GBS Corporation selected SEDONA as its partner for Member
Relationship Management (MRM), and Customer Relationship Management (CRM) application
and services.
    
    Announced an international partnership with Haydrian Corporation based in Bellevue,
Washington and with locations across the globe. SEDONA and Haydrian will create a
co-branded version of SEDONAs CRM/MRM application, Intarsia. Haydrian will
immediately begin to market, sell and support Intarsia to local and regional financial
institutions in the developing countries of the world. Haydrian will also offer
Intarsia integrated with Haydrians anti-money laundering solution, XM3.
    
    Announced that it has delivered the first version of Intarsia for the higher
education market. Intarsia for higher education was installed at one of the countrys
most prestigious universities and it is anticipated to be generally available in May
2007. Intarsia for higher education integrates data from multiple data sources such as
web inquiries, enrollment, academic calendar and program and certificate into one
system, allowing the educational institution to optimize the effectiveness of its
marketing programs.
 Description of Business Strategy
      5




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
   
    
    Targeting the SMB market with a highly-verticalized CRM/MRM application
solution
 Worldwide CRM Spending: Forecast 2002-2006
  TOTAL ASSETVALUE
    
    < $100M
    
    $100M - $300M
    
    $300M - $500M
    
    $500M - $1B
    
    $1B - $3B
    
    $3B - $10B
    
    > $10BCOMMUNITY &
REGIONAL BANKS
    
    
    3,806
    
    
    
    2,918
    
    
    
    826
    
    
    
    654
    
    
    
    263
    
    
    
    154
    
    
    
    118CREDIT UNIONS
    
    
    7,781
    
    
    
    727
    
    
    
    182
    
    
    
    151
    
    
    
    92
    
    
    
    10
    
    
    
    2TOTAL NUMBER OF
INSTITUTIONS
    
    
    11,587
    
    
    
    3,645
    
    
    
    1,008
    
    
    
    805
    
    
    
    355
    
    
    
    164
    
    
    
    120
 Source: FDIC & National Credit Union Association  September 2006
  6




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
   AMR Research Worldwide CRM Spending:
Forecast 2002-2006
 
    
    Removing the barriers to purchasing and maintaining a CRM/MRM system
     
    
    Shortens the sales cycle by greatly reducing the financial barriers  software,
hardware and people-ware costs  and the resource requirements on a customers
existing IT organization;
    
    Builds a recurring revenue stream, as the solution can immediately be made
available to an existing customer base with a low monthly fee to stimulate volume
deployment;
    
    Generates new revenue opportunities through the up-sell of new integration and
training services as well as software upgrades; and
    
    Results in achieving a positive return on investment more rapidly than
traditional software licensing. The immediate availability of the application
enables organizations to capitalize on its benefits right away.
 7




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 
    
    Marketing unique proprietary solution to target markets through multiple sales
distribution channels
  
    
    Indirect Sales Distribution Channel
      8




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 
    
    Direct Sales Distribution Channel
  
    
    Staying in the forefront of CRM/MRM technology
    
    
    Analyze customer and prospect data, enabling financial services organizations to
manage critical business performance such as profitability of customers,
households, and products.
    
    Measure the effectiveness of a financial services organizations lead generation
and marketing campaigns and ensure timely follow-up of referrals, customer
requests, and sales leads.
    
    Improve coordination and communication between financial services organizations
and its customers, enhancing the ability to deliver effective service and improve
organizational productivity.
    
    Automate business processes that may be critical for the effective management
and monitoring of the relationships and interactions with a financial services
organizations customers.
    
    Create look-a-like models to effectively identify prospects that share the
same characteristics as the institutions best customers, increasing the
institutions ability to acquire new customers.
    
    Help predict customer retention and make profitable cross-sell (next best
product) recommendations.
    
    Develop personalized sales, marketing, and services programs aimed at retaining
the financial organizations most profitable customers and turn unprofitable
customers into profitable ones.
    
    Seamlessly enhance the financial services organizations customer and prospect
data with user demographics, behaviors, interests, and preferences information
provided by third-party content management suppliers.
 9




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
  
    
    Focusing on companys bottom line results
  Research & Development
  
    
    Promote and cultivate a culture of team-based development:
  
    
    Efficient and predictable software development life cycle:
     10




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 Trademarks and Copyrights
  ® ® ®
 ®
 Customers
    Backlog
  11




---



##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 Competition
   
    
    Harland (NYSE:JH) provides software solutions for financial institutions,
including, but not limited to, bank core systems, deposit and loan origination, teller,
mortgage, call center, document solution and customer relationship management.
    
    Harte-Hanks (NYSE:HHS) provides direct and target marketing services,
including, but not limited to, sales lead management, inbound/outbound telemarketing and
web-based database marketing, to consumers and business-to-business marketers across
multiple vertical markets.
    
    Marquis is a privately-held company primarily focused on low cost MCIF, sales
and services and referral tracking solutions for the financial services market.
    
    
    Management and Technical Resources  The Company has many years of management-level
experience dealing with the SMB and software markets (see Management) and technical
resources with extensive knowledge in planning, designing, implementing, delivering and
supporting leading-edge technology for the application software market.
    
    Marketing and Sales  The Company has an entrenched marketing and sales distribution
channel through worldwide OEM partnership with leading core services providers for the
financial services market.
 12




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##### 



ITEM 1. DESCRIPTION OF BUSINESS (continued)
 
    
    Technology  The Companys proven CRM/MRM solution is specifically designed and priced
for the financial services market. It is fully integrated with the financial services
organizations core processing systems and designed to support the business processes and
data requirements of the multiple lines of business of those organizations.
   Employees
  Dependence Upon Key Personnel
   www.sedonacorp.com investorinfo@sedonacorp.com , www.sec.gov
 13




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##### 



ITEM 2. DESCRIPTION OF PROPERTY
      ITEM 3. LEGAL PROCEEDINGS
   14




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##### 



ITEM 3. LEGAL PROCEEDINGS (continued)
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  PART II
 ITEM 5:
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES.
 Market Price of and Dividends of the Companys Common Stock
   High
    
    LowYear ended December 31, 2005:Quarter ended March 31, 2005
    
    $
    0.47
    
    
    $
    0.25Quarter ended June 30, 2005
    
    $
    0.27
    
    
    $
    0.14Quarter ended Sept. 30, 2005
    
    $
    0.25
    
    
    $
    0.14Quarter ended December 31, 2005
    
    $
    0.19
    
    
    $
    0.12Year ended December 31, 2006:Quarter ended March 31, 2006
    
    $
    0.38
    
    
    $
    0.14Quarter ended June 30, 2006
    
    $
    0.34
    
    
    $
    0.17Quarter ended Sept. 30, 2006
    
    $
    0.29
    
    
    $
    0.17Quarter ended December 31, 2006
    
    $
    0.24
    
    
    $
    0.13Year ended December 31, 2007:Quarter through March 31, 2007
    
    $
    0.29
    
    
    $
    0.13
 15




---



##### 



ITEM 5:
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES.(continued)
 Dividends
   Equity Compensation Plans as of December 31, 2006:
  Weighted-AverageExercise Price of
    
    Number of SharesNumber of Shares to be
    
    Outstanding
    
    Remaining AvailableIssued Upon Exercise of
    
    Options,
    
    for Future IssuanceOutstanding Options,
    
    Warrants and
    
    under EquityPlan Category
    
    Warrants and Rights
    
    Rights
    
    Compensation PlansEquity compensation
plans approved by
security holders
(1)
    
    
    11,900,930
    
    
    $
    0.91
    
    
    
    13,717,658Equity compensation
plans not approved
by security holders
(2)
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    11,900,930
    
    
    $
    0.91
    
    
    
    13,717,658
 
 (1)
    
    These plans consist of the 1992 and 2000 Incentive Stock Option Plan which replaced the 1992
plan. The current plan includes a formula that automatically increases the number of
securities available for issuance equal to 20% of the number of shares issued and outstanding.(2)
    
    The Company does not maintain any equity compensation plans that have not been approved by
the stockholders. 16




---



##### 



ITEM 5:
    
    MARKET FOR THE COMPANYS COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS(continued)
 Recent Sales of Unregistered Securities
  ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
        17




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION(continued)
 Critical Accounting Policies
 Revenue Recognition
  Product License Revenue
   
    
    Persuasive evidence of an arrangement exists, provided only by a contract
signed by both parties
    
    Delivery and acceptance of the software has been received
    
    The fee to be paid by the customer is fixed or determinable
    
    Collection of the fee is reasonably assured
  Services Revenue
   18




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION(continued)
  
    
    Installation revenue is recognized upon completed installation and customer acceptance
and is based on a contractual hourly rate. Training revenue is not a material element of a
contract and revenue is recognized as training services are provided.
    
    Maintenance revenue is recognized ratably over the life of the related contract. The
Company establishes the value of maintenance revenue based on the price quoted and received
for renewals of existing maintenance contracts.
 Software Development Costs
     Accounting for Stock-Based Awards
    19




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION(continued)
 Results of Operations
    Cost of Revenues
  Gross Profit
  Investment Activities
  Operating Expenses
  20




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION(continued)
 Other Expenses
  Liquidity and Capital Resources
       21




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION(continued)
 Obligations and Commitments
  Payments Due by Period (in thousands)Less than
    
    
    1-3
    
    
    3-5
    
    
    +5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsAccounts Payable &
Other Accrued
Liabilities
    
    $
    1,180
    
    
    $
    941
    
    
    $
    239
    
    
    
    
    
    
    
    Short Term Debt
    
    
    1,439
    
    
    
    1,439
    
    
    
    
    
    
    
    
    
    
    
    Current maturities
of long term debt
    
    
    258
    
    
    
    250
    
    
    
    8
    
    
    
    
    
    
    
    Long term debt
    
    
    790
    
    
    
    
    
    
    
    790
    
    
    
    
    
    
    
    Building Leases
    
    
    359
    
    
    
    92
    
    
    
    267
    
    
    
    
    
    
    
    TOTAL
    
    $
    4,026
    
    
    $
    2,722
    
    
    $
    1,304
    
    
    
    
    
    
    
    
  Inflation
  Financial Risk Management
    22




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##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
  
 Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
 Accounting for Certain
Hybrid Instruments.
 Fair Value Measurements.
 Accounting for the
Conversion of an Instrument that Became Convertible Upon the Issuers Exercise of a Call
Option
 23




---



##### 



ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
  Debtors Accounting for a
Modification or Exchange of Convertible Debt Instruments
 Issuers Accounting for a Previously Bifurcated Conversion Option in a
Convertible Debt Instruments When the Conversion Option No Longer Meets the Bifurcation
Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities
 Amendment of FASB Staff Position FAS 123(R)-1
 Technical Corrections of FASB No 123(R).
 Off-Balance Sheet Arrangements
  ITEM 7.
    
    FINANCIAL STATEMENTS
  ITEM 8.
    
    CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
  24




---



##### 



ITEM 8A.
    
    CONTROLS AND PROCEDURES
    ITEM 8B.
    
    OTHER INFORMATION
  25




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##### 



PART III
 ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
  Name
    
    Age
    
    Position
    
    SinceDavid R. Vey
    
    
    54
    
    
    Chairman of the Board
    
    
    2003Marco A. Emrich
    
    
    54
    
    
    President, Chief Executive Officer, and Director
    
    
    1999David C. Bluestone
    
    
    51
    
    
    Director
    
    
    2005Scott C. Edelman
    
    
    53
    
    
    Director
    
    
    2004Victoria V. Looney
    
    
    49
    
    
    Director
    
    
    2003Jack A. Pellicci
    
    
    68
    
    
    Director
    
    
    1996Roger W. Scearce
    
    
    57
    
    
    Director
    
    
    2004Anita M. Primo
    
    
    39
    
    
    Vice President, Chief Financial Officer and
Corporate Secretary
    
    
    2003Timothy A. Rimlinger
    
    
    43
    
    
    Vice President, Chief Technology Officer
    
    
    2000
   https://www.sedonacorp.com
   David R. Vey
 26




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##### 



ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT(continued)
 Marco A. Emrich
 David C. Bluestone
 Scott C. Edelman
 Victoria V. Looney
 27




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##### 



ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT(continued)
  Jack A. Pellicci
 Roger W. Scearce th
 Anita M. Primo
 28




---



##### 



ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT(continued)
 Timothy A. Rimlinger
 ITEM 10.
    
    EXECUTIVE COMPENSATION
  NonqualifiedNon-Equity
    
    DeferredAnnual Compensation
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Compensation
    
    All OtherName and Principal Position
    
    Fiscal Year
    
    Salary
    
    Bonus
    
    Stock Awards
    
    Option Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalMarco A. Emrich
    
    
    2006
    
    
    $
    225,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    225,000President and CEO
    
    
    2005
    
    
    $
    225,000
    
    
    $
    
    
    
    $
    
    
    
    $
    10,500
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    235,500Alyssa S. Dver 
    
    
    2006
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    93,893
    
    
    $
    93,893V.P. & Chief Marketing
Officer
    
    
    2005
    
    
    $
    140,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    140,000Anita M. Primo
    
    
    2006
    
    
    $
    110,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    110,000V.P. & Chief Financial
Officer
    
    
    2005
    
    
    $
    110,000
    
    
    $
    
    
    
    $
    
    
    
    $
    12,071
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    122,071Timothy A. Rimlinger
    
    
    2006
    
    
    $
    130,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    130,000V.P. & Chief Technology
Officer
    
    
    2005
    
    
    $
    130,000
    
    
    $
    
    
    
    $
    
    
    
    $
    14,267
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    144,267
 
 
    
    Alyssa S. Dver employment with SEDONA terminated
December 20, 2005. The 2006 other compensation includes $70,000 in severance cost pursuant to the executives
employment agreement with the Company, $10,000 accrued bonus payment, and $13,893 in commission.Option awards are calculated based upon the fair value of
each common stock option issued in accordance with Statement of Financial Accounting Standards (SFAS) 123R. The
fair value estimate is calculated using the Black-Scholes. Assumptions made in the valuation are detailed in Note 6. to the accompanying financial statements. Base Salary
  Annual Cash Incentive Opportunities
  29




---



##### 



ITEM 10. EXECUTIVE COMPENSATION (continued)
 Long-Term Stock-Based Incentives
   Compensation Committee Interlocks and Insider Participation
  Stock Purchase Opportunities
 Option Grants
  Options Granted in Fiscal 2006
 Percent ofNumber of
    
    TotalSecurities
    
    OptionsUnderlying
    
    Granted
    
    Exercise orOptions
    
    to Employees
    
    Base Price
    
    ExpirationName
    
    Granted (#)
    
    in 2006
    
    ($/Sh)
    
    DateMarco A. Emrich
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alyssa S. Dver
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Anita M. Primo
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Timothy A. Rimlinger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 30




---



##### 



ITEM 10. EXECUTIVE COMPENSATION (continued)
 Options Exercised and Unexercised
  Aggregate Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
 Number of Securities
    
    Value of UnexercisedUnderlying Unexercised
    
    In-the-MoneyShares
    
    
    
    
    
    Options and Warrants at
    
    Options atAcquired on
    
    Value
    
    December 31, 2006
    
    December 31, 2006Name
    
    Exercise
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableMarco A. Emrich
    
    
    0
    
    
    
    0
    
    
    
    1,452,500
    
    
    
    0
    
    
    $
    1,500
    
    
    
    0Anita M. Primo
    
    
    0
    
    
    
    0
    
    
    
    188,727
    
    
    
    12,500
    
    
    $
    1,724
    
    
    
    0Timothy R. Rimlinger
    
    
    0
    
    
    
    0
    
    
    
    234,905
    
    
    
    0
    
    
    $
    2,039
    
    
    
    0
 Compensation of Directors
     31




---



##### 



ITEM 10. EXECUTIVE COMPENSATION (continued)
       Employment Agreements and Change of Control Arrangements
   32




---



##### 



ITEM 10. EXECUTIVE COMPENSATION (continued)
  2006 DIRECTOR COMPENSATION
 NonqualifiedFees Earned
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    Deferredor Paid in
    
    Stock
    
Option
    
    Incentive Plan
    
    Compensation
    
    All OtherName
    
    Cash
    
    Awards
    
    Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalDavid C. Bluestone
    
    $
    1,500
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,500Scott C. Edelman
    
    $
    1,000
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,000Victoria V. Looney
    
    $
    1,000
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,000Jack Pellicci
    
    $
    2,000
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,000Roger W. Scearce
    
    $
    1,500
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,500David R. Vey
    
    $
    500
    
    
    $
    
    
    
    $
    21,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21,500
  Compliance with Section 16(a) of the Securities Exchange Act
  ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 The following table sets forth information regarding the beneficial ownership of the common stock
as of April 11, 2007 with respect to:
 
    
    Each person or group known to the Company who beneficially owns five percent or more of
the outstanding shares of the Companys common stock;
    
    Each Director and named Executive Officer; and
    
    The Companys Executive Officers and Members of its Board of Directors as a group.
   33




---



##### 



ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS (continued)
 Amount and Nature ofName of Beneficial Owner
    
    Beneficial Ownership
    
    Percent of ClassMarco A. Emrich
    
    
    1,530,385
    
    
    
    (1
    )
    
    
    1.67
    %David C. Bluestone
    
    
    210,000
    
    
    
    (1
    )
    
    
    *Scott C. Edelman
    
    
    235,000
    
    
    
    (1
    )
    
    
    *Victoria V. Looney
    
    
    347,500
    
    
    
    (1
    )
    
    
    *Jack Pellicci
    
    
    479,574
    
    
    
    (1
    )
    
    
    *Anita M. Primo
    
    
    248,814
    
    
    
    (1
    )
    
    
    *Timothy A. Rimlinger
    
    
    408,056
    
    
    
    (1
    )
    
    
    *Roger W. Scearce
    
    
    260,700
    
    
    
    (1
    )
    
    
    *David R. Vey
    
    
    52,177,999
    
    
    
    (1,2
    )
    
    
    47.46
    %All Executive Officers and
Directors as a group, (9
persons)
    
    
    55,177,999
    
    
    
    
    
    
    
    46.08
    %
 
 *
    
    Owner holds less than 1% of the class.(1)
    
    Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares identified in the table as beneficially
owned. The table includes shares which the following directors and executive
officers have a right to acquire within 60 days upon the exercise of outstanding
options and warrants:Mr. Emrich 455,000 options and 997,500 warrants
Mr. Bluestone  210,000 options
Mr. Edelman  235,000 options
Ms. Looney  290,000 options
Mr. Pellicci  458,250 options
Ms. Primo  188,727 options
Mr. Rimlinger  234,905 options
Mr. Scearce  235,000 options
Mr. Vey  290,000 options and 125,000 warrants(2)
    
    Mr. Vey has a right to acquire 19,223,310 shares within 60 days upon a
notice of conversion related to a $2,691,263 convertible note due October 23,
2008. The conversion price of the related note was issued at a discount to the
fair market value of the underlying common stock on the date the notes were
issued. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE
   34




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
          35




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
     Refinancing with Oak Harbor
  Refinancing with David Vey
  36




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
     Bridge Note with David Vey
  37




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
   Line of Credit with David Vey
   Intercreditor Agreement
  38




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
 Security Agreement
   Cross Default Provisions of the Notes
  Summary Chart of Indebtedness
  Payee
    
    Instrument
    
    Principal sum due
    
    Maturity DateOak Harbor
Investment
Properties, L.L.C.
    
    Promissory Note
dated as of August
17, 2006.
    
    $1,040,402
    
    May 1, 2009David Vey
    
    Secured Convertible
Promissory Note
dated as of October
23, 2006.
    
    $2,691,263
    
    October 23, 2008David Vey
    
    Promissory Note
dated as of October
23, 2006.
    
    $1,213,952
    
    October 23, 2007David Vey
    
    Revolving
Promissory Note
dated as of
September 27, 2006.
    
    The lesser of
$500,000 or the
balance of the
Revolving
Promissory Note
($225,000 as of
December 31, 2006.)
    
    August 17, 2007
 39




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
   Director Independence
 Audit Committee
  Nominations & Corporate Governance Committee
  40




---



##### 



ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND, DIRECTOR INDEPENDENCE(continued)
  Compensation Committee
  Executive Committee
  41




---



##### 



PART IV
 ITEM 13. EXHIBITS
  3.1
    
    Articles of Incorporation (2) (Exhibit 3.1)3.2
    
    Bylaws (2) (Exhibit 3.2)3.3
    
    Amendment to Articles of Incorporation (3)3.4
    
    Amendment to Articles of Incorporation (25)4.1
    
    Statement of Designation of Class A, Series F Convertible Preferred Stock (4) (Exhibit 4.0)4.2
    
    Certificate of Designations, Preferences and Rights of Class A, Series H Preferred Stock (5)
(Exhibit 4.1)4.3
    
    5% Convertible Note due March 22, 2001 (8) (Exhibit 99.3)10.1
    
    Series F Convertible Preferred Stock and Warrants Purchase Agreement, dated May 24, 1999, by
and between the Company, Oscar Tang, individually, and The Tang Fund (6) (Exhibit 4.0)10.12
    
    Convertible Notes and Warrants Purchase Agreement, dated November 22, 2000 (7) (Exhibit
99.2)10.22
    
    Lease between Teachers Insurance and Annuity Association and the Company (9) (Exhibit 99.1)10.25#
    
    2000 Incentive Stock Plan (10) (Appendix A)10.26#
    
    2000 Employee Stock Purchase Plan (10) (Appendix B)10.27#
    
    Employment Agreement, dated September 15, 1999, between the Company and Marco A. Emrich (11)
(Exhibit 10.1)10.30
    
    Shareholder/Investor Relations Compensation Agreement between the Company and Osprey
Partners, dated January 3, 1997, with amendments dated January 27, 2000 and December 13, 2000
(14) (Exhibit 10.30)10.31
    
    Finders Fee Agreement between the Company and Osprey Partners, dated February 24, 1999 (8)
(Exhibit 10.31)10.35
    
    Warrant issued to Acxiom Corporation Dated April 4, 2001 (8) (Exhibit 10.35)10.36
    
    Form of Common Stock and Warrants Purchase Agreements used in August 2001 to September 2002
private placements by and among the Company and the investors signatory thereto (12) (Exhibit
10.1)
 42




---



##### 



ITEM 13. EXHIBITS (continued)
 10.37
    
    Form of Registration Rights Agreements used in August 2001 to September 2002 private
placements by and among the Company and the investors signatory thereto. (12) (Exhibit 10.2)10.38
    
    Form of Notes dated September and October 2001 by and among the Company and investors
signatory thereto. (12) (Exhibit 10.3)10.38
    
    Form of Warrants issued to investors used in August 2001 to September 2002 private sales of
common stock and notes. (12) (Exhibit 10.4)10.39
    
    Agreement and related Promissory Note dated February 14, 2002 related to retirement of
November 2000 Convertible Notes and Warrants. (13)10.40
    
    Agreement for purchase of assets of Lead Factory, Inc. dated March 29, 2002. (13)10.42
    
    Convertible note dated December 6, 2002 (14)10.43
    
    Convertible note dated January 03, 2003 (14)10.44
    
    Convertible note dated January 10, 2003 (14)10.45
    
    Promissory note dated January 10, 2003 (14)10.46
    
    Convertible note dated March 13, 2003 (14)10.47
    
    Promissory note dated March 13, 2003 (14)10.48
    
    Addendum dated March 31, 2004 to Master Software License Agreement by and between the
Company and Fiserv Solutions Inc. dated March 28, 2002 (15)10.47
    
    Convertible note dated June 4, 2004 (16)10.54
    
    Convertible note by the Company in favor of David R. Vey dated June 4, 2004 (16)10.55
    
    Convertible note by the Company in favor of David R. Vey dated July 7, 2004 (17)10.56
    
    Convertible note by the Company in favor of David R. Vey dated September 15, 2004 (17)10.57
    
    Convertible note by the Company in favor of David R. Vey dated October 8, 2004 (17)10.58
    
    Convertible note by the Company in favor of David R. Vey dated November 18, 2004 (18)10.59
    
    Convertible note by the Company in favor of David R. Vey dated January 13, 2005 (19)10.60
    
    Convertible note by the Company in favor of David R. Vey dated January 31, 2005 (19)10.61
    
    Convertible note by the Company in favor of David R. Vey dated March 16, 2005 (19)10.62#
    
    Employment Agreement dated June 25, 2004 between Company and Marco A. Emrich (20)10.63#
    
    Employment Agreement dated July 7, 2004 between Company and Alyssa S. Dver (20)
 43




---



##### 



ITEM 13. EXHIBITS (continued)
 10.64#
    
    Employment Agreement dated July 20, 2004 between Company and Anita M. Primo (20)10.65#
    
    Employment Agreement dated July 20, 2004 between Company and Timothy Rimlinger (20)10.66
    
    Convertible note by the Company in favor of David R. Vey dated March 25, 2005 (21)10.67
    
    Convertible note by the Company in favor of David R. Vey dated March 30, 2005 (21)10.68
    
    Convertible note by the Company in favor of David R. Vey dated April 14, 2005 (21)10.69
    
    Convertible note by the Company in favor of David R. Vey dated April 22, 2005 (22)10.70
    
    Amended Facility Lease for King of Prussia, PA dated January 1, 2005 (24)10.71
    
    Amended Facility Lease for Plymouth, MN dated January 1, 2005 (24)10.72
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.73
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.74
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.75
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.76
    
    Convertible note and related documents by the Company in favor of William J. Rucks dated
July 1, 2005, August 1, 2005 and September 30, 2005 (23)(24)10.77
    
    Promissory Note dated August 17, 2006 in the principal amount of $1,040,402.22 from SEDONA
to Oak Harbor. (26)10.78
    
    Amended and Restated Security Agreement dated August 17, 2006 between SEDONA and Oak Harbor.
(26)10.79
    
    Exchange Agreement dated August 17, 2006 between SEDONA and Oak Harbor. (26)10.80
    
    Secured Convertible Promissory Note dated October 23, 2006 in the principal amount of
$2,691,263 from Sedona to Vey. (26)10.81
    
    Registration Rights Agreement dated August 17, 2006 between Vey and SEDONA. (26)10.82
    
    Exchange Agreement dated October 23, 2006 between SEDONA and Vey. (26)10.83
    
    Promissory Note dated October 23, 2006 in the principal amount of $1,213,952 from SEDONA to
Vey. (26)10.84
    
    Security Agreement dated October 23, 2006 between Vey and SEDONA. (26)10.85
    
    Revolving promissory note dated September 27, 2006 in the principal amount of $500,000 from
SEDONA to Vey. (26)10.86
    
    Intercreditor Agreement dated October 23, 2006 between Vey and Oak Harbor. (26)10.87
    
    Terms and Conditions Agreement dated September 27, 2006. (26)
 44




---



##### 



ITEM
13. EXHIBITS (continued)
 10.88
    
    Acknowledgment and Receipt among SEDONA, Vey and Oak Harbor. (26)10.89
    
    Assignment of ACEncrypt receivable by SEDONA to Vey. (26)10.90
    
    Waiver dated as of October 23, 2006 from Rucks. (26)10.91
    
    Waiver dated as of October 23, 2006 from Mitchell. (26)14.1
    
    Code of Conduct and Business Ethics, adopted by Board of Directors, June 21, 2004 (20)23.1
    
    Consent of McGladrey & Pullen,
LLP*31.1*
    
    Statement Under Oath of Principal Executive Officer of the Company Pursuant to Section 302
of Sarbanes-Oxley Act of 200231.2*
    
    Statement Under Oath of Principal Financial Officer of the Company Pursuant to Section 302
of Sarbanes-Oxley Act of 200232.1*
    
    Statement Under Oath of Principal Executive Officer of the Company Pursuant to Section 906
of Sarbanes-Oxley Act of 200232.2*
    
    Statement Under Oath of Principal Financial Officer of the Company Pursuant to Section 906
of Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.#
    
    Executive Compensation Plans and Arrangements.(1)
    
    Filed as an Exhibit to the Registration Statement on Form S-3, filed May 23, 2000 (File No.
333-37678).(2)
    
    Filed as an Exhibit to the Companys Current report on Form 8-K, dated June 15, 1992.(3)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
1995.(4)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999.(5)
    
    Filed as an Exhibit to the Registration Statement on Form S-3 filed June 5, 2000 (File No.
333-38578).(6)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1999. 45




---



##### 



ITEM 13. EXHIBITS (continued)
 
 (7)
    
    Filed as an Exhibit to the Current Report on Form 8-K filed November 28, 2000.(8)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
2000.(9)
    
    Filed as an Exhibit to the Current Report on Form 8-K filed August 31, 2000.(10)
    
    Filed as an Appendix to the Companys Definitive Proxy Statement for the 2000 Annual Meeting
of Shareholders filed May 17, 2000.(11)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.(12)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001.(13)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for fiscal year ended December 31,
2001.(14)
    
    Filed as an Exhibit to the Annual Report on Form 10-K/A for the fiscal year ended December
31, 2002.(15)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended Mach
31, 2004.(16)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2004.(17)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2004.(18)
    
    Filed as an Exhibit to the 8-K on November 24, 2005.(19)
    
    Filed as an Exhibit to the 8-K on March 17, 2005.(20)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
2004.(21)
    
    Filed as an Exhibit to the 8-K on April 19, 2005.(22)
    
    Filed as an Exhibit to the 8-K on April 27, 2005.(23)
    
    Filed as an Exhibit to the 8-K on July 11, 2005.(24)
    
    Filed as an Exhibit to the Annual Report on Form 10-KSB for the fiscal year ended December
31, 2005.(25)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2006.(26)
    
    Filed as an Exhibit to the 8-K on November 8, 2006.(27)
    
    Filed as an Exhibit to the 8-K on December 21, 2006. 46




---



##### 



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Type of Service
    
    2006
    
    2005Audit Fees
    
    $
    98,500
    
    
    $
    95,065Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    $
    19,835
    
    
    $
    10,475All Other Fees
    
    
    
    
    
    
    
 Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 All Other Fees.
 Pre-Approval of Audit and Non-Audit Services
    47




---



##### 



SIGNATURES
  SEDONA CORPORATIONApril 16, 2007
    /S/ Marco A. EmrichDATE
    Marco A. EmrichChief Executive Officer and President  Signatures
 BY
    
    /S/ David R. Vey
David
R. Vey
Chairman of the Board
    
    
    
    Date April 16, 2007BY
    
    /S/ Marco A. Emrich
Marco
A. Emrich
President, Chief Executive Officer and
Director
    
    
    
    Date April 16, 2007BY
    
    /S/ David C. Bluestone
David
C. Bluestone
Director
    
    
    
    Date April 16, 2007BY
    
    /S/ Scott C. Edelman
Scott
C. Edelman
Director
    
    
    
    Date April 16, 2007BY
    
    /S/ Victoria V. Looney
Victoria
V. Looney
Director
    
    
    
    Date April 16, 2007BY
    
    /S/ Jack A. Pellicci
Jack
A. Pellicci
Director
    
    
    
    Date April 16, 2007BY
    
    /S/ Anita M. Primo
Anita
M. Primo
Chief Financial Officer and Vice President
Principal Financial and Accounting Officer
    
    
    
    Date April 16, 2007BY
    
    /S/ Roger W. Scearce
Roger
W. Scearce
Director
    
    
    
    Date April 16, 2007
 48




---



##### 



Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial StatementsConsolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    F-3Consolidated Statements of Operations for each of the
two years in the period ended December 31, 2006
    
    
    F-4Consolidated Statements of Stockholders Deficit for each of the
two years in the period ended December 31, 2006
    
    
    F-5Consolidated Statements of Cash Flows for each of the
two years in the period ended December 31, 2006
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
   F-1




---



##### 



Share-Based Payment
  /s/ McGladrey & Pullen, LLP 
 F-2




---



##### 



SEDONA Corporation and Subsidiary
 
 Consolidated Balance Sheets  (In Thousands, Except Share and Per Share Data)
 December 31,2006
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    7
    
    
    $
    51Accounts receivable
    
    
    300
    
    
    
    254Prepaid expenses and other current assets
    
    
    117
    
    
    
    124Total current assets
    
    
    424
    
    
    
    429Accounts receivable, non-current
    
    
    270
    
    
    
    63Property and equipment, net of accumulated depreciation and amortization
    
    
    19
    
    
    
    25Non-current assets  other
    
    
    3
    
    
    
    3Total non-current assets
    
    
    292
    
    
    
    91Total assets
    
    $
    716
    
    
    $
    520Liabilities and stockholders deficitCurrent liabilities:Accounts payable
    
    $
    531
    
    
    $
    263Accrued expenses and other current liabilities
    
    
    649
    
    
    
    935Deferred revenue
    
    
    675
    
    
    
    554Current maturities of long-term debt
    
    
    1,258
    
    
    
    961Interest payable with common stock
    
    
    
    
    
    
    292Short-term debt
    
    
    1,439
    
    
    
    3,435Total current liabilities
    
    
    4,552
    
    
    
    6,440Long-term debt, less current maturities
    
    
    3,982
    
    
    
    1,000Deferred revenue
    
    
    270
    
    
    
    63Total long-term liabilities
    
    
    4,252
    
    
    
    1,063Total liabilities
    
    
    8,804
    
    
    
    7,503Stockholders deficit:Class A convertible preferred stock (Liquidation preference $1,000)Authorized shares  1,000,000Series A, par value $2.00, Issued and outstanding shares 500,000
    
    
    1,000
    
    
    
    1,000Series H, par value $2.00, Issued and outstanding shares for 2005   1,500
    
    
    
    
    
    
    1,500Common stock, par value $0.001Authorized shares 175,000,000, Issued and outstanding shares 
90,153,534 and 87,324,334 in 2006 and 2005, respectively
    
    
    90
    
    
    
    87Additional paid-in-capital
    
    
    63,290
    
    
    
    60,646Accumulated deficit
    
    
    (72,468
    )
    
    
    (70,216
    )Total stockholders deficit
    
    
    (8,088
    )
    
    
    (6,983
    )Total liabilities and stockholders deficit
    
    $
    716
    
    
    $
    520
 See accompanying notes.
 F-3




---



##### 



SEDONA Corporation and Subsidiary
 
 Consolidated Statements of Operations  (In Thousands, Except Share and Per Share Data)
 For years ended December 31,2006
    
    2005Revenues:Product licenses  unrelated parties
    
    $
    577
    
    
    $
    159Services-unrelated parties
    
    
    598
    
    
    
    564Services- related parties
    
    
    240
    
    
    
    Total revenues
    
    
    1,415
    
    
    
    723Cost of revenues:Product licenses
    
    
    5
    
    
    
    28Services
    
    
    294
    
    
    
    220Total cost of revenues
    
    
    299
    
    
    
    248Gross profit
    
    
    1,116
    
    
    
    475Expenses:General and administrative
    
    
    1,461
    
    
    
    1,435Stock option expense
    
    
    237
    
    
    
    7Sales, marketing and product support
    
    
    419
    
    
    
    638Research and development
    
    
    727
    
    
    
    912Total operating expenses
    
    
    2,844
    
    
    
    2,992Loss from operations
    
    
    (1,728
    )
    
    
    (2,517
    )Other income (expense):Interest expense
    
    
    (488
    )
    
    
    (377
    )Convertible debenture expense
    
    
    (36
    )
    
    
    Total other expenses
    
    
    (524
    )
    
    
    (377
    )Net Loss
    
    
    (2,252
    )
    
    
    (2,894
    )Deemed dividends applicable to preferred stockholders
    
    
    (120
    )
    
    
    (270
    )Loss applicable to Common Stockholders
    
    $
    (2,372
    )
    
    $
    (3,164
    )Basic and diluted net loss per share applicable to common shares
    
    $
    (0.03
    )
    
    $
    (0.04
    )Basic and diluted weighted average common shares outstanding
    
    
    89,640,569
    
    
    
    86,959,403
 See accompanying notes.
 F-4




---



##### 



SEDONA Corporation and Subsidiary
 
 Consolidated Statements of Stockholders Deficit  (In Thousands, Except Share Data)
 Stock Series A
    
    
    Stock Series HShares
    
    Amount
    
    
    Shares
    
    AmountBalance, December 31, 2004
    
    
    500,000
    
    
    $
    1,000
    
    
    
    
    1,500
    
    
    $
    1,500Common stock issued for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for legal expenses related to litigation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock for employer 401(k) contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of options and warrants issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss, year ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2005
    
    
    500,000
    
    
    $
    1,000
    
    
    
    
    1,500
    
    
    $
    1,500Common stock issued for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for legal expenses related to litigation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued to placement agent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlement with Acxiom (Note 14)
    
    
    
    
    
    
    
    
    
    
    
    (1,500
    )
    
    
    (1,500
    )Common stock issued for accrued interest expense on convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of conversion feature of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of options and warrants issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss, year ended December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2006
    
    
    500,000
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
 See accompanying notes.
 F-5




---



##### 



SEDONA Corporation and Subsidiary
Consolidated Statements of Stockholders Deficit  (In Thousands, Except Share Data)
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    DeficitBalance, December 31, 2004
    
    
    86,640,561
    
    
    $
    86
    
    
    $
    60,478
    
    
    $
    (67,322
    )Common stock issued for consulting services
    
    
    150,032
    
    
    
    
    
    
    
    37
    
    
    
    Common stock issued for legal expenses related to
litigation
    
    
    272,431
    
    
    
    1
    
    
    
    60
    
    
    
    Issuance of common stock for employer 401(k)
contribution
    
    
    122,732
    
    
    
    
    
    
    
    39
    
    
    
    Common stock issued for employee stock purchase plan
    
    
    138,578
    
    
    
    
    
    
    
    24
    
    
    
    Fair value of options and warrants issued
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Net loss, year ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,894
    )Balance, December 31, 2005
    
    
    87,324,334
    
    
    $
    87
    
    
    $
    60,646
    
    
    $
    (70,216
    )Common stock issued for consulting services
    
    
    173,265
    
    
    
    
    
    
    
    32
    
    
    
    Common stock issued for legal expenses related to
litigation
    
    
    242,262
    
    
    
    
    
    
    
    43
    
    
    
    Common stock issued to placement agent
    
    
    200,000
    
    
    
    1
    
    
    
    42
    
    
    
    Settlement with Acxiom (Note 14)
    
    
    
    
    
    
    
    
    
    
    1,821
    
    
    
    Common stock issued for accrued interest expense on
convertible notes
    
    
    2,062,161
    
    
    
    2
    
    
    
    307
    
    
    
    Common stock issued for employee stock purchase plan
    
    
    151,512
    
    
    
    
    
    
    
    25
    
    
    
    Fair value of conversion feature of debt
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    Fair value of options and warrants issued
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    Net loss, year ended December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,252
    )Balance, December 31, 2006
    
    
    90,153,534
    
    
    
    90
    
    
    
    63,290
    
    
    
    (72,468
    )
 See accompanying notes.
 F-6




---



##### 



SEDONA Corporation and Subsidiary
Consolidated Statements of Cash Flows  (In Thousands)
 Year ended December 312006
    
    2005Operating activities:Net loss
    
    $
    (2,252
    )
    
    $
    (2,894
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation
    
    
    6
    
    
    
    19Charge for employer 401(K) stock contribution
    
    
    
    
    
    
    39Common stock issued for legal, consulting services
and placement agent
    
    
    118
    
    
    
    97Charge for option or warrant based compensation
    
    
    237
    
    
    
    7Amortization debt discount
    
    
    36
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (252
    )
    
    
    17Prepaid expenses and other current assets
    
    
    6
    
    
    
    21Accounts payable and accrued expenses
    
    
    499
    
    
    
    540Deferred revenue
    
    
    328
    
    
    
    100Net cash used in operating activities
    
    
    (1,274
    )
    
    
    (2,054
    )Investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (22
    )Net cash used in investing activities
    
    
    
    
    
    
    (22
    )Financing activities:Repayments of long-term obligations
    
    
    (850
    )
    
    
    Issuance of common stock, net
    
    
    25
    
    
    
    24Issuance of convertible notes
    
    
    755
    
    
    
    Proceeds from issuance of short-term debenture and notes
    
    
    1,300
    
    
    
    1,965Net cash provided by financing activities
    
    
    1,230
    
    
    
    1,989Net (decrease) in cash and cash equivalents
    
    
    (44
    )
    
    
    (87
    )Cash and cash equivalents, beginning of year
    
    
    51
    
    
    
    138Cash and cash equivalents, end of year
    
    $
    7
    
    
    $
    51
 See accompanying notes.
 F-7




---



##### 



F-8




---



##### 



(continued)
    â
         F-9




---



##### 



(continued)
     Accounting for the Impairment or Disposal of Long-Lived
Assets
      , Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed.
 F-10




---



##### 



(continued)
    Revenue Recognition
  Product License Revenue
   Services Revenue
  F-11




---



##### 



(continued)
  
    
    Installation revenue is recognized upon completed installation and customer acceptance
and is based on a contractual hourly rate. Training revenue is not a material element of a
contract and revenue is recognized as training services are provided.
    
    Maintenance revenue is recognized ratably over the life of the related contract. The
Company establishes the value of maintenance revenue based on the price quoted and received
for renewals of existing maintenance contracts. Typically, maintenance contracts are
entered into for initial three-year terms and are renewable annually thereafter.
       Share Based Payment
  F-12




---



##### 



(continued)
 Accounting for Stock Issued to
Employees
   2006
    
    2005Risk-free interest rate:
    
    4.83% to 4.87%
    
    
    3.71% - 4.39
    %Expected average volatility:
    
    
    93.4
    %
    
    
    102%Expected holding period:
    
    2 - 4 years
    
    3 - 10 yearsExpected dividend yield:
    
    
    0%
    
    
    
    0%
     F-13




---



##### 



December 31,2006
    
    2005Machinery and equipment
    
    $
    76
    
    
    $
    76Leasehold improvements
    
    
    15
    
    
    
    15Purchased software for internal use
    
    
    31
    
    
    
    31122
    
    
    
    122Less accumulated depreciation and amortization
    
    
    103
    
    
    
    97$
    19
    
    
    $
    25
   December 31,2006
    
    2005Note payable  CIMS acquisition Due 2006 (Note 14)
    
    $
    
    
    
    $
    953Oak Harbor note
    
    
    1,040
    
    
    
    Convertible note with David Vey, net of discount
of $110,000
    
    
    2,592
    
    
    
    Convertible note with Rucks & Mitchell
    
    
    1,600
    
    
    
    1,000Capital lease obligations (Note 10)
    
    
    8
    
    
    
    8Deferred revenue
    
    
    270
    
    
    
    635,510
    
    
    
    2,024Less current maturities
    
    
    1,258
    
    
    
    961Long-term debt and liabilities
    
    $
    4,252
    
    
    $
    1,063
  Material Investor
   F-14




---



##### 



(continued)
        F-15




---



##### 



(continued)
       Refinancing with Oak Harbor
  F-16




---



##### 



(continued)
  Refinancing with David Vey
    F-17




---



##### 



(continued)
   Bridge Note with David Vey
   F-18




---



##### 



(continued)
 Line of Credit with David Vey
   Intercreditor Agreement
  Security Agreement
  F-19




---



##### 



(continued)
  Cross Default Provisions of the Notes
  Summary Chart of Indebtedness
  Payee
    
    Instrument
    
    Principal sum due
    
    Maturity DateOak Harbor
Investment
Properties, L.L.C.
    
    Promissory Note
dated as of August
17, 2006.
    
    $1,040,402
    
    
    May 1, 2009David Vey
    
    Secured Convertible
Promissory Note
dated as of October
23, 2006.
    
    $2,691,263
    
    
    October 23, 2008David Vey
    
    Promissory Note
dated as of October
23, 2006.
    
    $1,213,952
    
    
    October 23, 2007David Vey
    
    Revolving
Promissory Note
dated as of
September 27, 2006.
    
    The lesser of
$500,000 or the
balance of the
Revolving
Promissory Note
($225,000 as of
December 31, 2006)
    
    August 17, 2007
 Rucks and Mitchell
  F-20




---



##### 



(continued)
        F-21




---



##### 



(continued)
   Common Equity
 Grants of Stock for Professional Services
    Grant of Stock Pursuant to Employee Stock Purchase Plan
  F-22




---



##### 



(continued)
 Financing Activities with David R. Vey and Oak Harbor Investments LLC
      F-23




---



##### 



(continued)
 Weighted AverageWeighted Average
    
    Remaining
    
    Aggregate IntrinsicShares
    
    Exercise Price
    
    Contractual Term (Years)
    
    ValueOutstanding at
December 31, 2004
    
    
    2,984,712
    
    
    $
    1.46Canceled or expired
    
    
    (439,000
    )
    
    
    2.06Granted
    
    
    2,221,998
    
    
    
    0.17Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2005
    
    
    4,767,710
    
    
    $
    0.80Canceled or expired
    
    
    (1,054,661
    )
    
    
    1.42Granted
    
    
    600,000
    
    
    
    0.21Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2006
    
    
    4,313,049
    
    
    $
    0.59
    
    
    
    4.27
    
    
    $
    21,500
 Weighted AverageExercisable at
    
    
    
    
    
    Exercise Price
    
    Weighted Average
    
    
    Remaining
    
    
    Aggregate IntrinsicYear-end
    
    Options
    
    Range Per Share
    
    Exercise Price
    
    
    Contractual Term (Years)
    
    
    Value2005
    
    
    3,407,860
    
    
    $
    0.15 to $5.13
    
    
    $
    1.072006
    
    
    4,146,215
    
    
    $
    0.15 to $5.13
    
    
    $
    0.61
    
    
    
    
    4.27
    
    
    
    $
    21,500
  Ranges
    
    TotalRange of exercise prices
    
    $0.15 to $1.16
    
    $1.35 to $2.25
    
    $2.50 to $5.13
    
    $0.15 to $5.13Options outstanding
    
    
    3,758,049
    
    
    
    417,000
    
    
    
    138,000
    
    
    
    4,313,049Weighted average
remaining contractual
life (years)
    
    
    5.77
    
    
    
    2.73
    
    
    
    2.54
    
    
    
    4.27Weighted average
exercise price
    
    
    0.36
    
    
    
    1.86
    
    
    
    2.98
    
    
    
    0.59Exercisable
    
    
    3,591,215
    
    
    
    417,000
    
    
    
    138,000
    
    
    
    4,146,215Weighted average
exercise price
    
    
    0.37
    
    
    
    1.86
    
    
    
    2.98
    
    
    
    0.61
   F-24




---



##### 



(continued)
 Weighted AverageWeighted Average
    
    Remaining
    
    Aggregate IntrinsicShares
    
    Exercise Price
    

Contractual Term (Years)
    
    ValueOutstanding at
December 31, 2004
    
    
    15,434,727
    
    
    $
    1.14Canceled or expired
    
    
    (3,425,202
    )
    
    
    1.32Granted
    
    
    125,000
    
    
    
    0.35Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2005
    
    
    12,134,525
    
    
    $
    1.08Canceled or expired
    
    
    (5,746,644
    )
    
    
    0.92Granted
    
    
    1,200,000
    
    
    
    0.35Exercised
    
    
    
    
    
    
    Outstanding at
December 31, 2006
    
    
    7,587,881
    
    
    $
    1.09
    
    
    
    1.84
    
    
    $
    0
 Weighted AverageExercisable at
    
    
    
    
    
    Exercise Price
    
    Weighted Average
    
    
    Remaining
    
    
    Aggregate IntrinsicYear-end
    
    Warrant Shares
    
    Range Per Share
    
    Exercise Price
    
    
    Contractual Term (Years)
    
    
    Value2005
    
    
    11,895,698
    
    
    $
    0.30 to $3.75
    
    
    $
    1.072006
    
    
    7,363,830
    
    
    $
    0.35 to $3.75
    
    
    $
    1.07
    
    
    
    
    1.84
    
    
    
    $
    0
  Ranges
    
    
    TotalRange of exercise prices
    
    
    $0.35 to $1.13
    
    
    $1.21 to $2.25
    
    
    $2.50 to $3.75
    
    
$0.35 to $3.75Outstanding
    
    
    
    5,482,881
    
    
    
    
    1,413,000
    
    
    
    
    692,000
    
    
    
    
    7,587,881Weighted average remaining
contractual life (years)
    
    
    
    1.89
    
    
    
    
    2.32
    
    
    
    
    1.20
    
    
    
    
    1.84Weighted average exercise
price
    
    
    
    0.60
    
    
    
    
    2.08
    
    
    
    
    2.99
    
    
    
    
    1.09Exercisable
    
    
    
    5,357,680
    
    
    
    
    1,413,000
    
    
    
    
    593,150
    
    
    
    
    7,363,830Weighted average exercise
price
    
    
    
    0.59
    
    
    
    
    2.08
    
    
    
    
    3.07
    
    
    
    
    1.07
  F-25




---



##### 



(continued)
  Year Ended December 31,2006
    
    2005Stock options and warrants
    
    $
    0.23
    
    
    $
    0.18
   Options to Directors and Officers
       F-26




---



##### 



(continued)
           F-27




---



##### 



(continued)
          Future Minimum Building Lease Payments
In Thousands
 2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    TotalCorporate
Headquarters
    
    $
    81
    
    
    $
    84
    
    
    $
    85
    
    
    $
    87
    
    
    $
    
    
    
    $
    337Plymouth, MN
    
    $
    11
    
    
    $
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22Total
    
    $
    92
    
    
    $
    95
    
    
    $
    85
    
    
    $
    87
    
    
    $
    
    
    
    $
    359
  F-28




---



##### 



Year ending December 31,2006
    
    2005Accrued payroll, benefits and severance
    
    $
    176
    
    
    $
    245Accrued rent
    
    
    5
    
    
    
    Accrued fees and other expenses to Directors
for professional services and other expenses
    
    
    126
    
    
    
    217Accrued legal expenses related to
Litigation (see Note 7, contingencies)
    
    
    
    
    
    
    43Note payable, general insurance
    
    
    95
    
    
    
    105Accrued interest on debt obligations
    
    
    241
    
    
    
    Miscellaneous
    
    
    6
    
    
    
    58Total
    
    $
    649
    
    
    $
    668
      F-29




---



##### 



Year Ended December 312006
    
    2005Cash paid during the year for interest
    
    $
    110
    
    
    $
    18Conversion of accrued interest into
common stock
    
    
    307
    
    
    
    Conversion of accrued interest into debt
    
    
    281
    
    
    
    Fair value of conversion feature of debt
    
    
    136Settlement with Acxiom for forgiveness of
debt
    
    
    1,820
    
    
    
    
     F-30




---



##### 



F-31




---



##### 



3.1
    
    Articles of Incorporation (2) (Exhibit 3.1)3.2
    
    Bylaws (2) (Exhibit 3.2)3.3
    
    Amendment to Articles of Incorporation (3)3.4
    
    Amendment to Articles of Incorporation (25)4.1
    
    Statement of Designation of Class A, Series F Convertible Preferred Stock (4) (Exhibit 4.0)4.2
    
    Certificate of Designations, Preferences and Rights of Class A, Series H Preferred Stock (5)
(Exhibit 4.1)4.3
    
    5% Convertible Note due March 22, 2001 (8) (Exhibit 99.3)10.1
    
    Series F Convertible Preferred Stock and Warrants Purchase Agreement, dated May 24, 1999, by
and between the Company, Oscar Tang, individually, and The Tang Fund (6) (Exhibit 4.0)10.12
    
    Convertible Notes and Warrants Purchase Agreement, dated November 22, 2000 (7) (Exhibit 99.2)10.22
    
    Lease between Teachers Insurance and Annuity Association and the Company (9) (Exhibit 99.1)10.25#
    
    2000 Incentive Stock Plan (10) (Appendix A)10.26#
    
    2000 Employee Stock Purchase Plan (10) (Appendix B)10.27#
    
    Employment Agreement, dated September 15, 1999, between the Company and Marco A. Emrich (11)
(Exhibit 10.1)10.30
    
    Shareholder/Investor Relations Compensation Agreement between the Company and Osprey
Partners, dated January 3, 1997, with amendments dated January 27, 2000 and December 13, 2000
(14) (Exhibit 10.30)10.31
    
    Finders Fee Agreement between the Company and Osprey Partners, dated February 24, 1999 (8)
(Exhibit 10.31)10.35
    
    Warrant issued to Acxiom Corporation Dated April 4, 2001 (8) (Exhibit 10.35)10.36
    
    Form of Common Stock and Warrants Purchase Agreements used in August 2001 to September
2002 private placements by and among the Company and the investors signatory thereto (12)
(Exhibit 10.1)10.37
    
    Form of Registration Rights Agreements used in August 2001 to September 2002 private
placements by and among the Company and the investors signatory thereto. (12) (Exhibit 10.2)
 F-32




---



##### 



(continued)
 10.38
    
    Form of Notes dated September and October 2001 by and among the Company and investors
signatory thereto. (12) (Exhibit 10.3)10.38
    
    Form of Warrants issued to investors used in August 2001 to September 2002 private sales of
common stock and notes. (12) (Exhibit 10.4)10.39
    
    Agreement and related Promissory Note dated February 14, 2002 related to retirement of
November 2000 Convertible Notes and Warrants. (13)10.40
    
    Agreement for purchase of assets of Lead Factory, Inc. dated March 29, 2002. (13)10.42
    
    Convertible note dated December 6, 2002 (14)10.43
    
    Convertible note dated January 03, 2003 (14)10.44
    
    Convertible note dated January 10, 2003 (14)10.45
    
    Promissory note dated January 10, 2003 (14)10.46
    
    Convertible note dated March 13, 2003 (14)10.47
    
    Promissory note dated March 13, 2003 (14)10.48
    
    Addendum dated March 31, 2004 to Master Software License Agreement by and between the
Company and Fiserv Solutions Inc. dated March 28, 2002 (15)10.47
    
    Convertible note dated June 4, 2004 (16)10.54
    
    Convertible note by the Company in favor of David R. Vey dated June 4, 2004 (16)10.55
    
    Convertible note by the Company in favor of David R. Vey dated July 7, 2004 (17)10.56
    
    Convertible note by the Company in favor of David R. Vey dated September 15, 2004 (17)10.57
    
    Convertible note by the Company in favor of David R. Vey dated October 8, 2004 (17)10.58
    
    Convertible note by the Company in favor of David R. Vey dated November 18, 2004 (18)10.59
    
    Convertible note by the Company in favor of David R. Vey dated January 13, 2005 (19)10.60
    
    Convertible note by the Company in favor of David R. Vey dated January 31, 2005 (19)10.61
    
    Convertible note by the Company in favor of David R. Vey dated March 16, 2005 (19)10.62#
    
    Employment Agreement dated June 25, 2004 between Company and Marco A. Emrich (20)10.63#
    
    Employment Agreement dated July 7, 2004 between Company and Alyssa S. Dver (20)10.64#
    
    Employment Agreement dated July 20, 2004 between Company and Anita M. Primo (20)
 F-33




---



##### 



(continued)
 10.65#
    
    Employment Agreement dated July 20, 2004 between Company and Timothy Rimlinger (20)10.66
    
    Convertible note by the Company in favor of David R. Vey dated March 25, 2005 (21)10.67
    
    Convertible note by the Company in favor of David R. Vey dated March 30, 2005 (21)10.68
    
    Convertible note by the Company in favor of David R. Vey dated April 14, 2005 (21)10.69
    
    Convertible note by the Company in favor of David R. Vey dated April 22, 2005 (22)10.70
    
    Amended Facility Lease for King of Prussia, PA dated January 1, 2005 (24)10.71
    
    Amended Facility Lease for Plymouth, MN dated January 1, 2005 (24)10.72
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.73
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.74
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.75
    
    Convertible note by the Company in favor of David R. Vey dated December 6, 2005(24)10.76
    
    Convertible note and related documents by the Company in favor of William J. Rucks dated
July 1, 2005, August 1, 2005 and September 30, 2005 (23)(24)10.77
    
    Promissory Note dated August 17, 2006 in the principal amount of $1,040,402.22 from SEDONA
to Oak Harbor. (26)10.78
    
    Amended and Restated Security Agreement dated August 17, 2006 between SEDONA and Oak Harbor. (26)10.79
    
    Exchange Agreement dated August 17, 2006 between SEDONA and Oak Harbor. (26)10.80
    
    Secured Convertible Promissory Note dated October 23, 2006 in the principal amount of
$2,691,263 from Sedona to Vey. (26)10.81
    
    Registration Rights Agreement dated August 17, 2006 between Vey and SEDONA. (26)10.82
    
    Exchange Agreement dated October 23, 2006 between SEDONA and Vey. (26)10.83
    
    Promissory Note dated October 23, 2006 in the principal amount of $1,213,952 from SEDONA to Vey. (26)10.84
    
    Security Agreement dated October 23, 2006 between Vey and SEDONA. (26)10.85
    
    Revolving promissory note dated September 27, 2006 in the principal amount of $500,000 from
SEDONA to Vey. (26)10.86
    
    Intercreditor Agreement dated October 23, 2006 between Vey and Oak Harbor. (26)10.87
    
    Terms and Conditions Agreement dated September 27, 2006. (26)10.88
    
    Acknowledgment and Receipt among SEDONA, Vey and Oak Harbor. (26)10.89
    
    Assignment of ACEncrypt receivable by SEDONA to Vey. (26)10.90
    
    Waiver dated as of October 23, 2006 from Rucks. (26)10.91
    
    Waiver dated as of October 23, 2006 from Mitchell. (26)
 F-34




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##### 



(continued)
 14.1
    
    Code of Conduct and Business Ethics, adopted by Board of Directors, June 21, 2004 (20)23.1
    
    Consent of McGladrey & Pullen,
LLP*31.1*
    
    Statement Under Oath of Principal Executive Officer of the Company Pursuant to Section 302
of Sarbanes-Oxley Act of 200231.2*
    
    Statement Under Oath of Principal Financial Officer of the Company Pursuant to Section 302
of Sarbanes-Oxley Act of 200232.1*
    
    Statement Under Oath of Principal Executive Officer of the Company Pursuant to Section 906
of Sarbanes-Oxley Act of 200232.2*
    
    Statement Under Oath of Principal Financial Officer of the Company Pursuant to Section 906
of Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.#
    
    Executive Compensation Plans and Arrangements.(1)
    
    Filed as an Exhibit to the Registration Statement on Form S-3, filed May 23, 2000 (File No.
333-37678).(2)
    
    Filed as an Exhibit to the Companys Current report on Form 8-K, dated June 15, 1992.(3)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
1995.(4)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999.(5)
    
    Filed as an Exhibit to the Registration Statement on Form S-3 filed June 5, 2000 (File No.
333-38578).(6)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1999.(7)
    
    Filed as an Exhibit to the Current Report on Form 8-K filed November 28, 2000.(8)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
2000.(9)
    
    Filed as an Exhibit to the Current Report on Form 8-K filed August 31, 2000. F-35




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##### 



EXHIBIT INDEX (continued)(10)
    
    Filed as an Appendix to the Companys Definitive Proxy Statement for the 2000 Annual Meeting
of Shareholders filed May 17, 2000.(11)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.(12)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001.(13)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for fiscal year ended December 31,
2001.(14)
    
    Filed as an Exhibit to the Annual Report on Form 10-K/A for the fiscal year ended December
31, 2002.(15)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended Mach
31, 2004.(16)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2004.(17)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2004.(18)
    
    Filed as an Exhibit to the 8-K on November 24, 2005.(19)
    
    Filed as an Exhibit to the 8-K on March 17, 2005.(20)
    
    Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,
2004.(21)
    
    Filed as an Exhibit to the 8-K on April 19, 2005.(22)
    
    Filed as an Exhibit to the 8-K on April 27, 2005.(23)
    
    Filed as an Exhibit to the 8-K on July 11, 2005.(24)
    
    Filed as an Exhibit to the Annual Report on Form 10-KSB for the fiscal year ended December
31, 2005.(25)
    
    Filed as an Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2006.(26)
    
    Filed as an Exhibit to the 8-K on November 8, 2006.(27)
    
    Filed as an Exhibit to the 8-K on December 21, 2006. F-36