<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A

{X}   Annual report pursuant to section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended December 31, 2001 or

{ } Transition report pursuant to 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
              ------------------------------------------------------
              (Exact name of Registrant as specified in its charter)

          Pennsylvania                                    95-4091769
 -------------------------------                       -------------------
 (State or other jurisdiction of                         (IRS Employer
 incorporation or organization)                        Identification No.)


455 South Gulph Road, Suite 300, King of Prussia, PA             19406
-----------------------------------------------------          ----------
 (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code 484-679-2200

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.001 per share
-------------------------------------------------------------------------------
                                (Title of class)

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

The aggregate market value of the voting stock held by non-affiliates of the
Registrant computed by reference to the closing price as reported on The Nasdaq
Stock Market as of April 24, 2002 was $55,085,000.

The number of shares of the Registrant's Common Stock issued and outstanding as
of April 24, 2002 was 45,450,764 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.



<PAGE>


                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE REGISTRANT

The following table sets forth-certain information regarding the directors,
executive officers and key employees of the Company.

Name                          Age     Position
----                          ---     --------

Directors and
Executive Officers:

Laurence L. Osterwise         54      Chairman of the Board

R. Barry Borden               62      Vice Chairman of the Board

Marco A. Emrich               49      CEO, President and Director

Michael A. Mulshine           62      Secretary and Director

Jack Pellicci                 63      Director

James C. Sargent              86      Director

Robert M. Shapiro             56      Director

James T. Womble               59      Director

William K. Williams           60      Vice President, Chief Financial Officer

Key Employees:

Alyssa S. Dyer                37      Vice President, Chief Marketing Officer

Michael Crofts                47      Vice President, Sales

Robert Griffin                55      Vice President, Strategic Alliances and
                                      Partnerships

Timothy A. Rimlinger          38      Vice President, Engineering


All directors hold office until the next annual meeting of the shareholders and
until their successors are elected and qualified.

All officers serve at the discretion of the Board of Directors subject to the
terms of their employment agreements.

The business experience, principal occupation and employment of the directors
and executive officers have been as follows:

Laurence L. Osterwise was appointed Chairman of the Board in September 1999,
after having served as Chief Executive Officer, President and a Director since
April 1997. Mr. Osterwise came to the Company in November 1996 as its Chief
Operating Officer and President of SEDONA GeoServices, Inc., a subsidiary.
Before joining the Company, he was President of the Communications Division of
General Instrument Corporation, now a division of Motorola. Prior to joining
General Instrument, Mr. Osterwise was with IBM Corporation for 25 years, where
he held positions as President of Production Industries, U.S. Vice President


<PAGE>


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE REGISTRANT
         (continued)

and Corporate Director of Market Driven Quality, and IBM Rochester General
Manager and Director of Application Business Systems. Under his leadership, IBM
Rochester was awarded the Malcomb Baldridge National Quality Award. Mr.
Osterwise received a BS in Mathematics from Duke University in 1969 and an MS in
Computer Sciences from Syracuse University in 1973.

R. Barry Borden, Vice Chairman of the Board since September 1999, was Chairman
from June 1998 to September 1999, and has been a Director since June 1996. He
has founded and managed businesses in the computer hardware and software
industry for the past 30 years. He currently serves as President of LMA Group, a
management consulting firm he founded in 1984. He also serves as Executive
Chairman of TradeAccess Corporation of Boston, MA, a supplier of enterprise
software. From 1997 until 2001, Mr. Borden served as President of Broadbeam
Corporation of Princeton, NJ, a supplier of software for wireless data
communications. Prior to that he served as Chairman and CEO of Mergent
International, a supplier of software for data security on PC desktops and
enterprise wide networks. Mr. Borden also serves on the Board of Directors of
FASTNET Corporation, an Internet service provider, and AM Communications, a
provider of technology for managing and monitoring of broadband systems. Mr.
Borden received a BSEE degree from the University of Pennsylvania in 1961.

Marco A. Emrich has been Chief Executive Officer, President and a Director since
September 1999. He has over 20 years of software industry experience. From 1998
to 1999, he served as President and CEO of Cambridge-based e-commerce
application service provider Empresa Inc. Prior to joining Empresa Inc., Mr.
Emrich was President, CEO and Chairman of CenterLine Software, Inc., where he
created and launched a web-based application that enables businesses to monitor,
manage and report on network-centric or multi-tier distributed business
applications. Prior to CenterLine, he held positions as Senior Director of
Cincom Systems, Inc.'s Advanced Technology Group and Manager of NAS Information
Network Technology Group at Digital Equipment Corporation. Mr. Emrich holds a
Bachelor's degree in Electrical Engineering with specialization in Systems
Engineering from Pontifical Catholic University of Rio De Janeiro, Brazil.

Michael A. Mulshine has been a Director and Secretary since May 1985 and has
been associated with the Company on a management consulting basis since 1979. He
has been the President of Osprey Partners, a management consulting firm, since
1977. In addition, he is a Director of VASCO Data Security International, Inc.,
a global provider of enterprise-wide security solutions that support e-business
and e-commerce. Mr. Mulshine received a BSEE degree from Newark College of
Engineering of the New Jersey Institute of Technology in 1961.

Jack A. Pellicci, a Director since October 1996, is Group Vice President of
Oracle Service Industries where he leads the Global Business Development Group.
Prior to joining Oracle in 1992, Mr. Pellicci retired as a Brigadier General
with 30 years in the U.S. Army, where he was the Commanding General of the
Personnel Information Systems Command. Mr. Pellicci is a member of the Board of
Directors of the Open Geospatial Consortium (OGC), a worldwide organization
leading the initiative for interoperability of geospatial information and
location based services. He serves as a Director on the Boards of the Fairfax
County Chamber of Commerce, the United Services Organization (USO) and is a
corporate fellow of the National Governors Association. He is a graduate of the
U.S. Military Academy at West Point with a Bachelor of Engineering degree, and
received a Master of Mechanical Engineering degree

                                       2
<PAGE>


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE
         REGISTRANT (continued)

from Georgia Institute of Technology. He is also a member of the Board of
Directors of OGETA Services, the Fairfax County Chamber of Commerce and the
United Services Organization (USO). He currently serves as a Corporate Fellow
for the National Governors Association.

James C. Sargent, a Director since January 1992, was Counsel to the law firm of
Opton, Handler, Gottlieb, Fieler & Katz, and was counsel to Abel Noser
Corporation, a member of the New York Stock Exchange. He was previously a
partner and counsel to Whitman Breed Abbott & Morgan, LLP, now Winston and
Strawn. He was New York Regional Administrator from 1955 to 1956, and
Commissioner of the Securities and Exchange Commission from 1956 to 1960.

Robert M. Shapiro, a Director since November 1998, is Vice President of Global
Sales and Business Development for Autoweb.com, a major online automotive
retailer. From 1995 to 1997, Mr. Shapiro was Senior Vice President of R. L. Polk
& Company, a privately owned $400 million global information services company,
where he directed worldwide marketing, product management, and business
development activities for all software products sold to the transportation,
insurance, finance, retail, fundraising, and publishing industries. Prior to
joining R. L. Polk, Mr. Shapiro was Senior Vice President, Commercial Marketing
for Prodigy, where he created the first commercially viable interactive service
including product positioning and branding. He is noted as a pioneer in building
online business-to-consumer commercial sites. Prior to joining Prodigy, Mr.
Shapiro gained his early marketing and sales experience during seventeen years
with IBM Corporation and Proctor & Gamble. Mr. Shapiro served on the Board of
Directors of Blackburn Polk Marketing Services of Canada, and Carfax, USA. He
received his BA degree from the University of San Diego in 1967.

James T. Womble, a Director since April 1999, has been a Director of Acxiom
Corporation since 1975, and is Division Leader of its Services Division. This
Division has locations in Conway and Little Rock, Arkansas, Chicago, Atlanta,
and Memphis and manages relationships around the world with Acxiom's clients in
the credit card, retail banking and retail industries. Prior to joining Acxiom,
Mr. Womble worked for IBM as a systems engineer and marketing representative. He
holds a degree in civil engineering from the University of Arkansas.

William K. Williams was appointed Vice President and Chief Financial Officer in
April 1998. Prior to his joining the Company, Mr. Williams worked as an
independent financial consultant with emerging growth companies, served as Vice
President of Business Development for Intelligent Electronics, Inc., a Fortune
500 company and held various financial management positions at DuPont, including
four years as Director of Finance for Japan operations. Mr. Williams joined
DuPont upon earning an MBA degree in Finance at the University of Maryland in
1970.

Alyssa Dver was appointed Vice President and Chief Marketing Officer upon
joining the Company in April 2000. Ms. Dver founded Lead Factory, Inc., a
Boston-based start-up for web-based lead tracking solutions. Prior to founding
Lead Factory, she was Vice President of Marketing and Customer Care for Empresa,
Inc., a company delivering electronic commerce solutions for financial services
and e-tailing organizations. She previously held senior management positions at
CenterLine Software, Cincom Systems and Digital Equipment Corporation. She has a
B.S. degree in Economics from The Wharton School, University of Pennsylvania.

                                       3
<PAGE>

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE
         REGISTRANT (continued)

Michael Crofts joined SEDONA in March 1999 and was appointed Vice President of
Sales in February 2001. Prior to joining SEDONA, he was Vice President at The
John H. Harland Company, where he sold database marketing software and direct
marketing consulting services in the southwest United States and Canada. Mr.
Crofts was also Managing Director for Latin America at Olivetti North America,
where he restructured and managed a bank branch automation software distribution
network throughout Latin America and the Caribbean. He holds a Juris Doctor
degree from Gonzaga University School of Law and a Bachelor of Arts from the
University of Idaho.

Robert Griffin joined SEDONA in 1997, and was appointed Vice President of
Strategic Alliances and Partnerships in February 2001. In that role, he is
responsible for developing and leveraging partnerships, to create new marketing
and sales distribution channels. Prior to joining SEDONA, he worked 28 years at
IBM Corporation, where he directed a variety of aspects of marketing and sales,
including market and brand management, business partner recruiting and support,
and field sales management. Mr. Griffin achieved widespread recognition for his
work in introducing the first and second generation of AS/400 systems to the
worldwide marketplace. Mr. Griffin attended DePaul University and the University
of Iowa.

Timothy Rimlinger was appointed Vice President of Engineering in July 2000 and
is responsible for the design, implementation and delivery of all SEDONA's
products. He served as Director of Technology Development since joining the
Company in January 1996. Before joining the Company, he was Senior Development
Engineer at Lockheed Martin. Prior to that, he was Senior Development Engineer
for GE Aerospace. He received his BS degree in Electrical Engineering from
Pennsylvania State University and his MS in Electrical Engineering from
Villanova University.

Compensation of Directors

Under our 1992 Long-Term Incentive Plan (the "1992 Plan"), on the first business
day of January 1998 and on the first business day of January in each succeeding
year through January 2001, each non-employee director of the Company received a
grant of an option to purchase shares of Common Stock at the then-current fair
market value, as determined in accordance with the 1992 Plan, as follows: an
option to purchase 15,000 shares of Common Stock for service on the Board of
Directors during the preceding year, plus an option to purchase 2,500 shares of
Common Stock for serving as the Chairman of the Board of Directors or Chairman
of a committee of the Board of Directors during the preceding year. If, however,
a director became eligible for an option grant after the first regularly
scheduled meeting of the Board of Directors during any calendar year, the
Compensation Committee of our Board of Directors (the "Compensation Committee")
determined the size of such option grant by multiplying 15,000 shares (and/or
2,500 shares) by a fraction which was determined by dividing the number of
regularly scheduled Board of Directors meetings remaining in the calendar year
by six.

In addition, under the terms of the 1992 Plan, any new director elected to the
Board of Directors was granted an option to purchase 25,000 shares of Common
Stock at the then-current fair market value, as determined in accordance with
the 1992 Plan. The shares underlying these options were to vest at the rate of
5,000 shares per year for five years, commencing on the first anniversary date
of his election to the Board of Directors and on each subsequent anniversary
thereafter.

                                       4
<PAGE>

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE
         REGISTRANT (continued)

Further, commencing in 1998, on or before January 31 in each year, each
non-employee director would receive an annual retainer of $5,000 as cash
compensation for his services as a director for the preceding year. Also, each
non-employee director would receive $500 for attendance at each Board of
Directors and committee meeting, with multiple meetings held on the same day to
count as one.

Certain revisions to non-employee director compensation were made in 2002. Under
our 2000 Incentive Stock Option Plan (the "Plan"), each non-employee director of
SEDONA, on the first business of January of 2002 and on the first business day
of January in each succeeding year, shall receive as compensation for service to
the Board of Directors, a grant of an option to purchase Common Stock, at the
then current fair market value, as determined in accordance with the Plan, as
follows: a 30,000 share option grant for service to the Board of Directors
during the preceding year; plus, a 5,000 share option grant for serving as the
Chairman of the Board of Directors or a committee of the Board of Directors
during the preceding year. If, however, an Eligible Director (as defined in the
Plan) shall become eligible for an option grant after the first regularly
scheduled meeting to the Board of Directors during any calendar year, the
Compensation Committee shall determine the size of such option grant by
multiplying 30,000 shares (and/or 5,000 shares) by a fraction which is
determined by dividing the number of regularly scheduled Board of Directors
meetings remaining in the calendar year by four. The non-employee directors were
issued the following option grants in January 2002 for service to the Board of
Directors in 2001: Messrs. Borden, Mulshine, Pellicci and Sargent, 35,000
shares; Messrs. Shapiro and Womble, 30,000 shares.

In addition, any new director elected to the Board of Directors will be granted
an option to purchase 50,000 shares of Common Stock (the "New Director Option"),
at the then current fair market value, as determined in accordance with the
Plan. The shares underlying this option will vest at the rate of 10,000 shares
per year for five years, on the anniversary date of the new director's election
to the Board of Directors.

If unexercised, each option shall expire on the tenth anniversary of the date of
grant and shall vest and become fully exercisable upon grant, with the exception
that the New Director Options shall vest over five years. Once vested, options
shall remain fully exercisable until the earlier of: (i) the expiration of their
ten-year term; (ii) three years following the optionee's separation from Board
of Directors service for any reason; or (iii) one year following the death of
the optionee.

On or before January 31, 2003 and on or before January 31 in each succeeding
year, each non-employee director will receive an annual retainer of $10,000 as
cash compensation for such director's services for the preceding year. Also,
effective January 1, 2002, each non-employee director will receive $750 for each
attendance at Board of Directors and committee meetings, with multiple meetings
held on the same day to count as one. The amounts shall be subject to annual
review and possible adjustment at the discretion of the Board of Directors. In
addition, any director's cash compensation obligations that may accrue will be
paid in cash only if SEDONA is current in all of its cash obligations, or on a
change of control, assuming that all current cash obligations had been met.

                                       5
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

The following table sets forth all compensation awarded to, earned by, or paid
for services rendered to SEDONA and our subsidiaries in all capacities during
the three years ended December 31, 1999, 2000 and 2001 for our President and
Chief Executive Officer and Vice President and Chief Financial Officer, who are
the only executive officers whose salary and bonus for such year exceeded
$100,000 (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                        Annual Compensation           Long-Term Compensation
------------------------ ------ ------------------------------------ ------------------------- --------- --------------
                                                                              Awards           Payouts
                                ---------- --------- --------------- ------------------------- ---------
                                                                                  Securities
                                                         Other       Restricted   Underlying
                                                         Annual         Stock      Options/      LTIP      All Other
  Name and Principal             Salary     Bonus     Compensation    Award(s)       SARs      Payouts   Compensation
       Position          Year      ($)       ($)         ($)(1)          ($)          (#)        ($)          ($)
------------------------ ------ ---------- --------- --------------- ------------ ------------ --------- --------------
<S>                      <C>    <C>        <C>                                      <C>
Marco A. Emrich          2001   $216,923   $18,750         --            --         652,500       --          --
   President and Chief   2000   $225,000   $94,877         --            --           --          --          --
   Executive Officer     1999    $63,173      --           --            --         725,000       --          --
------------------------ ------ ---------- --------- --------------- ------------ ------------ --------- --------------
William K. Williams      2001   $114,500    $4,000         --            --          90,000       --          --
   Vice President and    2000   $130,000   $17,500         --            --           --          --          --
   Chief Financial       1999    $95,000      --           --            --          50,000       --          --
   Officer
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      In fiscal year 2001, no Named Executive Officer received perquisites or
         other personal benefits, securities or property as a portion of the
         executive officer's salary and bonus.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth all options granted to the Named Executive
Officers during 2001.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                 Individual Grants
----------------------------------------------------------------------------------- -------------------------
                                           Percent of                                 Potential Realizable
                                              Total
                              Number of     Options/                                Value at Assumed Annual
                             Securities       SARs                                    Rates of Stock Price
                             Underlying    Granted to   Exercise                    Appreciation For Option
                              Options/      Employees    of Base                            Term(2)
                            SARs Granted    In Fiscal     Price       Expiration       5%           10%
           Name                (#)(1)         Year        ($/Sh)         Date          ($)          ($)
--------------------------- -------------- ------------ ----------- --------------- -------------------------
<S>                            <C>            <C>         <C>          <C>  <C>       <C>          <C>
Marco A. Emrich                652,500        44.5%       $1.03        8/31/09        150,075      515,000
--------------------------- -------------- ------------ ----------- --------------- ------------ ------------
William K. Williams            90,000         6.1%        $1.03        4/21/09        18,000       63,900
-------------------------------------------------------------------------------------------------------------
</TABLE>


(1)      Vesting schedule is time-based, generally over a four-year period,
         which may, in certain cases, be accelerated by performance factors such
         as stock price.

(2)      The potential realizable value amounts shown illustrate the values that
         might be realized upon exercise immediately prior to the expiration of
         their term using five percent and ten percent appreciation rates as
         required to be used in this table by the Securities and Exchange
         Commission, compounded annually, and are not intended to forecast
         future appreciation, if any, of our stock price. Additionally,

                                       6
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION  (continued)

             these values do not take into consideration the provisions of the
             options providing for nontransferability or termination of the
             options following termination of employment. Therefore, the actual
             values realized may be greater or less than the potential
             realizable values set forth in the table.


                     AGGREGATED OPTION/SAR EXERCISES IN THE
                 LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

The following table sets forth certain information as of December 31, 2001,
regarding the number and year-end value of unexercised stock options held by
each of the Named Executive Officers. No stock appreciation rights have been
granted by the Company.


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                               Number of Securities Underlying       Value of Unexercised In-the-Money
                              Unexercised Options/SARs at Fiscal           Options/SARs at Fiscal
                                           Year-End                              Year-End
           Name                              (#)                                  ($)(1)
--------------------------- --------------------------------------- ------------------------------------
                              Exercisable        Unexercisable       Exercisable       Unexercisable
--------------------------- ----------------- --------------------- --------------- --------------------
<S>                             <C>                <C>                    <C>               <C>
Marco A. Emrich                 302,500            1,075,000              $0                $0
--------------------------- ----------------- --------------------- --------------- --------------------
William K. Williams             130,000              60,000               $0                $0
--------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Market value of underlying securities is based on the closing price of
         the Common Stock as reported on the Nasdaq SmallCap Market on December
         31, 2001 ($0.79), net of the option/warrant exercise price.

Employment Contracts and Change-in-Control Arrangements

On September 15, 1999, the Company entered into an Employment Agreement with
Marco A. Emrich, its Chief Executive Officer and President (the "CEO
Agreement"). The CEO Agreement had a term of two years and three months. Pending
renewal, Mr. Emrich continues to serve under the terms of this agreement with an
annual base salary of $225,000. Mr. Emrich can also earn up to $100,000 annually
in the form of cash bonus, subject to quarterly measurements. In addition, under
the CEO Agreement, Mr. Emrich received 200,000 options and 175,000 warrants with
a strike price of $2.50, which will vest over 4 years at 25% per year. He also
was granted 350,000 warrants with a strike price of $2.50 with a four year
"cliff vest" provision, and certain acceleration provisions based on stock price
performance. In the event of "Change of Control" within 12 months there will be
a 33% acceleration of unvested options/warrants; and 50% acceleration after the
first 12 months.

On January 1, 2000, the Company entered into a two -year Employment Agreement
with William K. Williams, its Vice President and Chief Financial Officer (the
"CFO Agreement"). Pending renewal, Mr. Williams continues to serve under the
terms of this agreement, with an annual base salary of $130,000 plus additional
compensation as directed by the Board of Directors. Mr. Williams can also earn
up to $40,000 annually in the form of cash bonus, subject to quarterly
measurements.

                                       7
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION  (continued)

Compensation Committee Interlocks and Insider Participation

The current members of SEDONA's Compensation Committee are Messrs. R. Barry
Borden and Laurence L. Osterwise. No executive officer of SEDONA has served as a
director or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, whose executive officers served as a
director of or member of our Compensation Committee.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who beneficially own more than 10% of a
registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("Commission"),
and The Nasdaq Stock Market, Inc. Directors, executive officers and beneficial
owners of more than 10% of the outstanding shares of our Common Stock are
required by Commission regulations to furnish SEDONA with copies of all Section
16(a) forms that they file. Based solely on review of the copies of such forms
received or written representations that no reports on Form 5 were required, we
believe that for the year ended December 31, 2001, all of our directors,
executive officers and greater than 10% beneficial owners complied with Section
16(a) filing requirements applicable to them.

             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee is responsible for recommending compensation policies
with respect to our executive officers, and for making decisions about awards
under our stock-based compensation plans. Each member of the Compensation
Committee is a "non-employee director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Act"), and an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code.
This report addresses SEDONA's compensation policies for 2001 as they affected
the Chief Executive Officer and our other executive officers, including the
Named Executive Officers.

Compensation Policies

The Compensation Committee's executive compensation policies are designed to
provide competitive compensation opportunities, reward executives consistent
with SEDONA's performance, recognize individual performance and responsibility,
underscore the importance of shareholder value creation, and assist SEDONA in
attracting and retaining qualified executives. The principal elements of
compensation employed by the Compensation Committee to meet these objectives are
base salaries, annual cash incentives, and long-term stock-based incentives.

All compensation decisions are determined following a review of many of our
Company's achievements over the past year, the individual's contributions to our
success, any significant changes in role or responsibility, and the internal
equity of compensation relationships.

In general, the Compensation Committee intends that the overall total
compensation opportunities provided to our executive officers should reflect
competitive compensation for executives with corresponding responsibilities in
comparable firms providing similar products and services. To the extent
determined to be appropriate, the Compensation Committee also considers general
economic conditions, our financial performance, and the individual's performance
in establishing the compensation opportunities for the executive officers. Total
compensation opportunities for the executive officers are

                                       8
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION  (continued)

adjusted over time as necessary to meet this objective. Actual compensation
earned by the executive officers reflects both their contributions to SEDONA's
actual shareholder value creation and our actual financial performance.

The competitiveness of our total compensation program - including base salaries,
annual cash incentives, and long-term stock-based incentives - is assessed by
the Compensation Committee. Data for external comparisons may be drawn from a
number of sources, including the publicly available disclosures of selected
comparable firms with similar products and national compensation surveys of
information technology firms of similar size.

To present a reasonable comparison of our performance versus our peers, the
Board of Directors has determined that it would employ two indexes in the Stock
Performance Graph section of this report; (i) the Nasdaq-US Index, and (ii) the
Nasdaq Computer & Data Processing Index, since there is no one index that
exactly matches SEDONA's business. As we progress with our business development
plans, many of the firms in these indexes will be employed in the peer group to
be used by the Compensation Committee to assess the external competitiveness of
compensation levels.

While the targeted total compensation levels for the executive officers are
intended to be competitive, compensation paid in any particular year may be more
or less than the average, depending upon our actual performance.

Base Salary

Base salaries for all executive officers, including our Chief Executive Officer,
are reviewed by the Compensation Committee on an annual basis. In determining
appropriate base salaries, the Compensation Committee considers external
competitiveness, the roles and responsibilities of the individual, the internal
equity of compensation relationships, and the contributions of the individual to
our success.

Annual Cash Incentive Opportunities

The Compensation Committee believes that executives should be rewarded for their
contributions to the success and profitability of SEDONA and, as such, approves
the annual cash incentive awards. Incentive awards are linked to the achievement
of revenue and net income goals by SEDONA and/or specific business units, and
the achievement by the executives of certain assigned objectives. The individual
objectives set for our executive officers are generally objective in nature and
include such goals as revenue, profit and budget objectives, and increased
business unit productivity. The Compensation Committee believes that these
arrangements tie the executive's performance closely to key measures of the
success of SEDONA or the executive's business unit. All executive officers,
including the Chief Executive Officer, are eligible to participate in this
program.

Long-Term Stock-Based Incentives

The Compensation Committee also believes that it is essential to link executive
and shareholder interests. As such, from time to time, the Compensation
Committee grants stock options to executive officers and other employees under
the Plan. In determining actual awards, the Compensation Committee considers the
externally competitive market, the contributions of the individual to our
success, and the need to retain the individual over time. All executive
officers, including the Chief Executive Officer, are eligible to participate in
this program.

                                       9
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION  (continued)

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction
to public companies for compensation over $1,000,000 paid to its Named Executive
Officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. Although no Named Executive
Officer received compensation exceeding this limit in 2001, we have limited the
number of shares of Common Stock subject to options which may be granted to our
employees in a manner that complies with the performance-based requirements of
Section 162(m). While the Compensation Committee does not currently intend to
qualify its annual incentive awards as a performance-based plan, it will
continue to monitor the impact of Section 162(m).


                                             Respectfully submitted,

                                             R. Barry Borden, Chairman
                                             Jack A. Pellicci

                                       10
<PAGE>

                             STOCK PERFORMANCE GRAPH

The graph below compares the cumulative total stockholder return on our Common
Stock for the period from December 31, 1996 through December 31, 2001 with the
cumulative total return on (i) the "Nasdaq-US Index", and (ii) the "Nasdaq
Computer & Data Processing Index." The comparisons assume the investment of $100
on December 31, 1996 in the Common Stock and in each of the indices and, in each
case, assumes reinvestment of all dividends. We have not paid any dividends on
our Common Stock and do not intend to do so in the foreseeable future. The
performance graph is not necessarily indicative of future performance.


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                              12/31/96   12/31/97    12/31/98   12/31/99    12/31/00   12/31/01
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>        <C>         <C>        <C>         <C>
SEDONA Corporation                             100.00      73.57       64.96      94.02       23.08      21.61
------------------------------------------------------------------------------------------------------------------
NASDAQ-US Index                                100.00     122.48      172.70     320.87      193.00     153.15
------------------------------------------------------------------------------------------------------------------
NASDAQ Computer & Data Processing Index        100.00     122.87      219.20     481.81      221.85     178.66
------------------------------------------------------------------------------------------------------------------
</TABLE>






                               [GRAPHIC OMITTED]







ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of March 31, 2002, assuming
conversion of Class A Series A Convertible Preferred Stock into shares of Common
Stock, for (i) each person or entity who is known to us to beneficially own five
percent or more of the Common Stock, (ii) each of our directors, (iii) each of
our Named Executive Officers, and (iv) all directors and executive officers as a
group. The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them unless
otherwise indicated. For purposes of the table, a person or group of persons is
deemed to have beneficial ownership of any shares as of a given date which such
person has the right to acquire within 60 days after such date.

                                       11
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         (continued)


<TABLE>
<CAPTION>
     NAME AND ADDRESS OF                         AMOUNT AND NATURE OF
     BENEFICIAL OWNER(1)                        BENEFICIAL OWNERSHIP(2)                   PERCENT OF CLASS
     -------------------                        -----------------------                   ----------------
<S>                                                    <C>                                     <C>
     Laurence L. Osterwise                             2,322,553                               4.53%

     Marco A. Emrich                                     302,500                                  *

     Michael A. Mulshine                               1,600,148(3)                            3.12%

     James C. Sargent                                    330,384                                  *

     R. Barry Borden                                     263,220                                  *

     Jack A. Pellicci                                    207,868                                  *

     Robert M. Shapiro                                   170,809                                  *

     James T. Womble                                     102,324                                  *

     William K. Williams                                 130,000                                  *

     All Executive Officers and                        5,429,806                              10.59%
     Directors as a Group
     (9 persons)
</TABLE>

*        Represents less than one percent.

(1)      The address of all persons listed is c/o SEDONA Corporation, 455 South
         Gulph Road, King of Prussia, PA 19406.

(2)      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. Osterwise - 2,088,000 warrants
         Mr. Emrich - 166,250 warrants and 136,250 options
         Mr. Mulshine - 152,485 options and 1,282,250 warrants
         Mr. Sargent - 243,705 options
         Mr. Borden - 242,632 options
         Mr. Pellicci - 186,544 options
         Mr. Shapiro - 128,750 options
         Mr. Womble - 81,000 options
         Mr. Williams - 130,000 options

(3)      Includes warrants to purchase up to 706,415 shares issued to Osprey
         Partners, a company owned by Mr. Mulshine.

                                       12
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In December 2000, SEDONA amended its Consulting Agreement with Osprey Partners
("Osprey"), a company that is owned by Michael A. Mulshine. Under that
agreement, Osprey was to provide services to SEDONA with regard to shareholder
and investor relations activities and for management consulting services. Under
the agreement Osprey was issued warrants to purchase up to 56,000 shares of our
Common Stock, with such warrants to vest at the rate of 4,667 shares on the
first of each month for the twelve months starting January 1, 2001, and such
warrants to be exercisable for up to ten years at an exercise price of $1.13 per
warrant. Under the agreement Osprey was also to be paid a monthly retainer in
the amount of $3,500. It is management's belief that the levels of compensation
for services provided were favorable to the Company and were reasonably below
market rates for such services.

                                       13
<PAGE>

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        SEDONA CORPORATION

April 24, 2002                          /s/ Marco A. Emrich
----------------                        -------------------------------------
DATE                                    Marco A. Emrich
                                        CHIEF EXECUTIVE OFFICER AND PRESIDENT

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant, in
the capacities and on the dates indicated. Each person in so signing also makes
and constitutes Laurence L. Osterwise, Chairman of the Board of Directors, his
true and lawful attorney-in-fact, in his name, place and stead, to execute and
caused to be filed with the Securities and Exchange Commission, any or all
amendments to this report.

Signatures
----------

By /s/ Laurence L. Osterwise                           Date April 24, 2002
   -----------------------------------------           ---------------------
   Chairman of the Board of Directors

By /s/ R. Barry Borden                                 Date April 24, 2002
   -----------------------------------------           ---------------------
   R. Barry Borden
   Vice Chairman of the Board of Directors

By /s/ Marco A. Emrich                                 Date April 24, 2002
   -----------------------------------------           ---------------------
   Chief Executive Officer and President
   (Principal Executive Officer)

By /S/ William K. Williams                             Date April 24, 2002
   -----------------------------------------           ---------------------
   Chief Financial Officer and Vice President
   (Principal Financial and Accounting Officer)

By /S/ Michael A. Mulshine                             Date April 24, 2002
   -----------------------------------------           ---------------------
   Michael A. Mulshine
   Director and Secretary

By /S/ Jack Pellicci                                   Date April 24, 2002
   -----------------------------------------           ---------------------
   Jack Pellicci
   Director

By /S/ James C. Sargent                                Date April 24, 2002
   -----------------------------------------           ---------------------
   James C. Sargent
   Director

By /S/ Robert M. Shapiro                               Date April 24, 2002
   -----------------------------------------           ---------------------
   Robert M. Shapiro
   Director

By /S/ James T. Womble                                 Date April 24, 2002
   -----------------------------------------           ---------------------
   James T. Womble
   Director

                                       14