<PAGE>

                         Securities and Exchange Commission
                               Washington, D.C. 20549
                                          
                                     FORM 10-Q
                                          
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
                                          
(Mark One)

/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

For the quarterly period ended          June 30, 1997.
                                    --------------------

/ / 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      0-21705
                                                   -------


                   SANCHEZ COMPUTER ASSOCIATES, INC.
-------------------------------------------------------------------------------
          (Exact Name of Registrant as Specified in Its Charter)
                                     
                                     
        Pennsylvania                            23-2161560
-------------------------------    ------------------------------------
(State or Other Jurisdiction of    (I.R.S. Employer Identification No.)
Incorporation or Organization)                                   


40 Valley Stream Parkway, Malvern, PA                  19355     
-----------------------------------------------------------------
(Address of Principal Executive Offices)               (Zip Code)



Registrant's Telephone Number, Including Area Code:    (610) 296-8877
                                                       --------------


                            N/A
--------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.


                          Yes    X      No
                              -------      -------

As of July 31, 1997, there were outstanding 10,933,282 shares of the issuer's 
Common Stock, no par value.


<PAGE>



                    SANCHEZ COMPUTER ASSSOCIATES, INC.
                                     
                            INDEX TO FORM 10-Q
                   FOR THE QUARTER ENDED JUNE 30, 1997
                                     
                                     
                                     
                                     
                      PART I:  FINANCIAL INFORMATION



ITEM 1:  FINANCIAL STATEMENTS
                                                                   Page  No.
                                                                   ---------

CONSOLIDATED BALANCE SHEETS
  June 30, 1997 (Unaudited) and December 31, 1996................      3

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
  Three and Six Months Ended June 30, 1997 and 1996..............      4

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
  Six Months Ended June 30, 1997 and 1996........................      5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)...........      6

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........      7



                       PART II:  OTHER INFORMATION
                                     
ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY  
         HOLDERS.................................................      13

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K........................      13

SIGNATURES.......................................................      14


                                       2


<PAGE>

                                  Sanchez Computer Associates, Inc.
                                     Consolidated Balance Sheets
                                 (in thousands, except share amounts)




<TABLE>
<CAPTION>

                                                  JUNE 30,       DECEMBER 31,
                       ASSETS                       1997             1996
                                                 -----------     ------------
                                                 (UNAUDITED)

<S>                                             <C>             <C>
Current assets
  Cash and cash equivalents.......................$  15,902      $   15,446
  Accounts receivable, less allowance of $40......    8,093           8,920
  Prepaid and other current assets................    1,198           2,203
                                                   --------         -------
    Total current assets..........................   25,193          26,569

Property and equipment
  Equipment.......................................    2,424           2,084
  Furniture and fixtures..........................      249             238
  Leasehold improvements..........................       66              64
                                                   --------         -------
                                                      2,739           2,386
Accumulated depreciation and amortization.........   (1,660)         (1,462)
                                                   --------         -------
  Net property and equipment......................    1,079             924

Capitalized software costs, net of amortization 
  of $1,422 at June 30, 1997 and $1,289 
  at December 31, 1996............................      770             675
                                                    -------         -------
    Total assets.................................. $ 27,042        $ 28,168
                                                    -------         -------
                                                    -------         -------

                     LIABILITIES

  Current liabilities
    Current portion of long-term debt............. $    171        $    224
    Accounts payable, trade.......................      857             637
    Accrued expenses..............................    2,287           2,474
    Deferred revenue..............................    2,155           3,913
                                                    -------         -------
        Total current liabilities.................    5,470           7,248

  Deferred revenue................................    1,128           1,508
  Long-term debt-net of current portion...........      163             218
  Other long-term liabilities.....................      230             284
                                                    -------         -------
        Total liabilities.........................    6,991           9,258

Commitments (Note E)


               SHAREHOLDERS' EQUITY

Common stock, no par value
  Authorized--50,000,000 shares
  Issued and outstanding--10,922,219 and 
    10,865,255 shares at June 30, 1997 
    and December 31, 1996, respectively...........      109             109
  Additional paid-in capital......................   18,213          18,103
  Retained earnings...............................    2,150           1,236
  Notes due on common stock purchases.............     (421)           (538)
                                                    -------         -------
    Total shareholders' equity....................   20,051          18,910
                                                    -------         -------
    Total liabilities and shareholders' equity.... $ 27,042       $  28,168
                                                    --------        -------
                                                    --------        -------

</TABLE>
 

                      See notes to consolidated financial statements


                                       3



<PAGE>


                                  Sanchez Computer Associates, Inc.
                                Consolidated Statements of Operations
                               (in thousands, except per share amounts)
                                               (UNAUDITED)



<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED     SIX MONTHS ENDED
                                                           JUNE 30,              JUNE 30,
                                                     --------------------  --------------------
                                                        1997       1996       1997       1996
                                                     ---------  ---------  ---------  ---------
<S>                                                 <C>         <C>       <C>         <C>

Revenues
  Software license fees............................   $2,801  $   2,310  $   5,128  $   3,694
  Product enhancement fees.........................      255        324        493        427
  Implementation and consulting services...........    1,782      1,115      3,193      2,045
  Software maintenance fees........................    1,369      1,024      2,544      2,084
                                                     ---------  ---------  ---------  ---------
    Total revenues.................................    6,207      4,773     11,358      8,250
Operating expenses
  Product development..............................    1,562      1,037      2,947      1,851
  Product support..................................      876        765      1,640      1,443
  Implementation and consulting....................    1,212        714      2,171      1,341
  Sales and marketing..............................      995        861      1,823      1,404
  Royalties and sublicense fees....................      318        475        718      1,013
  General and administrative.......................      627        398      1,145        705
                                                     ---------  ---------  ---------  ---------
    Total operating expenses.......................    5,590      4,250     10,444      7,757
                                                     ---------  ---------  ---------  ---------
Income from operations.............................      617        523        914        493
Interest income, net...............................      238         85        452        146
                                                     ---------  ---------  ---------  ---------
Income before income taxes.........................      855        608      1,366        639
Income tax provision...............................      282        250        451        262
                                                     ---------  ---------  ---------  ---------
Net income......................................... $    573    $   358    $   915    $   377
                                                     ---------  ---------  ---------  ---------
                                                     ---------  ---------  ---------  ---------
Net income per average common share................ $   0.05    $  0.04    $  0.08    $  0.04

Weighted average common shares outstanding.........   11,706      9,178     11,671      9,220


</TABLE>
 

                  See notes to consolidated financial statements


                                       4

<PAGE>



                                  Sanchez Computer Associates, Inc.
                                Consolidated Statements of Cash Flows
                                          (in thousands)
                                           (UNAUDITED)


<TABLE>
<CAPTION>


                                                                                                  SIX MONTHS ENDED JUNE 30,
                                                                                                  -------------------------
                                                                                                    1997           1996
                                                                                                  ---------      ---------
<S>                                                                                              <C>             <C>

Cash flows from operating activities
  Net income....................................................................................  $     915      $     377
  Adjustments to reconcile net income to cash provided by (used in) operating activities
  Depreciation and amortization.................................................................        429            305
  Other.........................................................................................        (44)           (30)
Cash provided (used) by changes in operating assets and liabilities
  Accounts receivable...........................................................................        827         (1,390)
  Prepaid and other current assets..............................................................      1,005            122
  Accounts payable and accrued expenses.........................................................         33            547
  Deferred revenues.............................................................................     (2,138)          (453)
                                                                                                  ---------      ---------
Net cash provided by (used in) operating activities...........................................        1,027           (522)

Cash flows from investing activities
  Capitalized computer software costs...........................................................       (228)          (101)
  Capital expenditures..........................................................................       (462)          (200)
                                                                                                  ---------      ---------
Net cash used in investing activities.........................................................         (690)          (301)

Cash flows from financing activities
  Proceeds from insurance of long-term debt.....................................................                       148
  Repayment of notes due on common stock purchases..............................................        117              7
  Principal payments under capital lease obligations............................................         (8)           (56)
  Principal payments under long-term notes......................................................       (100)           (91)
  Proceeds from exercise of stock options.......................................................        110
                                                                                                  ---------      ---------
Net cash provided by financing activities.....................................................          119              8
                                                                                                  ---------      ---------

Net increase (decrease) in cash and cash equivalents..........................................          456           (815)
Cash and cash equivalents at beginning of period..............................................       15,446          5,546
                                                                                                  ---------      ---------
Cash and cash equivalents at end of period....................................................   $   15,902     $    4,731
                                                                                                  ---------      ---------
                                                                                                  ---------      ---------


Supplemental cash flow information
Interest paid.................................................................................   $       19     $       17
Income taxes paid.............................................................................   $      116     $      228

</TABLE>


                 See notes to consolidated financial statements


 
                                       5

<PAGE>
                       Sanchez Computer Associates, Inc.
               Notes to Unaudited Consolidated Financial Statements
                     (in thousands, except per share amounts)
 
(A.)    BASIS OF PRESENTATION
 
         The accompanying consolidated financial statements of Sanchez 
Computer Associates, Inc. (the "Company") include the accounts of all of the 
Company's wholly owned subsidiaries. All significant intercompany 
transactions and balances have been eliminated. Certain prior period amounts 
have been reclassified to conform with current period presentation. In the 
opinion of management, the consolidated financial statements reflect all 
normal and recurring adjustments which are necessary for a fair presentation 
of the Company's financial position, results of operations, and cash flows as 
of the dates and for the periods presented. The consolidated financial 
statements have been prepared in accordance with generally accepted 
accounting principles for interim financial information. Consequently, these 
statements do not include all the disclosures normally required by generally 
accepted accounting principles for annual financial statements nor those 
normally made in the Company's Annual Report on Form 10-K. Accordingly, 
reference should be made to the Company's Annual Report on Form 10-K for 
additional disclosures, including a summary of the Company's accounting 
policies, which have not changed. The consolidated results of operations for 
the six months ended June 30, 1997 are not necessarily indicative of results 
for the full year.
 
(B.)     CASH AND CASH EQUIVALENTS
 
         Cash and cash equivalents at June 30, 1997 included amounts on 
deposit with Safeguard Scientifics, Inc. ("Safeguard"), a shareholder of the 
Company, in conjunction with a note agreement dated June 12, 1997. The demand 
note provides for borrowings by Safeguard from the Company of up to a maximum 
of $12 million on a revolving basis at Safeguard's effective borrowing rate 
minus .75%. This rate is higher than the Company is currently earning on its 
money market investments. At June 30, 1997 advances to Safeguard amounted to 
$9.2 million. Interest income from these advances amounted to $27 for the 
first six months of 1997. 

(C.)     ACCRUED EXPENSES
 
         Accrued expenses consist of the following:
 
<TABLE>
<CAPTION>
                                                       JUNE 30,    DECEMBER 31,
                                                         1997          1996
                                                     -----------  -------------
<S>                                                 <C>          <C>

Accrued compensation and related items............   $     687     $     715
Accrued royalties.................................         263           728
Accrued income taxes..............................         602           210
Other.............................................         735           821
                                                     -----------   ------------
                                                     $   2,287     $   2,474
                                                     -----------   ------------
                                                     -----------   ------------
</TABLE>

(D.)     NET INCOME PER SHARE
 
         Net income per common share was computed by dividing income by the 
weighted average number of shares outstanding during each period, including 
common stock equivalents which would arise from the exercise of stock options 
and warrants, using the treasury stock method.
 
         Stock options and warrants granted with exercise prices below the 
initial public offering price during the twelve-month period preceding the 
initial filing date of the offering (September 27, 1996) have been included 
in the calculation of common stock equivalents using the treasury stock 
method, assuming an offering price of $5.50 per share, as if they were 
outstanding for all periods presented prior to the offering.

(E.)     COMMITMENTS
 
         Commitments at June 30, 1997 were substantially the same as those 
disclosed in Note 9 of the Notes to Consolidated Financial Statements as of 
December 31, 1996.

                                       6


<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
        AND RESULTS OF OPERATIONS
 
OVERVIEW
 
    The Company designs, develops, markets, implements and supports 
comprehensive banking software, called PROFILE-Registered Trademark-, for 
financial services organizations worldwide. Sanchez's highly flexible PROFILE 
family of products is comprised of three integrated modules which operate on 
open, client-server platforms. The primary module, called PROFILE/Anyware, is 
a multi-currency bank production system which supports deposit, loan, 
customer, transaction processing and bank management requirements through 
multiple distribution channels, including the Internet. The other modules are 
PROFILE/FMS, a multi-company, multi-currency, financial management and 
accounting system, and PROFILE/ITS, a system that processes treasury 
transactions including foreign exchange, money market, securities trading 
(capital markets), futures, options and trade finance. The PROFILE system is 
currently licensed to 26 clients in ten countries serving more than 375 
financial institutions.
 
    The Company's operating results for the second quarter ended June 30, 1997
reflected increases in both revenues and net income compared to the same period
in 1996. Revenues increased by 30.0% to $ 6.2 million while net income increased
by 60.1% to $573,000 as compared to the quarter ended June 30, 1996. In
particular, a significant revenue contribution was derived from the licensing of
the PROFILE/Anyware product to Canada's Credit Union Central of Saskatchewan
("CUCS"). When CUCS is combined with Sanchez's existing Canadian credit union
clients, PROFILE will serve more than one million credit union members in
Canada. Additional second quarter revenue growth for 1997 as compared to 1996
was attributable to increased PROFILE implementation activity from the Emerging
Bank Market in Asia, as the Company signed its second client in this region--PT
Bank Rama in Jakarta, Indonesia.
 
    The Company made a strategic decision in early 1996 to increase its
investment in technology and product development, in particular as it relates to
PROFILE/Anyware, as well as certain other projects such as the development of
its graphical user interface ("GUI") client and the completion of the
adaptation, or "porting," of the Company's software to operate on different
computer systems. The company has continued increasing its investment in these
areas, and, as indicated below, product development expenditures increased in
the second quarter of 1997 when compared to the same period in 1996. In
addition, the Company decided to increase its investment in sales and marketing
activities, partially due to the implementation of the PROFILE/Anyware strategy,
but also as part of a focused effort to increase its direct sales efforts in
both the Emerging Banking Market and Direct Banking Market.
 
    The Company's backlog at June 30, 1997 amounted to $19.4 million. The
components of the backlog were $6.8 million for software license, product
enhancement and implementation and consulting revenues and $12.6 million for
maintenance and support. At December 31, 1996, the Company's backlog amounted to
$19.8 million, consisting of $8.1 million for software license, product
enhancement and implementation and consulting revenues and $11.7 million for
maintenance and support.
 
                                       7
<PAGE>

RESULTS OF OPERATIONS
 
    The following table sets forth for the periods indicated selected statement
of operations data:
 
<TABLE>
<CAPTION>
                                                                               QUARTER ENDED        SIX MONTHS ENDED
                                                                                  JUNE 30,              JUNE 30,
                                                                            --------------------  --------------------
DOLLARS IN THOUSANDS                                                          1997       1996       1997       1996
                                                                             ---------  ---------  ---------  ---------
<S>                                                                         <C>        <C>        <C>        <C>

Revenues
  Software license fees...................................................  $   2,801  $   2,310  $   5,128  $   3,694
  Product enhancement fees................................................        255        324        493        427
  Implementation and consulting services..................................      1,782      1,115      3,193      2,045
  Software maintenance fees...............................................      1,369      1,024      2,544      2,084
                                                                            ---------  ---------  ---------  ---------
    Total revenues........................................................  $   6,207  $   4,773  $  11,358  $   8,250
                                                                            ---------  ---------  ---------  ---------
                                                                            ---------  ---------  ---------  ---------
Percentage Relationship to Total Revenues
Revenues
  Software license fees...................................................       45.1%      48.4%      45.2%      44.8%
  Product enhancement fees................................................        4.1        6.8        4.3        5.2
  Implementation and consulting services..................................       28.7       23.3       28.1       24.8
  Software maintenance fees...............................................       22.1       21.5       22.4       25.2
                                                                            ---------  ---------  ---------  ---------
    Total revenues........................................................      100.0      100.0      100.0      100.0

Operating expenses
  Product development.....................................................       25.2       21.7       25.9       22.4
  Product support.........................................................       14.1       16.0       14.4       17.5
  Implementation and consulting...........................................       19.6       15.0       19.1       16.3
  Sales and marketing.....................................................       16.0       18.0       16.1       17.0
  Royalties and sublicense fees...........................................        5.1       10.0        6.3       12.3
  General and administrative..............................................       10.1        8.3       10.1        8.5
                                                                            ---------  ---------  ---------  ---------
    Total operating expenses..............................................       90.1       89.0       91.9       94.0

  Income from operations..................................................        9.9       11.0        8.1        6.0
  Interest income, net....................................................        3.8        1.8        4.0        1.8
                                                                            ---------  ---------  ---------  ---------
  Income before income taxes..............................................       13.7       12.8       12.1        7.8
  Income tax provision....................................................        4.5        5.3        4.0        3.2
                                                                            ---------  ---------  ---------  ---------
  Net income..............................................................        9.2        7.5        8.1        4.6
                                                                            ---------  ---------  ---------  ---------
                                                                            ---------  ---------  ---------  ---------
</TABLE>
 
Three Months Ended June 30, 1997, Compared to Three Months Ended June 30, 1996
 
    REVENUES.  Revenues increased $1.4 million, or 30.0%, in 1997, as license
fees, implementation and consulting and maintenance fees each improved over the
same period in the prior year. License fee revenue increased by $491,000 or
21.3%, relative to 1996 due primarily to a new client in Canada and an increased
number of client projects in process. This was partially offset by lower license
fees generated in Central Europe (since the 1996 period included a one-time
license expansion right for an existing customer of approximately $800,000).
Implementation and consulting service revenues increased by $667,000, or 59.8%
in 1997 as compared to 1996. Most of this growth is attributable to the
increased levels of PROFILE implementation activity in both Canada and the
Emerging markets of Central Europe and Asia. The number of active implementation
projects in the 1997 second quarter was approximately double the comparable
number during the 1996 period. Software maintenance fees increased by 33.7% or
$345,000, attributable primarily to ongoing growth in Central European and
Canada.
 
    PRODUCT DEVELOPMENT. Product development expenses increased $525,000 or 
50.6%, in 1997, due to the ongoing impact of the Company's strategic decision 
to increase investment in development for various technology projects. The 
most significant of these investments during the second quarter of 1997 
continued to be the ongoing development of the Company's GUI client. Average 
staffing, including subcontractors, in the product development area increased 
from 40 during the second 

                                       8

<PAGE>

quarter of 1996 to 63 during the second quarter of 1997. The percent 
relationship to total revenues also increased from 21.7% in 1996 to 25.2% in 
1997.
 
    PRODUCT SUPPORT.  Product support expenses increased by $111,000 or 14.5%,
in the quarter ended June 30, 1997, primarily due to an increase in the average
number of employees, 43 in 1997 versus 32 in 1996, required to support the
larger converted client base in 1997 relative to 1996.
 
    IMPLEMENTATION AND CONSULTING. Implementation and consulting expenses
increased by $498,000 or 69.7% during the second quarter of 1997, in conjunction
with a corresponding increase in implementation and consulting revenues of
$667,000 (a 59.8% increase relative to the same period in 1996). Of the $498,000
increase in expenses, $283,000 was related to increased utilization of third
party consultants and subcontractors required to support the increased revenue
levels. Many of these third party contractors provide support relative to the
Company's sub-licensed PROFILE/ITS product offering, which was being installed
at three European client sites during the 1997 quarter. The remaining increase
in expenses of $215,000 resulted from increased staffing and related overheads.
The percent relationship to related revenues increased in the 1997 quarter to
68% from 64% in the 1996 second quarter, due primarily to more extensive
utilization of more costly third party resources to deliver implementation
services as described above.
 
    SALES AND MARKETING. Sales and marketing expenses increased by $134,000, or
15.6% in the 1997 period, as the Company continued to increase its direct
coverage in this area, primarily via staffing increases in selected foreign
market locations. Marketing expenses related to the promotional and advertising
campaign for PROFILE/Anyware which commenced in early 1996 remained relatively
constant in the second quarter of 1997 as compared to the same period in 1996.
Due to the fact that total corporate revenues increased 30.0%, sales and
marketing expenses as a percent of total revenues decreased from 18.0% in the
second quarter of 1996 to 16.0% for the June, 1997 quarter.
 
    ROYALTIES AND SUBLICENSE FEES. The Company is obligated to pay royalties to
Digital Equipment Corporation and to certain clients based on the collection of
certain license fees. These obligations have varying expiration terms. The
Company also is obligated to pay sublicense and maintenance fees to certain
third party licensors, primarily related to its PROFILE/ITS product and also for
the M programming language and data base. These amounts will vary depending on
the applicable revenue components subject to such fees. For the quarter ended
June 30, 1997, these fees decreased by $157,000 or 33.1% as the result of a
$180,000 reduction in royalty expense, partially offset by a $23,000 increase in
third party license and support fees as compared to the same period in 1996. The
decrease in royalty expense for the 1997 period is in part attributable to a
lower level of license fees subject to royalty payment.
 
    GENERAL AND ADMINISTRATIVE. These expenses increased by $229,000, or 57.5%,
due to a number of factors which include additional expenses related to being a
public company, increased staffing, and increased costs related to training of
certain third party partners, in the 1997 period as compared to 1996.
 
    INTEREST INCOME, NET. Interest income, net, increased $153,000 in 1997 due
to income earned on higher invested cash balances, partially attributable to the
proceeds from the Company's initial public offering which were received as of
December, 1996.
 
    INCOME TAX PROVISION. Taxes in the 1997 second quarter were 33.0% of income
before income taxes, as compared to 41.1% in the 1996 quarter. This reduced
effective rate is primarily the result of the Company's establishment of a
Foreign Sales Corporation (FSC) in late 1996, as well as certain state net
operating loss carryforwards.
 
Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996

    REVENUES.  Revenues increased $3.1 million, or 37.7%, in 1997, as all
revenue categories improved over the same period in the prior year. License fee
revenue increased by $1.4 million or 38.8%, relative to 1996 due to
substantially increased activity in the Canadian marketplace (including direct
banking) as well as increased activity in the Asian markets relative to the same
period in 1996. Implementation and consulting service revenues increased by $1.1
million, or 56.1% in 1997 as compared to 1996. Most of this growth is
attributable to the increased levels of PROFILE implementation activity in the
Canadian marketplace as well as in Central Europe and Asia. Software maintenance
fees increased by 22.1% or $460,000, attributable primarily to an ongoing growth
in the Central European customer maintenance base as well as increases for a
client based in Portugal tied to their final acceptance of PROFILE.

                                       9

<PAGE>


    PRODUCT DEVELOPMENT. Product development expenses increased $1.1 million or
59.2%, in 1997, due to the ongoing impact of the Company's strategic decision to
increase investment in development for various technology projects. In
particular, the Company continued to invest heavily in the development of its
GUI client, which resulted in sharply increased expenditures for technical
resources. More specifically, staffing related expenditures (both employees and
third party contractors) increased by $850,000 in the 1997 six month period as
compared to 1996. The percent relationship to total revenues also increased from
22.4% in 1996 to 25.9% in 1997.
 
    PRODUCT SUPPORT.  Product support expenses increased by $197,000 or 13.7% in
the six months ended June 30, 1997, primarily due to an increase in staffing in
1997 versus 1996, required to support the larger converted client base. Also,
the 1997 period included a higher level of overhead costs related to the Prague
support office, which was opened in April of 1996.
 
    IMPLEMENTATION AND CONSULTING. Implementation and consulting expenses
increased by $830,000 or 61.9% during 1997, in conjunction with a corresponding
increase in implementation and consulting revenues of $1.1 million (a 56.1%
increase relative to the same period in 1996). Of the $830,000 increase in
expenses, $430,000 was related to increased utilization of third party
consultants and subcontractors required to support the increased revenue levels,
particularly related to the PROFILE/ITS product offering. Of the remaining
$400,000 increase in expenses, $213,000 resulted from increased internal
staffing. The heavier 1997 utilization of third party consultants and
subcontractors was a significant factor in the increase of the percent
relationship to related revenues, which moved from 65.6% in 1996 to 68% in 1997.
 
    SALES AND MARKETING. Sales and marketing expenses increased by $419,000, or
29.8% in the 1997 period, as the Company continued to increase its direct
coverage in this area by a combination of increased staffing as well as the use
of third party consultants in selected foreign market locations. Further, the
increased staffing in these areas coupled with the increased corporate revenue
levels for the quarter resulted in increases in both travel related expenses and
sales commission expense in the 1997 period as compared to 1996. Due to the fact
that total corporate revenues increased 37.7%, sales and marketing expenses as a
percent of total revenues decreased from 17.0% in 1996 to 16.1% for 1997.
 
    ROYALTIES AND SUBLICENSE FEES. For the six months ended June 30, 1997, these
fees decreased by $295,000 or 29.1%, mainly as a result of a $252,000 reduction
in royalty expense in 1997 as compared to the same period in 1996. The 1997
period decrease in royalty expense is due to a lower level of license fees
subject to royalty payment.
 
    GENERAL AND ADMINISTRATIVE. These expenses increased by $440,000, or 62.4%,
due to a number of factors which include additional expenses related to being a
public company, as well as increased staffing and related overheads in the 1997
period as compared to 1996.
 
    INTEREST INCOME, NET. Interest income, net, increased $306,000 in 1997 due
to income earned on higher invested cash balances, which averaged approximately
$16.5 million for the six months ended June 1997 as compared to approximately
$5.5 million in 1996.

    INCOME TAX PROVISION (BENEFIT). Taxes in 1997 were 33.0% of income before
income taxes, as compared to 41.0% in the 1996 six month period. This reduced
effective rate is primarily the result of the Company's establishment of a
Foreign Sales Corporation (FSC) in late 1996, as well as certain state net
operating loss carryforwards.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Cash and cash equivalents were $15.9 million at June 30, 1997. During
December of 1996, the Company raised $11.8 million (net of direct expenses) from
its initial public offering. Cash flow from operations for the six months ended
June 30, 1997 was $1.0 million as compared to ($522,000) in 1996. The increased
rate of cash flow in the 1997 period was primarily attributable to receipts
during the period of several significant contract milestone payments, some of
which had been billed in late 1996. The Company continues to expect a certain
amount of variability in the timing of major contract milestone payments which
will impact cash flow from operations during any given quarter.
 
    The Company's business is not capital intensive and capital asset
expenditures for the 1997 six month period amounted to $462,000 as compared to
$200,000 during the same period in 1996. These expenditures consisted primarily
of personal computers and upgrades to the Company's network systems. The Company
is currently in the process of evaluating the possibility of leasing a second
office facility in the vicinity of its Malvern, Pennsylvania headquarters. In
the event such a 


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<PAGE>

lease agreement is in fact entered into during the second half of the year, 
it could result in a short-term increase in the Company's capital asset 
expenditures.
 
    Effective June 12, 1997, the Company entered into a demand note agreement
with Safeguard Scientifics, Inc. ("Safeguard"), a major shareholder of the
Company. The note provides for borrowings by Safeguard from the Company of up to
a maximum of $12 million on a revolving basis at Safeguard's effective borrowing
rate less .75%. At June 30, 1997, advances to Safeguard under this note amounted
to $9.2 million, which is included in "Cash and Cash Equivalents" on the
accompanying balance sheet.
 
    Additionally, in early July 1997, the Company both renewed and restructured
its bank borrowing agreements. Under the revised agreement, the Company
converted approximately $300,000 outstanding under its revolving credit facility
for capital equipment purchases to a 24 month term loan. In conjunction with
this, a new $500,000 revolving credit facility for capital purchases was
established. The amounts shown in the accompanying June 30, 1997 balance sheet
have been adjusted to reflect this new agreement.
 
    The Company currently anticipates that cash generated from operations and
existing cash balances will be sufficient to satisfy its operating cash needs
for the foreseeable future and at a minimum through the next 12 months. Should
the Company's business expand more rapidly than expected, the Company believes
that additional bank credit would be available to fund such operating and
capital requirements. In addition, the Company could consider seeking additional
public or private debt or equity financing to fund future growth opportunities.
 
    The Company believes that its business is generally not seasonal; however,
the Company has historically experienced a certain degree of variability in its
quarterly revenue and earnings patterns. This variability is typically driven by
significant events which directly impact the recognition of project related
revenues. Examples of such events include the timing of new business contract
closings and the initiation of license and service fee revenue recognition,
"one-time" payments from existing clients relative to license expansion rights
(required to process a greater number of customer accounts or expand the number
of permitted users), and completion of a significant implementation project roll
out and the related revenue recognition. The timing of revenues is difficult to
forecast because the Company's sales cycle is relatively long in the case of new
clients and may depend on factors such as the size and scope of the project,
length of contract negotiations, and general economic conditions in a particular
sales prospect's country of origin. Because a high percentage of the Company's
expenses are relatively fixed, a variation in the timing of the initiation or
the completion of client projects, particularly at or near the end of any
quarter, can cause significant variations in operating results from quarter to
quarter.

    The Company's forward-looking statements about its revenues, earnings, and
business development have been derived from its operating budgets and forecasts,
which are based upon detailed assumptions about many important factors. Several
important factors may cause the Company's actual results to differ materially
from those contemplated by any forward-looking statements made by the Company.
These factors include the course of business in the financial services industry,
competition among software companies serving that industry, the Company's
management of the long sales cycle for its products, the timing of new contract
closings and other significant events of revenue recognition affecting the
Company's quarterly results, the development of the Direct Banking Market and
market acceptance of the Company's products within that market, the Company's
ability to continue to improve its product, and the Company's ability to manage
the concentration of sales to financial service companies in foreign markets
(particularly Central Europe and Asia).
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
    In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." This Statement establishes standards for computing and presenting
earnings per share ("EPS") and applies to entities with publicly held common
stock or potential common stock (as defined). This Statement is effective for
financial statements issued for periods ending after December 15, 1997. Earlier
application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. The Company has calculated both basic and 
diluted earnings per share, as such terms are defined in SFAS NO. 128, for 
the periods presented herein, and has determined that both such calculated 
amounts are identical to the earnings per common share amounts as currently 
reported on Exhibit 11.
 
    In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
to establish standards for reporting and display of comprehensive income and its
components in financial statements. The new standard requires an entity to a)
classify items of other comprehensive income by their nature in a financial
statement and b) display the accumulated balance 

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<PAGE>

of other comprehensive income separately from retained earnings and 
additional paid in capital in the equity section of a statement of financial 
position. The new standard is effective for fiscal years beginning after 
December 15, 1997.
 
    In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments 
of an Enterprise and Related Information" to establish standards for 
reporting information about operating segments in annual financial statements 
and require reporting of selected information about operating segments in 
interim financial reports issued to shareholders. It also establishes 
standards for related disclosures about products and services, geographical 
areas and major customers. The new standard is effective for fiscal years 
beginning after December 15, 1997. Adoption of SFAS No. 131 will not affect 
the Company's financial condition or results of operations and the Company is 
evaluating the impact on its disclosure requirements.
 
                                       12
<PAGE>

                       SANCHEZ COMPUTER ASSOCIATES, INC.
 
PART II--OTHER INFORMATION
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
        a. An annual meeting of shareholders was held on May 29, 
           1997 at the corporate offices in Malvern, Pennsylvania. 

        b. The meeting involved the election of eight directors to hold 
           office until the next Annual Meeting of Stockholders and until 
           their successors are elected and qualified. Those elected are:
 
                                                    Votes For    Votes Withheld
                                                  ------------  ---------------
           Michael A. Sanchez...................    10,390,176        15,562
           Frank R. Sanchez.....................    10,390,176        15,562
           Warren V. Musser.....................    10,389,836        15,902
           Lawrence Chimerine...................    10,390,516        15,222
           Kailash C. Khanna....................    10,388,916        16,822
           John D. Loewenberg...................    10,388,596        17,142
           Ira M. Lubert........................    10,390,356        15,382
           Thomas C. Lynch......................    10,388,556        17,182

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
        (a) Exhibits
 
            Exhibit 10.1--Safeguard Scientifics, Inc. Revolving Note Agreement
                          Dated June 12, 1997
 
            Exhibit 11--Computation of net income per share
 
            Exhibit 27--Financial Data Schedule
 
        (b) Reports on Form 8-K
 
            NONE
 
No other applicable items.
 
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<PAGE>


                                   SIGNATURES
 
    Pursuant to the requirements 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.
 
                       SANCHEZ COMPUTER ASSOCIATES, INC.

                       /S/ Joseph F. Waterman 
                       ---------------------------------
                       Joseph F. Waterman 
                       Senior Vice-President & Chief Financial Officer


Date: August 12, 1997
 





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