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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

|/x/ | Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2001 or
|--- | --------------------------------------------------------------------------------------------------------------------------
|/ / | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934.                                       

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Sento Corporation(Name of small business issuer in its charter)


Utah



000-06425



87-0284979(State or other jurisdiction
of incorporation)



(Commission File No.)



(IRS Employer Identification No.)808 East Utah Valley Drive
American Fork, Utah 84003(Address of principal executive offices, including zip code)Issuer's telephone number, including area code:(801) 492-2000Securities registered under Section 12(b) of the Exchange Act:NoneSecurities registered under Section 12(g) of the Exchange Act:Common Stock, $.25 par value


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Check
whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /x/  No / /

Check
if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained herein, and no disclosure will be contained, to the best of the Issuer's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. /x/

State
Issuer's revenues for its most recent fiscal year: $26,103,625

The
aggregate market value of the Common Stock held by non-affiliates of the issuer, based upon the closing sale price of the Common Stock reported by the NASDAQ SmallCap Market on
May 31, 2001, was approximately $19,282,717.

The
number of shares of Common Stock outstanding as of May 31, 2001 was 8,468,376

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Issuer's definitive proxy statement relating to its Annual Meeting of Shareholders are incorporated by reference in Part III of this report.

Transitional
Small Business Disclosure Format (check one): Yes / /  No /x/

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TABLE OF CONTENTS

|PART I               |  | 1                                                                                                              
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------
|Item 1.              |  | Business                                                                                                       
|Item 2.              |  | Description of Property                                                                                        
|Item 3.              |  | Legal Proceedings                                                                                              
|Item 4.              |  | Submission of Matters to a Vote of Security Holders                                                            
|PART II              |  | 9                                                                                                              
|Item 5.              |  | Market for Registrant's Common Equity and Related Shareholder Matters                                          
|Item 6.              |  | Management's Discussion and Analysis of Financial Condition and Results
of Operations                          
|                     |  | Results of Operations                                                                                          
|                     |  | Liquidity and Capital Resources                                                                                
|                     |  | Risks Related to Existing and Proposed Sento Operations                                                        
|Item 7.              |  | Financial Statements                                                                                           
|Item 8.              |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure                           
|PART III             |  | 17                                                                                                             
|Item 9.              |  | Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
|Item 10.             |  | Executive Compensation                                                                                         
|Item 11.             |  | Security Ownership of Certain Beneficial Owners and Management                                                 
|Item 12.             |  | Certain Relationships and Related Transactions                                                                 
|Item 13.             |  | Exhibits and Reports on Form 8-K                                                                               
|SIGNATURES           |  | 18                                                                                                             
|FINANCIAL STATEMENTS |  | F-1                                                                                                            

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The statements contained in this Annual Report on Form 10-KSB that are not purely historical are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements involve various risks and
uncertainties. Forward-looking statements contained in this Report include statements regarding the Company's plans to develop and deliver integrated information technology services, acquisition
plans, market opportunities and acceptance, expectations, goals, revenues, financial performance, strategies, mission and intentions for the future. Such forward-looking statements are included under
Item 1. "Business," Item 2. "Properties" and Item 6. "Management's Discussion and Analysis of Financial Condition and Results of Operations." All forward-looking statements included in this Report are
made as of the date hereof, based on information available to the Company as of such date, and the Company assumes no obligation to update any forward-looking statement. It is important to note that
such statements may not prove to be accurate and that the Company's actual results and future events could differ materially from those anticipated in such statements. Among the factors that could
cause actual results to differ materially from the Company's expectations are those described under Item 6. "Management's Discussion and Analysis of Financial Condition and Results of
OperationsRisks Related to Existing and Proposed Sento Operations." All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by this section and other factors included elsewhere in this Report.

PART I

Item 1.  Business

Sento provides Customer Contact Solutions, including customer acquisition, customer care, technical support services, help-desk functions, and Web
solutions. Through its state-of-the-art Customer Contact Solutions Centers, Sento provides domestic and international support services to mid-sized and
enterprise level companies including Fortune 500 companies. By allowing companies to focus on their core business, Sento believes it helps companies eliminate unnecessary costs while creating a better
quality of service for the consumer. Throughout this Report, the word client refers to entities Sento serves, such as original equipment manufacturers ("OEMs"), software publishers, hardware system
manufacturers, and other entities requiring mid-level to high-end technical services. The word customer refers to customers of Sento's clients.

Background

Sento was formed in 1986 as Spire Technologies, Inc. and marketed high-end third party hardware and software products as a value added
reseller ("VAR"). In 1996, Sento completed a share exchange with an existing public company.

In
1997 and 1998, Sento undertook a strategic transition to focus its efforts on Customer Contact Solutions. Sento constructed a new generation customer contact facility ("Customer
Contact Solutions Center" or "CCSC"), which is now operational and was staffed with 393 agents as of May 31, 2001. This CCSC has a capacity of between 500 and 790 agents, depending on how many
shifts Sento is running. During the peak period of December 2000, this CCSC was staffed with approximately 625 agents.

Sento
sold certain operations, comprising substantially all of its VAR business, in March and June 1999. In October 1999, Sento announced its intention to undertake a
series of transactions intended to accelerate the development and commercialization of the integrated voice and Internet customer care technology utilized in the Customer Contact Solutions Center. On
November 17, 1999, Sento, as contributor, and EchoPass Corporation, a newly-formed Utah corporation organized by certain existing and former officers, directors and employees of Sento
("EchoPass"), as contributee, entered into a Contribution Agreement, subsequently amended and consummated as of March 1, 2000,

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pursuant to which, among other things, Sento transferred to EchoPass substantially all of the technology owned and utilized by Sento in the operation of its Customer Contact Solutions Centers (the
"EchoPass Technology") (the "EchoPass Transactions"). In addition, as part of the EchoPass Transactions, EchoPass entered into Stock Purchase Agreements with a group of financial and strategic
investors, who contributed approximately $27.6 million in exchange for shares of EchoPass Preferred Stock and a Master Software License Agreement between Genesys Telecommunications
Laboratories, Inc., a leading developer of enterprise interaction management software ("Genesys"), as licensor, and EchoPass, as licensee. Under the Contribution Agreement, Sento and other
parties to the EchoPass Transactions took the following actions:



On
December 16, 1999, the shareholders of Sento approved the EchoPass Transactions. Between December 1999 and March 2000, EchoPass engaged in negotiations with
prospective EchoPass investors. Effective March 1, 2000, EchoPass entered into Series B Preferred Stock Purchase Agreements with New Enterprise Associates and Cannan Partners, whereby
these two venture capital firms provided approximately $22.7 million to EchoPass in exchange for 8,040,000 shares of EchoPass Series B Preferred Stock. EchoPass also entered into
Series B Preferred Stock Purchase Agreements with other financial and strategic investors. Sento owns 4,000,000 shares of the EchoPass Series A Preferred Stock, representing
approximately 26% of the outstanding shares of EchoPass on an "as-converted" basis (approximately 20% of the shares of EchoPass on a fully diluted basis, after giving effect to the
exercise of outstanding and proposed options to acquire shares of Echo Pass common stock).

Sento's
marketing and sales efforts focus primarily on middle market and enterprise level companies, including Fortune 500 companies. Sento's currently operational Customer Contact
Solutions Centers are located in American Fork, Utah and Evanston, Wyoming.

Recent Developments

Customer Contact Solutions Center Expansion.In May 2000, Sento opened a new,
state-of-the-art Customer Contact Solutions Center in Evanston, Wyoming. This expansion began with 20 support representatives (currently there are 90
representatives in this center) engaging in customer interactions over the Internet (email, Web text chat, Web callbacks and Internet calls) and handling standard telephony-based calls. This CCSC has
a maximum capacity of approximately 400 representatives,

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depending on the shifts Sento is running. In October 2000 Sento announced its intention to construct a new Customer Contact Solutions Center in Green River, Wyoming. Sento is nearing completion
of construction of the Green River facility and expects the new CCSC, which will accommodate 300 representatives, to be fully operational in the second fiscal quarter of 2002. In February 2001
Sento began the construction of a second CCSC in American Fork, Utah. Construction of the second American Fork CCSC has been completed and Sento expects the facility to be fully operational during the
second fiscal quarter of 2002. Sento believes the expansion will increase Sento's ability to respond to anticipated business growth from current Fortune 500 clients and new client activity.

Discontinuance of Training Division Operations.On May 30, 2001, Sento announced that it is discontinuing the
operations of its Training Division to focus on the Company's profitable, higher-growth CCSC business. The discontinuation of the Training Division operations is in line with the Company's stated
objective of reducing operating expenses to concentrate resources and personnel on the Company's core business of CCSC.

The Industry

The customer contact services industry encompasses a broad spectrum of services and technology used to build long-term relations between clients
and their customers.

Sento
believes most organizations face a rapidly changing, highly competitive environment in which improved customer contact center services and enhanced customer interactions can be
a significant factor in improving products and services, lowering costs, increasing customer satisfaction and building competitive advantages. Many top executives and managers recognize the importance
of information technology ("IT") in their organizations and the potential benefits of improved customer service. At the same time, the rapid technological change and migration required to achieve
those benefits creates tremendous pressure on organizations and their management. As the pace of advancements in technology accelerates, an organization's ability to evaluate, integrate, deploy and
leverage new technology is becoming a critical competitive issue. In particular, internal contact centers are frequently challenged to use limited time and resources (both financial and human) to stay
abreast of rapid technological change while maintaining the operations of customer contact centers without incurring significant technological or operational risks.

The
challenge of maintaining an organization's focus on core business areas while attempting to monitor and benefit from rapid changes has prompted many organizations to seek customer
contact center solutions from external providers. Organizations are finding it increasingly difficult and expensive to service all their needs in-house. As a result, "outsourcing" is
rapidly gaining favor among many organizations.

Sento
believes that the principal factors motivating organizations to pursue outsourced customer contact center services are the desire to provide improved customer service, an effort
to focus internal organizational resources on the organization's core competencies, the necessity of enhancing revenue, growth, and efficiencies. Sento believes most organizations that currently
support their customers in-house, whether in their core business or to facilitate business operations, are currently outsourcing, or will in the future outsource, some or all of their
customer contact needs.

Business Strategy

Sento's business strategy is to develop and provide integrated customer contact solutions that enable its customers to effectively use leading-edge
technology to improve their business operations and

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reduce their operating expenses. Sento believes it can pursue its business strategy by implementing the following strategic initiatives:

Develop and Market Leading Edge Customer Contact Solutions.Sento develops strategies and implements customer contact
solutions that help its clients significantly drive service costs lower while greatly improving customer choice and satisfaction. Sento's business strategy drives its clients' customers from expensive
phone interactions to more cost-effective Web solutions. These innovative Web solutions are delivered through Sento's proprietary "Services Portal", through which customers access
effective self-help tools, live chat with co-browse, email express, and other live Web services. Sento's unique Customer Resource Management ("CRM") environment records and
delivers the customers' Web experience (i.e. the "click stream") to the live agent; thereby enhancing the customers' Web experience and enabling Sento to effectively measure and improve the
self-help delivery.

Internal Growth, Partnerships, and Acquisitions.Sento intends to expand its operations by opening, acquiring, or
partnering with other customer support facilities in strategic locations throughout the U.S. and foreign countries. Management believes that if Sento successfully identifies and consummates
partnerships with or acquisitions of additional offices, it will enhance its ability to offer multinational clients a comprehensive package of integrated customer contact services. In addition to
geographic expansion, Sento will seek to identify and partner with or acquire companies that provide complementary customer contact solutions and support, and as a result, extend the breadth of its
service offerings.

Attract and Retain Highly Skilled Professionals.Sento's success will depend on its ability to attract, train, motivate
and retain highly skilled professionals. Management believes Sento's approach to ongoing training and certifications provides an excellent career path filled with significant opportunities across the
spectrum of experience, from entry-level positions to upper-level engineers. Sento's sales, customer care, helpdesk, and technical support centers offer both entry-level employees and seasoned
professionals the prospect of training to enhance their abilities while serving customers across a broad range of vertical markets. Sento also offers its professionals the opportunity for rapid
advancement and expert personal training, as employees can move from one career step to another while remaining within Sento. Sento employees work with leading-edge technologies in a
flexible, entrepreneurial environment that includes ongoing training and development. Management believes Sento's ability to maintain this corporate culture has proven successful. Sento will continue
to focus on retaining a talented workforce that exceeds industry expectations, resulting in a higher quality product for its clients.

Capitalize on Technology.Sento is currently or will soon be operating Customer Contact Solutions Centers in four
locations and in two states. In the past, Sento was solely reliant on EchoPass services (including the EchoPass Technology transferred to EchoPass as discussed above). The Company has adopted an
approach to technology, which reduces Sento's reliance on some EchoPass Technology and related services and combines traditional and proven call center infrastructure and systems. The melding of
"cutting edge" technologies and proven systems provided by companies such as Nortel Networks (NT), Cisco Systems (CSCO), and AT&T Corporation (T) will enable Sento to attain previously
unachieved levels of utilization and efficiency in the industry. While Sento will continue to use the EchoPass Technology and other EchoPass services of EchoPass, Sento is not solely reliant on a
single vendor to provide products and services. Sento's policy on technology requires that infrastructure be fully scalable, meet or exceed customer needs, and have several levels of redundancy. Sento
currently incorporates the "5 nines" into all of its own systems. The "5 nines" is a term used to identify the reliability of a system or process being fully functional 99.999% of its intended use
time. For these reasons, Sento believes it has mitigated some of the risk of financial loss associated with system downtime or reliability issues.

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Sento's Customer Contact Solutions Centers go beyond a traditional telephone-centric customer support facility, incorporating increased customer contact points through nearly any
media type, particularly focused on Internet interactions (e-mail, Web text chat, Internet calls, Web collaboration, Web callback interactions and co-browsing) as well as voice
and fax communication, all with the same speed and efficiency as conventional telephone interactions. The advent of the Internet and the proliferation of electronic customer interactions are changing
the manner in which businesses communicate with their customers, and Sento believes its Customer Contact Solutions Centers will position Sento to meet these emerging opportunities.

Services

Sento's integrated customer contact solutions are designed to enable its clients to effectively use leading-edge technology to improve their
business processes and operating results. Clients relying upon
Sento to provide Customer Contact Solutions may realize reduced costs associated with product/services support, customer satisfaction and brand loyalty. Sento proposes to do this in several ways:

Customer Contact Solutions.Sento offers a broad range of customer contact outsourcing services consisting principally
of customer acquisition, customer care, helpdesk, technical support, and the development of a Web strategy to drive customers to the Web. Sento uses advanced systems, including client/server-based
database and reporting systems, Internet, local area networks ("LAN"), multi-user systems, Computer-Telephony Integration ("CTI"), CRM, and Integrated Voice Response ("IVR") technologies,
to provide immediate and accurate support to its clients, enabling those clients to focus increased attention on their core business operations. CTI combines customer data with voice systems in order
to enhance telephony services. For example, automatic number identification ("ANI") allows a caller's history to be retrieved from the database while the call is routed to the appropriate service
representative. In this way, any available contact representative is fully informed of the customer's contact history and is more capable of servicing the customer in a fast and professional manner.
IVR is an automated telephony system that responds with a voice menu that allows the user to make choices and enter information via the user's telephone keypad to receive information and accurately
route the call to a service representative. IVR systems can be used in Sento's Customer Contact Solutions Centers to enhance or as a replacement for reception operators and may also integrate database
access and fax responses. All of these services are able to collect valuable data about the customer that goes beyond contact solutions. As a first point of contact, Sento is also able to provide
clients access to these databases in order to better understand customer habits, sales trends, or even improve product offerings.



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International Operations.Sento and its clients may mutually benefit by distributing some or all customer interactions
to international locations. Through a joint venture with another company, Sento has formed Sento South Africa. A large volume of electronic and Web based customer interactions are currently directed
to that facility. Sento actively seeks new locations within and outside of the continental United States such as Europe, India, and Australia, where a skilled workforce could reside that would allow
Sento to pursue Company directives including levels of profitability that could be more difficult to achieve in a large domestic urban area.

Divestitures

On May 30, 2001, Sento announced its plans to discontinue the operations of its Training Division to focus on the Company's profitable, higher-growth
Customer Contact Solutions business. The discontinuation of Sento's Training Division operations is in line with the Company's stated objective of reducing operating expenses to concentrate resources
and personnel on the Company's core CCSC business. In the near term, Sento will continue to operate this division for a time while it seeks a buyer. If no buyer can be located, the Training Division
will be closed down. Pursuant to generally accepted accounting principles, the Company has reflected the operating results of the Training Division as discontinued operations in the March 31,
2001 financial statements included in this Report.

Competition

The contact center industry is highly competitive, global in scope, and comprised of a myriad of enterprises and individuals. Methods of competition within the
industry include, but are not limited to, marketing, product performance, price, product differentiation, service, technology, and compliance with industry standards. Sento anticipates that present
and potential competition in the various markets it serves will come from enterprises and individuals of various types, many of which could be larger or have greater resources than those of Sento.
Firms not now in direct competition with Sento may introduce competing products in the future. It is possible for companies to be at various times competitors, customers, and collaborators in
different markets. Management believes that efforts to implement Sento's strategy of delivering integrated contact center solutions, powered by the Web, may constitute a competitive advantage.

As
Sento has completed its transition to the delivery of outsourced Customer Contact Solutions, it has encountered a new range of competitors in the customer contact solutions
industry. Sento faces significant and diverse competition in the customer contact solutions industry from a broad spectrum of international, national, regional and local enterprises.

Sento's
ability to compete will be driven by its niche approach, its competencies in leading-edge technologies, its deployment of Web solutions, and its efforts to
aggressively establish a presence in other verticals such as customer services and the financial sector.

Given
the extensive market opportunity in the customer contact center space, management believes that Sento's strategy of providing the "best-of-breed"
services, powered by the Web, will provide it with

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competitive positioning to achieve high growth and capture market share while reaching profitability objectives. Additionally, bankers and others in the financial sector are beginning to recognize the
value a Customer Contact Solutions Center may provide. Sento expects to direct considerable time and effort to establish a solid presence in this vertical.

Significant Customers

Two customers accounted for 62% of Sento's revenues for the year ended March 31, 2001. These two customers accounted for 38%, and 24%, respectively of
revenues for fiscal 2001. For the year ended March 31, 2000, three customers accounted for 86% of Sento's revenues. These three customers accounted for 39%, 31%, and 16%, respectively of
revenues for fiscal 2000. Consistent with industry standards, Sento's contracts are generally cancelable by the customer on short-term notice. Sento's loss of a significant amount of
business with any of its key customers could have, and the loss of a substantial amount of business with any of its largest existing customers would have, a material adverse effect on Sento's
business, financial condition and results of operations. In addition, Sento's future revenue growth is dependent upon its ability to attract and retain new customers.

Patents and Proprietary Technology

Sento does not own any patents nor has it submitted any patent applications relating to its products. Sento has a limited number of copyrights and has obtained
licenses to create derivative works relative to copyrights owned by third parties. The ownership of such derivative works vests in the licensor. Sento is also seeking tradename and trademark
protection for certain of its names and marks.
Accordingly, Sento's management does not believe that any particular patent or group of patents, copyrights, trademarks, or tradenames is of material importance to the business of Sento as a whole.

Research and Development

Sento competes in an industry that is characterized by rapid technological change. Historically, Sento has not incurred significant expenses for research and
development. As clients needs change and evolve and as Internet and Web technologies proliferate, Sento expects to incur additional expense in the development of improved customer contact solutions
tools and offerings. In seeking to develop and maintain a competitive edge in technology, Sento will also be dependent on the research and development efforts of other technology providers and
partners.

Employees

As of May 31, 2001, Sento had approximately 609 total employees, of which approximately 537 were full-time employees and approximately 72
were part-time employees. Competition for qualified personnel in Sento's industry is intense. The future success and growth of Sento will depend in large measure upon its ability to
attract and retain qualified management and technical personnel. There can be no assurance that Sento will be able to attract and maintain all personnel necessary for the development and operation of
its business nor that it will be able to train its current employees on new developments in technology. If Sento fails to attract and retain key management and technical personnel, Sento's operations
may be adversely impacted. None of Sento's employees is represented by a labor organization with respect to his or her employment with Sento. Sento has never had a work stoppage, and Sento considers
its employee relations agreeable.

Proprietary Marks

Sento utilizes many third-party products represented by registered or common-law trademarks, including the following trademarks:
(1) Microsoft®, Windows NT®, Windows 98, and Windows 2000® which are trademarks of Microsoft; (2) Red Hat, which is a
trademark of Red Hat Inc;

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(3) Linux, which is a trademark of Linus Torvalds; and (4) Intel®, which is a registered trademark of Intel. This Report also contains trademarks of other
companies including Genesys, which is a registered trademark of Genesys Telecommunications Laboratories, Inc; Nortel, which is a registered trademark of Nortel Networks; Cisco, which is a registered
trademark of Cisco Systems Inc; and AT&T, which is a registered trademark of AT&T Corporation.

Item 2.  Description of Property.

Sento's headquarters and initial Customer Contact Solutions Center is located at 808 East Utah Valley Drive, American Fork, Utah. Sento leases approximately
40,000 square feet of space used for its administrative and customer contact solutions operations. The initial lease period will end in August 2005, with a monthly base rent of $35,070, subject
to adjustment during the renewal period. Sento's Evanston, Wyoming Customer Contact Solutions Center consists of approximately 33,000 square feet of leased space. The Evanston initial lease period
will end in June 2005, and the monthly base rent is $9,625. Sento's second American Fork, Utah facility houses administrative offices and a newly developed Customer Contact Solutions Center.
The initial lease for this facility will end in June 2005 and the monthly base rent is $17,171, subject to a five percent increase beginning July 2002. Sento has also contracted for a
new Customer Contact Solutions Center located at Green River, Wyoming. When completed the Green River facility will comprise approximately 14,000 square feet of space with the option to add an
additional 10,000 square feet at any point in the future. The lease is expected to commence during the second quarter of fiscal year 2002 and the initial term of the lease is seven years. The monthly
base rent at the Green River facility will be $11,667, which includes real estate taxes, insurance against loss, facility and property maintenance including electrical, plumbing, HVAC, and ordinary
wear. The lessor will also assume responsibility for janitorial services, snow, and trash removal.

Item 3.  Legal Proceedings.

From time to time, the Company is involved in litigation, most of which is incidental to its business. In the Company's opinion, no litigation to which the
Company currently is a party is likely to have a material adverse effect on the Company's results of operations or financial condition.

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Report.

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PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters

The Company's common stock, par value $.25 (the "Common Stock"), is listed and traded under the symbol "SNTO" on the Nasdaq Small Cap Market maintained by the
National Association of Securities Dealers (the "NASD"). The following table sets forth the range of high and low closing prices for the Common Stock for the periods indicated, as reported by the
NASD. The quotations represent prices in the market between dealers in securities; they do not include retail markup, markdown or commissions, and do not necessarily represent actual transactions.

Quarter Ended

High

LowMarch 31, 2001

$
3.00

$
1.63December 31, 2000

$
4.06

$
2.38September 30, 2000

$
4.31

$
3.31June 30, 2000

$
6.38

$
3.31March 31, 2000

$
7.44

$
4.25December 31, 1999

$
4.63

$
2.13September 30, 1999

$
3.00

$
1.84June 30, 1999

$
2.06

$
1.53


The
Company did not pay or declare dividends on the Common Stock during the fiscal years ended March 31, 2001 and 2000. The Company currently anticipates that it will retain
all available funds to finance its future growth and business expansion. The Company does not presently intend to pay cash dividends in the foreseeable future.

As
of May 31, 2001, the Company had 8,468,376 shares of Common Stock outstanding, held by 444 shareholders of record, which does not include shareholders whose shares are held
in securities position listings.

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Item 6.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Sento provides Customer Contact Solutions, including customer acquisition, customer care, technical support services, help-desk functions, and Web
solutions. Through its state-of-the-art Customer Contact Solutions Centers, Sento provides domestic and international support services to mid-sized and
enterprise level companies including Fortune 500 companies.

Subsequent
to March 31, 2001, the Company's management and Board of Directors reached a decision to discontinue the Company's Training Division. The results of operations of
the Training Division have been reflected as a discontinued operation in the financial statements included in this Report.

Results of Operations

Fiscal 2001 Compared to Fiscal 2000

Revenues.Customer Contact Solutions revenues increased 87%, or $12,125,000, from $13,979,000 for the fiscal year ended
March 31, 2000 to $26,104,000 for the fiscal year ended March 31, 2001 (total revenues for fiscal 2000 were $14,658,000). The Company began its Customer Contact Solutions operations
during the quarter ended March 31, 1998, and in August of 1998, moved to its "state of the art" Customer Contact Solutions Center in American Fork, Utah. The significant increase in revenues
reflects the Company's strategic focus on providing services through its Customer Contact Solutions Centers, which resulted in the acquisition of new clients and increased revenues from existing
clients. The American Fork facility originally employed 30 agents in August of 1998, and the Company now employs approximately 483 agents in three centers. Revenue by quarter is as follows:

Three Months Ended

Revenues

Increase (decrease)
from prior quarterSeptember 30, 1998

$
294,468

$
7,014December 31, 1998

$
685,881

$
391,413March 31, 1999

$
1,575,429

$
889,548June 30, 1999

$
2,128,492

$
553,063September 30, 1999

$
2,318,631

$
190,139December 31, 1999

$
4,264,383

$
1,945,752March 31, 2000

$
5,267,371

$
1,002,988June 30, 2000

$
4,856,045

$
(411,326
)September 30, 2000

$
5,394,214

$
538,169December 31, 2000

$
7,760,778

$
2,366,564March 31, 2001

$
8,092,588

$
331,810


Cost of Sales.Cost of sales from continuing operations increased 96%, or $11,102,000, from $11,580,000 for the fiscal
year ended March 31, 2000 to $22,682,000 for the year ended March 31, 2001. This increase was due primarily to additional expenses necessary to generate increased revenue. Gross profit
as a percentage of revenues decreased by 8%, from 21% of revenues during the year ended March 31, 2000 to 13% of revenues for the year ended March 31, 2001. The Company's clients have
been affected by the general economic slowdown, and they in turn have exerted pricing pressure on Sento's services. Actual call volumes in the fourth quarter of fiscal 2001 were less than forecasted,
which resulted in lower absorption of overhead costs created in anticipation of higher call volumes. In addition, the rapid revenue growth in the Customer Contact Solutions centers during the third
quarter required immediate
and significant hiring and upfront training costs for new agents to handle the increased call volume. As a result, gross margins were adversely impacted because the new agents must be trained before
they become productive in handling customer calls and begin to generate revenue.

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Selling, General and Administrative Expenses.Selling, general and administrative expenses decreased 4%, or $92,000,
from $2,379,000 for the year ended March 31, 2000 to $2,287,000 for year the ended March 31, 2001. The decrease was due primarily to management's focus on cost reduction and reduced
overhead related to the discontinuation of the Company's Australian operations in March 2000. Selling, general, and administrative expenses increased $400,000 as a result of an inordinate
amount of bad debt expense arising from sales to two dot.com companies who were unable to meet their financial obligations to the Company. During the year ended March 31, 2001, the Company
recorded a $75,000 reduction of selling, general and administrative expenses related to warrants issued to non-employee consultants, which were subject to a periodic re-pricing
under generally accepted accounting principles.

Research and Development Expense.The Company expensed $242,000 in research and development costs during 2000. The
majority of these costs related to the development of the EchoPass Technology that was later sold to EchoPass. No significant research and development costs were incurred during 2001, and the Company
does not expect to incur significant research and development costs in the future.

Equity Loss on Investment in EchoPass Corporation.The Company accounts for its investment in EchoPass under the equity
method of accounting. During the years ended March 31, 2001, and 2000, the Company recognized $150,000 and $194,000, respectively, of its portion of EchoPass' losses. These recognized losses
equal the total investment in EchoPass, and the Company will not recognize any further losses on this investment. Should EchoPass become profitable in the future, the Company will recognize its
portion of the profits after its portion of unrecognized losses have been offset by profits.

Interest Income.Interest income increased by $122,000, or by 749%, from $16,000 during the year ended March 31,
2000 to $138,000 for the year ended March 31, 2001. The increase in interest income was due primarily to the Company's increase in cash during fiscal 2001.

Interest Expense.Interest expense increased $151,000 during the fiscal year ended March 31, 2001 compared to
fiscal 2000 due primarily to the increase in debt used to finance equipment and furniture in new Customer Contact Solutions Centers and interest expense associated with the convertible debentures sold
by the Company in January 2000.

Other Income (Expense, Net).Other income (expense) includes the following for the fiscal years ended March 31,
2001 and 2000:

March 312001

2000Proceeds from assets impaired or written off in prior periods

$


$
158,865Loss on sale of property and equipment


(13,303
)

(75,855
)Other


(34,829
)

83,744Other (expense) income, net

$
(48,132
)
$
166,754


Liquidity and Capital Resources

Cash balances increased 50%, or $1,194,000, from $2,382,000 at March 31, 2000 to $3,576,000 at March 31, 2001. Working capital increased to
$3,927,000 at March 31, 2001 from $3,661,000 at March 31, 2000. The improved liquidity was primarily due to $1,802,000 of cash flow from operations, and $2,185,000 in borrowings under
long-term equipment loans, less $2,995,000 in capital spending. In addition, the Company as of May 31, 2001 has a $3 million unused revolving line of credit and unused
equipment lines of credit in the amount of approximately $1.4 million.

11

---

On September 13, 2000, the Board of Directors approved the repurchase of up to $1,000,000 of the Common Stock. The repurchase program is conditioned upon the Company's having
cash balances of at least $3,500,000 plus an unused bank line of credit of $3,000,000 immediately prior to any buyback of shares. As of March 31, 2001, the Company had repurchased 111,495
shares of common stock at a total cost of $285,000 under this buyback program.

The
Company's primary sources of liquidity have been operations, cash received from sales of assets and cash provided through private sales of equity and debt, as well as borrowings
under a bank line of credit and loans made to the Company by the Wyoming Industrial Development Corporation. In addition, the Company has financed some of its equipment utilized in its business
through long-term
leasing arrangements. The historic growth rate of the Customer Contact Solutions Centers has consumed substantial amounts of cash, and the Company may be required to pursue additional funding
opportunities to fund future growth should it accelerate in excess of historical and planned future growth. In the event the Company is not able to find such alternate sources of funding, its ability
to pursue its planned business strategy may be limited. There can be no assurance that the Company will be able to obtain necessary capital funding on terms favorable to the Company.

Risks Related to Existing and Proposed Sento Operations

In addition to other information in this Report, the following are important factors that should be considered carefully in evaluating the Company and its
business.

Dependence on Key Customers.Two customers accounted for approximately 62% of the Company's revenues for the year ended
March 31, 2001. These two customers accounted for approximately 38%, and 24%, respectively of revenues for fiscal 2001. For the year ended March 31, 2000, three customers accounted for
approximately 86% of the Company's revenues. These three customers accounted for approximately 39%, 31%, and 16%, respectively of revenues for fiscal 2000. Consistent with industry standards, Sento's
contracts are generally cancelable by the customer on short-term notice. Sento's loss of a significant amount of business with any of its key customers could have, and the loss of a
substantial amount of business with any of its largest existing technical support customers would have, a material adverse effect on Sento's business, financial condition, and results of operations.
In addition, Sento's future revenue growth is dependent upon its ability to attract and retain new customers.

Risks of Growth Strategy.Sento's business strategy is premised, in part, upon expansion of its operations by opening,
acquiring or partnering with other customer support facilities. Substantial risks accompany Sento's growth plans. For example, Sento's growth plans are dependent upon its ability to attract and retain
new customers. Sento's failure to attract and retain new customers will not only prevent the implementation of its business strategy, but may leave Sento with excess personnel and physical facilities,
which would have a negative impact on Sento's results of operations and financial condition.

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

Reliance on EchoPass for Outsourced Services.Since completion of the EchoPass transactions in March 2000, Sento
no longer possesses the EchoPass Technology transferred to EchoPass and no longer employs a number of former technical support employees who were formerly engaged in developing the technology and
maintaining Sento's Customer Contact Solutions Centers. Some of these technical

12

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support functions are now provided by EchoPass employees on an outsourced basis pursuant to a services agreement. As a result, Sento is dependent on EchoPass for many of the technical support
functions related to Sento's Customer Contact Solutions Centers. The outsourcing relationship could result in decreased attention to Sento's needs, slower response times and the lack of redundant
support functions. If EchoPass fails in its business efforts, Sento may be required to identify and retain one or more alternate third party providers of such services and could experience service
delays, interruptions and cancellations. In addition, if EchoPass does not provide to Sento high-quality technical support services at competitive prices, Sento may elect or be forced to
obtain replacement services from alternate sources. There can be no assurance that Sento would be able to obtain such services at a reasonable cost, if at all, or without a material interruption of
its business.

Conflicts Between Sento and EchoPass.EchoPass owns the EchoPass Technology, which comprises a portion of the
technology utilized in Sento's Customer Contact Solutions Centers. Although a statement of work between Sento and EchoPass grants to Sento the right to utilize substantially all of the EchoPass
Technology in the operation of its existing and future Customer Contact Solutions Centers, EchoPass will likely have the opportunity to license the EchoPass Technology to third parties, including
existing and potential competitors of Sento.

Changing Needs of the Customer Contact Service Market.The customer contact service industry is characterized by rapid
technological change, changes in customer requirements and preferences, and the emergence of new industry standards and practices that could render Sento's existing and proposed products, services,
technology and systems obsolete. To remain competitive, Sento must continually improve the performance, features, and reliability of its products and services, including its existing customer contact
service applications, and develop new products and services that address the increasingly sophisticated and varied needs of its prospective customers. If Sento cannot adapt or respond in a
cost-effective and timely manner to changing industry standards, market conditions, or customer requirements, its business and operating results would suffer and could negatively impact
Sento's business and/or financial condition.

Sento's
success will also depend in part on EchoPass' ability to develop solutions that keep pace with the continuing changes in information technology, evolving industry standards,
and changing client requirements. There can be no assurance that Sento will be successful in adequately addressing these developments on a timely basis or that, if these developments are addressed,
Sento will be successful in the marketplace. In addition, there can be no assurance that products or technologies developed by others will not render Sento's services non-competitive or
obsolete. Sento's or EchoPass' failure to address these developments could have a material adverse effect on Sento's business and financial condition.

Dilution of Sento's Ownership in EchoPass.EchoPass' success in developing and licensing its technology will depend to
a significant extent on EchoPass' ability to obtain financing required to develop, market and sell its technology. As a result, EchoPass will have an incentive to issue additional capital stock to
sources of such financing. Since the completion of the EchoPass 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 capital
stock. The issuance of such additional capital stock would have the effect of diluting Sento's ownership of the EchoPass capital stock and reducing Sento's ability to influence the management and
policies of EchoPass.

The
dilution of Sento's economic interests could result in Sento receiving less financial benefit from EchoPass' use of the EchoPass Technology than Sento could have obtained through
commercializing the EchoPass Technology itself. Sento's lack of voting control over EchoPass could result in EchoPass' taking actions in conflict with or adverse to the interests of Sento. In
addition, Sento will not have the unrestricted right to develop new applications for the EchoPass Technology

13

---

without obtaining the consent of EchoPass. Without a controlling interest in EchoPass, Sento will not be assured of obtaining EchoPass' consent for such additional applications.

Competition.The market for providing customer contact services is highly fragmented and very competitive. The customer
contact services industry, however, has begun to experience a degree of consolidation and the existence of major customer contact center companies has resulted in an additional level of competition
from service providers that have greater name recognition, larger installed customer bases, and significantly greater financial, technical, and marketing resources than Sento. Over the past several
years, a number of existing companies have enjoyed increasing success and rapid internal growth. Several of these companies have been active in acquiring smaller regional customer contact services
companies and are becoming major competitors with a measurable share of this rapidly expanding market

Also,
many major companies provide their own in-house customer care support and customer training. However, such companies are within the potential customer base for
customer contact service providers and have the capability of outsourcing those services to Sento.

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

Competition in Customer Contact Services Market.The customer contact services market is new and intensely competitive.
There are no substantial barriers to entry, and established 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, may leverage their existing relationships and capabilities to offer customer service applications. Any delays in the general
market acceptance of the customer contact service applications and EchoPass' proposed products and services would likely harm EchoPass' competitive position. Delays would allow EchoPass' competitors
additional time to improve their service or product offerings, and also provide time for new competitors to develop e-business customer service applications and solicit prospective
customers within EchoPass' target markets. Increased competition could result in pricing pressures, reduced operating margins and loss of market share.

Risk of Emergency Interruption of Customer Contact Solutions Center Operations.Sento's business depends to a large
extent on computer and telecommunications equipment and software systems (both equipment and systems maintained 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 not result in a prolonged interruption in Sento's ability to provide
support services to its clients. The temporary or permanent loss of computer or telephone equipment or systems, through casualty, operating malfunction or otherwise, could have a material adverse
effect on Sento. Property and business interruption insurance may not be adequate to compensate Sento for all losses that it may incur.

Attracting, Training, and Retaining Quality Management and Employees.The customer contact services market suffers from
a significant labor shortage. Sento's success will depend, in large part, on its ability to attract, retain and train highly-qualified technical, managerial and marketing personnel with the required
expertise. Sento has not entered into employment agreements that require the services of any of its key managerial or technical personnel to remain with Sento for any specified period of time.
Competition for such personnel is intense. There can be no assurance that Sento will be able to attract and maintain the personnel necessary for the development and operation of its business nor that
it will be able to train its current employees on new developments in technology. Specifically, the loss of the Company's current Vice President of Operations, its Chief Executive Officer, or its
Chief Financial Officer, or of the services of any other key personnel or an inability to attract, retain,

14

---

train and motivate qualified personnel could have a material adverse effect on the business, financial condition and results of operations 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 to
approximately 609 as of May 31, 2001. The support required for two of the Company's largest clients is seasonal. There is therefore a necessity for very rapid increases in employees and
subsequent decrease in the number of employees as the requirements for support decrease. In addition there is continued rapid growth on a year-to-year comparison. The Company
cannot provide any assurance that its current management team can successfully manage Sento's rapidly evolving business, and any failure to do so could have a material adverse effect upon Sento's
operating results.

Liquidity and Capital Resources.At March 31, 2001, Sento had working capital of $3,927,000 and a cash balance
of $3,576,000. Sento's liquidity position has improved since March 31, 2000. However, future growth, particularly growth in excess of planned growth, will depend on the Company's ability to
obtain financing. The historic growth rate of the Customer Contact Solutions operations has consumed substantial amounts of cash and will continue to require significant capital investment. The
Company may be required to pursue additional funding opportunities to fund future growth should it accelerate in excess of historical and planned future growth. In the event the Company is not able to
find such alternate sources of funding, its ability to pursue its planned business strategy may be limited. There can be no assurance that the Company will be able to obtain necessary capital funding
on terms favorable to the Company, if at all.

Dependence on Industry Trend to Outsource Services.Sento's business depends in large part on the trend within the IT
industry to outsource certain services. Sento cannot provide any assurance that this trend will continue or that, if the trend continues, it will continue at the same rate of growth. The failure of
this trend to continue could have a material adverse effect on the business, financial condition, and results of operations of Sento.

Potential Significant Fluctuations in Quarterly Results.The value of individual transactions can constitute a
substantial percentage of Sento's quarterly revenue, and particular transactions may generate a substantial portion of the operating profits for a quarter. Because Sento's staffing and other operating
expenses are based on anticipated revenue levels, and a high percentage of its expenses are fixed, delays in the receipt of orders can cause significant variations in operating results from quarter to
quarter. In addition, Sento may expend significant resources pursuing potential sales that will not be consummated. Sento also may choose to reduce prices or to increase spending in response to
competition or to pursue new market opportunities, which may adversely affect its operating results.

In
particular, Sento's quarterly revenues from its Customer Contact Solutions Center operations are potentially volatile. Such revenues are principally a function of the number of
support requests received by Sento, and the time spent on such requests. Consequently, Sento's profitability may be adversely affected if Sento receives fewer support requests than anticipated or the
time spent in resolving inquiries is greater than anticipated.

For
the reasons identified above, management believes that period-to-period comparisons of Sento's results of operations may not be meaningful and that no one
should rely upon them as an indication of future performance. Furthermore, Sento cannot provide any assurance that it will be able to achieve or sustain profitability on a quarterly basis.

Possible Volatility of Stock Price.The trading price of the Common Stock has fluctuated widely in response to
variations in quarterly operating results, announcements by Sento or its competitors, industry trends, general economic conditions or other events or factors. Such fluctuations, as well as
fluctuations in the trading volume of the Common Stock, may continue in the future. Regardless of the general outlook for Sento's business, the announcement of quarterly operating results below
analyst and investor expectations could have a material and adverse effect on the market price of the Common Stock.

15

---

Anti-Takeover Considerations.Sento's Articles of Incorporation and Bylaws, the Utah Revised Business
Corporation Act, and the Utah Control Shares Acquisition Act each contain certain provisions that may have the effect of inhibiting a non-negotiated merger or other business combination.
Sento's Articles of Incorporation grant to the Board of Directors the authority, without further action by Sento's shareholders, to fix the rights and preferences of, and issue shares of preferred
stock. These provisions may deter hostile takeovers or delay or prevent changes in control of Sento or changes in Sento's management, including transactions in which shareholders might otherwise
receive a premium for their shares over the then-current market prices. In addition, these provisions may limit the ability of shareholders to approve transactions that they may deem to be
in their best interests.

Dividends.Dividends are payable on the Common Stock only when, as, and if declared by Sento's Board of Directors. At
present Sento intends to retain any future earnings for use in its business and therefore does not anticipate paying any dividends on the Common Stock in the foreseeable future.

Item 7. Financial Statements.

The financial statement information required by Item 7 is included on pages F-1 to F-20.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

16

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PART III

Items 9, 10, 11 and 12.

These items are incorporated by reference to the Company's definitive proxy statement relating to the Company's Annual Meeting of Shareholders.

Item 13. Exhibits and Reports on Form 8-K.

(a)  EXHIBITS

|Number |  | Description                                                                                       |  | Incorporated
by Reference |   | Filed
Herewith |  
|------ |  | ------------------------------------------------------------------------------------------------- |  | ------------------------- | - | -------------- | -
|3.1    |  | Articles of Incorporation, as amended                                                             |  | (1                        | ) |                |  
|3.2    |  | Bylaws                                                                                            |  | (2                        | ) |                |  
|10.1   |  | Sento Corporation 1999 Omnibus Stock Incentive Plan                                               |  | (3                        | ) |                |  
|10.2   |  | Sento Corporation 1996 Employee Stock Purchase Plan (Amended and Restated)                        |  | (3                        | ) |                |  
|10.3   |  | Form of Warrant                                                                                   |  | (3                        | ) |                |  
|10.4   |  | Silicon Valley Bank Amended and Restated Loan and Security Agreement, dated as of April 28, 2000. |  | (3                        | ) |                |  
|10.5   |  | Form of 7% Convertible Subordinated Debentures                                                    |  | (3                        | ) |                |  
|10.6   |  | Lease Agreement, dated January 1, 2000, between the Company and K.E.B. Enterprises LP             |  | (3                        | ) |                |  
|10.7   |  | Lease Agreement, dated May 24, 2000, between the Company and Abinadi, Inc.                        |  | (3                        | ) |                |  
|10.8   |  | Business Lease with Wyoming Financial Properties Inc.                                             |  | (4                        | ) |                |  
|10.9   |  | Loan Modification Agreement with Silicon Valley Bank                                              |  | (4                        | ) |                |  
|21     |  | Subsidiaries of the Registrant                                                                    |  | (3                        | ) |                |  
|23     |  | Consent of Ernst & Young LLP                                                                      |  |                           |   | (5             | )

---



17

---





SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on June 15, 2001.

| |  | SENTO CORPORATION
| |  | -----------------
| |  | By:              

In
accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on
June 15, 2001.

|Signature                             |  | Capacity in Which Signed                                                              
|------------------------------------- |  | --------------------------------------------------------------------------------------
|                                      |  |                                                                                       
|/s/GARY B. FILLERGary B. Filler       |  | Chairman of the Board and Acting Chief Financial Officer (Principal financial officer)
|/s/DENNIS L. HERRICKDennis L. Herrick |  | President, Chief Executive Officer and Director (Principal executive officer)         
|/s/KIETH E. SORENSONKieth E. Sorenson |  | Director                                                                              
|/s/KIM A. COOPERKim A. Cooper         |  | Director                                                                              
|/s/LYNDON L. RICKSLyndon L. Ricks     |  | Director                                                                              
|/s/STANLEY J. CUTLERStanley J. Cutler |  | Corporate Controller and Secretary (Principal accounting officer)                     

18

---

Report of Independent Auditors

The Board of Directors and Shareholders
Sento Corporation and Subsidiaries

We
have audited the accompanying consolidated balance sheets of Sento Corporation and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity and comprehensive income (loss) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sento Corporation and subsidiaries at
March 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United
States.



April 19,
2001

except
for paragraph 3

of
note 5, as to which the date is

May 23,
2001

F1

---



Sento Corporation and Subsidiaries    Consolidated Balance Sheets

|                                           |                                                                                                                            | March 31 |           
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------- | -------- | ----------
|
|Assets                                     |                                                                                                                            |          |           
|Current assets:                            |                                                                                                                            |          |           
|                                           | Cash and cash equivalents                                                                                                  |          | $         
|                                           | Accounts receivable, less allowance for doubtful accounts of $80,000 in 2001 and $131,000 in 2000                          |          |           
|                                           | Receivable from EchoPass Corporation                                                                                       |          |           
|                                           | Other current assets                                                                                                       |          |           
|                                           |                                                                                                                            |          |           
|Total current assets                       |                                                                                                                            |          | 8,180,506 
|Property and equipment, net                |                                                                                                                            |          | 3,887,782 
|Investment in EchoPass Corporation         |                                                                                                                            |          |          
|Other assets                               |                                                                                                                            |          | 73,795    
|                                           |                                                                                                                            |          |           
|Total assets                               |                                                                                                                            | $        | 12,142,083
|                                           |                                                                                                                            |          |           
|Liabilities and stockholders' equity       |                                                                                                                            |          |           
|Current liabilities:                       |                                                                                                                            |          |           
|                                           | Accounts payable                                                                                                           |          | $         
|                                           | Payable to EchoPass Corporation                                                                                            |          |           
|                                           | Accrued salaries and payroll taxes                                                                                         |          |           
|                                           | Accrued liabilities                                                                                                        |          |           
|                                           | Accrued loss from disposal of business segment                                                                             |          |           
|                                           | Current portion of long-term debt and capital leases                                                                       |          |           
|                                           | Customer deposits and other current liabilities                                                                            |          |           
|                                           |                                                                                                                            |          |           
|Total current liabilities                  |                                                                                                                            |          | 4,253,088 
|                                           | Long-term debt and capital leases, excluding current portion                                                               |          |           
|                                           | Convertible debt                                                                                                           |          |           
|                                           |                                                                                                                            |          |           
|Total long-term liabilities                |                                                                                                                            |          | 2,571,088 
|Commitments                                |                                                                                                                            |          |           
|Stockholders' equity:                      |                                                                                                                            |          |           
|                                           | Common stock, $.25 par value, 50,000,000 shares authorized; issued and outstanding 8,524,285 in 2001 and 8,313,398 in 2000 |          |           
|                                           | Additional paid-in capital                                                                                                 |          |           
|                                           | Deferred compensation                                                                                                      |          |           
|                                           | Accumulated deficit                                                                                                        |          |           
|                                           |                                                                                                                            |          |           
|Total stockholders' equity                 |                                                                                                                            |          | 5,317,907 
|                                           |                                                                                                                            |          |           
|Total liabilities and stockholders' equity |                                                                                                                            | $        | 12,142,083
|                                           |                                                                                                                            |          |           

See accompanying notes.

F2

---



Sento Corporation and Subsidiaries    Consolidated Statements of Operations

|                                                  |                                                    | Year Ended March 31 |           
|------------------------------------------------- | -------------------------------------------------- | ------------------- | ----------
|
|Revenue                                           |                                                    | $                   | 26,103,625
|Cost of sales                                     |                                                    |                     | 22,682,299
|                                                  |                                                    |                     |           
|                                                  | Gross profit                                       |                     |           
|Selling, general, and administrative expenses     |                                                    |                     | 2,287,176 
|Research and development expense                  |                                                    |                     |          
|                                                  |                                                    |                     |           
|                                                  | Income from operations                             |                     |           
|Equity loss on investment in EchoPass Corporation |                                                    |                     | (149,795  
|Interest income                                   |                                                    |                     | 138,099   
|Interest expense                                  |                                                    |                     | (253,996  
|Other (expense) income, net                       |                                                    |                     | (48,132   
|                                                  |                                                    |                     |           
|                                                  | Income before income taxes                         |                     |           
|Income tax benefit                                |                                                    |                     |          
|                                                  |                                                    |                     |           
|                                                  | Income from continuing operations                  |                     |           
|                                                  | Loss from discontinued operations                  |                     |           
|                                                  | Gain (loss) on disposal of discontinued operations |                     |           
|                                                  |                                                    |                     |           
|                                                  | Net loss                                           |                     | $         
|                                                  |                                                    |                     |           
|Net income (loss) per sharebasic                 |                                                    |                     |           
|                                                  | Continuing operations                              |                     | $         
|                                                  | Discontinued operations                            |                     |           
|                                                  |                                                    |                     |           
|Net income (loss)                                 |                                                    | $                   | 0.00      
|                                                  |                                                    |                     |           
|Net income (loss) per sharediluted               |                                                    |                     |           
|                                                  | Continuing operations                              |                     | $         
|                                                  | Discontinued operations                            |                     |           
|                                                  |                                                    |                     |           
|Net income (loss)                                 |                                                    | $                   | 0.00      
|                                                  |                                                    |                     |           

See accompanying notes.

F3

---



Sento Corporation and Subsidiaries    Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss)

|                                                 |                                                  | Common Stock |   |   |           |   |   | Retained
Earnings
(Accumulated
Deficit) |   | Accumulated
Other
Comprehensive
Income (Loss) |          |   |   |            |         
|------------------------------------------------ | ------------------------------------------------ | ------------ | - | - | --------- | - | - | --------------------------------------- | - | --------------------------------------------- | -------- | - | - | ---------- | --------
|
|
|Balances at March 31, 1999                       |                                                  | 6,120,671    |   | $ | 1,580,607 |   | $ | 7,247,143                               |   | $                                             | (204,814 | ) | $ | (7,327,537 | )       
|Cancellation of treasury shares                  |                                                  |             |   |   | (50,438   | ) |   | (336,125                                | ) |                                               |         |   |   |           |         
|Conversion of bonds                              |                                                  | 401,264      |   |   | 100,316   |   |   | 431,951                                 |   |                                               |         |   |   |           |         
|Exercise of stock options                        |                                                  | 211,638      |   |   | 52,910    |   |   | 444,832                                 |   |                                               |          |   |   |           |         
|Private placement of common stock                |                                                  | 1,200,000    |   |   | 300,000   |   |   | 1,580,522                               |   |                                               |         |   |   |           |         
|Cancellation of stock options                    |                                                  |             |   |   |          |   |   | (150,575                                | ) |                                               | 150,575  |   |   |           |         
|Common stock issued for royalty payments         |                                                  | 169,097      |   |   | 42,274    |   |   | 359,033                                 |   |                                               |         |   |   |           |         
|Warrant exercises                                |                                                  | 173,749      |   |   | 43,437    |   |   | 395,310                                 |   |                                               |         |   |   |           |         
|Amortization of deferred compensation            |                                                  |             |   |   |          |   |   |                                        |   |                                               | 46,034   |   |   |           |         
|Issuance of warrants with convertible debentures |                                                  |             |   |   |          |   |   | 226,609                                 |   |                                               |         |   |   |           |         
|Issuance of warrants for services                |                                                  |             |   |   |          |   |   | 127,847                                 |   |                                               | (127,847 | ) |   |           |         
|Employee stock purchases                         |                                                  | 36,979       |   |   | 9,245     |   |   | 65,406                                  |   |                                               |         |   |   |           |         
|Tax effect of disqualifying disposition          |                                                  |             |   |   |          |   |   | 3,277                                   |   |                                               |         |   |   |           |         
|Comprehensive loss:                              |                                                  |              |   |   |           |   |   |                                         |   |                                               |          |   |   |            |         
|                                                 | Net loss                                         |              |  |   |           |  |   |                                         |  |                                               |          |  |   |            | (111,711
|                                                 | Effect of change in foreign currency translation |              |  |   |           |  |   |                                         |  |                                               |          |  |   |            |        
|Total comprehensive loss                         |                                                  |              |   |   |           |   |   |                                         |   |                                               |          |   |   |            |         
|                                                 |                                                  |              |   |   |           |   |   |                                         |   |                                               |          |   |   |            |         
|Balances at March 31, 2000                       |                                                  | 8,313,398    |   |   | 2,078,351 |   |   | 10,395,230                              |   |                                               | (136,052 | ) |   | (7,439,248 | )       
|Purchase and cancellation of common stock        |                                                  | (111,495     | ) |   | (27,874   | ) |   | (257,168                                | ) |                                               |         |   |   |           |         
|Revaluation of warrants issued for services      |                                                  |             |   |   |          |   |   | (75,146                                 | ) |                                               | 75,146   |   |   |           |         
|Amortization of deferred compensation            |                                                  |             |   |   |          |   |   |                                        |   |                                               | 29,741   |   |   |           |         
|Exercise of stock options                        |                                                  | 245,148      |   |   | 61,287    |   |   | 437,476                                 |   |                                               |         |   |   |           |         
|Employee stock purchases                         |                                                  | 77,234       |   |   | 19,308    |   |   | 181,664                                 |   |                                               |         |   |   |           |         
|Net comprehensive loss                           |                                                  |             |   |   |          |   |   |                                        |   |                                               |         |   |   | (24,808    | )       
|                                                 |                                                  |              |   |   |           |   |   |                                         |   |                                               |          |   |   |            |         
|Balances at March 31, 2001                       |                                                  | 8,524,285    |   | $ | 2,131,072 |   | $ | 10,682,056                              |   | $                                             | (31,165  | ) | $ | (7,464,056 | )       
|                                                 |                                                  |              |   |   |           |   |   |                                         |   |                                               |          |   |   |            |         

F4

---



Sento Corporation and Subsidiaries    Consolidated Statements of Cash Flows

|                                                 |                                                                                           | Year Ended March 31                                |                        
|------------------------------------------------ | ----------------------------------------------------------------------------------------- | -------------------------------------------------- | -----------------------
|
|Cash flows from operating activities:            |                                                                                           |                                                    |                        
|                                                 | Net loss                                                                                  |                                                    | $                      
|                                                 | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                    |                        
|                                                 |                                                                                           | Loss (gain) on disposal of discontinued operations |                        
|                                                 |                                                                                           | Depreciation and amortization                      |                        
|                                                 |                                                                                           | Amortization of deferred compensation              |                        
|                                                 |                                                                                           | Provision for losses on accounts receivable        |                        
|                                                 |                                                                                           | Equity loss on investment in EchoPass Corporation  |                        
|                                                 |                                                                                           | Net loss on disposal of assets                     |                        
|                                                 |                                                                                           | Gain on sale of subsidiary                         |                        
|                                                 |                                                                                           | Accretion on debenture for warrant                 |                        
|                                                 |                                                                                           | Changes in operating assets and liabilities:       |                        
|                                                 |                                                                                           |                                                    | Accounts receivable    
|                                                 |                                                                                           |                                                    | Other assets           
|                                                 |                                                                                           |                                                    | Accounts payable       
|                                                 |                                                                                           |                                                    | Accrued liabilities    
|                                                 |                                                                                           |                                                    | Income taxes receivable
|                                                 |                                                                                           |                                                    | Customer deposits      
|                                                 |                                                                                           |                                                    |                        
|                                                 |                                                                                           |                                                    |                        
|Cash flows from investing activities:            |                                                                                           |                                                    |                        
|                                                 | Investment in EchoPass Corporation                                                        |                                                    |                        
|                                                 | Capital expenditures                                                                      |                                                    |                        
|                                                 | Proceeds from sale of assets                                                              |                                                    |                        
|                                                 | Disposal of businesses, net of cash                                                       |                                                    |                        
|                                                 | Proceeds from notes receivable                                                            |                                                    |                        
|                                                 |                                                                                           |                                                    |                        
|                                                 |                                                                                           |                                                    |                        
|Cash flows from financing activities:            |                                                                                           |                                                    |                        
|                                                 | Proceeds from issuance of stock                                                           |                                                    |                        
|                                                 | Proceeds from issuance of long-term debt and line of credit                               |                                                    |                        
|                                                 | Principal payments of long-term debt and credit line                                      |                                                    |                        
|                                                 | Principal payments on capital leases                                                      |                                                    |                        
|                                                 | Proceeds from exercise of stock options                                                   |                                                    |                        
|                                                 | Proceeds from exercise of warrants                                                        |                                                    |                        
|                                                 | Proceeds from employee stock purchase plan                                                |                                                    |                        
|                                                 | Proceeds form issuance of convertible debentures                                          |                                                    |                        
|                                                 | Repurchase of common stock                                                                |                                                    |                        
|                                                 |                                                                                           |                                                    |                        
|                                                 |                                                                                           |                                                    |                        
|Effect of exchange rate changes                  |                                                                                           |                                                    |                       
|                                                 |                                                                                           |                                                    |                        
|Net increase in cash and cash equivalents        |                                                                                           |                                                    | 1,193,419              
|Cash and cash equivalents at beginning of period |                                                                                           |                                                    | 2,382,321              
|                                                 |                                                                                           |                                                    |                        
|Cash and cash equivalents at end of period       |                                                                                           | $                                                  | 3,575,740              
|                                                 |                                                                                           |                                                    |                        

F5

---



Sento Corporation and Subsidiaries    Supplement to Consolidated Statements of Cash Flows

|                                                                       |          | Year Ended March 31
|---------------------------------------------------------------------- | -------- | -------------------
|
|Supplemental disclosures of cash flow information                      |          |                    
|Cash paid for:                                                         |          |                    
|                                                                       | Interest |                    
|Supplemental disclosures of noncash investing and financing activities |          |                    
|Common stock issued for payment of royalties                           |          | $                  
|Common stock issued for conversion of bonds                            |          |                    
|Assets acquired under capital lease                                    |          |                    
|Issuance of warrants with convertible debentures                       |          |                    
|Cancellation of treasury shares                                        |          |                    

See accompanying notes.

F6

---



Sento Corporation and Subsidiaries        Notes to Consolidated Financial Statements        March 31, 2001

1.  Description of Business

Sento Corporation provides the latest in CRM (Customer Relations Management) service solutions for a diversified portfolio of organizations. These services
include telephone, e-mail, Web text chat, Web callbacks, browser collaboration, voicemail, and fax. These solutions are designed to direct incoming interactions to the right client
company's agent at the right time with skills-based routing and customer data screen pops, enabling immediate and accurate customer care. During fiscal 2000 and 2001, Sento specialized in Help Desk
Services, Technical Training, and Education. Sento conducts its principal business through its wholly owned subsidiary Sento Technical Services Corporation.

Historically,
Sento operated as a Value Added Reseller (VAR) generating revenues from its sales and distribution of third-party hardware and software products. As a reseller, the
Company was dependent on third-party suppliers. During fiscal 2000, the Company completed a strategic transition using its technical core competencies to offer IT outsourcing services and
IT training. As a result, the Company no longer operates as a VAR, effective in the first quarter of fiscal 2000.

In
addition, during fiscal 2000, the Company conducted substantially all of its foreign operations through Sento Australia Pty. Limited, based near Sydney, Australia. As of
March 1, 2000, Sento Australia ceased operations. Revenues from foreign sales for the period ended March 31, 2000, were approximately four percent of total sales.

In
May 2001, the Company's management and Board of Directors reached a decision to discontinue the Company's Training Division segment. The results of operations for the
Training Division have been reflected as a discontinued operation in the accompanying financial statements (see Note 5).

2.  Significant Accounting Policies

Principles of Consolidation

The accompanying financial statements include the consolidated financial statements of Sento and its wholly owned subsidiaries (collectively, the Company). All
significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Revenue Recognition

Revenue is generally recognized when persuasive evidence of an arrangement exists, delivery of services has occurred, the fee is fixed or determinable, and
collection of the resulting receivable is reasonably assured.

Property and Equipment

Property and equipment are stated at cost. Depreciation of fixed assets is computed on the straight-line method over the estimated useful lives of
individual classes of assets. Leasehold improvements are depreciated over the shorter of the remaining lease term or the useful life of the

F7

---

improvements. The estimated useful lives of equipment and furniture are three to ten years. Major replacements, which extend the useful lives of equipment, are capitalized and depreciated over the
remaining useful lives. Normal maintenance and repair items are expensed as incurred.

Research and Development

Research and development costs are expensed as incurred. In accordance with Statement of Position 98-1,Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalized approximately $200,000 in fiscal 2000 associated with major enhancements to its
technology. The value of this technology was included in the assets transferred to Echopass (see Note 4).

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and deferred tax liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and deferred tax
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and deferred tax liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Net Income (Loss) Per Common Share

Basic income (loss) per share is computed in accordance with Financial Accounting Standards Board Standards No. 128,Earnings
Per Share. Basic net income (loss) per share is computed as net income or loss divided by the weighted average number of common shares outstanding for the period. Diluted net
income (loss) per share reflects the potential dilution that could occur from common shares issueable through stock options, warrants, and other convertible securities, if dilutive.

F8

---

The following table sets forth the calculation of basic and diluted net loss per share:

|                                                                     |                          | Year Ended March 31 |          
|-------------------------------------------------------------------- | ------------------------ | ------------------- | ---------
|
|Net loss                                                             |                          | $                   | (24,808  
|                                                                     |                          |                     |          
|Denominator for basic net income per shareweighted average shares   |                          |                     | 8,484,538
|Dilutive common stock options and warrants                           |                          |                     | 540,431  
|                                                                     |                          |                     |          
|Denominator for diluted net income per shareweighted average shares |                          |                     | 9,024,969
|                                                                     |                          |                     |          
|Basic net income per share:                                          |                          |                     |          
|                                                                     | Continuing operations    |                     | $        
|                                                                     | Discontinuing operations |                     |          
|                                                                     |                          |                     |          
|Net loss                                                             |                          | $                   | 0.00     
|                                                                     |                          |                     |          
|Diluted net income per share:                                        |                          |                     |          
|                                                                     | Continuing operations    |                     | $        
|                                                                     | Discontinuing operations |                     |          
|                                                                     |                          |                     |          
|Net loss                                                             |                          | $                   | 0.00     
|                                                                     |                          |                     |          

Stock-Based Compensation

The Company has adopted the footnote disclosure provisions of Statement of Financial Accounting Standards No. 123,Accounting
for Stock Based Compensation(SFAS 123). SFAS 123 encourages entities to adopt a fair value based method of accounting for stock options or similar equity
instruments. However, it also allows an entity to continue measuring compensation cost for stock based compensation using the intrinsic-value method of accounting prescribed by Accounting Principles
Board Opinion No. 25,Accounting for Stock Issued to Employees(APB 25). The Company has elected to continue to apply the provisions of APB 25
and provide pro forma footnote disclosures required by SFAS 123.

Comprehensive Income

Comprehensive income is comprised of net inomce and other comprehensive income. Other comprehensive income includes certain changes in equity of the Company
that are excluded from net income. There were no items of other comprehensive income in fiscal 2001. Other comprehensive income in fiscal 2000 included the effect of change in foreign currency
translation.

Concentration of Credit Risk

In the normal course of business, the Company provides unsecured credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations. Two customers accounted for 62% of revenues for the year ended
March 31, 2001. These two customers accounted for 38% and 24%, respectively of fiscal 2001 revenues. For the year ended

F9

---

March 31, 2000, three customers accounted for approximately 86% of the Company's revenues. These three customers accounted for approximately 39%, 31% and 16%, respectively of fiscal 2000
revenues.

Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues, and expenses and the
disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those
estimates.

Reclassifications

Certain items in the 2000 consolidated financial statements have been reclassified to conform with the 2001 presentation.

Financial Instruments

The carrying value of accounts receivable, accounts payable, accrued expenses, and debt approximate their estimated fair value.

Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to $635,722 and $791,404 in fiscal 2001 and 2000, respectively.

3.  Other (Expense) Income, Net

March 312001

2000Proceeds from assets impaired or written off in prior periods

$


$
158,865Loss on sale of property and equipment


(13,303
)

(75,855
)Other


(34,829
)

83,744Other (expense) income, net

$
(48,132
)
$
166,754


4.  Business Acquisitions and Asset Dispositions

In August 1998, Sento acquired the marketing rights to certain IT training courses from Educational Systems, Inc. ("ESI") for $100,000 cash and
an agreement to pay future royalties of not less than $500,000 and not more than $1,400,000 (in cash and shares of common stock) over a 33-month period. In August 1999, Sento and
ESI entered into a settlement and release agreement and issued 169,067 shares of common stock as full consideration for unpaid royalties.

As
of March 1, 2000, Sento Australia ceased its operations. There was no significant gain or loss resulting from this action.

F10

---

Pursuant to a shareholder vote at a special shareholder meeting in December 1999, the Company consummated the sale of certain technology to EchoPass Corporation (EchoPass) in
exchange for 4,000,000 shares of EchoPass' Series A preferred stock in March 2000. EchoPass was formed in fiscal 2000. The Company recorded its investment in EchoPass at the historical
carrying value of the underlying technology that was transferred to EchoPass. As of March 31, 2000, the Company's investment represented a 26% ownership interest in EchoPass. Therefore, the
Company has recorded its pro-rata share of EchoPass losses under the equity method of accounting. As of March 31, 2001, the investment in EchoPass had been written down to a zero
balance as the result of recording the Company's pro-rata share of EchoPass losses.

5.  Discontinued Operations

In June 1999, the Company completed the sale of its VAR business and certain related assets. The Company received cash of $50,000 and future contingent
earn-out payments of up to $350,000 to be
received over 36 months. To date, the Company has received $44,594 in earn-out payments under this arrangement.

The
VAR business has been accounted for as discontinued operations, and accordingly, the results of operations are segregated from continuing operations in the accompanying statement
of operations. Revenue, operating costs and expenses, other income and expenses, and income taxes of this business have been reclassified to discontinued operations for the year ended March 31,
2000. Revenues related to the VAR business and included in discontinued operations as of March 31, 2000 were $994,229, and the loss from this operation was $56,389 for fiscal 2000. In addition,
there was a gain of $5,000 recognized in fiscal 2000 from the disposal of this business.

On
May 23, 2001, the Company reached a decision to discontinue the operations of its Training Division, which had historically been presented as a separate business segment.
Sento intends to operate the Training Division while it seeks a qualified buyer. If no buyer can be located, the Training Division will be closed down. Pursuant to generally accepted accounting
principles, a charge of $577,119 has been retroactively reflected in the Company's 2001 consolidated financial statements for the estimated costs of discontinuing this segment. Revenues, operating
costs and expenses, other income and expenses, and income taxes of this business have been reclassified to discontinued operations for the years ended March 31, 2001 and 2000. Included in the
Company's estimated loss on discontinued operations is an estimated loss associated with the termination of leased facilities. The cost to terminate the lease could range from $0 to approximately
$166,000. Revenues related to this business and included in discontinued operations as of March 31, 2001 and 2000 were $3,147,037 and $4,110,948, respectively. The loss from this operation
during the years ended March 31, 2001 and 2000 was $268,015 and $471,066, respectively.

F11

---

6.  Property and Equipment

Property and equipment consists of the following as of March 31:

2001

2000Leasehold improvements

$
887,883

$
270,967Furniture, fixtures, and equipment


5,010,441


3,080,2955,898,324


3,351,962Less accumulated depreciation


(2,010,542
)

(1,192,375
)$
3,887,782

$
2,158,887


7.  Notes Payable to Bank and Long-Term Debt

On April 28, 2000, the Company renegotiated the terms of its revolving line-of-credit agreement with a bank. The Company can
draw up to $3,000,000 under the agreement, subject to eligible receivable balances. The outstanding balance accrues interest at prime plus 1.25% and is subject to certain restrictive covenants. The
Company also issued warrants to the bank, in connection with obtaining the original line of credit in 1999, to purchase 60,000 shares of common stock at $1.60 per share. The stock purchase warrant is
currently exercisable and expires March 2, 2004. The Company had no balances outstanding against the credit line as of March 31, 2001.

On
November 7, 2000, the Company renegotiated the conditions of its term loan with a bank for purchases of property and equipment. The Company can draw up to $2,000,000 under
the loan. Each draw is amortized over 36 months from the date of the draw and the Company can request either a variable interest rate (prime plus 1.5%) or a fixed interest rate (the Bank's
Treasury Rate) on each draw. As of March 31, 2001 the Company had drawn down $1,200,623 from this loan. Under the loan agreement, funds may be drawn through June 30, 2001.

The
Company opened a second Customer Contact Solution Center located in Evanston, Wyoming during fiscal 2000. A major funding source of this site was through a five-year
8.5% interest loan from the Wyoming Industrial Development Corporation ($1,000,000). Draws on the loan began in April of 2000 and the loan was fully drawn in January 2001. Effective
May 12, 2001, the interest rate on this loan was reduced to 6.05% through an amendment to the loan agreement.

Substantially
all of the assets of the Company serve as collateral for the above line-of-credit and loans.

F12

---

Long-term debt, including capital lease obligations, consist of the following as of March 31:

2001

200011% note payable in monthly installments of $4,871, including
interest, secured by equipment

$


$
6,4269% note payable in monthly installments of $5,890, including
interest, secured by equipment





5,60810.4% note payable in monthly installments totaling $3,217,
including interest, secured by equipment


64,191


97,9187.5% note payable in monthly installments totaling $601,
including interest, secured by equipment


8,234


30,0008.5% note payable in monthly installments totaling $26,088,
including interest, secured by furniture and equipment


982,984


10.9% note payable in monthly installments totaling $2,787,
including interest, secured by furniture and equipment, drawn
under the Company's $2,000,000 term loan


77,056


Variable-rate (prime plus 1.25%-1.5% or 9.5% at March 31, 2001)
notes payable in monthly installments totaling $32,476, secured
by furniture equipment, drawn under the Company's $2,000,000 term loan


1,006,176


Total installment notes payable


2,138,641


139,952Present value of net minimum capital lease payments


53,994


81,217Total long-term debt


2,192,635


221,169Less current portion


(714,371
)

(80,492
)Long-term debt, excluding current portion

$
1,478,264

$
140,677


Capitalized
leases are for equipment. Future minimum capital lease payments, excluding taxes, insurance and other costs as of March 31, 2001 were:

Year2002

$
36,5762003


23,993Thereafter


Total minimum capital lease payments


60,569Less amounts representing interest


(6,575
)Present value of net minimum capital lease payments

$
53,994


F13

---

Sento Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

March 31, 2001

7.  Notes Payable to Bank and Long-Term Debt (Continued)

Aggregate maturities of installment notes payable are as follows: 2002, $681,439; 2003, $694,714; 2004, $560,323; and 2005, $202,165. The Company's debt
covenants require, among other things, the maintenance of a minimum net worth, debt to net worth ratio and income.

8.  Convertible Bonds and Debentures

In July 1997, the Company sold to Canadian Imperial Holdings, Inc. (Canadian Imperial) $1,000,000 of six percent Series A Convertible
Bonds with attached warrants to purchase 42,500 shares of common stock from $4.00 to $5.50 per share which expired in May 1999. The bonds were convertible into shares of Sento common stock at a
conversion price equal to the lesser of 85 percent of the average closing bid price of the Sento common stock for the five trading days preceding Canadian Imperial's notice of
conversion or $5.22. Sento also granted to Canadian Imperial certain rights to register shares of Sento common stock issuable upon the conversion of the bonds. Of the total proceeds, $55,465 was
allocated to the value of the warrants and was recorded as an addition to paid-in capital. During the year ended March 31, 2000, all of the remaining and outstanding bonds, $500,000
of principal ($472,266, book value), and $60,000 of accrued interest, were converted into 401,264 shares of common stock.

In
February 2000, the Company issued $1,300,000 of 7% convertible subordinated debentures in $1,000 units consisting of one $990 debenture and warrants to purchase 100 shares
of common stock for $6.25 per share. Pursuant to the original terms of the debenture, in January 2001, the purchase price of the warrants decreased to $5.00 per share and in
February 2001, the interest rate on the debentures increased to 8%. Each debenture is convertible at the option of the holder for 198 shares of common stock at a conversion price of $5.00 per
share. Debentures which have not been converted or earlier redeemed are due and payable in February 2003. The Company granted certain rights to register the shares of common stock that are
issuable upon the conversion of the debentures. The Company also issued warrants to the placement agent for 35,000 shares of common stock at a purchase price of $5.00 per share. Of the total proceeds,
$226,609 allocated to value the warrants (including the placement agent warrants) and offering costs of $84,878 have been charged against the book value of the debentures and are being amortized over
the life of the debentures.

9.  Income Taxes

As of March 31, 2001 and 2000, the Company had federal and state net operating loss carryforwards of approximately $4,254,888 and $3,396,281
respectively. The net operating loss and credit carryforwards will expire at various dates beginning in 2019 through 2021, if not utilized.

F14

---

Income tax expense (benefit) consists of:

Current

Deferred

TotalYear ended March 31, 2001:Federal

$


$


$
State








$


$


$
Year ended March 31, 2000:Federal

$
(67,832
)
$


$
(67,832
)State








$
(67,832
)
$


$
(67,832
)


Actual
income tax expense differs from the "expected" tax expense (computed by applying the U.S. federal corporate income tax rate of 34 percent to income before income taxes)
as follows:

Year Ended March 312001

2000Computed "expected" tax (benefit) expense

$
(8,435
)
$
(43,572
)Increase (decrease) in income taxes resulting from:State income taxes, net of federal tax benefit


(992
)

(4,485
)Nonconsolidated losses (income)


50,930


125,191Return to accrual adjustments


(213,915
)

Change in valuation allowance


147,000


(500,000
)Gain on related party capitalization





368,648Nondeductible meals and entertainment and other


25,412


(13,614
)Income tax (benefit) expense

$


$
(67,832
)


F15

---

9.  Income Taxes (continued)

Significant components of the Company's deferred tax assets and liabilities for federal and state income taxes as of March 31, 2001 and 2000 are as
follows:

|                          |                                   | 2001 |            | 2000      |  
|------------------------- | --------------------------------- | ---- | ---------- | --------- | -
|Deferred tax assets:      |                                   |      |            |           |  
|                          | Net operating loss carryforwards  |      | $          | 1,667,000 |  
|                          | Deferred and accrued compensation |      |            | 186,000   |  
|                          | Intangible assets                 |      |            | 462,000   |  
|                          | Accrued liabilities               |      |            | 198,000   |  
|                          | Other, net                        |      |            | 28,000    |  
|                          |                                   |      |            |           |  
|                          | Deferred tax assets               |      |            | 2,541,000 |  
|Deferred tax liabilities: |                                   |      |            |           |  
|                          | Property and equipment            |      |            | (48,000   | )
|                          | Installment sales                 |      |            | (130,000  | )
|                          |                                   |      |            |           |  
|Deferred tax liabilities  |                                   |      | (178,000   | )         |  
|Net deferred tax assets   |                                   |      | 2,363,000  |           |  
|Valuation allowance       |                                   |      | (2,363,000 | )         |  
|                          |                                   |      |            |           |  
|Total                     |                                   | $    |           |           | $
|                          |                                   |      |            |           |  

The
net valuation allowance decreased by $531,000 and $500,000 during the year ended March 31, 2001 and 2000, respectively.

In
fiscal 2001, the valuation allowance increased by $384,000 related to excess tax benefits resulting from stock option exercises. If and when the Company is able to utilize these
excess tax benefits in future periods, the reduction in the valuation allowance will be credited directly to additional paid-in capital.

10.  Leases

The Company has non-cancelable operating leases for office space. The Company incurred rent expense of $786,254 and $488,991 for the years ended
March 31, 2001 and 2000, respectively. Future minimum rent payments under existing non-cancelable operating leases are $742,392 in fiscal 2002, $759,261 in fiscal 2003, $771,900 in
fiscal 2004, $782,946 in fiscal 2005, and $407,995 in fiscal 2006.

11.  Retirement Plan

The Company has a qualified defined contribution retirement plan under Section 401(k) of the Internal Revenue Code. The plan covers all employees who
meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pretax basis. In addition, employer contributions are made at the discretion of
the Board of Directors. Participants are fully vested at all times in employee contributions. Employer contributions vest over a six-year period. No employer contributions were made during
2001 or 2000.

F16

---

12.  Common Stock

Stock Options

The Company has adopted a stock option plan (the Plan) pursuant to which the Company's Board of Directors may grant stock options to officers and key
employees. The Plan authorizes grants of options to purchase up to 3,500,000 shares of authorized but unissued common stock. Stock options are granted with an exercise price not less than the stock's
fair market value at the date of grant. All stock options granted to employees have ten-year terms; stock options granted to board members generally have a five-year term. The
number of shares granted, vesting period, and price per share is determined by the Board of Directors. Stock options vest over three or four years. At March 31, 2001, there were 1,141,644
additional shares available for grant under the Plan.

Stock
option activity, relating to qualified and nonqualified options during the periods indicated is as follows:

|                                                               |  | Fiscal Year Ended March 31
|-------------------------------------------------------------- |  | --------------------------
|
|
|Balance outstanding at beginning of year                       |  |                           
|Granted                                                        |  |                           
|Exercised                                                      |  |                           
|Forfeited                                                      |  |                           
|                                                               |  |                           
|Balance outstanding at end of year                             |  |                           
|                                                               |  |                           
|Exercisable at end of year                                     |  |                           
|                                                               |  |                           
|Weighted-average fair value of options granted during the year |  | $                         

F17

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Sento Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

March 31, 2001

12.  Common Stock (Continued)

The following table summarizes information about stock options outstanding at March 31, 2001:

|Exercise
Price |  | Number
Outstanding at
March 31, 2001 |  | Weighted-
Average
Remaining
Contractual Life |  | Weighted-
Average
Exercise
Price |      | Number
Exercisable at
March 31, 2001 |         | Weighted-
Average
Exercise
Price
|-------------- |  | ------------------------------------ |  | -------------------------------------------- |  | -------------------------------- | ---- | ------------------------------------ | ------- | --------------------------------
|$1.50          |  | 100,000                              |  | 8.00                                         |  | $                                | 1.50 |                                      | 100,000 |                                 
|1.75           |  | 310,049                              |  | 7.57                                         |  |                                  | 1.75 |                                      | 194,315 |                                 
|2.19 - 2.50    |  | 186,500                              |  | 6.37                                         |  |                                  | 2.39 |                                      | 78,166  |                                 
|2.56 - 3.06    |  | 232,250                              |  | 8.34                                         |  |                                  | 2.90 |                                      | 44,735  |                                 
|3.12 - 4.13    |  | 146,875                              |  | 7.51                                         |  |                                  | 3.40 |                                      | 40,435  |                                 
|4.25           |  | 123,000                              |  | 9.30                                         |  |                                  | 4.25 |                                      |        |                                 
|4.50           |  | 364,750                              |  | 8.57                                         |  |                                  | 4.50 |                                      | 124,853 |                                 
|4.81           |  | 86,000                               |  | 9.05                                         |  |                                  | 4.81 |                                      |        |                                 
|5.44           |  | 5,000                                |  | 9.06                                         |  |                                  | 5.44 |                                      |        |                                 
|6.25           |  | 205,000                              |  | 6.36                                         |  |                                  | 6.25 |                                      | 30,621  |                                 
|               |  |                                      |  |                                              |  |                                  |      |                                      |         |                                 
|               |  | 1,759,424                            |  | 7.83                                         |  |                                  | 3.52 |                                      | 613,125 |                                 
|               |  |                                      |  |                                              |  |                                  |      |                                      |         |                                 

The
fair value of each option grant is estimated on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions:
2001expected dividend yield zero percent, risk-free interest rate of 4.61 percent, expected life of 5 years, and expected stock-price volatility of
92.91 percent; 2000expected dividend yield zero percent, risk-free interest rate of 6.50 percent, expected life of 5 years, and expected stock-price
volatility of 86.89 percent.

The
Company applies APB 25 in accounting for options issued under the Plan. Had the Company determined compensation cost based on the fair value at the grant date for its stock
options under SFAS 123, the Company's net loss would have been increased to the pro forma amounts indicated below:

|                                |  |             |  | 2001 |          | 2000 |  
|------------------------------- |  | ----------- |  | ---- | -------- | ---- | -
|Net loss                        |  | As reported |  | $    | (24,808  | )    | $
|                                |  | Pro forma   |  |      | (866,403 | )    |  
|Basic income (loss) per share   |  | As reported |  |      | 0.00     |      |  
|                                |  | Pro forma   |  |      | (0.10    | )    |  
|Diluted income (loss) per share |  | As reported |  |      | 0.00     |      |  
|                                |  | Pro forma   |  |      | (0.10    | )    |  

The
full impact of calculating compensation cost for stock options under SFAS 123 may not be representative of the effects on reported net income (loss) for future years.

F18

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Stock Warrants

Outstanding warrants to purchase shares of the Company's common stock are as follows:

Number of warrants

Exercise price

Expiration date25,000

$
5.50

June 200125,000


6.25

June 200150,000


4.75

September 200150,000


5.50

December 200150,000


6.25

December 2001378,751


2.50

May 2002130,000


5.00

February 200335,000


5.00

February 200310,000


4.25

May 200350,000


2.50

May 200360,000


1.60

March 2004863,751


Warrants Issued for Services

In fiscal 2000 and 2001, Sento issued 150,000 warrants in exchange for consulting services. These warrants have been accounted for pursuant to Emerging Issues
Task Force (EITF) Issue No. 96-18. Accordingly, the warrants are periodically revalued based on the then fair market value of the underlying common stock during the performance
period. During 2001, the Company recognized a reversal of expense previously recognized of approximately $75,000 related to the revaluation of the warrants.

Private Placement

In July 1999 the Company completed a private placement of common stock and warrants resulting in total consideration received of $1,920,000. This
private placement was in the form of 600,000 units consisting of two shares of common stock and a warrant to purchase one share of common stock. The units were sold at a price of $3.20 per unit. The
stock purchase warrants are exercisable for a three-year period at $2.50 per share. Offering costs relating to the private placement totaled approximately $39,000.

Employee Stock Purchase Plan

The Company has adopted a stock purchase plan under which 500,000 shares of common stock are reserved for future issuance to employees of the Company. The
purpose of the stock purchase plan is to provide a method whereby certain employees of the Company may acquire a proprietary interest in the Company through the purchase of shares of common stock. The
stock purchase plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code. As of March 31, 2001, the Company had sold 150,346 shares
to employees of the Company under this plan.

F19

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13.  Related Party Transactions

During fiscal 2000, the Company sold fixed assets to EchoPass (see Note 4) for approximately $1,303,000. No gain or loss was recognized on the sale.

Subsequent
to the transfer of technology to EchoPass (see Note 4), Sento and EchoPass entered into the following agreements:

Services Agreementwherein EchoPass licenses technology to Sento and provides other technical support functions to Sento.

Facilities and Services Agreementwherein Sento provides EchoPass a license to use office space and administrative
services.

Customer Support Agreementwherein Sento provides outsourced product support for EchoPass customers.

The
following sets forth costs incurred and revenue generated under the agreements listed above during the years ended March 31:

2001

2000Costs incurred for EchoPass services under the Services Agreement

$
3,706,000

$
235,000Charges to EchoPass under the Facilities and Services Agreement


155,000


28,000Revenue recognized under Customer Support Agreement


691,000


71,000


GT InvestmentsIn March of 1999, Sento entered into a consulting agreement with GT Investments, a company that is wholly
owned by Gary B. Filler, Sento's Chairman and acting Chief Financial Officer (CFO). Under the agreement, Sento pays GT Investments $8,500 per month for the CFO services provided by Mr. Filler.
In March of 2001, Sento contracted with GT Investments to provide consulting services to its wholly owned subsidiary, Sento Training Corporation. The total expense incurred by Sento under its
arrangement with GT Investments during the years ended March 31, 2001 and 2000 was $109,611 and $102,000, respectively. The consulting agreement is cancelable by either party at any time.

F20

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