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**UnitedStatesSecurities and Exchange Commission****Washington, D.C.  20549**

**FORM 10-QSB**
| **x**                                   | **Quarterly  Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**  |
|-----------------------------------------|-----------------------------------------------------------------------------------------------|
|                                    |                                                                                          |
| **For the Quarter Ended June 30, 2001** |
|                                    |
| **o**                                   | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|                                    |                                                                                          |
| **Commission File Number 06425**        |

** **

**SENTOCORPORATION**(Exact Name of Small Business Issuer as Specified in its Charter)

| **Utah**                                                        | **87-0284979**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State  or other Jurisdiction of Incorporation or Organization) | (I.R.S.  Employer Identification No.) |
|                                                            |                                  |
| **808 East Utah Valley Drive  American Fork, Utah**             | **84003**                             |
| (Address  of Principal Executive Offices)                       | (zipcode)                             |
|                                                            |                                  |
| **(801) 492-2000**                                              |
| (Issuer’s  telephone number, including area code)          |

 

Indicate bycheck mark whether the issuer (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the issuer was required to file suchreports), and (2) has been subject to such filing requirements for the past 90days.

Yes x              Noo

State thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date:
| Class                |   | Outstanding at  June 30, 2001 |   |
|----------------------|--------|-------------------------------|--------|
|                      |   |                               |   |
| Common capital stock |   | 8,385,876                     |   |
| $.25 par value       |   |                          |   |

 

TransitionalSmall Business Disclosure Format (check one):

Yes  o              No  x

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**SENTOCORPORATION**Quarterly Report on Form 10-QSBQuarter ended June 30, 2001

TABLE OF CONTENTS

| PART I   | FINANCIAL INFORMATION                                                                        |
|----------|----------------------------------------------------------------------------------------------|
|     |                                                                                         |
| Item 1.  | Financial Statements                                                                         |
|     |                                                                                         |
|     | Condensed  Consolidated Balance Sheets  June 30, 2001 and March 31, 2001                     |
|     |                                                                                         |
|     | Condensed  Consolidated Statements of Operations  Three Months ended June 30, 2001 and 2000  |
|     |                                                                                         |
|     | Condensed  Consolidated Statements of  Cash Flows  Three Months ended June 30, 2001 and 2000 |
|     |                                                                                         |
|     | Notes  to Condensed Consolidated Financial Statements                                        |
|     |                                                                                         |
| Item  2. | Management's  Discussion and Analysis of Financial Condition and Results of Operations.      |
|     |                                                                                         |
|     |                                                                                         |
| PART II. | OTHER INFORMATION                                                                            |
|     |                                                                                         |
| Item 6.  | Exhibits  and Reports on Form 8-K                                                            |
|     |                                                                                         |
|     | SIGNATURES                                                                                   |

 

PART I -FINANCIAL INFORMATION

Item 1.  Financial Statements

**SENTOCORPORATIONAND SUBSIDIARIES**

**Condensed ConsolidatedBalance Sheets**

**ASSETS**

|             | **June 30, 2001**             |      | **March 31, 2001** |      |
|------------------|-------------------------------|-----------|--------------------|-----------|
|             | ****                          |      | ****               |      |
|             | **(Unaudited)**               |      |               |      |
|             | ****                          |      |               |      |
| Current  assets: |                          |      |               |      |
|             | Cash                          | $         | 3,828,880          |      | $ | 3,575,740 |   |
|             | Accounts  receivable (net)    | 3,142,870 |               | 4,392,911 |   |
|             | Other  current assets         | 343,882   |               | 211,855   |   |
|             |                          |           |               |           |   |
|             | Total  current assets         | 7,315,632 |               | 8,180,506 |   |
|             |                          |      |               |      |
|             | Property and  equipment (net) | 4,338,299 |               | 3,887,782 |   |
|             | Other assets                  | 84,883    |               | 73,795    |   |
|             |                          |           |               |           |   |
|             | Total Assets                  | $         | 11,738,814         |      | $ | 12,142,083 |   |
|             |                          |           |               |           |   |
|                  |                               |           |                    |           |  |  |  |  |  |  |

** **

**LIABILITIESAND STOCKHOLDERS’ EQUITY**

| Current  liabilities:   |                                        |       |       |       |
|-------------------------|---------------------------------------------|------------|------------|------------|
|                    | Current  portion of long-term debt          | $          | 948,846    |       | $ | 714,371 |   |
|                    | Accounts  payable                           | 988,247    |       | 1,417,148  |   |
|                    | Accrued  liabilities                        | 1,347,080  |       | 1,477,541  |   |
|                    | Accrued loss  from discontinued operations  | 185,174    |       | 424,270    |   |
|                    | Deferred  revenue                           | 221,685    |       | 219,758    |   |
|                    |                                             |       |            |       |
|                    | Total  current liabilities                  | 3,691,032  |       | 4,253,088  |   |
|                    |                                        |            |       |            |   |
|                    |                                        |       |       |       |
| Long-term  liabilities: |                                        |       |       |       |
|                    | Convertible  debt                           | 1,117,942  |       | 1,092,824  |   |
|                    | Long-term  debt, net of current portion     | 1,847,165  |       | 1,478,264  |   |
|                    |                                        |            |       |            |   |
|                    | Total  long-term liabilities                | 2,965,107  |       | 2,571,088  |   |
|                    |                                        |            |       |            |   |
|                    |                                        |       |       |       |   |
| Stockholders'  equity:  |                                        |       |       |       |
|                    | Common stock                                | 2,132,270  |       | 2,131,072  |   |
|                    | Additional  paid-in capital                 | 10,676,266 |       | 10,682,056 |   |
|                    | Deferred  compensation                      | (5,032     | )          | (31,165    | ) |
|                    | Treasury stock                              | (347,572   | )          | -          |   |
|                    | Accumulated  deficit                        | (7,373,257 | )          | (7,464,056 | ) |
|                    |                                        |            |       |            |   |
|                    | Total  stockholders' equity                 | 5,082,675  |       | 5,317,907  |   |
|                    |                                        |            |       |            |   |
|                    | Total  Liabilities and Stockholders' Equity | $          | 11,738,814 |       | $ | 12,142,083 |   |
|                    |                                        |            |       |            |   |
|                         |                                             |            |            |            |  |  |  |  |

**SENTOCORPORATIONAND SUBSIDIARIES**

**Condensed Consolidated Statements of Operations****(Unaudited)**

|                                                      | **Three Months Ended  June 30,** |      |
|-----------------------------------------------------------|----------------------------------|-----------|
|                                                      |                             |
|                                                      | ****                             |      |
|                                                      | **2001**                         |      | **2000** |   |
|                                                      | ****                             |      | **** |   |
|                                                      |                             |      |   |   |
| Revenue                                                   | $                                | 6,191,717 |   | $ | 4,856,045 |   |
|                                                      |                             |      |   |   |
| Cost of  sales                                            | 5,592,285                        |      | 4,147,789 |   |
|                                                      |                                  |      |  |   |
|                                                      |                             |      |   |   |
|                                                      | Gross profit                     | 599,432   |   | 708,256 |   |
|                                                      |                             |      |   |   |
| Selling,  general and administrative expenses             | 443,063                          |      | 421,388 |   |
|                                                      |                                  |      |  |   |
|                                                      | Operating  income                | 156,369   |   | 286,868 |   |
|                                                      |                             |      |   |   |
| Equity loss  on investment in EchoPass Corporation        | -                                |      | (149,795 | ) |
| Other  expense, net                                       | (65,570                          | )         | (12,213 | ) |
|                                                      |                                  |      |  |   |
| Income from  continuing operations                        | 90,799                           |      | 124,860 |   |
|                                                      |                             |      |   |   |
| Income from  discontinued operations, net of income taxes | -                                |      | 150,164 |   |
|                                                      |                                  |      |  |   |
| Net income                                                | $                                | 90,799    |   | $ | 275,024 |   |
|                                                      |                                  |      |  |   |
| Basic  income  per share:                            |                             |      |   |   |
|                                                      |                             |      |   |   |
| Income from  continuing operations                        | $                                | 0.01      |   | $ | 0.01 |   |
|                                                      |                             |      |   |   |
| Income from  discontinued operations                      | -                                |      | 0.02 |   |
|                                                      |                                  |      |  |   |
| Net income  per common share                              | $                                | 0.01      |   | $ | 0.03 |   |
|                                                      |                                  |      |  |   |
|                                                      |                             |      |   |   |
| Diluted  income per share:                                |                             |      |   |   |
|                                                      |                             |      |   |   |
| Income from  continuing operations                        | $                                | 0.01      |   | $ | 0.01 |   |
|                                                      |                             |      |   |   |
| Income from  discontinued operations                      | -                                |      | 0.02 |   |
|                                                      |                                  |      |  |   |
| Net income  per common share                              | $                                | 0.01      |   | $ | 0.03 |   |
|                                                      |                                  |      |  |   |
|                                                      |                             |      |   |   |
| Weighted  average common shares   outstanding:  |                             |      |   |   |
|                                                      |                             |      |   |   |
|                                                      | Basic                            | 8,471,004 |   | 8,318,380 |   |
|                                                      |                             |      |   |   |   |
|                                                      | Diluted                          | 8,595,382 |   | 9,390,483 |   |
|                                                           |                                  |           |  |  |  |  |  |  |

 

**SENTOCORPORATION****ANDSUBSIDIARIES**

**CondensedConsolidated Statements of Cash Flows****(Unaudited)**

|                                               | **Three Months Ended  June 30,**                                                                    |      |
|----------------------------------------------------|-----------------------------------------------------------------------------------------------------|-----------|
|                                               |                                                                                                |
|                                               | ****                                                                                                |      |
|                                               | **2001**                                                                                            |      | **2000** |   |
|                                               | ****                                                                                                |      | **** |   |
| Cash flows  from operating activities:             |                                                                                                |      |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Net income                                                                                          | $         | 90,799 |   | $ | 275,024 |   |
|                                               |                                                                                                |      |   |   |
|                                               | Adjustments  to reconcile net income  to net cash  Provided by (used) in operating activities: |      |   |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Depreciation  and amortization                                                                      | 452,025   |   | 283,346 |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Gain loss on  disposal of assets                                                                    | (407      | ) | - |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Equity loss  on investment in EchoPass Corporation                                                  | -         |   | 149,795 |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Changes in  operating assets and liabilities:                                                       |      |   |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Accounts  receivable                                                                                | 1,250,041 |   | 13,265 |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Other assets                                                                                        | (145,515  | ) | (58,023 | ) |
|                                               | Accounts  payable                                                                                   | (428,901  | ) | 31,489 |   |
|                                               | Accrued  liabilities                                                                                | (369,557  | ) | 435,012 |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Deferred revenue                                                                                    | 1,927     |   | (98,196 | ) |
|                                               |                                                                                                     |      |  |   |
|                                               | Net cash  provided by  operating activities                                                    | 850,412   |   | 1,031,712 |   |
|                                               |                                                                                                |      |   |   |
| Cash flows  from investing activities:             |                                                                                                |      |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Proceeds  from sale of equipment                                                                    | 13,440    |   | - |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Purchase of  property and equipment                                                                 | (874,900  | ) | (349,603 | ) |
|                                               |                                                                                                |           |   |  |   |
|                                               | Net cash  used in investing activities                                                              | (861,460  | ) | (349,603 | ) |
|                                               |                                                                                                |      |   |   |
| Cash flows  from financing activities:             |                                                                                                |      |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Principal  payments of long term debt                                                               | (196,001  | ) | (30,518 | ) |
|                                               |                                                                                                |      |   |   |   |
|                                               | Issuance of  long-term debt                                                                         | 799,377   |   | 208,462 |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Purchase of  treasury stock                                                                         | (347,572  | ) | - |   |
|                                               |                                                                                                |      |   |   |   |
|                                               | Proceeds  from stock options exercised                                                              | 8,384     |   | 114,778 |   |
|                                               |                                                                                                     |      |  |   |
|                                               | Net cash  provided by financing activities                                                          | 264,188   |   | 292,722 |   |
|                                               |                                                                                                     |      |  |   |
| Net increase  in cash                              | 253,140                                                                                             |      | 974,831 |   |
|                                               |                                                                                                |      |   |   |
| Cash at beginning  of period                       | 3,575,740                                                                                           |      | 2 ,382,321 |   |
|                                               |                                                                                                     |      |  |   |
| Cash at end  of period                             | $                                                                                                   | 3,828,880 |   | $ | 3,357,152 |   |
|                                               |                                                                                                     |      |  |   |
|                                               |                                                                                                |      |   |   |
| Supplemental  disclosures of cash flow information |                                                                                                |      |   |   |
|                                                    |                                                                                                |      |   |   |
| Cash paid  for:                                    |                                                                                                |      |   |   |
|                                               |                                                                                                |      |   |   |
|                                               | Interest                                                                                            | $         | 96,556 |   | $ | 38,789 |   |
|                                                    |                                                                                                     |           |  |  |  |  |  |  |  |  |

**SENTOCORPORATION****ANDSUBSIDIARIES**

**Notes to Condensed Consolidated Financial Statements****June 30,2001****(Unaudited)**

A.         BASIS OF PRESENTATION

The accompanying unaudited condensedconsolidated financial statements are stated in accordance with theinstructions to Form 10-QSB and do not include all of the information andfootnotes required by generally accepted accounting principles for completefinancial statements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included.

Operating results for the three months endedJune 30, 2001 are not necessarily indicative of the results that may beexpected for the full year.  Theunaudited condensed consolidated financial statements should be read inconjunction with the consolidated financial statements and footnotes theretoincluded in the Company’s Annual Report on Form 10-KSB for the year ended March31, 2001.

B.          COMMON STOCK

Three months ended June 30, 2001During thethree months ended June 30, 2001, options to purchase 4,791 shares of commonstock were exercised.

There were 143,200 shares of common stockrepurchased during the three-month period at a total cost of  $347,572 pursuant to a stock repurchaseprogram approved by the Board of Directors in September 2000.  The repurchase program authorizes therepurchase of up to $1,000,000 of the Company’s common stock.  The repurchase is conditioned upon the Company’shaving cash balances of at least $3,500,000 and $3,000,000 of unused bank lineof credit immediately prior to the purchase of stock.   Through June 30, 2001, the Company has repurchased a cumulativetotal of 254,695 shares of the Company’s common stock under this program for$632,614.

Three months ended June 30, 2000During the three months ended June 30, 2000, options to purchase 46,210 sharesof common stock were exercised.

C.          INCOME PER SHARE

Income per share is computed in accordance withFinancial Accounting Standards Board Standard 128, “Earnings Per Share.”  Basic income per share is computed as netincome or loss divided by the weighted average number of shares of common stockoutstanding for the period.  Dilutedincome per share reflects the potential dilution that could occur from sharesof common stock issuable through stock options, warrants and other convertiblesecurities, if dilutive.  Sharesissuable pursuant to convertible debentures (257,400 shares) have not beenincluded in the calculations of diluted common stock outstanding for the threemonths ended June 30, 2001 and 2000, respectively, because to do so would beanti-dilutive due to interest expense added back to net income.
The following table sets forth the computationof basic and diluted earnings per share for the three months ended June 30,2001 and 2000:
 **Three Months Ended  June 30**    ****  **2001** **2000**  **** **** **Basic  net income per share:**    Net  income$90,799 $275,024         Denominator  for basic net income per share – weighted average shares8,471,004 8,318,380 Dilutive  common stock options and warrants124,378 1,072,103    Denominator  for diluted net income per share – weighted average shares8,595,382 9,390,483    Basic  net income per share:     Continuing  operations$0.01 $0.01  Discontinuing  operations- 0.02     Net  income$0.01 $0.03         Diluted  net income per share:     Continuing  operations$0.01 $0.01  Discontinuing  operations- 0.02     Net  income$0.01 $0.03    
 

D.         DISCONTINUED OPERATIONS

On May 23, 2001, the Company reached a decisionto discontinue the operations of its Training Division, which had historicallybeen presented as a separate business segment. Revenues, operating costs and expenses, other income and expenses, andincome taxes of this business have been reclassified to accrued loss fromdiscontinued operations for the three months ended June 30, 2001 and todiscontinued operations for the three months ended June 30, 2000.  Subsequent to June 30, 2001, the Companysold substantially all of the assets held for sale from this business for$10,000 cash and a $50,000 note receivable. As the Company has not completed the “wind-down” of its operations ofthe Training Division, no determination of the final loss on thesediscontinuing operations has been made.

E.          ECHOPASS CORPORATION

Pursuant to a shareholder vote at a specialshareholder meeting in December 1999, the Company consummated the sale ofcertain technology to EchoPass Corporation (“EchoPass”) in exchange for4,000,000 shares of EchoPass’ Series A Preferred Stock in March 2000.  EchoPass was formed in fiscal 2000 and is adevelopment stage company.  Sento hasrecorded its investment in EchoPass at the historical carrying value of theunderlying technology that was transferred to EchoPass.  As of March 31, 2000 Sento’s investmentrepresented a 26% ownership interest in EchoPass.  Therefore, Sento has recorded its pro-rata share of EchoPasslosses under the equity method of accounting. As of June 30, 2000, the investment in EchoPass had been written down toa zero balance as the result of recording Sento’s pro-rata share of EchoPasslosses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.

**General**

SentoCorporation provides the latest in CRM (Customer Relations Management) servicesolutions for a diversified portfolio of organizations including leadingdomestic and international computer hardware and software companies.  Through its state-of-the-art CustomerContact Solutions Centers, Sento’s services include telephone, e-mail, Web textchat, Web callbacks, browser collaboration, voicemail, and fax.  These solutions are designed to directincoming interactions to the right client company’s agent at the right timewith skills-based routing and customer data screen pops, enabling immediate andaccurate customer care.
**Results of Operations**

**ThreeMonths Ended June 30, 2001 Compared to the Three Months Ended June 30, 2000**

*Revenues.* Revenues increased 28%, or $1,336,000 from $4,856,000 for the threemonths ended June 30, 2000 to $6,192,000 for the three months ended June 30,2001.  The significant increase inrevenues was principally the result of increased revenues from existing customersand the acquisition of new customers. Although revenues increased from the same three-month period in theprevious year, revenues were not as high as management previously anticipateddue to Sento’s clients’ having been affected by the general economic slowdown,and they in turn exerted pricing pressures on Sento’s services.  These pricing pressures, coupled with lowercall volumes from most of Sento’s clients, resulted in lower than expectedrevenues.  There were 507 agents in onefacility in American Fork, Utah as of June 30, 2000; and there were a total of442 agents in two facilities (American Fork, Utah and Evanston, Wyoming) as ofJune 30, 2001.  The increase in revenuedespite decreased agent numbers was primarily a result of management’s increasingagent productivity and driving more clients’ customers from phone interactionsto more cost-effective Web solutions, such as self-help tools, live chat withco-browse, email express, and other live Web services.  Revenues by quarter for the twelve quartersended June 30, 2001 were as follows:
Three Months Ended Revenues Increase (decrease) from prior quarter    September  30, 1998 $294,468 $7,014 December  31, 1998 $685,881 $391,413 March  31, 1999 $1,575,429 $889,548 June  30, 1999 $2,128,492 $553,063 September  30, 1999 $2,318,631 $190,139 December  31, 1999 $4,264,383 $1,945,752 March  31, 2000 $5,267,371 $1,002,988 June  30, 2000 $4,856,045 $(411,326)September  30, 2000 $5,394,214 $538,169 December  31, 2000 $7,760,778 $2,366,564 March  31, 2001 $8,092,588 $331,810 June  30, 2001 $6,191,717 $(1,900,871)
 

*Cost of Sales.* Cost of sales from continuing operations increased 35%, or $1,445,000,from $4,148,000 for the three months ended June 30, 2000 to $5,593,000 for thethree months ended June 30, 2001.  Thisincrease was due in part to additional expenses necessary to generate increasedrevenue.  Gross profit as a percentageof revenues decreased by 5 percentage points, from 15% of revenues during thethree months ended June 30, 2000, to 10% of revenues for the three months endedJune 30, 2001.  The Company has thecapacity to service significantly higher volumes than it generated during thethree months ended March 31, 2001.  Thisexcess capacity, which was built in anticipation of higher revenues, resultedin a lower absorption of overhead and fixed costs, causing a decline in grossmargin.

*Selling, General andAdministrative Expenses.*  Selling, general and administrative expensesremained essentially constant at $443,000 for the three months ended June 30,2001 as compared to $421,000 for the three months ended June 30, 2000.  As a percentage of revenue, selling generaland administrative expenses have decreased two percentage points from 9% ofrevenue during the three months ended June 30, 2000 to 7% of revenue during thethree months ended June 30, 2001 primarily as a result of management’scontinuing efforts to control administrative expenses.  However, with future anticipated increasedrevenues, these expenses are expected to increase, due, in part, to salescommissions and additional personnel expenses required to administer theincreased revenues.

*Other Expense (net).* During the three months ended June 30, 2001, the Company recorded otherexpense (net) of $66,000, as compared to $12,000 during the three months endedJune 30, 2000.  The net increase inexpense of $54,000 was primarily due to increased interest expense incurredfrom additional borrowings.

**Liquidity and Capital Resources**

Cash balancesincreased 7%, or $253,000, from $3,576,000 at March 31, 2001 to $3,829,000 atJune 30, 2001.  Working capitaldecreased slightly to $3,625,000 at June 30, 2001 from $3,927,000 at March 31,2000.  The increase in cash originatedprincipally from positive cash flow from operations of $850,000 and borrowingsunder long-term equipment loans.  Inaddition, the Company has unused lines of credit in the amount of approximately$3 million as of June 30, 2001.

On September13, 2000, the Board of Directors approved the repurchase of up to $1,000,000 ofthe Company’s common stock.  Therepurchase program is conditioned upon the Company’s having cash balances of atleast $3,500,000 plus an unused bank line of credit of $3,000,000 immediatelyprior to any buyback of shares. As of June 30, 2001 the Company had repurchaseda total of 254,695 shares of common stock at a total cost of  $633,000 under this buyback program.

Historicallythe Company’s primary sources of liquidity have been cash received from salesof assets and cash provided through private sales of equity and debt, as wellas borrowings under a bank line of credit, and for the fifteen months endedJune 30, 2001, liquidity and cash were provided by positive cash flow fromoperations.  In addition, the Company hasfinanced some of the equipment utilized in its business through long-termleasing arrangements.  The growth of theCompany has consumed substantial amounts of cash, and the Company may berequired to pursue additional financing opportunities to fund futuregrowth.  In the event the Company is notable to find additional sources of funding, its ability to pursue its plannedbusiness strategy may be limited.  Therecan be no assurance that the Company will be able to obtain necessary capitalfunding on terms favorable to the Company, if at all.

Subsequent toJune 30, 2001, the Company sold substantially all of the assets held for salefrom its Training Division for $10,000 cash and a $50,000 note receivable.  As the Company has not completed the“wind-down” of its operations of the Training Division, no determination of thefinal loss on these discontinuing operations has been made.

*The statementscontained in this Quarterly Report on Form 10-QSB that are not purelyhistorical are "forward-looking statements" within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. All forward-looking statements involve various risks and uncertainties.  Forward-looking statements contained in thisReport include statements regarding the Company's plans to develop and deliverintegrated information technology services, market opportunities andacceptance, expectations, goals, revenues, financial performance, strategies,mission and intentions for the future. Such forward-looking statements are included under. "Management'sDiscussion and Analysis of Financial Condition and Results of Operations"and encompass Sento’s beliefs, expectations, hopes or intentions regardingfuture events.  Words such as “expects,”“believes,” “anticipates,” and “likely” also identify forward-lookingstatements. All forward-looking statements included in this Report are made asof the date hereof, based on information available to the Company as of suchdate, and the Company assumes no obligation to update any forward-lookingstatement.  It is important to note thatsuch statements may not prove to be accurate and that the Company's actualresults and future events could differ materially from those anticipated in suchstatements.  Among the factors thatcould cause actual results to differ materially from the Company's expectationsare those described under “Management’s Discussion and Analysis of FinancialCondition and Results of Operations---Risks Related to Existing and ProposedOperations.”  All subsequent written andoral forward-looking statements attributable to the Company or persons actingon its behalf are expressly qualified in their entirety by this section and otherfactors included elsewhere in this Report.*

**Risks Related toExisting and Proposed Operations**

In addition toother information in this Report, the following are important factors thatshould be considered carefully in evaluating the Company and its business.

*Dependence on Key Clients*.  Two clients accounted for approximately 62% of the Company’s revenuesfor the year ended March 31, 2001, and for the three months ended June 30, 2001three clients accounted for approximately 63% of the revenues of the Company.  Consistent with industry standards, Sento’scontracts are generally cancelable by the client on short-term notice.  Sento’s loss of a significant amount ofbusiness with any of its key clients could have, and the loss of a substantialamount of business with any of its largest existing clients would have, amaterial adverse effect on Sento’s business, financial condition, and resultsof operations.  In addition, Sento’sfuture revenue growth is dependent upon its ability to attract and retain new clients.

*Risks of Growth Strategy*.  Sento’s business strategy is premised, in part, upon expansion of itsoperations by opening, acquiring or partnering with other customer supportfacilities. Substantial risks accompany Sento’s growth plans. For example,Sento’s growth plans are dependent upon its ability to attract and retain newclients. Sento’s failure to attract and retain new clients will not onlyprevent the implementation of its business strategy, but may leave Sento withexcess personnel and physical facilities, which would have a negative impact onSento’s results of operations and financial condition.

Sento’s growthplans are also subject to fluctuations in technology and industry standards,changes in customer requirements and preferences and general economicconditions, among other factors. Many of these factors are beyond Sento’scontrol. If Sento is incorrect in its assessment of the feasibility of itsgrowth plans, or if circumstances change in a way that Sento did not foresee oranticipate, Sento may not be able to grow as planned or its growth strategy mayhave an adverse effect on its business operations and financial condition.

*Reliance on EchoPass forOutsourced Services*.   Since completion of the EchoPasstransactions in March 2000, Sento no longer possesses the EchoPass technologytransferred to EchoPass and no longer employs a number of former technicalsupport employees who were formerly engaged in developing the technology andmaintaining Sento’s Customer Contact Solutions Centers. Some of these technicalsupport functions are now provided by EchoPass employees on an outsourced basispursuant to a services agreement. As a result, Sento is dependent on EchoPassfor some of the technical support functions related to Sento’s Customer ContactSolutions Centers. The outsourcing relationship could result in decreasedattention to Sento’s needs, slower response times and the lack of redundantsupport functions. If EchoPass fails in its business efforts, Sento may berequired to identify and retain one or more alternate third party providers ofsuch services and could experience service delays, interruptions andcancellations. In addition, if EchoPass does not provide to Sento high-qualitytechnical support services at competitive prices, Sento may elect or be forcedto obtain replacement services from alternate sources. There can be noassurance that Sento would be able to obtain such services at a reasonablecost, if at all, or without a material interruption of its business.

*Conflicts Between Sento andEchoPass*.   EchoPass owns the EchoPass technology,which comprises a portion of the technology utilized in Sento’s CustomerContact Solutions Centers. Although a statement of work between Sento andEchoPass grants to Sento the right to utilize substantially all of the EchoPasstechnology in the operation of its existing and future Customer ContactSolutions Centers, EchoPass will likely have the opportunity to license theEchoPass technology to third parties, including existing and potentialcompetitors of Sento.

*Changing Needs of the CustomerContact Service Market*.   The customer contact service industry ischaracterized by rapid technological change, changes in customer requirementsand preferences, and the emergence of new industry standards and practices thatcould render Sento’s existing and proposed products, services, technology andsystems obsolete. To remain competitive, Sento must continually improve theperformance, features, and reliability of its products and services, includingits existing customer contact service applications, and develop new productsand services that address the increasingly sophisticated and varied needs ofits prospective customers. If Sento cannot adapt or respond in a cost-effectiveand timely manner to changing industry standards, market conditions, orcustomer requirements, its business and operating results would suffer andcould negatively impact Sento’s business and/or financial condition.

Sento’s successmay also depend in part on the ability of Sento and/or EchoPass to developsolutions that keep pace with the continuing changes in information technology,evolving industry standards, and changing client requirements. There can be noassurance that Sento will be successful in adequately addressing thesedevelopments on a timely basis or that, if these developments are addressed,Sento will be successful in the marketplace. In addition, there can be noassurance that products or technologies developed by others will not renderSento’s services non-competitive or obsolete. Sento’s or EchoPass’ failure toaddress these developments could have a material adverse effect on Sento’sbusiness and financial condition.

*Dilution of Sento’s Ownershipin EchoPass*.   EchoPass’ success in developing andlicensing its technology will depend to a significant extent on EchoPass’ability to obtain financing required to develop, market and sell itstechnology. As a result, EchoPass will have an incentive to issue additionalcapital stock to sources of such financing. Since the completion of theEchoPass transactions, EchoPass has issued additional shares of capital stock,incurred debt, which may be converted or exchanged for shares of capital stock,and issued derivative securities, which can be exercised for shares of capitalstock. The issuance of such additional capital stock would have the effect ofdiluting Sento’s ownership of the EchoPass capital stock and reducing Sento’sability to influence the management and policies of EchoPass.

The dilution ofSento’s economic interests could result in Sento receiving less financialbenefit from EchoPass’ use of the EchoPass technology than Sento could haveobtained through commercializing the EchoPass technology itself. Sento’s lackof voting control over EchoPass could result in EchoPass’ taking actions inconflict with or adverse to the interests of Sento. In addition, Sento will nothave the unrestricted right to develop new applications for the EchoPasstechnology without obtaining the consent of EchoPass. Without a controllinginterest in EchoPass, Sento will not be assured of obtaining EchoPass’ consentfor such additional applications.

*Competition*.  The market for providing customer contact services is highly fragmentedand very competitive. The customer contact services industry, however, hasbegun to experience a degree of consolidation and the existence of majorcustomer contact center companies has resulted in an additional level ofcompetition from service providers that have greater name recognition, largerinstalled customer bases, and significantly greater financial, technical, andmarketing resources than Sento. Over the past several years, a number ofexisting companies have enjoyed increasing success and rapid internal growth.Several of these companies have been active in acquiring smaller regionalcustomer contact services companies and are becoming major competitors with ameasurable share of this rapidly expanding market.

Also, manymajor companies provide their own in-house customer care support and customertraining. However, such companies are within the potential customer base forcustomer contact service providers and have the capability of outsourcing thoseservices to Sento.

Sento cannotprovide any assurance that better and more efficient services will not beprovided by new or existing customer contact service providers in competitionwith Sento. The services provided by such competitors may be more effective orless expensive than those provided by Sento. There can be no assurance thatSento will improve, refine or enhance the services it provides.

*Competition in CustomerContact Services Market*.   The customer contact services market is newand intensely competitive. There are no substantial barriers to entry, andestablished or new entities may enter this market in the near future.Furthermore, established enterprise software companies, including IBM,Hewlett-Packard Company, Microsoft Corporation, and similar companies, mayleverage their existing relationships and capabilities to offer customerservice applications. Any delays in the general market acceptance of thecustomer contact service applications and EchoPass’ proposed products andservices would likely harm EchoPass’ competitive position. Delays would allowEchoPass’ competitors additional time to improve their service or productofferings, and also provide time for new competitors to develop e-businesscustomer service applications and solicit prospective customers withinEchoPass’ target markets. Increased competition could result in pricingpressures, reduced operating margins and loss of market share.

*Risk of Emergency Interruptionof Customer Contact Solutions Center Operations*.  Sento’s business depends to a large extent on computer andtelecommunications equipment and software systems (both equipment and systemsmaintained by Sento and equipment and systems maintained by third parties,including EchoPass). Sento cannot provide any assurance that natural disaster,human error, equipment malfunction or inadequacy, or other events would notresult in a prolonged interruption in Sento’s ability to provide supportservices to its clients. The temporary or permanent loss of computer ortelephone equipment or systems, through casualty, operating malfunction orotherwise, could have a material adverse effect on Sento. Property and businessinterruption insurance may not be adequate to compensate Sento for all lossesthat it may incur.

*Attracting, Training, andRetaining Quality Management and Employees*.   Thecustomer contact services market suffers from a significant labor shortage.Sento’s success will depend, in large part, on its ability to attract, retainand train highly-qualified technical, managerial and marketing personnel withthe required expertise. Sento has not entered into employment agreements thatrequire the services of any of its key managerial or technical personnel toremain with Sento for any specified period of time. Competition for suchpersonnel is intense. There can be no assurance that Sento will be able toattract and maintain the personnel necessary for the development and operationof its business nor that it will be able to train its current employees on newdevelopments in technology. Specifically, the loss of the Company’s currentVice President of Operations, its Chief Executive Officer, or its ChiefFinancial Officer, or of the services of any other key personnel or aninability to attract, retain, train and motivate qualified personnel could havea material adverse effect on the business, financial condition and results ofoperations of Sento.
In addition,Sento’s total employee count has grown from approximately 585 as of March 31,2000 to approximately 953 as of December 31, 2000 and has decreased toapproximately 464 as of July 31, 2001. The support required for two of theCompany’s largest clients is seasonal. There is therefore a necessity for veryrapid increases in employees and subsequent decreases in the number ofemployees as the requirements for support decrease. In addition there iscontinued rapid growth on a year-to-year comparison. The Company cannot provideany assurance that its current management team can successfully manage Sento’srapidly evolving business, and any failure to do so could have a materialadverse effect upon Sento’s operating results.

*Liquidity and CapitalResources*.   At June 30, 2001, Sento had working capitalof $3,625,000 and a cash balance of $3,829,000.  Future growth, particularly growth in excess of planned growth,will depend on the Company’s ability to obtain financing.  The historic growth rate of Sento’s CustomerContact Solutions operations has consumed substantial amounts of cash and willcontinue to require significant capital investment.  The Company may be required to pursue additional fundingopportunities to fund future growth should it accelerate in excess of historicaland planned future growth.  In the eventthe Company is not able to find such alternate sources of funding, its abilityto pursue its planned business strategy may be limited.  There can be no assurance that the Companywill be able to obtain necessary capital funding on terms favorable to theCompany, if at all.

*Dependence on Industry Trendto Outsource Services*.   Sento’s business depends in large part onthe trend within the IT industry to outsource certain services. Sento cannotprovide any assurance that this trend will continue or that, if the trendcontinues, it will continue at the same rate of growth.  The failure of this trend to continue couldhave a material adverse effect on the business, financial condition, andresults of operations of Sento.

*Potential SignificantFluctuations in Quarterly Results*.   Thevalue of individual transactions can constitute a substantial percentage ofSento’s quarterly revenue, and particular transactions may generate asubstantial portion of the operating profits for a quarter. Because Sento’sstaffing and other operating expenses are based on anticipated revenue levels,and a high percentage of its expenses are fixed, delays in the receipt oforders can cause significant variations in operating results from quarter toquarter. In addition, Sento may expend significant resources pursuing potentialsales that will not be consummated. Sento also may choose to reduce prices orto increase spending in response to competition or to pursue new marketopportunities, which may adversely affect its operating results.

In particular,Sento’s quarterly revenues from its Customer Contact Solutions Centeroperations are potentially volatile. Such revenues are principally a functionof the number of support requests received by Sento, and the time spent on suchrequests. Consequently, Sento’s profitability may be adversely affected ifSento receives fewer support requests than anticipated or the time spent inresolving inquiries is greater than anticipated.

For the reasonsidentified above, management believes that period-to-period comparisons ofSento’s results of operations may not be meaningful and that no one should relyupon them as an indication of future performance. Furthermore, Sento cannotprovide any assurance that it will be able to achieve or sustain profitabilityon a quarterly basis.

*Possible Volatility of StockPrice*.   The trading price of the Common Stock hasfluctuated widely in response to variations in quarterly operating results,announcements by Sento or its competitors, industry trends, general economicconditions or other events or factors. Such fluctuations, as well asfluctuations in the trading volume of the Common Stock, may continue in thefuture. Regardless of the general outlook for Sento’s business, theannouncement of quarterly operating results below analyst and investorexpectations could have a material and adverse effect on the market price ofthe Common Stock.

*Anti-Takeover Considerations.*  Sento’s Articles of Incorporation and Bylaws, the Utah Revised BusinessCorporation Act, and the Utah Control Shares Acquisition Act each containcertain provisions that may have the effect of inhibiting a non-negotiatedmerger or other business combination. Sento’s Articles of Incorporation grantto the Board of Directors the authority, without further action by Sento’sshareholders, to fix the rights and preferences of, and issue shares ofpreferred stock. These provisions may deter hostile takeovers or delay orprevent changes in control of Sento or changes in Sento’s management, includingtransactions in which shareholders might otherwise receive a premium for theirshares over the then-current market prices. In addition, these provisions maylimit the ability of shareholders to approve transactions that they may deem tobe in their best interests.

*Dividends.*  Dividends are payable on the Common Stock only when, as, and if declaredby Sento’s Board of Directors. At present Sento intends to retain any futureearnings for use in its business and therefore does not anticipate paying anydividends on the Common Stock in the foreseeable future.
PART II.                        OTHER INFORMATION

Item6.  Exhibits and Reports on Form 8-K

             None

SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
 SENTO CORPORATION  (Registrant)      By:/s/ DENNIS L. HERRICK   Dennis L. Herrick   President and Chief Executive Officer      By:/s/ STANLEY J. CUTLER   Stanley J. Cutler   Vice President of Finance and Secretary        Dated August 10, 2001