<PAGE>
Filing Pursuant to Rule 424(b)(2)
Registration Statement No. 333-37678
Prospectus Supplement
(To Prospectus Dated June 27, 2000)
SEDONA CORPORATION
Convertible Debenture
Warrants
Common Stock
This is an offering of a $3.0 million debenture convertible into shares
of our common stock and warrants exercisable into shares of our common stock.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol SDNA.
On November 21, 2000, the closing bid price of one share of our common stock was
$1.13. You should read this prospectus supplement and the related prospectus
carefully before you invest.
--------------------
Investing in our common stock involves a high degree of risk. You
should carefully read and consider the risk factors beginning on page 4 of our
prospectus dated June 27, 2000.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus supplement is November 22, 2000.
<PAGE>
TABLE OF CONTENTS
Page
Use of Proceeds....................................................... S-3
Market for Our Common Stock........................................... S-3
Description of Convertible Debenture and Warrants..................... S-3
Plan of Distribution.................................................. S-6
Forward-Looking Statements............................................ S-6
----------------------------------------
You should rely only upon information contained or incorporated by
reference in this prospectus supplement and the related prospectus. We have not
authorized anyone to provide you with information or to represent anything to
you not contained or incorporated by reference in this prospectus supplement and
the related prospectus. The information contained in this prospectus supplement
is current only as of its date, regardless of the time of delivery of this
prospectus supplement or of any sale of the shares of common stock.
We are offering to sell, and seeking offers to buy, our securities only
in jurisdictions where offers and sales are permitted.
<PAGE>
USE OF PROCEEDS
The net proceeds to us from this offering will be approximately $2.3
million. We plan to use approximately $2.25 million of the net proceeds to
redeem the outstanding shares of our Series G convertible preferred stock and
the remaining net proceeds for working capital purposes.
MARKET FOR OUR COMMON STOCK
On November 21, 2000, the closing bid price of one share of our common
stock on the Nasdaq SmallCap Market was $1.13. As of that date, and before the
issuance of shares of common stock upon conversion of the convertible debenture
or exercise of the warrants pursuant to this prospectus supplement, we had
30,194,514 shares of common stock outstanding.
DESCRIPTION OF THE CONVERTIBLE DEBENTURE AND WARRANTS
Convertible Debenture
Set forth below is a description of the material terms of the
convertible debenture. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the terms
of the convertible debenture, which have been filed as an exhibit to a Form 8-K.
General
The convertible debenture will be issued as unsecured debt. The
convertible debenture will be limited to an aggregate principal amount of $3.0
million. The convertible debenture is not subject to a sinking fund provision.
The entire principal amount of the convertible debenture will become due and
payable, together with any accrued and unpaid interest thereon, 120 days from
its original date of issuance. The holder, at our request, may extend the
payment of principal and interest for subsequent 30 day periods.
Interest
The convertible debenture bears interest quarterly in arrears on the
outstanding principal at the rate of 5% per annum. Accrual of interest commences
from the original date of issuance until we pay the entire principal amount of
the convertible debenture. The first interest payment is payable 120 days from
the date of issuance with additional interest payments, if required due to an
extension of payment of principal and interest by the holder, payable quarterly
beginning on June 1, 2001.
S-3
<PAGE>
Conversion
The actual purchase price of the convertible debenture is convertible
into our common stock at the option of the holder of the convertible debenture
at any time the market price of our common stock exceeds $2.00 per share at a
price equal to $1.04 per share. Our delivery to the holder of the convertible
debenture of the common stock into which the convertible debenture is
convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy our obligation to pay the principal amount of
the convertible debenture so converted.
In the event that we fail to pay the convertible debenture at maturity,
the actual purchase price of the convertible debenture may be converted at the
option of the holder at the lesser of $1.41 and 85% of the volume-weighted
average price of our common stock over the five trading days immediately
preceding the date on which a notice of conversion is delivered to us by the
holder.
Pursuant to its terms, the convertible debenture is convertible by a
holder only to the extent that the number of shares issuable, together with the
number of shares of common stock beneficially owned by such holder, but not
including unconverted portions of the convertible debenture, would not equal or
exceed 9.9% of the then outstanding common stock as determined in accordance
with section 13(d) of the Securities Exchange Act of 1934, unless the holder
provides us with at least 75 days notice prior to the conversion.
Optional Prepayment
We have the right to prepay the convertible debenture, in whole or in
part, at any time prior to maturity, upon not more than 5 days' notice. If we
fail to prepay within 5 days of providing notice, the prepayment notice will be
declared null and void and we will lose our prepayment rights.
Upon receipt of a notice of prepayment, the holder may, at its option,
convert the portion of the convertible debenture that we intend to prepay, at a
price equal to $1.04 per share.
Events of Default
One or more of the following described events, which has occurred and
is continuing, constitutes an "Event of Default" with respect to the convertible
debenture:
o we default in the payment of principal or interest on the
convertible debenture and the same shall continue for a period of
three (3) trading days; or
o any of the material representations or warranties made by us in
connection with the sale of the convertible debenture shall be
deemed to have been false or misleading in any material respect at
the time made; or
S-4
<PAGE>
o we fail to issue shares of common stock to the holder of the
convertible debenture upon proper exercise of the holder's
conversion rights or fail to transfer any common stock certificate
when required by the convertible debenture, and such transfer is
otherwise lawful, and any such failure shall continue uncured for
five (5) trading days; or
o we fail to perform or observe, in any material respect, any other
covenant, term, provision, condition, agreement or obligation under
the convertible debenture or any other agreement governing the
purchase of the convertible debenture and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the holder of such failure; or
o we (1) admit in writing our inability to pay our debts generally as
they mature; (2) make an assignment for the benefit of creditors or
commence proceedings for our dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for
us or for a substantial part of our property or business; or
o a trustee, liquidator or receiver shall be appointed for us or for a
substantial part of our property or business without our consent and
shall not be discharged within sixty (60) days after such
appointment; or
o any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of our properties or
assets and shall not be dismissed within sixty (60) days; or
o any money judgment, writ or warrant of attachment, or similar
process in excess of $100,000 in the aggregate shall be entered or
filed against us or any of our properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
o bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against us and, if
instituted against us, shall not be dismissed within sixty (60) days
after such institution or we shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition filed in
any such proceeding; or
o we have our common stock suspended or delisted from trading on the
Nasdaq SmallCap Market for more than five (5) trading days.
S-5
<PAGE>
Warrants
In connection with the issuance of the convertible debenture, we will
issue a warrant to the holder to purchase up to 400,000 shares of our common
stock at an exercise price per share of $1.37. We also will issue a warrant to
purchase up to 266,667 shares of our common stock at the same exercise price,
which will only be exercisable if the convertible debenture is not paid in full,
including all accrued and unpaid interest, within 120 days of the original
issuance date.
PLAN OF DISTRIBUTION
We are offering a $3.0 million convertible debenture under this
prospectus supplement for an aggregate purchase price of $2,500,000. We will
also issue to the purchaser of these shares of common stock a three (3) year
warrant to purchase up to 666,667 shares of our common stock at an exercise
price per share of $1.37. Upon the sale of these securities, we will pay a
$175,000 sales commission to Ladenburg Thalmann & Co. Inc., as placement agent
in connection with this offering. We will also issue Ladenburg Thalmann a
warrant to purchase 167,576 shares of our common stock at an exercise price per
share of $1.15. We will not pay any other compensation in conjunction with this
sale of securities. We have agreed to indemnify Ladenburg Thalmann against
liabilities under the Securities Act of 1933.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future
expectations and state other forward-looking information. Forward-looking
statements can be identified by the use of progressive terminology, such as may,
will, expect, anticipate, estimate, continue or other similar words. These
statements are subject to known and unknown risks and uncertainties that could
cause our actual results to differ materially from those contemplated by the
statements. Factors that might cause such a difference include those discussed
in the section titled Risk Factors in the prospectus dated June 27, 2000. Except
as required by applicable law, including the securities laws of the United
States, we do not intend to update or revise any forward-looking statements.
S-6
