<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


                                    FORM 10-Q






QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999


Commission File Number    0-15864
                       -------------



                               SEDONA CORPORATION
-------------------------------------------------------------------------------
             (exact name of registrant as specified in its charter)

      PENNSYLVANIA                                   95-4091769
---------------------------               -------------------------------------
 (State of Incorporation)                   (IRS Employer Identification No.)

             649 NORTH LEWIS ROAD, LIMERICK, PENNSYLVANIA 19468-1234
-------------------------------------------------------------------------------
               (Address of principal executive offices)   (Zip Code)

                                  610-495-3003
-------------------------------------------------------------------------------
               Registrant's telephone number, including area code

                               SCAN-GRAPHICS, INC.
-------------------------------------------------------------------------------
                                   Former Name

Indicate by the check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 and 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
                                                ------   ------


21,545,348 shares of common stock were outstanding as of June 30, 1999.
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES






                                                                       INDEX
PART I.  FINANCIAL INFORMATION                                         PAGE
------------------------------                                         ------
Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets -- June 30, 1999 (Unaudited)
         and December 31, 1998                                           4

         Consolidated Statements of Operations -- (Unaudited)
         three months ended June 30, 1999 and 1998                       5

         Consolidated Statements of Operations -- (Unaudited)
         six months ended June 30, 1999 and 1998                         6

         Consolidated Statements of Cash Flow -- (Unaudited)
         six months ended June 30, 1999 and 1998                         7

         Notes to Consolidated Financial Statements -
         June 30, 1999                                              8 - 10

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations             11 - 13


PART II.  OTHER INFORMATION
---------------------------
Item 1 through Item 6.                                             14 - 15

SIGNATURE PAGE                                                          16









                                       2
<PAGE>

                       NOTE ON FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are statements
other than historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such as "believes",
"anticipates", "intends", or "expects". These forward-looking statements relate
to the plans, objectives, and expectations of Sedona Corporation (the "Company"
or "Sedona Corp.") for future operations. In light of the risks and
uncertainties inherent in all forward-looking statements, the inclusion of such
statements in this Form 10-Q should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved or that any of the Company's operating expectations will be realized.
The Company's revenues and results of operations are difficult to forecast and
could differ materially from those projected in the forward-looking statements
contained herein as a result of certain factors including, but not limited to,
dependence on operating agreements with foreign partners, significant foreign
and U.S.-based customers and suppliers, availability of transmission facilities,
U.S. and foreign regulations, international economic and political instability,
dependence on effective billing and information systems, customer attrition and
rapid technological change. These factors should not be considered exhaustive;
the Company undertakes no obligation to release publicly the results of any
future revisions it may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.






















                                       3
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (In Thousands, except share and per share data)


<TABLE>
<CAPTION>
                                                                     (UNAUDITED)
                                                                       JUNE 30,         DECEMBER 31,
                                                                         1999               1998
                                                                     -----------        ------------
<S>                                                                   <C>                 <C>
Assets
Current Assets:
 Cash                                                                  $ 1,011              $  798
 Accounts and notes receivable, less
  allowance for doubtful accounts of
  $45 in 1999 and $226 in 1998                                             787               1,916
 Inventories                                                             1,131                 932
 Prepaid expenses and other current assets                                 130                 139
                                                                       ---------------------------
Total current assets                                                     3,059               3,785

Property And Equipment, less accumulated
 depreciation and amortization                                             919               1,115
Software development costs, net and other assets                           466                 345
                                                                       ---------------------------
Total assets                                                           $ 4,444              $5,245
                                                                       ===========================

Liabilities And Stockholders' Equity
Current Liabilities:
 Accounts payable and accrued expenses                                 $    956             $ 1,070
 Dividend payable                                                           249                 259
 Deferred revenue                                                           148                  47
 Current maturities of long-term debt                                        63                 125
                                                                       ----------------------------
Total current liabilities                                                1,416                1,501
Long-term debt, less current maturities                                     82                  132
Other                                                                       81                  155
                                                                       ----------------------------
Total long-term liabilities                                                163                  287
                                                                       ----------------------------
Total liabilities                                                      $ 1,579              $ 1,788

Stockholders' Equity:
    Class A convertible preferred stock
      Authorized shares - 1,000,000
        Series A, par value $2.00,
           Issued and outstanding shares - 500,000                       1,000                1,000
        Series B, par value $2.00,
           Issued and outstanding shares - 1,000 and
           -0- in 1999 and 1998, respectively                            1,000                  --
       Series E, par value $1,000,
           Issued and outstanding shares - 2,268 and
           4,347 in 1999 and 1998, respectively                          2,268                4,347
        Series F, par value $1,000,
           Issued and outstanding shares - 1,000 and
           -0- in 1999 and 1998, respectively                            1,000                  --
    Common stock, par value $0.001
      Authorized shares - 50,000,000
        Issued and outstanding shares - 21,545,348
         and 19,927,789 in 1999 and 1998, respectively                      22                   20
    Additional paid-in-capital                                          27,878               25,396
    Notes receivable, related parties                                      (53)                 (53)
    Accumulated deficit                                                (30,250)             (27,253)
                                                                       ----------------------------
Total stockholders' equity                                               2,865                3,457
                                                                       ----------------------------
Total liabilities and stockholders' equity                             $ 4,444              $ 5,245
                                                                       ============================
</TABLE>

                             See accompanying notes.

                                       4
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In Thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED JUNE 30,
                                                               ------------------------------------
                                                                 1999                         1998
                                                                 ----                         ----
<S>                                                            <C>                          <C>
Revenues:
  Sales                                                        $ 1,079                      $ 1,542
  License and royalty fees                                           3                          --
                                                               ------------------------------------
Total revenues                                                   1,082                        1,542
Cost of goods sold                                                 728                          779
                                                               ------------------------------------
Gross profit                                                       354                          763
Expenses:
  General and administrative                                       851                          704
  Sales and marketing                                              524                          674
  Research and development                                         143                          397
                                                               ------------------------------------
Total operating expenses                                         1,518                        1,775
                                                               ------------------------------------
                                                                (1,164)                      (1,012)
Other income(expense)
   Interest income                                                  22                           50
   Interest expense                                                (23)                         (21)
   Other                                                            --                           (1)
                                                               ------------------------------------
Total other income (expense)                                        (1)                          28
Loss before provision for income taxes                          (1,165)                        (984)
Income taxes                                                        --                           --
                                                               ------------------------------------
Net loss                                                        (1,165)                        (984)
Preferred stock dividends                                         (103)                        (235)
                                                               ------------------------------------
Net loss applicable to common stockholders                     $(1,268)                     $(1,219)
                                                               ====================================
Basic and diluted net loss applicable to
  common shares                                                $  (.06)                     $  (.06)
                                                               ====================================
Basic and diluted weighted average common
  shares outstanding                                            21,294,414               18,838,003
                                                               ====================================
</TABLE>












                             See accompanying notes.

                                       5
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In Thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED JUNE 30,
                                                                       ---------------------------------
                                                                         1999                   1998
                                                                         ----                   ----
<S>                                                                    <C>                     <C>
Revenues:
  Sales                                                                $ 1,670                 $ 2,744
  License and royalty fees                                                   5                       9
                                                                       ----------------------------------
Total revenues                                                           1,675                   2,753
Cost of goods sold                                                       1,375                   2,322
                                                                       ----------------------------------
Gross profit                                                               300                     431

Expenses:
  General and administrative                                             1,410                   1,903
  Sales and marketing                                                    1,227                   1,469
  Research and development                                                 444                     828
                                                                       ----------------------------------
Total operating expenses                                                 3,081                   4,200
                                                                       ----------------------------------
                                                                        (2,781)                 (3,769)
Other income(expense)
   Interest income                                                          34                      67
   Interest expense                                                        (50)                    (29)
   Other                                                                   --                        6
                                                                       ----------------------------------
Total other income (expense)                                               (16)                     44
Loss before provision for income taxes                                  (2,797)                 (3,725)
Income taxes                                                               --                     --
                                                                       ----------------------------------
Net loss                                                                (2,797)                 (3,725)
Preferred stock dividends                                                 (200)                   (427)
                                                                       ----------------------------------
Net loss applicable to common stockholders                             $(2,997)                $(4,152)
                                                                       ==================================
Basic and diluted net loss applicable to
  common shares                                                        $ (.14)                 $  (.22)
                                                                       ==================================
Basic and diluted weighted average common
  shares outstanding                                                    20,827,515             18,668,398
                                                                       ==================================
</TABLE>











                             See accompanying notes.

                                       6
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                 (In Thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                          UNAUDITED
                                                                                  SIX MONTHS ENDED JUNE 30,
                                                                                  -------------------------
                                                                                   1999               1998
                                                                                   ----               ----
<S>                                                                               <C>                <C>
Operating Activities
Net loss                                                                          $(2,797)           $(3,725)
Adjustments to reconcile net loss to net
 cash used in operating activities:
   Depreciation and amortization                                                      182                197
   Increase accounts receivable reserves                                              103                 --
   Increase inventory reserves                                                         --                737
   Recovery for losses on accounts receivable                                        (181)                --
   Changes in operating assets and liabilities:
    Accounts receivable                                                             1,206               (848)
    Inventories                                                                      (199)              (200)
    Prepaid expenses and other current assets                                           9                 41
    Other noncurrent assets                                                           103                  4
    Accounts payable and accrued expenses                                             (54)                (8)
    Other                                                                             101                392
                                                                                  --------------------------
Net cash used in operating activities                                             $(1,527)           $(3,410)

Investing Activities:
Purchase of property and equipment, net                                                14                (97)
Increase in capitalized software development costs                                   (224)                --
                                                                                  --------------------------
Net cash used in investing activities                                                (210)               (97)

Financing Activities:
Payment of preferred stock dividends                                              $   (71)           $    14
Changes in long-term obligations, net                                                (245)               (42)
Proceeds from issuance of preferred stock, net                                      1,925              5,000
Proceeds from exercise of common stock
   warrants/options                                                                   341                 50
                                                                                  --------------------------
Net cash provided by financing activities                                           1,950              5,022
                                                                                  --------------------------
Net increase in cash and cash equivalents                                             213              1,515
Cash and cash equivalents, at beginning of year                                       798              1,310
                                                                                  --------------------------
Cash and cash equivalents, at end of period                                       $ 1,011            $ 2,825
                                                                                  ==========================
</TABLE>







                             See accompanying notes.

                                        7
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                 (In Thousands, except share and per share data)

Note #1

The accompanying consolidated financial statements are unaudited and include the
accounts of Sedona Corporation and subsidiaries (the "Company"). All significant
inter-company transactions and balances have been eliminated. In April 1999, the
Company announced a name change of the corporation to Sedona Corporation from
SCAN-GRAPHICS, Inc. and began trading under the NASDAQ Symbol "SDNA."

The consolidated financial statements included herein for the three and six
months ended June 30, 1999 and 1998 are unaudited. In the opinion of management,
all adjustments (consisting of normal recurring accruals) have been made which
are necessary to present fairly the financial position of the Company in
accordance with generally accepted accounting principles. The results of
operations experienced for the six month period ended June 30, 1999 are not
necessarily indicative of the results to be experienced for the year ended
December 31, 1999.

The statement and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying notes should
therefore be read in conjunction with the Company's December 31, 1998 annual
financial statements on Form 10-K and Form l0-Q for the Company's quarter ended
March 31, 1999.

Note #2  Inventories:

         Inventories at June 30, 1999 and December 31, 1998 consist of the
         following:

                                                   June 30,
                                                    1999           December 31,
                                                 (Unaudited)          1998
                                                 -----------       ------------
         Raw materials                            $  311            $  389
         Work-in-process                              96               135
         Finished products                           724               408
                                                  ------            ------
                                                  $1,131            $  932
                                                  ======            ======


Note #3  Property and Equipment:

         Property and equipment consists of:

                                                    June 30,
                                                      1999        December 31,
                                                   (Unaudited)       1998
                                                   -----------    ------------
         Machinery & equipment                       $3,237          $3,215
                  Equipment under capital lease         471             507
                  Furniture & fixtures                  197             199
         Autos & trucks                                --                12
                  Leasehold improvements                 88              88
                  Software                              290             290
                                                     ------          ------
                                                      4,283           4,311
         Less accumulated
                   depreciation and amortization      3,364           3,196
                                                     ------          ------
                                                     $  919          $1,115
                                                     ======          ======

                                       8
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                 (In Thousands, except share and per share data)

Note #4  Long-Term Debt:

         Long-term debt consists of the following:

                                                    June 30,
                                                     1999         December 31,
                                                  (Unaudited)        1998
                                                  -----------     ------------
         Note Payable, payable in monthly
         installments of $6, including
         interest at 8.75% through July
         1999. The note payable is
         collateralized by equipment.               $  4             $ 40
         Capital lease obligations                    80              217
                                                    ----             ----
                                                      84              257
         Less current maturities                       3              125
                                                    ----             ----
         Long-term debt                             $ 81             $132
                                                    ====             ====

Note #5  Stockholders' Equity

         During the second quarter of 1999, holders of $614 principal value of
         the Series "E" Preferred Stock exercised their right to convert into
         common stock and 589,785 common shares were issued. In addition, one
         Series "E" holder's Preferred Stock with $45 principal value was
         redeemed for cash by the Company.

         On March 31, 1999, the Company entered into a $1.0 million private
         placement purchase agreement for the issuance of 1,000 shares of Series
         B convertible preferred stock. After a period of 12 months from March
         31, 1999 (anniversary date), the investor can convert the preferred
         stock to common stock at the lower of: 1) $2.30 (the "Closing Price"),
         or 2) 100% of the common stock's average last trade price during the 25
         trading days preceding the Conversion Date (the "Conversion Date
         Price"). In no event can the conversion price be below $1.15. The
         conversion amount shall be the principal amount of the preferred stock
         being converted, plus an 8% premium accruing from the closing date to
         the conversion date. In addition, if the common stock's average last
         trade price during the 25 days preceding the anniversary is less than
         145% of the Closing Price, the investor shall also be entitled to five
         year warrants under a variable formula such that the lower the
         conversion price, the higher the number of warrants. Additional
         warrants may be issued to a maximum of 1,875,749 under this agreement.
         Mandatory conversion of the preferred stock shall occur on the third
         anniversary after closing.

         On May 17, 1999, the Company announced that it would be retiring all
         its remaining Series E Preferred Stock with proceeds from new common
         stock issuance. This transaction is anticipated to be concluded in the
         third quarter of 1999.

         During the second quarter of 1999, there were a total of 505,000 common
         stock options with exercise prices varying from $1.35 to $2.13 per
         share issued to employees and directors of the Company and 485,000
         common stock warrants with exercise prices ranging from $1.16 to $2.19
         per share issued to certain officers and directors and a consultant to
         the Company. The exercise prices of these options and warrants
         approximated fair value at the time of such grants.

                                       9
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
                 (In Thousands, except share and per share data)


Note #5  Stockholders' Equity

         On May 24, 1999, the Company entered into a $1.0 million private
         placement purchase agreement for the issuance of 1,000 shares of Series
         F convertible preferred stock. After a period of 12 months from May 24,
         1999 (anniversary date), the investor can convert the preferred stock
         to common stock at the lower of: 1) $1.41 (the "Closing Price"), or 2)
         100% of the common stock's average last trade price during the 25
         trading days preceding the Conversion Date (the "Conversion Date
         Price"). In no event can the conversion price be below $1.00. The
         conversion amount shall be the principal amount of the preferred stock
         being converted, plus an 8% premium accruing from the closing date to
         the conversion date. In addition, if the common stock's average last
         trade price during the 25 days preceding the anniversary is less than
         145% of the Closing Price, the investor shall also be entitled to five
         year warrants under a variable formula such that the lower the
         conversion price, the higher the number of warrants. Additional
         warrants may be issued to a maximum of 1,646,178 under this agreement.
         Mandatory conversion of the preferred stock shall occur on the third
         anniversary after closing.

Note #6  Supplemental Disclosures of Cash Flow Information:

                                                 Six months ended June 30,
                                                 -------------------------
                                                     1999        1998
                                                   -------      ------

         Cash paid during period for interest      $    50      $   29
                                                   =======      ======
         Non-cash financing activities
          are as follows:

           Conversion of debenture interest
            and preferred stock dividends
            into common stock                      $    48      $  196
                                                   =======      ======
           Conversion of debentures into
            preferred  stock                       $  --        $  311
                                                   =======      ======
           Conversion of preferred stock
            to common stock                        $   614      $2,740
                                                   =======      ======
           Expenses incurred related to
            issuance of convertible stock          $    30      $  230
                                                   =======      ======
           Notes Receivable, related parties
            reductions                             $  --        $  906
                                                   =======      ======

                                       10
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 (In Thousands, except share and per share data)

Results of Operations

Revenues for the three months ended June 30, 1999 were $1,082 a 30% decrease
compared to the three months ended June 30, 1998 amount of $1,542. The decrease
was caused principally by sales of fewer units in Tangent Imaging Systems offset
to some extent by increases in sales in the SedonaGeo Services unit. Revenue to
two customers accounted for approximately 35% of net revenue for the three
months ended June 30, 1999, compared to revenue to two customers which accounted
for approximately 25% of net revenue for the three months ended June 30, 1998.

Net revenue for the six months ended June 30, 1999 decreased to $1,675, a 39%
decrease compared to the six months ended June 30, 1998, amount of $2,753. This
decrease was the result of declining sales in Tangent offset to some extent by
increases in Sedona GeoServices and Technology Resource Centers. Revenue to two
customers accounted for approximately 34% of net revenue for the six months
ended June 30, 1999, and revenue to one customer accounted for approximately 22%
of net revenue for the six months ended June 30, 1998.

Gross margin percentages for the three months ended June 30, 1999 and 1998 were
32.7% and 49.5% of revenue, respectively. The decrease in gross profit margin is
due to the decline in margins in Tangent Imaging Systems and Technology Resource
Centers which were offset to some extent by increases in Sedona GeoServices. The
decline in Tangent Imaging Systems was due primarily to high fixed costs versus
low sales volumes. In Technology Resource Centers, negative margins stemmed
primarily from certain technical difficulties in production.

Gross margin percentages for the six months ended June 30, 1999 and 1998 were
17.9% and 15.7% of revenue, respectively. The increase in gross profit margin is
accounted for principally by certain reserves taken in the first quarter of
1998. Excluding those reserves, gross margin would have been 42.4% for the first
half ended June 30, 1998. On this basis, margins during the first six months of
1999 declined principally due to lower sales volumes in the Company's Tangent
Imaging Systems division.

General and administrative expense for the three months ended June 30, 1999 was
78.7% of revenue compared to 45.7% of revenue at June 30, 1998. This increase
was due principally to lower sales volume.

General and administrative expense for the six months ended June 30, 1999 was
84.2% of revenue compared to 69.1% at June 30, 1998. This increase was due
principally to lower sales volumes.

Sales and marketing expense as a percentage of revenue increased to 48.4% of
sales for the three months ended June 30, 1999 compared to 43.7% at June 30,
1998. This increase was due principally to low revenue in Tangent Imaging
Systems offset to some extent by lower dollar expenditures.

Sales and marketing expenses as a percentage of revenue increased to 73.3% of
revenue for the six months ended June 30, 1999, compared to 53.3% at June 30,
1998. The increase was due to low sales volumes offset to some extent by lower
total dollar expenditures in this category.

                                       11
<PAGE>

Results of Operations (Continued)

Research and development expense as a percentage of revenue decreased to 13.2%
of revenue for the three months ended June 30, 1999 compared to 25.7% of revenue
for the three months ended June 30, 1998 due principally to capitalized software
development costs.

For the six months ended June 30, 1999 and 1998, research and development
expenses as a percentage of revenues decreased to 26.5% versus 30.1%,
respectively, reflecting lower dollar expenditures and capitalized software
development costs.

Liquidity and Capital Resources

At June 30, 1999, cash and cash equivalents increased to $1,011, a $213 increase
compared to the December 31, 1998 amount of $798. The above change in cash and
cash equivalents are explained as follows in the cash flow from operating,
investing and financing activities.

As of June 30, 1999, the cash flows from operating activities resulted in a net
use of cash of $1,527. This use of cash was primarily due to the operating
losses sustained by all divisions.

Decreases in receivables of $1,206 were due principally to decreases in sales
levels.

As of June 30, 1999, the cash flows from investing activities resulted in a net
use of cash of $210 primarily due to increases in capitalized software
development costs.

As of June 30, 1999, the cash flows from financing activities resulted in net
cash provided by financing activities of $1,950. The decrease in cash provided
when compared to the same period a year ago was due principally to lower
proceeds on the sale of a new series of preferred stock as described below
offset to some extent by greater proceeds from exercises of options and
warrants.

On May 24, 1999, the Company entered into a $1.0 million private placement
purchase agreement for the issuance of 1,000 shares of Series F convertible
preferred stock. After a period of 12 months from May 24, 1999 (anniversary
date), the investor can convert the preferred stock to common stock at the lower
of: 1) $1.41 (the "Closing Price"), or 2) 100% of the common stock's average
last trade price during the 25 trading days preceding the Conversion Date (the
"Conversion Date Price"). In no event can the conversion price be below $1.00.
The conversion amount shall be the principal amount of the preferred stock being
converted, plus an 8% premium accruing from the closing date to the conversion
date. In addition, if the common stock's average last trade price during the 25
days preceding the anniversary is less than 145% of the Closing Price, the
investor shall also be entitled to five year warrants under a variable formula
such that the lower the conversion price, the higher the number of warrants.
Additional warrants may be issued to a maximum of 1,646,178 under this
agreement. Mandatory conversion of the preferred stock shall occur on the third
anniversary after closing.







                                       12
<PAGE>

                       SEDONA CORPORATION AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 (In Thousands, except share and per share data)

Liquidity and Capital Resources (Continued)

The Company believes that proceeds from the private placements noted above and
funds generated from operations and/or additional equity contributions, will be
sufficient to meet the Company's working capital requirements for 1999.

Inflation

There can be no assurance that the Company's business will not be affected by
inflation in the future, however, management believes the inflation did not have
a material effect on the results of operations or financial condition of the
Company during the period presented herein.

Year 2000

The Company has and is continuing to conduct reviews of the Year 2000 issue with
all key executives participating. These reviews include all software produced by
the Company for use by its customers as well as the principal internally used
management information systems. As a result of these reviews management has
concluded that there is no Year 2000 issue of significance regarding either
software produced by the Company or used internally. Nevertheless, management
plans to continue compliance testing and will develop a comprehensive plan to
address any issues which may arise.

Subsequent Events

On July 16, 1999 the Company announced that the sale of assets of the Technology
Resource Centers to Diversified Technologies, Inc. of Scranton, PA. Completion
of this transaction is expected in the third quarter. No significant impact on
operations or the financial status of the Company is anticipated as a result of
this transaction.

Also on July 16, 1999, the Company announced that a letter of intent had been
signed with a major international imaging and scanner manufacturing company
which intends to acquire the Company's Tangent Imaging Systems operation.
Closing is expected within the third quarter. With the completion of this
transaction the Company will be wholly focused on the work of its Sedona
GeoServices division.











                                       13
<PAGE>

PART II - OTHER INFORMATION

         Item 1 - Legal Proceedings

                  No new actions have been filed against the Company since prior
                  filings of the Company and there have been no substantive
                  developments in previously disclosed matters.

                  No other actions other than matters involved in the ordinary
                  course of business are currently known by management and none
                  of these are believed by management to have potential
                  significance.


         Item 2 - Changes in Securities - None


         Item 3 - Default Upon Senior Securities - None


         Item 4 - Submission of Matters to a Vote of Security Holders - None


         Item 5 - Other Information - None


         Item 6 - Exhibits and Reports on Form 8-K - None


         Exhibit Document
         ----------------

         (2)      Plan of acquisition, reorganization, arrangement,
                  liquidation or succession. - None

        *(4)      Instruments defining the rights of security holders.
                  Documents related to Class A Convertible Preferred Stock,
                  Series F. (Exhibit 4.0)

         (10)     Material Contracts - None

         (11)     Statement re: computation of per share earnings. Not
                  applicable

         (15)     Letter re:  unaudited financial information. Not applicable

         (18)     Letter re:  change in accounting principles. Not applicable

         (19)     Previously unfiled documents. - None

         (20)     Report(s) furnished to security holders. - None


                                       14
<PAGE>

PART II - OTHER INFORMATION (CONTINUED)

         (23)     Published report regarding matters submitted to vote of
                  security holders.

         Proposal No. 1
         --------------

         In Election of Directors to terms expiring in 1999:

                                                     WITHHELD/
                                       FOR           AGAINST           TOTAL
                                    ----------      ---------        ----------
         R. Barry Borden            17,405,734      1,996,019        19,401,753
         David S. Hirsch            17,403,334      1,998,419        19,401,753
         Michael A. Mulshine        19,287,305        114,448        19,401,753
         Laurence L. Osterwise      17,344,909      2,056,844        19,401,753
         Jack A. Pellicci           19,296,055        105,698        19,401,753
         James C. Sargent           19,264,955        136,798        19,401,753
         Robert M. Shapiro          19,292,455        109,298        19,401,753
         James T. Womble            19,265,250        136,503        19,401,753


         (24)     Consents of experts and counsel. - None

         (25)     Power of attorney. None

        *(28)     Additional exhibits.

                  Articles of Amendment-Domestic Business Corporation
                  Corporation Name Change to Sedona Corporation - Exhibit 28

* Filed herewith
















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<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned,

Thereunto duly authorized.

                                 SEDONA CORPORATION



DATE:    August 16, 1999          /S/ Laurence L. Osterwise
     ----------------------      --------------------------------------------
                                 Laurence L. Osterwise
                                 President and Chief Executive Officer




DATE:   August 16, 1999           /S/ William K. Williams
     ----------------------      --------------------------------------------
                                 William K. Williams
                                 Vice President and Chief Financial Officer
                                 (Principal Financial and Accounting Officer)

























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