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

FORM 10-KSB

|ý |  | Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2005 or
|- |  | --------------------------------------------------------------------------------------------------------------------------
|o |  | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934.                                       

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.)
|420 East South Temple, Suite 400
Salt Lake City, Utah 84111 
|(Address of principal executive offices, including zip code)

Issuer's telephone number, including area code: (801) 431-9200

Securities
registered under Section 12(b) of the Exchange Act:None

Securities
registered under Section 12(g) of the Exchange Act:
Common Stock, $.25 par value

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 ý        No o

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. o

State Issuer's revenues for its most recent fiscal year: $31,785,561

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, 2005, was approximately $8,386,000.

The
number of shares of Common Stock outstanding as of May 31, 2005 was 3,783,567.

DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional
Small Business Disclosure Format (check
one): Yes o        No ý



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TABLE OF CONTENTS



|           |  |          |  |                                                                                                 |  | Page
|---------- |  | -------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|PART I     |  | 1       
|           |  | Item 1.  |  | Description of Business.                                                                        |  | 1   
|           |  |          |  | General Overview                                                                                |  | 1   
|           |  |          |  | Background                                                                                      |  | 2   
|           |  |          |  | Industry Overview                                                                               |  | 2   
|           |  |          |  | Business Strategy                                                                               |  | 3   
|           |  |          |  | Services                                                                                        |  | 5   
|           |  |          |  | Significant Clients                                                                             |  | 7   
|           |  |          |  | Competition                                                                                     |  | 8   
|           |  |          |  | Patents and Proprietary Technology                                                              |  | 8   
|           |  |          |  | Research and Development                                                                        |  | 8   
|           |  |          |  | Employees                                                                                       |  | 8   
|           |  |          |  | Proprietary Marks                                                                               |  | 9   
|           |  |          |  | Factors that May Affect Future Results                                                          |  | 9   
|           |  | Item 2.  |  | Description of Property                                                                         |  | 13  
|           |  | Item 3.  |  | Legal Proceedings                                                                               |  | 15  
|           |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders.                                            |  | 15  
|PART II    |  | 15      
|           |  | Item 5.  |  | Market for Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities |  | 15  
|           |  |          |  | Description of Capital Stock                                                                    |  | 15  
|           |  | Item 6.  |  | Management's Discussion and Analysis or Plan of Operations                                      |  | 20  
|           |  |          |  | Overview                                                                                        |  | 20  
|           |  |          |  | Critical Accounting Policies                                                                    |  | 22  
|           |  |          |  | Results of Operations                                                                           |  | 23  
|           |  |          |  | Liquidity and Capital Resources                                                                 |  | 25  
|           |  |          |  | Seasonality                                                                                     |  | 26  
|           |  |          |  | Recently Issued Accounting Pronouncements                                                       |  | 26  
|           |  | Item 7.  |  | Financial Statements.                                                                           |  | 27  
|           |  | Item 8.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.           |  | 27  
|           |  | Item 8A. |  | Controls and Procedures                                                                         |  | 27  
|           |  | Item 8B. |  | Other Information                                                                               |  | 27  
|PART III   |  | 27      
|           |  | Item 9.  |  | Directors and Executive Officers of the Registrant.                                             |  | 27  
|           |  | Item 10. |  | Executive Compensation.                                                                         |  | 32  
|           |  | Item 11. |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. |  | 35  
|           |  | Item 12  |  | Certain Relationships and Related Transactions.                                                 |  | 38  
|           |  | Item 13. |  | Exhibits and Reports on Form 8-K.                                                               |  | 38  
|           |  | Item 14. |  | Principal Accountant Fees and Services                                                          |  | 40  
|SIGNATURES |  | 41      

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Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-KSB (this"Report") contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the"Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the"Exchange Act"). Such statements can be identified by the use of
forward-looking words such as "anticipate," "estimate," "project," "likely," "believe," "intend," "expect" or similar words. These statements relate to our, and, in some cases, our clients' or
business partners', future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. All forward-looking statements included in this
Report are made as of the date hereof, based on information available to us as of such date, and we assume no obligation to update any forward-looking statement. It is important to note that such
statements may not prove to be accurate and that our actual results and future events will differ, and could differ materially, from those anticipated in such statements. Among the factors that could
cause actual results to differ materially from our Company's expectations are those described under Item 1. "Description of BusinessFactors that May Affect Future Results." Readers are
also encouraged to review our other filings with the Securities and Exchange Commission (the"Commission")describing other factors that may affect our
future results. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section and other
factors included elsewhere in this Report.

PART I

Item 1. Description of Business.

General Overview

Sento
Corporation ("Sento,"the"Company"or "we") is a global provider of call and contact center solutions for
customer acquisition, customer service, service intervention and technical support.
We use modern customer contact centers, coupled with our state-of-the-art proprietary software systems (the"Customer Choice
PlatformSM"or"CCP"), to provide domestic and international support services and technology solutions to our
primary target markets consisting of either: (1) smaller to mid-sized companies that are outsourcing customer and technical support for the first time or seeking to continue
outsourcing with a new vendor or combination of vendors; or (2) larger companies which may have already made the decision to outsource and are interested in deploying our Right Channeling and
other unique offerings.

The
Customer Choice PlatformSM is made up of multiple components. Each of these components integrates diverse tools, technologies and services such that both client data
and client interfaces are rolled up into a single customer view. Through these CCP components, clients are afforded toolset choices, customers are provided interaction channel choices, and agents are
afforded a single view for both the client and customer.

Our
proprietary customer relationship management ("CRM") software, known as "ReciteSM"and other reporting and management tools, when integrated
with communications points such as telephone, internet, chat, email,
call-back, and self-help, provide solutions designed to help our clients reduce costs and improve customer satisfaction.

By
outsourcing customer care, customer acquisition, technical support or help-desk solutions to us, our clients can focus on their core businesses. The staffing, operation
and management of efficient and cost-effective customer contact centers and the related technology are becoming more and more specialized, a business unto itself, and very different from
the core business of most of our clients. The engagement of an outsourced customer contact service offers our clients the opportunity to focus their limited human and financial resources on lowering
operating costs, reducing unnecessary capital expenditures, and other core objectives. We believe that the factors motivating organizations to

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outsource
customer contact services are the desires to provide better customer satisfaction, reduce costs, lower headcount and focus these human and financial resources on core business functions.
Organizations are finding it increasingly difficult and expensive to service their non-core needs internally. As a result, outsourcing continues to gain favor across the business spectrum.
Many business analysts believe this trend will continue to grow as technology becomes more complex and expensive and clients allocate their resources in the most cost-effective manner
possible.

Background

Sento
was formed in 1986 as a value-added reseller, formerly known as Spire Technologies, Inc. In 1996, we executed a share exchange with an existing public company. Sento is
incorporated under the laws of the State of Utah. Our common stock is traded on the NASDAQ Small Cap Market under the symbol "SNTO." Throughout this Report, the word "client"refers to entities we serve,
 and the word"customer(s)"refers to our clients' customer(s).

In
1997 and 1998, we undertook a strategic transition to focus our efforts on customer contact solutions. We designed and engaged a third party to construct a new generation customer
contact facility ("Customer Contact Solutions Center"or"CCSC")in American Fork, Utah. Subsequently,
we designed and engaged a third party to construct four additional Customer Contact Solutions Centers, two of which are in Utah and two of which are in Wyoming. One of our Wyoming CCSC is not
currently in use and is available for subletting. We also are in the process of consolidating the three Utah facilities into one supercenter. In addition, through contractual relationships, we have
arranged for the use of a CCSC in Delhi, India.

Effective
October 1, 2004, we acquired substantially all of the assets of Xtrasource, Inc. ("Xtrasource"), a
non-affiliated, privately-held Delaware corporation. The acquired assets consist of call center operations with facilities in the United States, the Netherlands and France that
offer integrated customer solutions, including help desk, technical assistance, and live web chat.

Industry Overview

The
customer contact services industry encompasses a broad spectrum of services and technology used to build long-term relations between clients and their customers.
Effective outsourcers provide cost-effective, high-quality customer support solutions that enable clients to reduce costs and increase focus on core competencies.

We
believe many 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
senior executives and managers recognize the importance of information technology in their organizations and the potential benefits of improved customer service. At the same time,
technological changes and the costs and time associated with implementing and using current solutions create tremendous pressure on organizations and their management. As the pace of technological
advancement accelerates, an organization's ability to evaluate, design, integrate, deploy, and leverage new technology becomes a critical competitive issue.

Staying
abreast of rapid technological change, while maintaining the required operational efficiency of customer contact centers, is also becoming increasingly more difficult and
expensive for companies. Running a contact center on a day-to-day basis requires a skill set and a level of expertise that differs from the core business of most clients.
Understanding the inter-relationship of the various technological requirements as they relate to the needs of the various internal divisions of a client company requires significant time, as well as
careful attention to the client's business needs. An outsourcer has the

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benefit
of seeing many companies and how they operate, then applying that knowledge to the issues at hand with other client businesses.

The
challenge of maintaining an organization's focus on core business areas while attempting to recognize and benefit from rapid changes has prompted more and more organizations to seek
outsourced customer contact center solutions. Organizations lacking this experience and know-how are finding it increasingly difficult and expensive to service all their customer contact
needs in-house. As a result, "outsourcing" continues to gain favor across the business spectrum.

Business Strategy

Our
business strategy is to design, develop, implement, and manage customer contact solutions that enable our clients to effectively use leading-edge technology and
diversified workforce management. By doing so, we position our clients to improve business operations, reduce operating expenses and increase overall customer satisfaction.

Our
business strategy is based on the following strategic initiatives:

Customer Choice PlatformSM Technology Suite.Our proprietary software suite allows customers to choose between
self-help, chat, email, phone and fee-based phone services to
solve their issues and is designed to enable our clients, partners, and other service providers serving the same client to work from a proven unified software platform regardless of whether they are
in the U.S. or in an offshore location. This technology suite, developed and hosted by us, provides a single repository for data entered from disparate locations and systems. Our technology suite
facilitates seamless tracking of customer interactions throughout all touch points. Our customer relationship management software gathers information from every phone call, chat, email and
self-help transaction connected to our technology suite, regardless of the service provider.

Consulting.The first step for most of our clients toward decreasing costs and improving efficiencies and customer
satisfaction is the utilization of our consulting services, which we offer to our clients to better design and implement solutions to meet their needs. This service is typically offered as part of the
ongoing customer contract services we provide. We focus on both macro and micro level processes and methodology. On the macro level, we work closely with clients to understand business needs and
goals. We then develop appropriate strategies and processes, often by implementing our Customer Choice PlatformSM, which incorporates self-help, chat, email, phone, and
fee-based phone services. On the micro level, we incorporate contact blue printing that analyzes all aspects of customer contacts including system interactions, as well as developing
appropriate customer satisfaction/feedback methods.

Design, Develop, Implement, and Manage Leading Edge Customer Relationship Management and Contact Center Solutions and
Methodologies.We develop strategies and methodologies designed to help our clients significantly reduce service costs, while increasing customer choices and
satisfaction. Our business strategy utilizes a suite of options to allow our clients' customers to access a variety of contact points depending upon the customer's desire and choice at the time.

We
have assisted many of our clients in deflecting expensive phone interactions to more cost-effective Web solutions while maintaining the same or higher levels of service
and quality. In all cases, we do not eliminate any single form of contact with the customer, but introduce more cost-effective forms and reallocate solutions according to the needs and
desires of our clients and their customers. This consultative function is designed to assist our clients in determining the best solution for their customer base. In situations when our clients desire
continuing or an increased level of telephone contact with their customers, we provide highly skilled and very personable phone agents to enhance both fee-based and free-phone
interactions. In consultation with our clients, we strive to deliver the preferred solution and methodology using a combination of telephone and Web solutions.

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Service InterventionSM Service InterventionSM is a program that allows clients to
avoid costly no fault found service claims and product returns. Our expertise is based upon tens of millions of calls troubleshooting over the past 17 years. Many of our service intervention
clients have had no fault
service claims and product returns of over 35%. We have been able to intervene on their behalf and phone-fix these problems, thus saving millions of dollars annually.

Sento Business Intelligence (SBI)  SBI incorporates reporting and analytic tools that enable our clients to
view multiple interaction channels with their customers. SBI also allows for data to be fed back into its Right Channeling (described below) workflows to better optimize these flows for each client
based on business needs and initiatives.

Intensive Knowledgebase Architecture, Management and Scoring.We deliver innovative Web solutions through our proprietary
"Customer Choice PlatformSM." This platform provides customers access to highly-effective self-help tools. If a particular issue is not resolved through
self-help, customers can then proceed seamlessly to live chat, email, phone, and other live Web services chosen by our clients. This transition to live help is simply an extension of the
customer's Customer Choice PlatformSMexperience. Our ReciteSM software records and delivers the customer's Web experience
(i.e. the "click stream," operating system, browser version, and other important information) to the live agent. This information transfer allows the agent to know immediately which features of the
Customer Choice PlatformSMthe customer has accessed, and reduces the time to resolution. By monitoring customer activity and analyzing
positive behavior, our tools are designed to report and improve the overall customer experience. Our skill and experience in knowledgebase architecture and management allow our clients to deliver
information to customers in a timely and cost-efficient fashion. These tools are available to companies for a licensing fee using an application software provider model, even when we are
not providing domestic or offshore labor. We currently support 19 languages.

Capitalize on Technology.Our Customer Contact Solutions Centers, which incorporate scientific workforce management, proven
call center infrastructure and leading-edge solutions, are designed to enable clients to rapidly deploy and quickly capitalize on trends within their customer base. In addition, we use
contact center resources in India, on a contract basis.

Our
systems incorporate newer technologies such as Voice over IP and hosted portal services. The integration of these systems provided by companies such as Nortel Networks, Cisco
Systems, and AT&T promote high levels of economy and efficiency. Our technology policy requires that infrastructure be fully scalable, meet or exceed customer needs, and provide adequate redundancy
and security.

Our
Customer Contact Solutions Centers go beyond a traditional telephone-centric customer support facility. We have acquired or developed systems that increase customer contact points
through focusing on Internet interactions such as email, Web text chat, Internet calls, Web collaboration, Web callback interactions, and co-browsing, as well as using voice and fax
communication. Our systems provide better efficiency than conventional telephone interactions. The increasing use of the Internet, as well as the rising levels of comfort and confidence of consumers
with the Internet, is changing the manner in which businesses communicate and interact with their customers. We believe our Customer Choice
PlatformSMand Customer Contact Solutions Centers position us to take advantage of these emerging opportunities.

Utilize Global Labor Pools.We currently own and operate US Customer Contact Centers in Utah, Wyoming, and North Carolina
along with centers in the Netherlands and France. In addition, we currently use contact center resources in India on a contract basis. In the past we have operated and/or utilized centers in Scotland,
Ireland and South Africa. We have determined that we can, in some instances, gain significant cost savings and/or language capabilities by utilizing non-U.S. labor. We currently contract
services from India to handle chat and email transactions. To date, we have generally found the Indian workforce to be highly-educated and possessing above-average writing capabilities.

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Services

Our
integrated Customer Choice PlatformSMand customer contact solutions are designed to enable our clients to effectively
use leading-edge technology to improve their business processes and operating results. Clients rely on our Customer Choice
PlatformSM, methodologies, and customer contact solutions to reduce costs associated with product/services support, while increasing
customer satisfaction and brand loyalty.

We
strive to achieve these goals by offering two core solutions: Right Channeling for customer acquisition, customer service and technical support and Service
InterventionSM. We also offer standard outsourced contact center services, and professional services. Each of these offerings is described below.

Right Channeling.Our Right Channeling offering is a multi-channel strategic mix of communications channels, customized for
each client based on their needs and industry. The client can "right channel" its customers to particular communications channels, or give the customer the option to choose. The channels include free
phone, fee phone, voice self-service, web self-service, chat (proactive and service/support), forums and email.

We
provide clients a robust inventory of tools through web interfaces. Through our Customer Choice PlatformSM, customer
specific information is made available to customers. This information provides customers with the option of answering questions and resolving problems without ever going to a live person for
assistance. If live assistance is necessary, however, the Customer Choice PlatformSMpresents customer information to live contact options
(voice, chat, email or forums). The customer then can make an informed choice as to the best possible live contact option for him or her. For our clients, we track customer behavior while on the
Customer Choice PlatformSM, which promotes quicker resolution to issues and increases customer satisfaction. The direct result is
increased efficiency and overall cost reduction.

We
provide clients with a variety of fee-based options. By adopting fee-based solutions and methodologies, our clients charge customers for annual service
contracts, multi-incident packets, single incidents, or even single minutes of support assistance. One option allows customers the added ability to move to the front of the queue at those times when
waiting for a free contact is not acceptable. While currently used in the telephone environment, fee-based services can apply to any type of contact, whether delivered by telephone, chat,
email, self-help, or a combination of these. Fee-based services can be used to route and prioritize interactions, enabling clients to offer multi-tiered service plans (e.g.
silver, gold, platinum, etc.).

In
the case of fee-based solutions, we currently invoice our clients' customers directly using a credit card or 900-number billing system (customers receive an
invoice on their telephone bills). In the case of credit card billing, funds are deposited directly into the clients' merchant accounts. In some cases the revenue generated from these
fee-based calls pays for a significant portion of the total cost of providing support. We believe that this option will achieve greater acceptance as clients recognize that significant
revenues to offset support costs can be generated from a very small number of transactions and that the customer has made an informed decision to choose this option.

Service InterventionSM.    Our acquisition of Xtrasource has allowed us to offer Service
InterventionSM to our clients. Unnecessary service claims and product returns can cost our clients millions of dollars per year. Our Service InterventionSM offering reduces
unnecessary service claims and product returns and stems from the unique and deep expertise that Xtrasource has accumulated over 17 years of experience in consumer electronics
("CE"). Among other capabilities, Xtrasource possessed valuable expertise supporting the installation and operation of universal remote controls. We
believe the expertise we acquired from Xtrasource gives us a unique understanding of CE device operation and integration and enables us to troubleshoot many CE devices.

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Contact Center Solutions.We offer onshore and offshore contact center facilities for outsourced customer care, including
three domestic locations (2,700 seats total, 3-shift capacity, all web enabled), two European locations and a contractual relationship in India (1,600 seats total). We offer customer
support in 19 languages.

We
offer a broad range of customer contact outsourcing services, consisting principally of customer acquisition, sales, customer care, helpdesk, technical support, and the development
and implementation of Web strategies to induce customers to use Web services. We use advanced systems, including web-enabled databases and reporting systems, Internet, local area networks,
multi-user systems, Computer-Telephony Integration, CRM, and Integrated Voice
Response ("IVR") technologies, to provide prompt and accurate support while reducing the technology, personnel, and management expenses incurred by our
clients.

IVR
is an automated self-help telephony system that responds with a voice menu that allows the user to make choices and enter information via the user's telephone keypad or
by voice to receive information and accurately route the call to a service representative. IVR systems are used in our Customer Contact Solutions Centers to enhance the customer experience by
assisting in routing the caller to the appropriate resource as quickly as possible and by limiting the amount of time required by a live agent to complete the interaction.

Most
importantly, our CRM tools allow our clients to view the activities and behavior of their customers in regard to the transactions we handle. These tools are easier and less
expensive to deploy than more cumbersome enterprise CRM systems. They also can be integrated into enterprise CRM systems for deeper analysis. The information gathered and reported using our CRM tools
facilitates our clients' efforts to improve the overall customer experience and to offer products designed to fulfill their customers' needs and desires.



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Professional Services.As part of extending our Right Channeling expertise, we provide a level of upfront and ongoing
consulting and professional services. These services span a number of areas of the organization, including operations, project management, development and web content management.

International Operations.Our clients and Sento both benefit by distributing some or all customer contacts to offshore
locations. Through our acquisition of Xtrasource, we are providing our services in the Netherlands and France. We also have contracted with a third-party service provider in India to deliver of some
of our chat and e-mail services, and have previously conducted operations through alliances in other offshore locations. These offshore locations can successfully handle a mix of voice,
chat, and email transactions. We are currently evaluating the possibility of utilizing other offshore locations. These international operations provide our clients with more choices and greater
control of their customer relationships. We believe offshore contact sites will help us to achieve levels of profitability that could be more difficult to realize in a large domestic urban area.

Significant Clients

Two
clients accounted for approximately 46% of our revenues for the year ended March 31, 2005. These two clients accounted for approximately 28%, and 18%, respectively, of our
revenues for fiscal 2005. For fiscal 2004, two clients accounted for approximately 47% of our revenues. These two clients accounted for approximately 29% and 18% of revenues for fiscal 2004.

Consistent
with industry standards, our contracts are generally cancelable by the client on short-term notice. Our loss of a significant amount of business with any of our
key clients could have, and the loss of a substantial amount of business with any of our larger existing
technical support clients would have, a material adverse effect on our business, financial condition, and results of operations. In addition, our future revenue growth is dependent upon our ability to
attract and retain new clients.

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Competition

The
contact center industry is highly competitive, global in scope, and comprised of myriad 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. We anticipate that present and potential competition in the
various markets we serve will come from enterprises and individuals of various types, many of which will likely be larger and will have greater resources. Companies not now in direct competition with
us may introduce competing products in the future. It is possible for companies to be at various times competitors, customers, and collaborators in different markets. We believe that implementation of
our strategy and methodology of delivering integrated contact center solutions, powered by the Web, constitutes a competitive advantage for higher margin business.

We
face significant and diverse competition in the customer contact solutions industry from a broad spectrum of international, national, regional and local enterprises. Our ability to
compete will be driven by our niche approach, our competencies in leading-edge technologies, our deployment of Web solutions, our strategic and business alliances, and our efforts to
aggressively establish a presence in other vertical markets such as the health care and the financial sectors.

Given
the extensive market opportunity in the customer contact center space, we believe that our strategy of providing the "best-of-breed" services, powered by
the Web, will provide us with a competitive advantage in achieving growth and in capturing market share while reaching profitability objectives.

Patents and Proprietary Technology

We
do not own any patents nor have we submitted any patent applications relating to our products. We have a limited number of copyrights and have obtained licenses to create derivative
works relative to copyrights owned by third parties. The ownership of such derivative works vests in the licensor. We claim trade name and trademark protection for our proprietary names and marks, and
are seeking formal registration of certain of our trademarks. We do not believe, however, that any particular patent
or group of patents, copyrights, trademarks, or trade names is of material importance to our financial condition or operating results.

Research and Development

We
compete in an industry that is characterized by rapid technological change. As our clients' needs change and evolve, and as Internet and Web technologies proliferate, we expect to
incur additional expense in the development and improvement of our Customer Choice PlatformSM, customer contact solutions tools and
offerings, and in the integration of our technology with third party platforms and software. To maintain our competitive edge in technology, we also intend to selectively utilize the research and
development efforts of third-party technology providers and partners. During the fiscal year ended March 31, 2005, we incurred $292,303 of product development expense.

Employees

We
maintain a staff of trained personnel to provide support to our clients. We have a technically-competent employee base, which we enjoy from being geographically situated close to
major universities and/or junior colleges in each of our contact centers. We enhance employees' proficiency through our sophisticated performance management system. Employees receive positive
performance feedback on a daily basis and are given access to training programs including Microsoft Certified Software Engineer, Novell Certification, and operating systems including Windows, Unix,
and Linux. We also maintain a highly-proficient performance management team responsible for training and

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monitoring
employees. Additionally, our software engineering and web development groups continue to be a major focus within the organization.

As
of May 31, 2005, we had approximately 836 total employees, of which approximately 680 were full-time employees and approximately 156 were part-time
employees. Competition for qualified personnel in our industry is intense. Our future success and growth will depend in large measure, upon our ability to attract and retain qualified management and
technical personnel. There can be no assurance we will be able to attract and maintain all personnel necessary for the development and operation of our business, or that we will be able to train our
current employees on new developments in technology. If we fail to attract and retain key management and technical personnel, our operations may be adversely affected. None of our US employees is
represented by a labor organization with respect to their employment. Our European employees are
represented by a works council in their respective locations as required by local law. We have never had a work stoppage, and we consider our employee relations to be satisfactory.

Proprietary Marks

We
use many third-party products represented by registered or common-law trademarks, including the following trademarks: (1) Microsoft®,
Windows® and MCSE®, which are trademarks of Microsoft; (2) CNE®, which is a trademark of Novell Inc; and (3) Linux, which is a trademark of Linus
Torvalds. This Report also contains trademarks of other companies including 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.

Factors that May Affect Future Results

There are a number of factors that may affect our operating results, including the risks and uncertainties identified in the following paragraphs. In addition to
other information set forth in this Report, readers should review and carefully consider the following factors.

We have a history of losses and may continue to experience losses.

We experienced net losses in four of our last six fiscal years. In the fiscal years ended March 31, 2005 and 2004, we had net losses of $(1,798,285) and
$(1,465,230), respectively, and we had an accumulated deficit of $(12,278,163) as of March 31, 2005. We may continue to incur net losses if we lose clients, are unable to attract and retain new
clients or do not properly utilize our resources. We cannot ensure that we will be able to achieve or maintain consistent profitable operations.

Our revenues and quarterly results can be volatile, which makes evaluating our business difficult.

Individual client revenue transactions can constitute a substantial percentage of our quarterly revenue, and some revenue transactions may generate a substantial
portion of the operating profits for a quarter. Our revenues also are a function of the number of support requests we receive, and the time
we spend on such requests. Thus, if we receive fewer support requests than anticipated or the time spent in resolving inquiries is greater than anticipated, our revenues may fluctuate. Further, delays
in the receipt of customer orders can cause significant fluctuation in revenues from quarter to quarter.

Because
our staffing and other operating expenses are based on anticipated revenue levels, and a high percentage of our expenses are fixed, the volatility in our revenues can cause
significant variations in operating results from quarter to quarter and we may not be able to achieve or sustain profitability on a quarterly basis. In addition, we may expend significant resources
pursuing potential sales that will not be consummated. Furthermore, we may choose to reduce prices or to increase spending in response to competition or to pursue new market opportunities, which may
adversely affect our operating results.

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For
the reasons identified above, we believe that period-to-period comparisons of our revenues and operating results may not be meaningful and should not be
considered an indication of future performance.

Several key clients represent a significant portion of our revenues, and the loss of a key client could affect our revenues and profitability.

Two clients accounted for approximately 46% of our revenues for the year ended March 31, 2005. These two clients accounted for approximately 28% and 18%,
respectively of our revenues for fiscal 2005. A key client, who accounted for 28% of revenues in fiscal 2002, cancelled its contract with us early in fiscal 2003. The loss of this client had a
significant negative impact on our revenue and profitability in fiscal 2003 and for the first nine months of fiscal 2004, until we generated replacement business.

Some
of our clients can generally cancel their contracts on short notice. It can take a significant amount of time to develop and obtain new clients and retrain employees to replace
revenue from a lost client. Thus, the loss of any of our key clients could have a significant effect on our revenues and profitability. In addition, our future revenue growth is dependent upon our
ability to attract and retain new clients.

We are subject to credit risks and may be unable to collect our accounts receivable balances.

We provide unsecured credit terms to our clients. Based on credit evaluations and other information gathered by our management, we establish credit terms for each
client; however, there can be no assurance that our future credit losses will be consistent with management's expectations. A significant change in the liquidity or financial condition of one or more
key clients, or a larger number of smaller clients, or further deterioration in the economic environment, in general, could have an adverse impact on the collectability of our accounts receivable and
our future operating results.

Implementation of our growth plans will be dependent on our ability to market and sell our services to new and existing clients.

Our growth plans are dependent upon our ability to attract and retain new clients and to generate additional business from existing clients. Our efforts to market
and sell our services will be affected by 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 our control. If we are incorrect in our assessment of the feasibility of our growth plans, if we are not effective in our efforts to market and sell our services or if
circumstances change in a way that we did not foresee or anticipate, we may not grow as planned or our growth strategy may have an adverse effect on business operations and our profitability.

A delay in market acceptance of our products and services could negatively impact our business and revenues.

We were a relatively early entrant in the customer self-services and chat markets; however, we have struggled in our efforts to market and sell our
products and services and have been slow to develop certain business operations. Further delays in the development of our products and services would allow our 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 clients within our target markets.
This would increase competition that could result in additional pricing pressures, and we may lose market share and revenues.

10

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Market volatility and fluctuations in our stock price and trading volume may cause sudden decreases in the value of an investment in our common stock.

The market price of our common stock has historically been, and we expect it to continue to be, volatile. This price has ranged between $1.41 and $17.89 in the
two year period ended April 30, 2005. The market for our common stock has, from time-to-time, experienced extreme price and volume fluctuations, which have often
appeared to be unrelated to our operating performance. Our stock price also has been affected by our own public announcements regarding such things as quarterly earnings, changes in clients, obtaining
financing and corporate partnerships. Consequently, events both within and beyond our control may cause shares of our common stock to lose their value rapidly.

We repriced our employee stock options and may have significant volatility in our earnings if our stock price increases or decreases.

In April 2003, we repriced certain employee and director stock options in an effort to provide an adequate incentive to assist in the retention and
motivation of our employees and directors. Current accounting rules require us to adjust the amount of compensation expense we recognize in our financial statements for changes in the stock price
until the stock options are exercised, forfeited or expire. In fiscal 2004 we recognized expense of $1,562,108 related to our repriced stock options. In fiscal 2005, we recognized a $346,337 benefit
due to our stock price being lower at the end of fiscal 2005 versus fiscal 2004. If our stock price is volatile, our future stock compensation charges may affect our profitability, either positively
or negatively.

Managing the utilization level of our resources is necessary in order to achieve our desired profitability.

Our business strategy requires us to fully utilize personnel and physical facilities in an effort to increase our profits. As we expand our operations, we may not
always be able to manage the level of personnel and facilities to reach our desired levels of utilization, which may affect our profitability. Also, if we lose existing clients, we may have excess
personnel and physical facilities that would have an adverse effect on our business operations and our profitability.

If we do not keep up with the rapid technological change experienced by the customer contact service market, our products and services may become
obsolete and we may lose clients.

The customer contact service industry is characterized by rapid technological change, alterations in customer requirements and preferences, and the emergence of
new industry standards and practices. Our operating results and financial condition will depend, in part, on our ability to develop solutions that keep pace with continuing changes in information
technology, evolving industry standards, and changing client requirements. There can be no assurance that we will be successful in adequately addressing these developments on a timely basis or that,
if these developments are addressed, we will be successful in the marketplace. In addition, products or technologies developed by others could render our services non-competitive or
obsolete. Our failure to address these developments could have a material negative effect on our business and financial condition.

We are susceptible to business and political risks from international operations that could result in reduced revenues or earnings.

We operate businesses or have contractual relationships in the Netherlands, France and India and are looking to expand in other countries. Additionally, there is
increasing demand for offshore customer care outsourcing capacity from North American companies. Expansion of our existing international operations and entry into additional countries will require
management attention and financial resources. In addition, there are certain risks inherent in conducting business internationally including: exposure to currency fluctuations, longer payment cycles,
greater difficulties in accounts

11

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receivable
collection, difficulties in complying with a variety of foreign laws, unexpected changes in legal or regulatory requirements, difficulties in staffing and managing foreign operations,
political instability and potentially adverse tax consequences. To the extent we do not manage our international operations successfully, our business could be adversely affected and our revenues
and/or earnings could be reduced.

Volatile economic conditions have affected and will likely continue to affect our operations and financial results.

Volatile economic conditions have adversely affected our operations and financial results. In certain sectors serviced by us in recent years, economic slowdowns
have caused us to lose some clients and also resulted in increased pricing pressures and lower call volumes from some existing clients. Slower economic conditions may limit our ability to attract new
clients or retain existing clients. These factors contributed to the decline in our revenues and the net losses we experienced during most of 2002 and
2003. The slower economy also resulted in excess capacity to service call volumes. A substantial percentage of our expenses are attributable to labor costs associated with staffing Customer Contact
Solutions Centers, which we may not be able to significantly reduce on short notice in order to compensate for unexpected shortfalls in call volumes. We cannot forecast future fluctuations in economic
conditions, and our operations and financial results may be materially and adversely affected by economic volatility.

If companies reduce their reliance on outsourced services, our revenues and financial condition may be adversely affected.

Our business depends in large part on the trend within the IT industry to outsource certain services. We 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 our business, financial condition,
and results of operations.

Competitive pressures could harm our financial performance.

The market for customer contact services is highly fragmented and very competitive. In certain segments of the industry, however, the customer contact services
industry has begun to experience a degree of consolidation, and the development 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 we have. Large established enterprise software
companies may leverage their existing relationships and capabilities to offer customer service applications. In other instances, many large companies provide their own in-house customer
care support and customer training. Also, a number of existing companies have experienced rapid internal growth, and 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. If our competitors provide more efficient or less expensive services, we may
lose market share and revenues.

We may be unable to attract, train and retain key management, technical and marketing personnel.

Our success will depend, in large part, on our ability to attract, retain and train highly qualified technical, managerial and marketing personnel with the
expertise required to successfully conduct our operations. We have entered into employment agreements with certain of our key managerial personnel; however, those agreements are subject to termination
under various circumstances and we have not entered into employment agreements with any of our key technical personnel. If we lose any key personnel or are unable to attract, retain, train or motivate
qualified personnel, our business operations and financial condition may be materially and adversely affected.

12

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A failure of our computers, telecommunications equipment or software systems could interrupt our ability to provide our services.

Our business depends to a large extent on computers, telecommunications equipment and software systems (both equipment and systems maintained by us and equipment
and systems maintained by third parties). A natural disaster, human error, equipment malfunction or inadequacy or multiple other events could result in a prolonged interruption in our ability to
provide support services to clients or their customers. The temporary or permanent loss of computer or telephone equipment or systems, through casualty, operating malfunctions or otherwise, could have
a material adverse effect on our operations, property or financial condition, and business interruption insurance may not be adequate to compensate for all losses that may be incurred.

We rely on a third-party software company for our chat and email applications.

We contract with a third-party software company to provide chat and email tools used with our CRM software, reporting and management services. If this software
company fails in its business efforts, we may lose our access to these software tools. Our failure to obtain adequate replacement software tools would cause us to experience service delays,
interruptions or cancellations.

Provisions of our Articles of Incorporation, Bylaws and Shareholder Rights Plan could impair or delay shareholders' ability to replace or remove our
management and could discourage takeover transactions that shareholders might consider to be in their best interests.

Our 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. Our Articles of Incorporation grant to our Board of Directors the authority, without further
action by our shareholders, to fix the rights and preferences of, and issue shares of preferred stock. Our recently adopted Bylaws provide advance notice requirements that may limit the opportunity
for our shareholders to advance nominees for election to our Board of Directors or submit matters from the floor at our meetings of our shareholders. In addition, the Board has adopted a Shareholder
Rights Plan which imposes constraints on transactions which could result in a change of control of Sento. These provisions may deter hostile takeovers or delay or prevent changes in control of Sento
or changes in our 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 our shareholders to approve transactions that they may deem to be in their best interests.

We have never declared a dividend on our common stock and we do not anticipate paying dividends in the foreseeable future.

No dividends have ever been declared or paid on our common stock. We intend to retain any future earnings for use in our business and do not anticipate paying any
dividends on our common stock in the foreseeable future.

Item 2. Description of Property

Our principal executive offices are located in Salt Lake City, Utah. This facility serves as our headquarters for our senior management along with parts of our
finance, sales and marketing groups. We conduct our core service offerings in customer contact solution centers in Orem, Utah, Raleigh, North Carolina, Evanston, Wyoming, Enschede, the Netherlands and
Metz, France and have engaged a third-party provider to deliver contract services from New Delhi, India. During most of fiscal 2005, we also operated two centers in American Fork, Utah. In
March 2005 we began a consolidation of our three existing customer contact solution centers located in Utah into one "super center" in Orem,

13

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Utah.
As part of this consolidation, we relocated our executive and administrative offices to Salt Lake City, Utah in June 2005. We believe this consolidation will improve our utilization of
our facilities and lead to improved profitability. We believe our facilities after this consolidation are adequate to meet current requirements and our immediate growth plans and could be replaced by
comparable space upon the termination of any such leases. All of our facilities are leased and, in the opinion of management, are adequately covered by insurance. The following table sets forth
additional information concerning our facilities:

|Location                  |  | General Usage                                               |  | Approximate
Square Feet |  | Monthly
Rent |        | Lease
Expiration
|------------------------- |  | ----------------------------------------------------------- |  | ----------------------- |  | ------------ | ------ | ----------------
|Raleigh, North Carolina   |  | Customer Contact Solution Center                            |  | 21,500                  |  | $            | 12,542 | (1)             
|American Fork, Utah       |  | Customer Contact Solution Center and Executive Offices      |  | 40,000                  |  | $            | 37,869 | (2)             
|American Fork, Utah       |  | Customer Contact Solutions Center                           |  | 15,300                  |  | $            | 17,876 |                 
|Orem, Utah                |  | Customer Contact Solutions Center                           |  | 45,780                  |  | $            | 48,715 | (3)             
|Salt Lake City, Utah      |  | New executive offices beginning in June 2005                |  | 8,397                   |  | $            | 6,998  |                 
|Evanston, Wyoming         |  | Customer Contact Solutions Center                           |  | 33,000                  |  | $            | 9,625  |                 
|Green River, Wyoming      |  | Currently not in use                                        |  | 10,000                  |  | $            | 11,920 | (4)             
|Enschede, the Netherlands |  | Customer Contact Solutions Center                           |  | 12,325                  |  | $            | 7,190  | (5)             
|Enschede, the Netherlands |  | Customer Contact Solutions Center and European Headquarters |  | 21,194                  |  | $            | 24,725 | (6)             
|Metz, France              |  | Customer Contact Solutions Center                           |  | 8,600                   |  | $            | 7,240  | (7)             

---

In addition to the above space, we currently have an option to lease approximately 13,000 additional square feet in the Orem, Utah facility under the same basic
terms and conditions of the current lease.

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Item 3. Legal Proceedings

From time to time, we are involved in litigation, most of which is incidental to our business. In our opinion, no litigation to which we currently are a party is
likely to have a material adverse effect on our 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.

PART II

Item 5. Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common stock, par value $.25, 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 our 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, 2005

$
4.81

$
3.18December 31, 2004

$
6.83

$
4.35September 30, 2004

$
8.70

$
5.05June 30, 2004

$
16.90

$
6.75March 31, 2004

$
12.35

$
3.97December 31, 2003

$
4.57

$
2.28September 30, 2003

$
3.17

$
1.94June 30, 2003

$
2.19

$
1.35


We
did not pay or declare dividends on our common stock during the fiscal years ended March 31, 2005 and March 31, 2004. We currently anticipate that we will retain all
available funds to finance our future growth and business expansion. We do not presently intend to pay cash dividends in the foreseeable future.

As
of May 31, 2005, we had 3,783,567 shares of common stock outstanding, held by 83 shareholders of record, which does not include shareholders whose shares are held in
street name.

Description of Capital Stock

General

This section describes the general terms and provisions of the shares of our common stock and preferred stock. This summary is not complete, and is qualified in
its entirety by reference to our Amended and Restated Articles of Incorporation (the "Articles") which are identified as an exhibit to this Report and our Bylaws. You should read our Articles, as well
as our Bylaws, for additional information regarding our capital stock.

Common Stock

Our Articles authorize the issuance of 50,000,000 shares of common stock. As of May 31, 2005, there were 3,783,567 shares of our common stock issued
and outstanding, held by approximately 83 shareholders of record, which does not include shareholders whose shares are held in street name.

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Except
as otherwise required by law, each share of our common stock entitles the holder to one vote on each matter which shareholders may vote on at all meetings of our shareholders. Holders of our
common stock are not entitled to cumulative voting in the election of directors. Holders of our common stock do not have preemptive, subscription or conversion rights, and there are no redemption or
sinking fund provisions applicable thereto. Shares of common stock are entitled to share equally and ratably in dividends paid from the funds legally available for the payment thereof, when, as and if
declared by our Board of Directors. The declaration of dividends, however, is subject to the discretion of our Board of Directors. Holders of our common stock are also entitled to share ratably in any
of our assets available for distribution to holders of our common stock after payment of liabilities upon liquidation or dissolution of Sento, whether voluntary or involuntary. All the outstanding
shares of our common stock are fully paid and non-assessable.

We
have no present intention of paying any cash dividends on our common stock and plan to retain any earnings to finance the development and expansion of our operations. The payment of
cash dividends also may be restricted by a number of other factors, including our future earnings, capital
requirements and financial condition, covenants with lenders, lessors or other parties, as well as restrictions on the payment of dividends imposed under Utah law.

Preferred Stock

As of May 31, 2005, our authorized preferred stock was 5,000,000 shares, of which none were issued and outstanding.

We
may issue preferred stock with such designations, powers, preferences and other rights and qualifications, limitations or restrictions as our Board of Directors may authorize, without
further action by our shareholders, including but not limited to:



On
May 28, 2005, in accordance with our Articles and the laws of the state of Utah, our Board of Directors authorized an amendment to our Articles designating rights, privileges,
and preferences for a Series A Preferred Stock (the "Series A Preferred Stock") consisting of 200,000 shares, no par value (the "Designation") with powers, preferences, rights, qualifications,
limitations, and restrictions including: (i) in the event of any voluntary or
involuntary liquidation (whether complete or partial), dissolution, or winding up of the Company, the holders of the Series "A" Preferred Stock shall be entitled to be paid out of the assets of the
Company available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount in cash equal to all unpaid dividends, whether or not previously declared, accrued thereon
to the date of final distribution subject to the priority

16

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distribution
required respecting any issued and outstanding shares of any series of preferred stock authorized prior to the date of the Designation plus an amount per share equal to 100 times the
aggregate amount to be distributed per share to the holders of shares of our common stock; (ii) the right to vote with the common stock as a single class (but not separately, except to the
extent required by Utah law) with each holder entitled to 100 votes per share on all matters submitted to a vote of the shareholders of the Company; (iii) the right to dividends in preference
to the holders of our common stock; and (iv) no right of the Company to redeem shares of Series A Preferred Stock.

Rights Agreement

Effective June 3, 2005, our Board of Directors approved a Rights Agreement with our stock transfer agent, pursuant to which our Board of Directors declared
a dividend of one right (a"Right") to purchase one one-hundredth (1/100) share of our Series A Preferred Stock for each outstanding
share of our common stock (par value $0.25 per share) (the"Rights Agreement"). Each Right, when exercisable, will entitle the holder to purchase from
us one one-hundredth (1/100) share of our Series A Preferred Stock at an exercise price of $100 (the"Exercise Price") subject to
adjustment. The Rights will expire upon the earliest of the redemption or exchange of the Rights or June 3, 2008 (the"Expiration Date").

The
Rights will separate from the shares of our common stock. Certificates for Rights will be issued and the Rights will become exercisable upon the earlier of (i) the tenth day
after the first public announcement or filing indicating that any person or group of affiliated or associated persons (the"Acquiring Person") has
become the beneficial owner of twenty percent (20%) or more of our common stock or (ii) the tenth day after the date of the commencement of, or first public announcement of, the intent of any
person to commence a tender or exchange offer or
take-over bid to acquire beneficial ownership of twenty percent (20%) or more of our common stock.

Unless
the Rights are redeemed earlier, in the event that an Acquiring Person obtains 20% or more of our then-outstanding common stock, then each holder of a Right that has
not previously been exercised (other than the Rights beneficially owned by the Acquiring Person, which will thereafter be void) will thereafter have the right to receive, on exercise, shares of our
common stock having a value equal to two times the Exercise Price.

At
any time prior to or within ten days after an Acquiring Person acquires 20% or more of our common stock, the Rights may be redeemed for $0.001 each at the option of our Board of
Directors, which would automatically terminate the right to exercise the Rights.

The
Exercise Price, the number of Rights, and the number of shares of Series A Preferred Stock or common stock or other securities or property issuable upon the exercise of the
Rights are subject to adjustment from time to time in connection with certain dilutive issuances of our capital stock as set forth in the Rights Agreement.

Our
Board of Directors adopted the Rights Agreement to ensure, to the extent possible, that all our shareholders are treated fairly in connection with any takeover bid and to provide
sufficient time for our shareholders to consider any such transaction. The Rights may have the effect of discouraging an acquisition of Sento deemed undesirable by the Board of Directors or rendering
an acquisition more difficult. The Rights may cause substantial dilution to a person or group that attempts to acquire Sento on terms or in a manner not approved by our Board of Directors, except an
offer conditioned on the negation, purchase or redemption of the Rights. We may redeem the Rights at $0.001 per Right at any time prior to the acquisition of 20% or more of our then outstanding common
stock by an Acquiring Person. Accordingly, we do not anticipate that the Rights will interfere with any merger or business combination approved by our Board of Directors.

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Registration Rights

We have granted registration rights to the holders of shares of common stock we sold in private offering transactions completed during 2003 and 2004. We have also
agreed to register shares of common stock issuable upon the exercise of warrants sold in such private offering transactions or issued to consultants in exchange for consulting and shareholder
relations services performed for Sento. The total number of shares of common stock which we are obligated to register under the Securities
Act is approximately 1,022,343, subject to adjustment for stock splits, stock dividends recapitalizations or similar transactions. Of the total number of shares of common stock subject to such
registration rights, 634,962 shares, together with warrants to purchase 126,992 shares, were issued in a private offering transaction completed on March 30, 2004 (the "2004 Private Placement").
Pursuant to the registration rights agreement executed in connection with the 2004 Private Placement, we were obligated to
file, and did file, a registration statement covering such shares (including the shares issuable upon conversion of the associated warrants) on or before May 31, 2004 and such was timely
declared effective. The holders of the remaining shares subject to registration rights (approximately 260,389 shares) possess "piggyback" registration rights, enabling them to request registration of
such shares in connection with the filing of the registration statement required to be filed in connection with the 2004 Private Placement.

Utah Control Shares Acquisition Act

The Utah Control Shares Acquisition Act (the"Control Shares Act") provides that any person or entity that
acquires "control shares" of a publicly-held Utah corporation in a "control share acquisition" is denied voting rights with respect to the acquired shares, unless a majority of the
disinterested shareholders of the corporation elects to restore such voting rights. The Control Shares Act provides that a person or entity acquires "control shares" whenever it acquires shares that,
but for the operation of the Control Shares Act, would bring its voting power within any of the following three ranges: (i) 20% to 331/3%, (ii) 331/3% to
50%, or (iii) 50% or more. A "control share acquisition" is generally defined as the direct or indirect acquisition of either ownership or voting power associated with issued and outstanding
control shares. The directors or shareholders of a corporation may elect to exempt the stock of the corporation from the provisions of the Control Shares Act through adoption of a provision to that
effect in the articles of incorporation or bylaws of the corporation. Our Articles and Bylaws do not exempt our common stock from the provisions of the Control Shares Act.

The
shareholders of a corporation must consider the status of the voting rights of control shares of the corporation acquired in a control share acquisition at the next annual or special
meeting of shareholders held following such acquisition. The acquiror may accelerate the decision and require the corporation to hold a special meeting of shareholders for the purpose of considering
the status of those rights if the acquiror (i) files an "acquiring person statement" with the corporation, and (ii) agrees to pay all expenses of the meeting. If the shareholders do not
vote to restore voting rights to the control shares, the corporation may, if its articles of incorporation or bylaws so provide, redeem the control shares from the acquiror at fair market value. If
the acquiror fails to file an acquiring person statement, the corporation may, if its articles of incorporation or bylaws so provide, redeem the control shares at any time within 60 days of the
acquiror's last acquisition of control shares, regardless of the decision of the shareholders to restore voting rights. Our Articles and Bylaws do not provide for such redemption. Unless otherwise
provided in the articles of incorporation or bylaws of a corporation, shareholders are entitled to dissenters' rights if the control shares are accorded full voting rights and the acquiror has
obtained majority or more control shares. Our Articles and Bylaws do not deny such dissenters' rights to our shareholders. The provisions of the Control Shares Act may discourage companies interested
in acquiring a significant interest in or control of Sento.

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Certain Indemnification and Limited Liability Provisions

Our Articles provide that we shall indemnify any person who is or was a director, officer, employee or agent of our company, or who was serving at our request as
a director, officer, employee or agent of another entity, trust or plan to the fullest extent permitted by the Utah Revised Business Corporation Act. Our Bylaws also include discretionary
indemnification provisions with respect to officers, employees and agents, each subject to limitations generally reflecting the limitations on indemnification set forth in the Utah Revised Business
Corporation Act.

The
Utah Revised Business Corporation Act provides that we may purchase and maintain insurance on behalf of any person who is or was one of our directors, officers, employees or agents,
or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him
or her or incurred by him or her in such capacity or arising out of his or her status in such capacity, whether or not we would have the power to indemnify him or her against such liability under the
indemnification provisions of our bylaws or the laws of the State of Utah, as the same are amended or modified. We maintain insurance from commercial carriers against certain liabilities that may be
incurred by our directors and officers. As a result of the indemnification provisions described above and contained in the Utah Revised Business Corporations Act, subject to certain limitations in the
Utah Revised Business Corporation Act, we may be permitted or compelled to provide indemnification and advancement of expenses to our directors, officers, agents, and employees when they are made
parties to an investigation or legal action in connection with services performed at our request, including when such persons are alleged to have violated the Securities Act. Insurance purchased with
respect to such persons may also cover expenses or other liabilities associated with an allegation of violations of the Securities Act.

Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons or pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Change in Control Arrangements

See the description above under the heading, "Rights Agreement."

During
the fiscal year ended March 30, 2002, our Board of Directors reviewed the time and insight provided by our directors, as well as our limited ability to provide additional
cash payments to our directors as compensation for their services to Sento. Based upon this review, as well as an assessment that the directors would likely be required to devote increased time and
attention during the fiscal year ended March 30, 2002 to several strategic initiatives, including review and negotiation of prospective transactions intended to promote shareholder value and
liquidity, our Board of Directors adopted resolutions intended to compensate our directors if Sento completes such a transaction. Pursuant to resolutions adopted in April 2001 and
March 2002, our Board approved a contingent issuance of shares of common stock to each of our directors (18,750 shares to Gary Filler, then Chairman of the Board, and 12,500 shares to each
other director then serving). The shares of common stock are issuable only upon the completion of certain merger, consolidation, acquisition, sale and liquidation transactions constituting a "change
of control" under our 1999 Omnibus Stock Incentive Plan. Because none of the conditions has been satisfied as of the date of this Report, there have been no shares or other rights issued or granted to
the directors as of this date. The resolutions remain effective and could result in future issuances of shares of common stock if the resolutions are not rescinded and one or more of the stated
conditions occurs.

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Our
recently adopted Bylaws provide advance notice requirements for proposed shareholder nominations for election to the Board of Directors and for business proposed by shareholders from
the floor at our annual meeting of shareholders.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

Company Purchases of Equity Securities

During the fourth quarter of fiscal 2005, we purchased the following shares of our common stock:

|Period              |  | Total number
of shares
purchased |  | Average
price paid
per share |      | Total number of
shares purchased
as part of publicly
announced plan |        | Maximum number
of shares that may
yet be purchased
under the plan
|------------------- |  | -------------------------------- |  | ---------------------------- | ---- | ------------------------------------------------------------------- | ------ | -----------------------------------------------------------------
|Month ended 3/31/05 |  | 59,799                           |  | $                            | 3.41 |                                                                     | 59,799 |                                                                  
|                    |  |                                  |  |                              |      |                                                                     |        |                                                                  
|Total               |  | 59,799                           |  | $                            | 3.41 |                                                                     | 59,799 |                                                                  
|                    |  |                                  |  |                              |      |                                                                     |        |                                                                  

Item 6. Management's Discussion and Analysis or Plan of Operations

Overview

We provide Web-enabled CRM solutions for a diversified portfolio of organizations. These services include self-help, live chat, Web
collaboration, email, and telephone. Utilizing a tested and proven technology set, we provide an enhanced customer experience at a significant cost reduction when compared to traditional models. We
deploy a distributed workforce strategy and customer-centric applications to provide the best in customer care and support. We conduct our principal business operations through our wholly-owned
subsidiaries, Sento Technical Services Corporation and Xtrasource Acquisition, Inc.

Effective
October 1, 2004, through our wholly-owned subsidiary, Xtrasource Acquisition, Inc., we acquired substantially all of the assets of Xtrasource, a
non-affiliated, privately-held Delaware corporation with approximately $10 million in annual sales. We have agreed to pay the former owners of Xtrasource a quarterly
contingent earnout of 30% of earnings before interest, taxes, depreciation and amortization from the Xtrasource operations (the"Earnout") for the
quarterly periods between the closing and September 30, 2009 (with a maximum cap of $6.5 million). Earnout payments are subject to various reduction and offset rights including, but not
limited to, reductions for debt payments (to secured and unsecured creditors) and working capital deficiencies. We granted the former owners of Xtrasource a line of credit of no more than $200,000 to
enable Xtrasource to pay costs and expenses associated with closing its Brazilian subsidiary, which we did not acquire (and we did not assume its liabilities), and for ordinary course expenses related
to the transaction. Amounts drawn on the line of credit will be deducted from Earnout payments. Our consolidated operating results contain the operating results of the acquired business from
October 1, 2004 through March 31, 2005.

On
January 27, 2005, we announced our intentions to consolidate our Utah call center operations from three centers into one primary super-center. We completed this move during
June 2005. We believe we will be able to increase our efficiencies through this initiative and reduce the cost of providing our services over the long-term. However, we anticipate
that we will incur moving costs of approximately $100,000 and the probable write-down of property and equipment that will not be needed after the move of approximately $300,000. In
addition, we anticipate that we will accrue rent expense for the remaining lease term on the vacated centers (approximately $230,000). The charges

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discussed
above had a negative impact on our operations during the quarter ended March 31, 2005 and will have a negative impact on the quarter ending June 30, 2005.

We
believe that a significant issue currently facing our company relates to the variable pricing of a significant number of our outstanding employee stock options. In April 2003,
we repriced the majority of our then outstanding employee stock options to the then-current market price of $1.60 per share. This re-pricing was done to give our employees
incentive to grow revenues and improve profitability, with the objective of increasing shareholder value. We believe this re-pricing contributed in a large part to our improved operating
results during the fiscal year ended March 31, 2004. Under U.S. generally accepted accounting principles ("GAAP"), we are required to "mark to
market" these employee options, by adjusting the non-cash compensation expense we record on these stock options on a quarterly basis until they are exercised, forfeited or expire. This
non-cash expense is calculated by multiplying the number of currently exercisable options by the amount that the current market price of our common stock is above the exercise price of
$1.60 per share, less any amounts previously recorded as expense for vested shares. Thus, in a period of increasing stock prices we may record a significant amount of non-cash compensation
expense. Conversely, if our stock price falls in a future period, we may subsequently reverse a portion of the expense previously recognized with respect to stock options that remain outstanding.
These periodic adjustments of our non-cash compensation expense may result in significant volatility in the results of our operations. During the years ended March 31, 2005 and
2004, we recognized non-cash compensation benefit (expense) of $346,337 and $(1,562,108), respectively, to reflect adjustments to the value of the options due to the change in market price
of our common stock above the exercise price of $1.60 per share. See Notes 2 and 9 to our Consolidated Financial Statements.

Because
the actual amount of compensation expense we will recognize with respect to outstanding stock options will depend on the market price of our common stock at the end of each
quarterly period and the timing of exercise, forfeiture or expiration of outstanding options, we are not able to forecast the amount of non-cash compensation expense related to these stock
options that we may incur in any future period.

Pursuant
to a consulting agreement with a third party public relations firm, we agreed to issue the third party, as partial consideration for consulting services, a warrant to purchase
5,000 shares of our common stock each month during the term of the agreement. Through October 31, 2004, we issued warrants to purchase 60,000 shares of common stock. The warrants permit the
holder to acquire shares of common stock at an exercise price of $3.00 per share at any time prior to the date that is three and one-half years after the date of issuance. Each warrant
vests with respect to 25% of the shares subject thereto on the first day of each calendar quarter following its issuance. The warrants also include a net exercise provision and
anti-dilution provisions pursuant to which the exercise price and number of shares issuable thereunder will be adjusted proportionately in the event of a stock split, stock dividend,
recapitalization or similar transaction. We also have granted the warrant holder piggyback registration rights with respect to any registration (other than on Form S-4 or
Form S-8) that permits the registration of secondary sales. This agreement was terminated October 31, 2004. We have recognized expense based on the fair value of the warrants
over the period which the consulting services were provided.

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Effective May 21, 2004, our Board of Directors modified certain warrants to extend the expiration date from May 31, 2004 to August 31, 2004. The value of this
warrant modification, as determined using the Black-Scholes valuation model, was $37,875 (which is the difference between the value of the original warrants immediately prior to the modification and
the value of the extended warrants). In connection with this modification, the warrant holders did not provide to us any additional stated or unstated rights, privileges, or agreements. Accordingly,
this transaction has been reflected as a "deemed dividend as a result of warrant modification" on our accompanying consolidated statement of operations and in determining net loss attributable to
common shareholders.

Critical Accounting Policies

Our
significant accounting policies are described in Note 2 to our Consolidated Financial Statements. Those financial statements were prepared in accordance with GAAP. Included
within these policies are our "critical accounting policies." Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements and
require management's subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to revenue
recognition, credit risk and stock-based compensation. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties, and as a
result, actual results could differ materially from these estimates. The development and selection of these critical accounting policies have been discussed, and are reviewed each year, with the Audit
Committee of our Board of Directors.

Revenue Recognition.Revenue is 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. We generate revenue by delivering technical assistance to users of our clients' products
through the use of live chat, Web collaboration, email and telephone interactions. We recognize revenues as services are provided, according to the terms of the underlying agreement with our clients
which specify how the client will be charged, generally based on a monthly, hourly, per minute or per-call rate. We also provide licenses to a limited number of our clients for the use of
our customer contact software tools that we host. In these arrangements, we charge our client a monthly fee based on the number of users. Revenue under those arrangements is recognized as the service
is provided.

Revenues
generated from professional and consulting services are recognized as the service is provided, based on time and materials incurred at contractually agreed upon rates.

Credit Risk.We have established an allowance for doubtful accounts to reserve for uncollectible accounts receivable. Each
quarter we review the receivables on an account-by-account basis and determine the probability of collection. Management judgment is exercised in determining the probability of
collection. Factors we consider in making this judgment are the age of the receivable, the financial resources of our clients, previous client history and recent client communications. Our credit
losses have generally been within our expectations with the exception of a specific reserve we made in fiscal 2005 of $475,000 for a financially distressed client. However, there can be no assurance
that our future credit losses will be within our expectations. In addition, our revenues and accounts receivable are concentrated in a relatively few number of customers. A significant change in the
liquidity or financial position of any one of these customers or a further deterioration in the economic environment, in general, could have an adverse impact on the collectibility of our accounts
receivable and our future operating results.

Stock-Based Compensation.Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for
Stock Based Compensation(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

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method
of accounting prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(APB 25). We have elected
to continue to apply the provisions of APB 25 and provide pro forma disclosures required by SFAS 123 in the footnotes to the consolidated financial statements. We use the Black Scholes
option-pricing model to determine the amount of additional pro forma expense related to these options as presented in our disclosures. Had we adopted a fair-value-based method of
accounting for stock options, the pro forma expense for these options in our disclosures would be recorded as expense in our statements of operations and could materially affect our operating results.

In
April 2003, we repriced certain of our outstanding employee stock options. We account for stock options that were repriced in accordance with Financial Accounting Standards
Board ("FASB") Interpretation No. 44,Accounting for Certain Transactions Involving Stock Compensation, which requires that we adjust the
compensation expense we record on these stock options based on the market price of the Company's underlying stock until the options are exercised, forfeited or expire. This adjustment to compensation
expense is done quarterly and can fluctuate significantly due to the volatility of the market price of our common stock.

While
we currently have no such arrangements, we also issue equity-based incentive compensation to non-employees from time to time. Pursuant to Emerging Issues Task Force
(EITF) 96-18,Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring or in Conjunction with Selling Goods or
Services, we account for these arrangements based on the fair value of the equity instrument issued. The fair value of these instruments is measured each quarter as the related
goods or services are provided and the underlying securities vest. We use the Black Scholes pricing model to determine the value of these instruments. The resulting quarterly change in value of these
instruments is either charged or credited to income and can also fluctuate significantly based on the change in value of the underlying common stock.

Results of Operations

Fiscal 2005 compared to Fiscal 2004

Revenues.Our revenues increased 49% or $10,390,000, from $21,396,000 for the fiscal year ended March 31, 2004 to
$31,786,000 for the fiscal year ended March 31, 2005. The primary reasons for the increase are $5,278,000 of revenue from our acquisition of Xtrasource and $4,549,000 million of
additional net revenue generated from our existing client base. We were also able to generate $562,000 in revenue from new clients.

Cost of sales.Our cost of sales increased $9,180,000, or 51% from $18,072,000 for the fiscal year ended March 31,
2004 to $27,252,000 for the fiscal year ended March 31, 2005. This increase in cost was primarily the result of increased business as discussed in the revenue section above. Our gross profit as
a percentage of sales decreased to 14% for the fiscal year ended March 31, 2005 from 16% for the fiscal year ended March 31, 2004. The decrease in gross profit related primarily to less
revenue as a percentage of total revenue being generated from high-margin professional services and "ramp-up" costs we incurred due to the increase in business volume.

Selling, general and administrative expenses.Our selling, general and administrative expenses increased by 91%, or
$2,425,000, from $2,666,000 for the fiscal year ended March 31, 2004 to $5,091,000 for the fiscal year ended March 31, 2005. This increase was primarily due to increased marketing
efforts that resulted in more revenues for the year ended March 31, 2005 and additional costs associated with the business we acquired from Xtrasource.

Product development.We spent $292,000 in product development during fiscal 2005. We believe that this product development is
necessary for anticipated new business and to enhance our product offerings. We incurred no product development costs during fiscal 2004.

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Specific reserve for doubtful account.In fiscal 2005, we recorded a one-time charge of $475,000 to increase our
bad debt reserves for a financially distressed client. The client incurred difficulties obtaining financing needed to fund an aggressive growth strategy causing us to believe that it is likely the
client will not be able to pay its obligation. We recorded no such reserve during fiscal 2004. We accrue provisions for bad debts during the ordinary course of business when events or circumstances
indicate that a receivable may not be collectible. These provisions are included in selling, general and administrative expenses for fiscal 2005 and 2004.

Amortization of intangible assets.Effective October 1, 2004, we acquired substantially all of the assets and
operations of Xtrasource. We allocated the purchase price over the assets acquired, including an allocation of $1,366,000 to intangible assets which primarily represent the acquired customer base and
the related assigned contracts. We have determined that the expected life of these intangible assets is five years and accordingly, we recorded an expense of $137,000 for the amortization of these
intangibles during the last six months of fiscal 2005. There was no comparable expense during fiscal 2004.

Restructuring charge.In January 2005 we approved a plan to consolidate our three Utah contact centers into one
"super-center". We believe that this consolidation will improve our utilization of resources and thereby increase our productivity and profitability. As part of this plan, we stopped using one of our
facilities in March 2005 and recorded $220,000 of related restructuring charges. The charges include accrued facilities and relocation costs as well as an impairment of approximately $100,000
of leasehold improvements that were located in the abandoned facility.

Non-cash charge for valuation of warrants (operating).We also issued warrants to purchase common stock to a
non-employee for consulting services. Pursuant to Emerging Issues Task Force (EITF) 96-18,Accounting for Equity Instruments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling Goods or Services, we accounted for these arrangements based on the fair value of the warrants issued. The fair
value of these warrants was measured each quarter as the related services were provided and the underlying warrants vested. We use the Black Scholes pricing model to determine the value of these
warrants. The resulting quarterly change in value of these warrants was charged to income. During fiscal 2005, we recorded a charge for these warrants of $240,000. Our arrangement with this consultant
was terminated in October 2004. We did not incur any similar charges in fiscal 2004.

Stock-based compensation.In April 2003, our Board of Directors approved an employee stock option exchange program.
Under this program, options to purchase 377,342 shares of common stock with exercise prices above $2.00 per share were exchanged for options to purchase 313,592 shares of common stock at an exercise
price equal to the then current market price of $1.60. This exchange program was considered to be an effective "repricing" of stock options, which requires us to adjust the amount of compensation
expense we recognize each quarter until the stock options are exercised, forfeited or expire (see Note 9 to our audited consolidated financial statements). The cumulative amount of this charge
is calculated by multiplying the exercisable number of options as of the applicable measurement date by the difference between the market price of stock on such date and the exercise price of $1.60,
less any amounts previously recognized.

During
fiscal 2005 we recorded a non-cash stock-based compensation benefit of $346,000, a $1,908,000 change from $1,562,000 of non-cash stock-based compensation
expense that we recorded during fiscal 2004. This increase was primarily a result of changes in vested and unexercised options under the exchange program and fluctuations in the market value of our
common stock.

The
market value of our common stock has fluctuated from $1.60 at April 23, 2003, the date of the exchange program approval, to $12.35 as of March 31, 2004, and to $3.28 as
of March 31, 2005. Due to the price volatility of our common stock and the inability to predict when and how many stock options will be exercised or cancelled, we cannot project the impact of
options under this exchange program on future periods.

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Interest income.Our interest income increased $74,000 or 322% from $23,000 in fiscal 2004 to $97,000 in fiscal 2005. The
primary reason for this increase was our increase in cash balances from the sale of common stock in March 2004.

Interest expense.Our interest expense decreased $106,000, or 45%, from $236,000 during the fiscal year ended
March 31, 2004 to $130,000 during the fiscal year ended March 31, 2005. The decrease in interest expense was due primarily to the conversion of all of our convertible debt into equity
during fiscal 2004.

Non-cash charge for valuation of warrants and conversion of debentures.This expense relates to the amortization
of debt discount created by assigning a portion of the proceeds received in conjunction with convertible debentures and notes payable financings to warrants issued with the debt. We amortize this cost
over the life of the corresponding debt. This cost decreased $214,000, or 94%, from $228,000 for the fiscal 2004 to $14,000 for fiscal 2005. The conversion of all of our convertible debt to equity
during fiscal 2004 required us to accelerate the amortization of this cost and is the primary reason for the decrease in expense over the prior year. The $14,000 charge in fiscal 2005 relates
exclusively to warrants issued with notes payable financings.

Liquidity and Capital Resources

Our cash balances decreased $870,000, or 13%, from $6,568,000 at March 31, 2004 to $5,698,000 at March 31, 2005. During fiscal 2005, we generated
$1,552,000 of cash flow from operations. We used $887,000 of cash flow for the acquisition of Xtrasource and a net $1,227,000 for investing in property and equipment during fiscal 2005. We also used
$350,000 of cash flow for financing activities in fiscal
2005. The primary reason for the change in the amount of cash generated from operating activities was the timing of cash receipts. Our accounts receivable decreased due to a shift in the seasonality
of our business. In fiscal 2004, we had a large client with significant seasonal volume during our fourth quarter that caused an increase in accounts receivable at March 31, 2004. Although our
revenue increased in fiscal 2005 when compared to fiscal 2004, we were no longer doing business with this seasonal customer in the fourth quarter of fiscal 2005 and, as a result, our accounts
receivable decreased as compared to March 31, 2004. This resulted in a significant positive cash flow in fiscal 2005. Included in our cash flow from financing activities is $1,175,000 of
proceeds from the issuance of long-term debt which is largely offset by $1,076,000 in principal payments of long-term debt and capital leases. Also included in our cash flow
from financing activities are proceeds from the exercise of stock warrants, employee stock purchases and option exercises totaling $436,000 and the payment of accrued offering costs of $627,000. These
accrued offering costs relate to our sale of common stock in March 2004 and were accrued at that time.

During
the year ended March 31, 2004, we generated $18,000 of cash flow from operations, used $1,308,000 of cash flow for investing in property and equipment and generated
$5,275,000 of cash flow from financing activities. The primary reason for the change in the amount of cash generated from operating activities was the timing of cash receipts and payments on working
capital balances, such as accounts receivable, accounts payable and accrued liabilities. Accounts receivable increased due to significant revenue achieved during the fourth quarter of fiscal 2004,
which had not been collected as of year end. There was a net increase in payables and accrued liabilities due to increased business volume during the fourth quarter of fiscal 2004, which resulted in
an increase in our cash flows from operations since the liabilities had been incurred but not yet paid as of year end. Included in our cash flow from financing activities in fiscal 2004 is $6,670,198
of proceeds, including accrued offering costs, from the sale of common stock.

Our
working capital decreased $1,701,000, or 23%, from $7,199,000 at March 31, 2004 to $5,498,000 at March 31, 2005. In addition to our $870,000 decrease in cash, we had a
net decrease in accounts receivable and a net increase in current liabilities. The increase in current liabilities is primarily due to our acquisition of Xtrasource which included the assumption of
certain liabilities. The

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acquisition
of Xtrasource also increased our business volume and receivables. However, our receivables as of March 2005 were lower than our receivables at March 2004 due to the loss of
seasonal fourth quarter business discussed above.

We
have contractual obligations, including debt agreements and leases, that will require the use of cash. The following table sets forth our contractual obligations as of
March 31, 2005:

|                                    |  | Payments Due by Period |          
|----------------------------------- |  | ---------------------- | ---------
|
|
|Long Term Debt (principal only) (1) |  |                        | 499,000  
|Capital Leases                      |  |                        | 313,000  
|Operating Leases                    |  |                        | 1,815,000
|Less: subleases                     |  |                        | (146,000 
|                                    |  |                        |          
|Total Contractual Cash Obligations  |  | $                      | 2,481,000

---

At
present, we believe we will be able to meet our current obligations for operations as they come due.

Historically
our primary sources of liquidity have been cash received through private sales of equity and debt as well as from the sale of assets. During the five years ended
March 31, 2005, we have had positive cash flow from operations, which also has provided liquidity. In addition, we have financed some of the equipment utilized in our business through
long-term leasing and loan arrangements. Our growth and operations have consumed substantial amounts of cash.

Effective
March 31, 2005, we renewed our line of credit with a bank that allows us to borrow up to $3,000,000 or 80% of eligible accounts receivable. The line of credit accrues
interest at 1% over of the bank's prime rate (5.75% as of March 31, 2005) and matures on March 31, 2007. We had no amounts drawn on the line of credit at March 31, 2005. We also
entered into a new term debt agreement with the same bank that was effective March 31, 2005. The loan allows for minimum $100,000 draws with a maximum of $1,000,000 through March 31,
2006. We are required to make interest only payments equal to 1.5% over the bank's prime rate during the draw-down period. At the end of the draw-down period, we will be
required to pay monthly installments of principal and interest over 36 months.

Seasonality

Our
operating results have historically been affected by the seasonal variances experienced by several significant clients. Currently, our results are favorably affected by a significant
increase in service requests we experience during our third fiscal quarter, resulting primarily from our support of a client's on-line retail operations during the holiday months of
November and December.

Recently Issued Accounting Pronouncements

In
December 2004, the FASB issued SFAS No. 123R,Share-Based Payment,which requires the measurement of all share-based
payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. We are
required to adopt the accounting provisions of SFAS 123R for reporting periods beginning after December 15, 2006. The pro forma disclosures currently permitted under SFAS No. 123
no longer will be an alternative to financial statement recognition under SFAS 123R. Although we have not yet determined whether the adoption of SFAS 123R will result in amounts that are
similar to the current pro forma disclosures under SFAS 123, we are evaluating the requirements under SFAS 123R and expect the adoption could have a significant impact on our
consolidated statements of operations and net income/loss per share.

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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

Item 8A. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit
to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange Commission's rules and forms, and that information is accumulated and communicated to our management, including our principal
executive and principal financial officers (whom we refer to in this periodic report as our "Certifying Officers"), as appropriate to allow timely decisions regarding required disclosure. Our
management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of March 31, 2005, pursuant to
Rule 13a-15(b) promulgated under the Securities Exchange Act as of March 31, 2005. Based upon that evaluation, our Certifying Officers concluded that, as of March 31,
2005, our disclosure controls and procedures were effective. There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our
internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced above.

Item 8B. Other Information.

None.

PART III

Item 9. Directors and Executive Officers of the Registrant.

Directors

Each of our directors serves until the next annual meeting of shareholders and until his successor is duly elected and qualified. Certain information regarding
our directors is set forth below:

|Name                    |  | Age |  | Position                                        |  | Director Since
|----------------------- |  | --- |  | ----------------------------------------------- |  | --------------
|C. Lloyd Mahaffey       |  | 50  |  | Chairman of the Board                           |  | 2004          
|Patrick F. O'Neal       |  | 59  |  | President, Chief Executive Officer and Director |  | 2002          
|Kim A. Cooper           |  | 46  |  | Director                                        |  | 1999          
|Eric Olafson            |  | 45  |  | Director                                        |  | 2001          
|Phillip J. Windley, PhD |  | 46  |  | Director                                        |  | 2003          
|Donald H. Livingstone   |  | 62  |  | Director                                        |  | 2004          
|Richard E. Dyer         |  | 59  |  | Director                                        |  | 2004          

C. Lloyd Mahaffeywas appointed to serve as a director in March 2004 and has served as Chairman of the Board since
October 26, 2004. Mr. Mahaffey has over 25 years of experience in the development, funding and marketing of advanced technology systems to business, education, consumer and
government markets. Mr. Mahaffey is the Managing Partner for Dynamis Group, LLC., a commercial development and construction company with offices in Eagle and Donnelly, Idaho and the

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Managing
Partner of Carloma Group; a diversified private equity company. A long term technology venture capitalist and senior operating executive, Mr. Mahaffey served as a Managing Partner of
Redleaf Ventures I, II, and Aspen Ventures (SBIC) III from 1998 to 2004. From 1995 to 1998, Mr. Mahaffey served as the Chief Operating Officer, as well as Senior Vice President and General
Manager of Global Development and Marketing, of VeriFone. While there, he was responsible for VeriFone's early stage investments in WebTV, CyberCash, and VeriSign. He led the team that sold VeriFone
to Hewlett Packard for $1.3 billion. Prior to joining Verifone, Mr. Mahaffey served in a variety of senior executive roles at Apple Computer, Inc. during its formative years and
was responsible for the development of Apple's highly regarded Education and Federal Government business segments worldwide. Mr. Mahaffey received his Bachelor's degree in history at The
Citadel, The Military College of South Carolina, in 1978, where he was an Honor Graduate. He also attended Stanford University's Graduate School of Business Technology Executive Program in 1987.

Patrick F. O'Nealwas appointed to serve as our President and Chief Executive Officer and as a director in January 2002. Prior to
joining Sento, Mr. O'Neal was the Managing Director of Digital Lighthouse Corporation since September 1996. Mr. O'Neal also served on the Board of Directors of Digital Lighthouse
Corporation from March 1996 to January 2000 and as president of three subsidiaries that dealt with regulated industries (securities, insurance and mortgage services). Mr. O'Neal
received his bachelor's degree from Indiana State University and his law degree (Doctor of Jurisprudence) from Indiana University.

Kim A. Cooperwas appointed to serve as a director of Sento in August 1999. Mr. Cooper is the President and Chief Executive
Officer of Exceed, LLC, a consulting firm, and Chairman of the Board for multinational, TechTeam Global, Inc. At various times during the previous eight years, he was founder and Chief
Executive Officer of the following companies: Digital Harbor, Inc., ComDais, Inc., GlobalSim, Inc., and DriveSafety, Inc. During such time, Mr. Cooper also served as
Chief Strategy Officer of IMCentric, Inc., Chief Operating Officer of Sorenson Media, Inc., and General Counsel of E-Idea Labs, Inc. Earlier in his career,
Mr. Cooper was the Vice President of Worldwide Marketing and Business Development for Novell, Inc. for two years, and the Vice President of Worldwide Customer Services, Sales &
Marketing for WordPerfect Corporation for ten years. Mr. Cooper also currently serves as a director of Authoritative.Net, LC, and has recently finished writing a business book. He is a
practicing corporate attorney and graduated with honors from Brigham Young University Law School.

Eric Olafsonwas appointed to serve as a director in October 2001. Since 2000, Mr. Olafson has been the Chairman of the
Board of Tomax Corporation, a developer and marketer of web-based software for retailers ("Tomax"). From 1990 through the present, Mr. Olafson has served as the President and Chief
Executive Officer of Tomax. From 1987 to 1990, Mr. Olafson served as the Vice President of Marketing at Tomax. From 1986 to 1987, Mr. Olafson served as a consultant to Tomax.
Prior to 1986, Mr. Olafson was a co-founder of Dyonix Greentree Technologies, a Canadian software development company.

Phillip J. Windley, PhDwas appointed to serve as a director in October 2003. Dr. Windley is a consultant, author and
nationally recognized expert in using information technology. He also is currently an Associate Professor of Computer Science at Brigham Young University. Dr. Windley served during 2001 and
2002 as the Chief Information Officer for the State of Utah, serving in the Governor's Cabinet and as a member of the Governor's Senior Staff. In 1999 and 2000, Dr. Windley served as the Vice
President for Product Development and Operations at Excite@Home, managing a large, interdisciplinary team of product managers, engineers, and technicians developing and operating large-scale internet
and e-commerce products. Prior to joining Excite@Home, from 1998 to 1999, Dr. Windley served as the Chief Technology Officer of iMall, Inc. Dr. Windley was a professor
of Computer Science at Brigham Young University from 1993 to 1999 and at the University of Idaho from 1990 to 1993. While at Brigham Young University, Dr. Windley founded and directed the
Laboratory

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for
Applied Logic. Dr. Windley received his PhD in Computer Science from the University of California, Davis in 1990.

Donald H. Livingstonewas appointed to serve as a director in November 2004 and has served as Chairman of the Audit Committee since
his appointment. Mr. Livingstone is Director of the Center for Entrepreneurship and a Teaching Professor in the Marriott School of Business of Brigham Young University ("BYU"). He taught for
seven years in the highly rated Accounting Department at BYU along with creating the entrepreneurship program. Prior to joining the faculty of BYU in 1994, Mr. Livingstone had a
29-year career with Arthur Andersen. At Arthur Andersen, he spent 19 years as a partner in the San Francisco and Los Angeles offices where he supervised the Financial Services
practice.

Additionally,
Mr. Livingstone currently serves as a member of the Board of Directors of Micrel Incorporated, where he is Chairman of the Audit Committee, as well as a member of
the Compensation and Corporate Governance Committees. He also serves as a member of the Board of Directors and is Chairman of the Audit Committee of American West Bancorp. He previously served as a
director of California Independent Bancorp ("CIB") and then of Humboldt Bancorp, which acquired CIB. Mr. Livingstone has also served with Tropical Sportswear International. He chaired the Audit
Committees in each of these companies.

Richard E. Dyerwas appointed to serve as a director in November 2004 and he has served as a member of the Audit Committee since
his appointment. Mr. Dyer was recently named Vice President of Americas Sales for SanDisk Corporation, the world's largest supplier of flash memory data storage card products, where he oversees
OEM and retail channels in the Americas. He joined SanDisk in 1998 and established the company's worldwide retail channel, growing revenues to $1.6 billion in that channel. Mr. Dyer has
also held executive positions in sales and marketing for Adobe Systems and for Eastman Kodak, where he served as Vice President of the Digital & Applied Imaging Division and provided
leadership in revitalizing the performance of its U.S. sales organization. Mr. Dyer also has experience with Apple Computer and Hewlett-Packard.

Executive Officers

In addition to Mr. O'Neal, whose biography is set forth above, certain biographical information is furnished below with respect to our other executive
officers:

Anthony J. Sansone,40, was appointed as our Senior Vice President, Chief Financial Officer and Corporate Secretary in July 2004.
Prior to joining Sento, Mr. Sansone was the Vice President of the Client Finance Group for JP Morgan Chase Commercial Card Solutions since January 2003. From August 1997 to
December 2002, Mr. Sansone served as Vice President, Treasurer and Corporate Secretary for Convergence Communications, Inc., which provided data, video and voice services in nine
Latin America countries. Mr. Sansone also serves as a director of the MountainWest Capital Network, an organization fostering deal flow, capital growth and business development.
Mr. Sansone received his bachelor's degree in Accounting from Utah State University and his master's degree in Business Administration from the University of Utah.

Stephen W. Fulling, 41, was appointed as our Senior Vice President and Chief Technology Officer in January 2004. From
March 2002 until January 2004, Mr. Fulling was Director of Information Technology Services at the State of Utah where he was responsible for a $60 million information
technology budget and over 250 employees. From August 1999 until February 2002, Mr. Fulling managed an engineering and operations division for Excite@Home, in support of a
$20 million E-commerce business. From October 1996 until August 1999, Mr. Fulling was the Senior Vice President of Engineering and Operations at
iMall Inc., where he built a technology organization that was instrumental in the acquisition of iMall Inc. by Excite@Home in 1999. Mr. Fulling has over 15 years of
experience in successfully developing products that use Internet and telecommunications technologies. Mr. Fulling graduated with a degree in Computer Science from the University of California.

29

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Thomas C. Tyler,54, was appointed as our Senior Vice President of Sales and Marketing in January 2005 after serving as our Senior
Vice President of Business Development after our acquisition of the Xtrasource assets. Mr. Tyler was founder, President, CEO, and Board Chairman of Xtrasource prior to the acquisition. Under
Mr. Tyler's guidance, Xtrasource's sales reached nearly $16 million with contact centers located in Raleigh, N.C., Enschede, The Netherlands, and Metz, France. From 1989 through 1994,
Mr. Tyler was President and CEO of Universal Electronics Inc. (NASDAQ), a Cleveland-based manufacturer of universal remote controls. During his tenure with Universal, Mr. Tyler
expanded the company by diversification of products and markets, bringing sales of $240,000 in 1988 to $96 million in 1994, making Universal #7 on the list ofBusiness
Weekmagazine's 100 Hottest Growing Small Companies List in America. In 1993, Mr. Tyler was able to guide the company through an IPO and
Secondary Offering, raising nearly $75 million of capital to fund the company's rapid growth. Prior to Universal Electronics, Mr. Tyler served as President of MTC/USA, Inc., an
independent consumer electronics distribution company. He also held various positions within Technicare Corporation, a Division of Johnson & Johnson, including Director of Magnetic Resonance
Marketing and Magnetic Resonance Product Director, as well as various sales and marketing positions with Eveready Battery Co., a then subsidiary of Union Carbide Corporation. Mr. Tyler received
his BS degree from the State University of New York at Brockport.

Chris Wells,45, was appointed as our Vice President of Client Relations in January 2005. Mr. Wells served as our Senior
Vice President of Sales from April 2003 to January 2005. Prior to joining Sento, Mr. Wells consulted as the General Manager for a $29 million dollar technology upgrade
project for the State of Utah from June 2002 to April 2003. Mr. Wells was Vice President and General Manager for Excite@Home Hosting Services from October 1999 to
March 2002. His responsibilities included building outsourcing shared hosting and e-commerce services to major Fortune 500 accounts. Prior to serving as Vice President and General
Manager, Mr. Wells served from June 1998 to October 1999 as the Vice President of Major Accounts at Imall Inc., a small Internet e-commerce
start-up, which was purchased by Excite@Home for over $500 million. Mr. Wells has over 13 years in sales and marketing experience, including over three years as a
director of major accounts at Novell Inc.

30

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The following persons are not executive officers but are expected to make a significant contribution to our business:

Mike Williams,32, was appointed as our Vice President of U.S. Operations in April 2002. Mr. Williams started with Sento in
January 1999 and has worked with Sento's more strategic relationships in a Senior Account Manager role. His prior experience spans several industries with his more recent experience within the
customer contact industry. In the contact center industry, he has experience in managing multiple contact center locations world-wide, including remote centers in locations such as India,
South Africa, Northern Ireland and Scotland. Mr. Williams is currently an advisory board member for JD Power & Associates and the SSPA, working toward the development of a Contact Center
Certification Award program. Mr. Williams attended Utah Valley State College.

Emile Koolstra,31, was appointed Vice President of European Operations in November 2004 in conjunction with Sento's acquisition of
Xtrasource. Mr. Koolstra heads the Contact Center Management, IT, Human Resources and Project Management departments for both of Sento's European offices in The Netherlands and in France.
Mr. Koolstra has been with Xtrasource since its inception in 1986 and has fulfilled several positions within Xtrasource, and was one of the key-players to bring the organization
from a 20 to a 300-seat operation. Prior to Xtrasource, Mr. Koolstra was employed in the pan-European customer support center of Universal Electronics. Emile holds a
Propaedeutics Business Science degree from the Technical University, Twente, in The Netherlands.

Rick Steiner, 50, was appointed Vice President of Quality and Training in January 2003. Mr. Steiner has worked in the
quality and performance field for 15 years. His prior work experience includes Convergys Corporation and American Express. While at American Express, Mr. Steiner was awarded the
Chairman's Award for Quality Improvement. Mr. Steiner is a member of ASQ (American Society for Quality Control) a recognized national quality organization. Mr. Steiner attended Brigham
Young University where he studied business and psychology.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, as well as persons who beneficially own more than ten
percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "SEC"). Reporting persons are also required by
SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that for
the fiscal year ended March 31, 2005 all of our executive officers and directors, as well as persons beneficially holding more than ten percent of our common stock, filed the required reports
on a timely basis, except that Form 3 filings required to be made by Messrs. Mahaffey, Dyer and Livingstone upon the appointment of each to our Board of Directors were filed late,
Form 3 filings required to be made by Messrs. Sansone and Tyler upon appointment of each as officers were filed late, and the following numbers of Form 4 filings reporting one
transaction each (except as otherwise noted) were filed late by Messrs. Cooper (1), Cutler (2 filings reporting 6 transactions), Dyer (1), Filler (2 filings reporting 3 transactions),
Livingstone (1), Mahaffey (1), Olafson (2), O'Neal (1), Tyler (2), Wells (1), and Windley (2).

Annual Meetings, Board Meetings and Committees

We request that all of the members of our Board of Directors attend each annual meeting of shareholders. All of the directors in office at such time attended our
annual meeting held in October 2004. During the year ended March 31, 2005, our Board of Directors held 5 formal board meetings and met informally on numerous occasions and approved
relevant matters by written consent.

31

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All
incumbent directors attended at least 75% of all board meetings and applicable committee meetings.

Our
Board of Directors has standing Audit, Governance & Nominating, Compensation and Strategy Committees. The members of our Audit Committee are Donald H. Livingstone (Chairman),
Richard E. Dyer and Eric Olafson. The members of the Governance & Nominating Committee are Kim Cooper (Chairman), Lloyd Mahaffey and Phillip Windley. The members of our Compensation Committee
are Eric Olafson (Chairman), Kim A. Cooper and C. Lloyd Mahaffey. All the directors are members of the Strategy Committee and Phillip Windley is Chairman.

All
members of our Audit Committee are independent according to Nasdaq's listing standards, and our Board of Directors has determined that the Audit Committee has one member qualifying
as an audit committee financial expert, as defined in Item 401(e) of Regulation S-B. The person our Board of Directors has determined is an audit committee financial expert is
Donald H. Livingstone.

Our
Board of Directors has also adopted a written Audit Committee Charter, a copy of which has been filed previously with the SEC on September 14, 2001 as an exhibit to our proxy
statement prepared in connection with our 2001 annual meeting of shareholders. The Audit Committee oversees our accounting and financial reporting processes and related audits. This involves, among
other tasks, the selection of our external auditors for ratification by our shareholders, pre-approving
engagements of our auditors with respect to audit and non-audit services, reviewing our accounting practices and controls and administering our Code of Ethics for Officers and Finance
Department Employees and whistleblower policy.

The
Governance & Nominating Committee is appointed by the Board to assist the Board in selecting qualified individuals to serve as Board members and to advise the Board concerning
corporate governance matters.

The
Compensation Committee is appointed by the Board to develop and implement compensation programs that enhance the Corporation's ability to recruit and retain qualified directors,
executives, and other personnel and develop and implement stock option and award programs that create long-term incentive for directors, executive management, and key employees.

The
Strategy Committee works with our management team to review and development strategic direction for emerging issues such as technology platforms.

Code of Ethics

We have adopted the Sento Corporation Code of Ethics for Officers and Finance Department Employees, which constitutes a code of ethics that applies to the
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as required in Item 406 of
Regulation S-B under the Exchange Act. We have posted our Code of Ethics for Officers and Finance Department Employees on our website at www.sento.com.

Item 10. Executive Compensation.

Summary Compensation Table

The following table provides certain summary information concerning the compensation paid or accrued by us to or on behalf of our Chief Executive Officer, as well
as all our other executive officers

32

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whose
aggregate compensation for the fiscal year ended March 31, 2005 exceeded $100,000 (collectively, the"Named Executive Officers").

|                                                                                              |  |                |  |                         |  |                 |     |                |  | Long-Term Compensation |  |                
|--------------------------------------------------------------------------------------------- |  | -------------- |  | ----------------------- |  | --------------- | --- | -------------- |  | ---------------------- |  | ---------------
|
|
|Patrick F. O'Neal
Chief Executive Officer                                                     |  | 2005
2004
2032 |  | 214,231
170,000
170,000 |  | 20,000
30,000
 | (1) | 

          |  | 

                  |  | 25,000
20,000

|Anthony J. Sansone (2)
Senior Vice President, Chief Financial Officer and Corporate Secretary |  | 2005
2004
2032 |  | 93,462

              |  | 

           |     | 

          |  | 

                  |  | 25,000

     
|Stephen W. Fulling (3)
Senior Vice President and Chief Technology Officer                     |  | 2005
2004
2003 |  | 120,000
20,769
        |  | 2,000

       |     | 

          |  | 

                  |  | 
20,000
     
|Thomas C. Tyler (4)
Senior Vice President of Sales and Marketing                              |  | 2005
2004
2003 |  | 75,000

              |  | 

           |     | 

          |  | 

                  |  | 

          
|Chris Wells (5)
Vice President of Customer Relations                                          |  | 2005
2004
2003 |  | 100,000
113,462
       |  | 

           |     | 46,558
9,601
 |  | 

                  |  | 5,000
7,500
  

---

Option Grants in Last Fiscal Year

The following table sets forth individual grants of options to acquire shares of our common stock made to the Named Executive Officers during the fiscal year
ended March 31, 2005.

|Name               |  | Options
Granted |  | Percent of Total
Options Granted to
Employees in Fiscal
Year |   | Exercice Price |      | Expiration Date
|------------------ |  | --------------- |  | ------------------------------------------------------------ | - | -------------- | ---- | ---------------
|Patrick F. O'Neal  |  | 25,000          |  | 13                                                           | % | $              | 6.31 |                
|Anthony J. Sansone |  | 25,000          |  | 13                                                           | % | $              | 7.95 |                
|Stephen W. Fulling |  |                |  |                                                             |   |                |     |                
|Thomas C. Tyler    |  |                |  |                                                             |   |                |     |                
|Chris Wells        |  | 5,000           |  | 3                                                            | % | $              | 8.23 |                

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Aggregated Option Exercises in Last Fiscal Year and Year End Option Values

The following table sets forth the aggregate value of unexercised options to acquire shares of our common stock held by the Named Executive Officers on
March 31, 2005, and the value realized upon the exercise of options during the fiscal year ended March 31, 2005.

|                   |  |       |  |   |        | Number of Unexercised
Options at FY End 2005(2) |        | Value of Unexercised
In-the-Money Options at
FY End 2005($)(3)
|------------------ |  | ----- |  | - | ------ | ----------------------------------------------- | ------ | --------------------------------------------------------------
|
|
|Patrick F. O'Neal  |  |      |  |   |       |                                                 | 68,575 |                                                               
|Anthony J. Sansone |  |      |  |   |       |                                                 |       |                                                               
|Stephen W. Fulling |  |      |  |   |       |                                                 | 7,083  |                                                               
|Thomas C. Tyler    |  |      |  |   |       |                                                 |       |                                                               
|Chris Wells        |  | 1,875 |  | $ | 10,181 |                                                 | 3,385  |                                                               

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Director Compensation

Our non-employee directors receive compensation of $4,000 for attendance at each quarterly Board meeting (except for the Chairman of the Board who
receives $8,000 for attendance at each quarterly Board meeting) and $2,000 for participation in each quarterly committee meeting. As additional incentive to serve, non-employee board
members from time to time receive options to purchase shares of our common stock. Mr. Mahaffey received options to purchase 7,500
shares of our common stock at $4.61 per share and options to purchase 11,250 shares of our common stock at $5.00 per share during fiscal 2005. Mr. Cooper, Mr. Olafson and
Mr. Windley each received options to purchase 7,500 shares of our common stock at $5.00 per share during fiscal 2005. Mr. Dyer and Mr. Livingstone each received options to
purchase 7,500 shares of our common stock at $5.32 per share during fiscal 2005.

Effective
as of February 1, 2005, the Chairman will receive, in addition to his per-meeting fee of $8,000 per meeting for each board meeting attended and $2,000 for
each committee meeting attended, $5,000 per month for a limited period of 11 months for additional services to be rendered as Chairman during such period, including evaluating merger and
acquisition opportunities and assisting the Corporation's efforts to achieve sales growth. This additional $5,000 per month payment shall be discontinued following the payment to be made on
December 1, 2005; however, the per-meeting compensation shall continue.

Code of Ethics

We have adopted the Sento Corporation Code of Ethics for Officers and Finance Department Employees, which constitutes a code of ethics that applies to the
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as

34

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defined
in Item 406 of Regulation S-K under the Securities Exchange Act of 1934, as amended. We have posted our Code of Ethics for Officers and Finance Department Employees on our
website atwww.sento.com.

Employment Agreements and Change of Control Arrangements

We have adopted the Sento Corporation 1999 Omnibus Stock Incentive Plan (the"Incentive Plan") which provides that
upon a change in control of Sento and a subsequent relocation, termination or reassignment of a participant in the Incentive Plan within one year, the options granted to such participant under the
Incentive Plan immediately vest and become exercisable. The Named Executive Officers are among the participants in the Incentive Plan. In addition, options issued to the Named Executive Officers and
all directors provide that upon a change in control of Sento all such options immediately vest and become exercisable.

We
have entered into employment agreements with our Chief Executive Officer, Chief Financial Officer and Senior Vice President of Sales and Marketing. The employment agreements have
initial terms of between one and three years. Under the agreements, the employees are entitled to a base salary, incentive bonuses and stock options, as determined by the Board of Directors, standard
benefits such as health and life insurance and reimbursement of reasonable expenses.

We
can terminate the employment contracts for cause, which is defined in the agreements, or without cause. In addition, the employee can terminate the contract for cause or on
180 days notice. If the contract is terminated without cause or as a result of a "change of control," as defined in the agreements, the employees are entitled to receive
post-employment insurance coverage and/or severance pay of up to 12 months salary, depending on the particular agreement. The agreements also contain non-competition,
non-solicitation and assignment of inventions provisions which we believe are consistent with industry practice.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

Beneficial Ownership Table

The following table sets forth information as of May 31, 2005 with respect to the beneficial ownership of shares of our common stock by each person known
by us to be the beneficial owner of more than 5% of our common stock, by each director, by each of the Named Executive Officers and by all directors and executive officers as a group. Unless otherwise
noted, each person named has sole voting and investment power with respect to the shares indicated. The percentages set forth below have

35

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been
computed based on the number of outstanding shares of our common stock, which were 3,783,567 shares as of May 31, 2005.

|                                                                                                                                                     |  | Beneficial Ownership
As of May 31, 2005 |     
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----
|
|Patrick F. O'Neal
President, Chief Executive Officer and Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                         |  | 98,454                                  | (1) 
|Eric Olafson
Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                                     |  | 24,466                                  | (2) 
|C. Lloyd Mahaffey
Chairman of the Board
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                   |  | 18,937                                  | (3) 
|Kim A. Cooper
Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                                    |  | 16,650                                  | (4) 
|Phillip J. Windley PhD
Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                           |  | 10,306                                  | (5) 
|Richard E. Dyer
Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                                  |  | 9,000                                   | (6) 
|Anthony J. Sansone
Senior Vice President, Chief Financial Officer and Corporate Secretary
420 East South Temple, Suite 400, Salt Lake City, UT 84111 |  | 8,070                                   | (7) 
|Donald H. Livingstone
Director
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                                            |  | 8,000                                   | (8) 
|Stephen W. Fulling
Senior Vice President and Chief Technology Officer
420 East South Temple, Suite 400, Salt Lake City, UT 84111                     |  | 7,916                                   | (9) 
|Chris Wells
Vice President of Customer Relations
420 East South Temple, Suite 400, Salt Lake City, UT 84111                                          |  | 1,562                                   | (10)
|Thomas C. Tyler
Senior Vice President of Sales and Marketing
420 East South Temple, Suite 400, Salt Lake City, UT 84111                              |  | 1,000                                   |     
|All executive officers and directors as a group (11 persons)                                                                                         |  | 204,361                                 | (11)

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table contains information regarding our equity compensation plans as of March 31, 2005.

EQUITY COMPENSATION PLAN INFORMATION

|                                                               |  | Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights |  | Weighted-average
exercise price of
outstanding
options, warrants
and rights |      | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the first
column)
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders (1)     |  | 402,619                                                                                     |  | $                                                                           | 4.48 |                                                                                                                                                  
|Equity compensation plans not approved by security holders (2) |  | 110,000                                                                                     |  | $                                                                           | 5.58 |                                                                                                                                                  
|                                                               |  |                                                                                             |  |                                                                             |      |                                                                                                                                                  
|Total                                                          |  | 512,619                                                                                     |  | $                                                                           | 4.72 |                                                                                                                                                  
|                                                               |  |                                                                                             |  |                                                                             |      |                                                                                                                                                  

---

The
warrants disclosed in the preceding table were issued to placement agents in conjunction with the issuance of convertible debt and common stock, and in exchange for consulting
services pursuant to individual compensation arrangements. These warrants give the holders the right to purchase share of our common stock at a price equal to the fair market value of a share of our
common stock at the time of issuance of the warrants. The terms of these warrants range from three to five years from the date of issuance of the warrants.

37

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Item 12. Certain Relationships and Related Transactions.

In March of 1999, we entered into a consulting agreement with GT Investments, a company that is wholly owned by Gary B. Filler, who served as our Chairman until
September 2004. Under the agreement, we paid GT Investments a monthly fee for services provided by Mr. Filler. The total expense we incurred under this arrangement with GT Investments
was $33,000 for the year ended March 31, 2005. The consulting agreement was cancelled in September 2004.

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



|Number |  | Description                                                                                  |  | Incorporated
by Reference |  | Filed
Herewith
|------ |  | -------------------------------------------------------------------------------------------- |  | ------------------------- |  | --------------
|3.1    |  | Amended and Restated Articles of Incorporation                                               |  | (1)                       |  |               
|3.3    |  | Amended Bylaws                                                                               |  | (1)                       |  |               
|10.1   |  | Sento Corporation 1999 Omnibus Stock Incentive Plan                                          |  | (2)                       |  |               
|10.2   |  | Sento Corporation 1996 Employee Stock Purchase Plan (Amended and Restated)                   |  | (2)                       |  |               
|10.3   |  | Lease Agreement, dated January 1, 2000, between the Company and K.E.B. Enterprises LP        |  | (2)                       |  |               
|10.4   |  | Lease Agreement, dated May 24, 2000, between the Company and Abinadi, Inc.                   |  | (2)                       |  |               
|10.5   |  | Business Lease with Wyoming Financial Properties Inc.                                        |  | (3)                       |  |               
|10.8   |  | Equipment Lease with NTFC Capital Corporation                                                |  | (4)                       |  |               
|10.9   |  | Lease agreement between the Company and Pracvest LLC                                         |  | (5)                       |  |               
|10.10  |  | Loan and security agreement between the Company and Silicon Valley Bank dated April 15, 2003 |  | (6)                       |  |               
|10.12  |  | Form of Warrant to purchase shares of Common Stock                                           |  | (6)                       |  |               
|10.13  |  | Equipment lease with General Electric Capital Corporation dated April 30, 2002               |  | (6)                       |  |               
|10.14  |  | First Amendment to Sento Corporation 1999 Omnibus Stock Incentive Plan                       |  | (6)                       |  |               
|10.15  |  | Canyon Park Technology Center Office Building Lease Agreement                                |  | (7)                       |  |               
|10.16  |  | Sublease agreement between Sento Corporation and Symantec Corporation                        |  | (7)                       |  |               
|10.17  |  | Securities Purchase Agreement dated March 30, 2004                                           |  | (8)                       |  |               
|10.18  |  | Registration Rights Agreement dated March 30, 2004                                           |  | (8)                       |  |               
|10.19  |  | Form of Common Stock Purchase Warrant                                                        |  | (8)                       |  |               
|10.20  |  | Amendment to Loan Documents with Silicon Valley Bank                                         |  | (8)                       |  |               
|10.21  |  | Amended and Restated Schedule to Loan and Security Agreement with Silicon Valley Bank        |  | (8)                       |  |               
|10.22  |  | Warrant to purchase Common Stock issued to Shareholder Relations                             |  | (8)                       |  |               
|10.23  |  | Form of Warrant to purchase Common Stock issuable to Remsen Funding Corporation              |  | (8)                       |  |               
|       |  |                                                                                              |  |                           |  |               

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|10.24 |  | Employment Agreement between Sento Corporation and Patrick O'Neal                     |  | (9)  |  |     
|----- |  | ------------------------------------------------------------------------------------- |  | ---- |  | ----
|10.25 |  | Employment Agreement between Sento Corporation and Thomas Tyler                       |  | (10) |  |     
|10.26 |  | Employment Agreement between Sento Corporation and Anthony Sansone                    |  | (11) |  |     
|10.27 |  | Lease Agreement with Bay Pacific, Co.                                                 |  |      |  | (12)
|10.28 |  | Amendment to Canyon Park Technology Center Office Building Lease Agreement            |  |      |  | (12)
|10.29 |  | Amendment to Lease Agreement with K.E.B. Enterprises L.P.                             |  |      |  | (12)
|10.30 |  | Amendment to Loan Documents with Silicon Valley Bank                                  |  |      |  | (12)
|10.31 |  | Amended and Restated Schedule to Loan and Security Agreement with Silicon Valley Bank |  |      |  | (12)
|21    |  | Subsidiaries of the Registrant                                                        |  |      |  | (12)
|23    |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm           |  |      |  | (12)
|31.1  |  | Certification of the Company's Principal Executive Officer                            |  |      |  | (12)
|31.2  |  | Certification of the Company's Principal Financial Officer                            |  |      |  | (12)
|32.1  |  | Certification of the Company's Principal Executive Officer                            |  |      |  | (12)
|32.2  |  | Certification of the Company's Principal Financial Officer                            |  |      |  | (12)

---

39

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Item 14. Principal Accountant Fees and Services

Audit Fees

The aggregate fees billed by Ernst & Young LLP, our independent public accountants ("E&Y"), for professional services rendered for the audit of our
financial statements and the reviews of our financial statements included in our Quarterly Reports on Forms 10-Q were approximately $106,000 for the fiscal year ended March 31, 2005
and approximately $61,000, for the fiscal year ended March 31, 2004.

Audit-Related Fees

The aggregate fees billed by E&Y for assurance and related services performed by E&Y that were reasonably related to the performance of the audit of our financial
statements and are not reported in the preceding paragraph were approximately $82,000 for the fiscal year ended March 31, 2005 and approximately $17,000 for the fiscal year ended
March 31, 2004. Audit-related fees relate primarily to audits of employee benefit plans, review of the Company's Form S-3 filed in fiscal 2005 and miscellaneous accounting
and internal control related consultations including consultations on merger and acquisition activity.

Tax Fees

The aggregate fees billed by E&Y for tax compliance, tax advice and tax planning were approximately $25,000 for the fiscal year ended March 31, 2005 and
approximately $15,000 for the fiscal year ended March 31, 2004. For fiscal 2005 and 2004, tax fees related primarily to the preparation of our income tax returns

All Other Fees

There were no fees billed for other non-audit services during fiscal years 2005 and 2004.

Pre-Approval Policies and Procedures

The Audit Committee of our Board of Directors ensures that we engage our public accountants to provide only audit and non-audit services that are
compatible with maintaining the independence of our public accountants. Our Audit Committee approves or pre-approves all services provided by our public accountants. Permitted services
include audit and audit-related services, tax and other non-audit related services. Certain services are identified as restricted. Restricted services are those services that may not be
provided by our external public accountants, whether identified in statute or determined in the opinion of our Audit Committee to be incompatible with the role of an independent auditor. All fees
identified in the preceding four paragraphs were approved by our Audit Committee. During the fiscal year ended March 31, 2005, our Audit Committee reviewed all non-audit services
provided by our external public accountants, and concluded that the provision of such non-audit services was compatible with maintaining the independence of the external public
accountants.

40

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this Annual Report on
Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized, on June 28, 2005.

| |  | SENTO CORPORATION
| |  | -----------------
| |  | By:              
| |  | 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 28, 2005.

|Signature                                     |  | Title                                                                                                               |  | Date         
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                                                     |  |              
|/s/C. LLOYD MAHAFFEYC. Lloyd Mahaffey         |  | Director, Chairman of the Board                                                                                     |  | June 28, 2005
|/s/PATRICK F. O'NEALPatrick F. O'Neal         |  | President, Chief Executive Officer and Director (Principal Executive Officer)                                       |  | June 28, 2005
|/s/KIM A. COOPERKim A. Cooper                 |  | Director                                                                                                            |  | June 28, 2005
|/s/ERIC OLAFSONEric Olafson                   |  | Director                                                                                                            |  | June 28, 2005
|/s/DONALD H. LIVINGSTONEDonald H. Livingstone |  | Director                                                                                                            |  | June 28, 2005
|/s/RICHARD E. DYERRichard E. Dyer             |  | Director                                                                                                            |  | June 28, 2005
|/s/PHILLIP J. WINDLEYPhillip J. Windley       |  | Director                                                                                                            |  | June 28, 2005
|/s/ANTHONY J. SANSONEAnthony J. Sansone       |  | Senior Vice President, Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer) |  | June 28, 2005

41

---



Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Sento Corporation and Subsidiaries

We
have audited the accompanying consolidated balance sheets of Sento Corporation and Subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of operations,
stockholders' equity and comprehensive 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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, 2005
and 2004, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.



Salt
Lake City, Utah
April 19, 2005

F-1

---



Sento Corporation and Subsidiaries

Consolidated Balance Sheets

|                                                           |                                                                                                                                                             | March 31
2005                                      |            | March 31
2004 |       
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------- | ------------- | ------
|Assets                                                     |                                                                                                                                                             |                                                    |            |               |       
|Current assets:                                            |                                                                                                                                                             |                                                    |            |               |       
|                                                           | Cash and cash equivalents                                                                                                                                   |                                                    | $          | 5,698,195     |       
|                                                           | Accounts receivable, less allowance for doubtful accounts of $749,000 and $264,000 at March 31, 2005 and 2004, respectively                                 |                                                    |            | 4,326,315     |       
|                                                           | Prepaid and other current assets                                                                                                                            |                                                    |            | 643,059       |       
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Total curent assets                                        |                                                                                                                                                             |                                                    | 10,667,569 |               |       
|Property and equipment, net                                |                                                                                                                                                             |                                                    | 4,031,632  |               |       
|Intangible assets, net                                     |                                                                                                                                                             |                                                    | 1,229,607  |               |       
|Other assets                                               |                                                                                                                                                             |                                                    | 296,775    |               |       
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Total assets                                               |                                                                                                                                                             | $                                                  | 16,225,583 |               | $     
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Liabilities and stockholders' equity                       |                                                                                                                                                             |                                                    |            |               |       
|Current liabilities:                                       |                                                                                                                                                             |                                                    |            |               |       
|                                                           | Accounts payable                                                                                                                                            |                                                    | $          | 2,110,013     |       
|                                                           | Accrued salaries and payroll taxes                                                                                                                          |                                                    |            | 1,559,676     |       
|                                                           | Accrued restructuring expense                                                                                                                               |                                                    |            | 118,793       |       
|                                                           | Accrued financing costs                                                                                                                                     |                                                    |            |              |       
|                                                           | Current portion of long-term debt and capital leases                                                                                                        |                                                    |            | 745,699       |       
|                                                           | Other current liabilities                                                                                                                                   |                                                    |            | 635,834       |       
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Total current liabilities                                  |                                                                                                                                                             |                                                    | 5,170,015  |               |       
|Long-term debt and capital leases, net of current portion  |                                                                                                                                                             |                                                    | 959,259    |               |       
|Accrued contingent consideration from business acquisition |                                                                                                                                                             |                                                    | 907,898    |               |       
|Commitments and contingencies                              |                                                                                                                                                             |                                                    |            |               |       
|Stockholders' equity:                                      |                                                                                                                                                             |                                                    |            |               |       
|                                                           | Common stock, $.25 par value, 50,000,000 shares authorized; shares issued and outstanding, 3,860,304 and 3,452,898 at March 31, 2005 and 2004, respectively |                                                    |            | 965,077       |       
|                                                           | Additional paid-in capital                                                                                                                                  |                                                    |            | 20,662,508    |       
|                                                           | Treasury stock                                                                                                                                              |                                                    |            | (203,681      | )     
|                                                           | Accumulated deficit                                                                                                                                         |                                                    |            | (12,278,163   | )     
|                                                           | Accumulated other comprehensive income:                                                                                                                     |                                                    |            |               |       
|                                                           |                                                                                                                                                             | Cumulative foreign currency translation adjustment |            |               | 42,670
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Total stockholders' equity                                 |                                                                                                                                                             |                                                    | 9,188,411  |               |       
|                                                           |                                                                                                                                                             |                                                    |            |               |       
|Total liabilities and stockholders' equity                 |                                                                                                                                                             | $                                                  | 16,225,583 |               | $     
|                                                           |                                                                                                                                                             |                                                    |            |               |       

See accompanying notes.

F-2

---



Sento Corporation and Subsidiaries

Consolidated Statements of Operations

|                                                                                                                                                         |                                              | Year Ended |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------- | ----------
|
|Revenue, net                                                                                                                                             |                                              | $          | 31,785,561
|Cost of sales (excluding stock based compensation of $2,099 and $233,635 for 2005 and 2004, respectively)                                                |                                              |            | 27,252,379
|                                                                                                                                                         |                                              |            |           
|                                                                                                                                                         | Gross profit                                 |            |           
|Selling, general, and administrative expenses (excluding stock based (benefit) compensation of $(348,436)and $1,328,473 for 2005 and 2004, respectively) |                                              |            | 5,090,976 
|Product development                                                                                                                                      |                                              |            | 292,303   
|Specific reserve for doubtful account                                                                                                                    |                                              |            | 475,000   
|Amortization of intangible assets                                                                                                                        |                                              |            | 136,594   
|Restructuring charge                                                                                                                                     |                                              |            | 220,000   
|Non-cash charge for valuation of warrants                                                                                                                |                                              |            | 239,558   
|Stock based (benefit) compensation                                                                                                                       |                                              |            | (346,337  
|                                                                                                                                                         |                                              |            |           
|                                                                                                                                                         | Loss from operations                         |            |           
|Interest income                                                                                                                                          |                                              |            | 96,986    
|Interest expense                                                                                                                                         |                                              |            | (129,747  
|Non-cash interest expense related to warrants issued with convertible debentures                                                                         |                                              |            | (13,568   
|Other expense, net                                                                                                                                       |                                              |            | (33,771   
|                                                                                                                                                         |                                              |            |           
|                                                                                                                                                         | Net loss before provision for income taxes   |            |           
|Income taxes                                                                                                                                             |                                              |            | (143,273  
|                                                                                                                                                         |                                              |            |           
|                                                                                                                                                         | Net loss                                     |            |           
|Deemed dividend as a result of warrant modification                                                                                                      |                                              |            | (37,875   
|                                                                                                                                                         |                                              |            |           
|                                                                                                                                                         | Net loss attributable to common stockholders |            | $         
|                                                                                                                                                         |                                              |            |           
|Net loss per share  basic and diluted                                                                                                                   |                                              | $          | (0.49     
|                                                                                                                                                         |                                              |            |           
|Weighted average shares outstanding                                                                                                                      |                                              |            | 3,754,627 
|                                                                                                                                                         |                                              |            |           

See accompanying notes.

F-3

---



Sento Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity and Comprehensive Loss

|                                                                                           |                                                    | Common Stock |   |   |         |   |   |            |   | Accumulated
Other
Comprehensive
Income |          |   |  
|------------------------------------------------------------------------------------------ | -------------------------------------------------- | ------------ | - | - | ------- | - | - | ---------- | - | -------------------------------------- | -------- | - | -
|
|
|Balances at March 31, 2003                                                                 |                                                    | 2,099,810    |   | $ | 524,953 |   | $ | 11,919,653 |   | $                                      |         |   | $
|Issuance of common stock and warrants                                                      |                                                    | 634,962      |   |   | 158,740 |   |   | 5,884,094  |   |                                        |         |   |  
|Exercise of warrants                                                                       |                                                    | 69,083       |   |   | 17,271  |   |   | (11,646    | ) |                                        |         |   |  
|Exercise of stock options                                                                  |                                                    | 54,432       |   |   | 13,608  |   |   | 73,963     |   |                                        |         |   |  
|Employee stock purchases                                                                   |                                                    | 18,231       |   |   | 4,558   |   |   | 21,877     |   |                                        |         |   |  
|Issuance of common stock upon conversion of debentures                                     |                                                    | 576,380      |   |   | 144,095 |   |   | 776,961    |   |                                        |         |   |  
|Issuance of warrants in conjunction with debt                                              |                                                    |             |   |   |        |   |   | 262,992    |   |                                        |         |   |  
|Stock-based compensation on revaluation of stock options                                   |                                                    |             |   |   |        |   |   | 1,562,108  |   |                                        |         |   |  
|Revaluation of non-employee warrants issued for services                                   |                                                    |             |   |   |        |   |   | 22,917     |   |                                        |         |   |  
|Comprehensive loss:                                                                        |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|                                                                                           | Net loss                                           |              |  |   |         |  |   |            |  |                                        |          |  |  
|                                                                                           |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|Net comprehensive loss                                                                     |                                                    |             |   |   |        |   |   |           |   |                                        |         |   |  
|                                                                                           |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|Balances at March 31, 2004                                                                 |                                                    | 3,452,898    |   | $ | 863,225 |   | $ | 20,512,919 |   | $                                      |         |   | $
|Adjustment to accrued offering costs from March 2004 offering of
common stock and warrants |                                                    |             |   |   |        |   |   | (53,973    | ) |                                        |         |   |  
|Exercise of warrants                                                                       |                                                    | 217,853      |   |   | 54,463  |   |   | 33,662     |   |                                        |         |   |  
|Exercise of stock options                                                                  |                                                    | 168,752      |   |   | 42,189  |   |   | 229,156    |   |                                        |         |   |  
|Employee stock purchases                                                                   |                                                    | 22,565       |   |   | 5,641   |   |   | 70,471     |   |                                        |         |   |  
|Stock-based compensation on revaluation of stock options                                   |                                                    |             |   |   |        |   |   | (346,337   | ) |                                        |         |   |  
|Non-employee warrants issued for services                                                  |                                                    |             |   |   |        |   |   | 239,558    |   |                                        |         |   |  
|Common stock cancelled to satisfy receivable                                               |                                                    | (1,764       | ) |   | (441    | ) |   | (22,948    | ) |                                        |         |   |  
|Purchase of treasury stock                                                                 |                                                    |             |   |   |        |   |   |           |   |                                        | (203,681 | ) |  
|Comprehensive loss:                                                                        |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|                                                                                           | Cumulative foreign currency translation adjustment |              |  |   |         |  |   |            |  |                                        |          |  |  
|                                                                                           | Net loss                                           |              |  |   |         |  |   |            |  |                                        |          |  |  
|                                                                                           |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|Net comprehensive loss                                                                     |                                                    |             |   |   |        |   |   |           |   |                                        |         |   |  
|                                                                                           |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  
|Balances at March 31, 2005                                                                 |                                                    | 3,860,304    |   | $ | 965,077 |   | $ | 20,662,508 |   | $                                      | (203,681 | ) | $
|                                                                                           |                                                    |              |   |   |         |   |   |            |   |                                        |          |   |  

See accompanying notes.

F-4

---



Sento Corporation and Subsidiaries

Consolidated Statements of Cash Flows

|                                                     |                                                                                       | Year Ended                                                                       |                              
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | -----------------------------
|
|Cash flows from operating activities:                |                                                                                       |                                                                                  |                              
|                                                     | Net loss                                                                              |                                                                                  | $                            
|                                                     | Adjustments to reconcile net loss to net cash provided by operating activities:       |                                                                                  |                              
|                                                     |                                                                                       | Depreciation                                                                     |                              
|                                                     |                                                                                       | Amortization of intangible assets                                                |                              
|                                                     |                                                                                       | Amortization of debt offering costs                                              |                              
|                                                     |                                                                                       | Non-cash interest expense related to warrants issued with convertible debentures |                              
|                                                     |                                                                                       | Stock-based (benefit) compensation on revaluation of stock options               |                              
|                                                     |                                                                                       | Valuation of non-employee warrants issued for services                           |                              
|                                                     |                                                                                       | Provisions for losses on accounts receivable and sales returns and allowances    |                              
|                                                     |                                                                                       | Restructuring charge                                                             |                              
|                                                     |                                                                                       | Net loss on disposal of assets                                                   |                              
|                                                     |                                                                                       | Changes in operating assets and liabilities:                                     |                              
|                                                     |                                                                                       |                                                                                  | Accounts receivable          
|                                                     |                                                                                       |                                                                                  | Other assets                 
|                                                     |                                                                                       |                                                                                  | Accounts payable             
|                                                     |                                                                                       |                                                                                  | Accrued liabilities and other
|                                                     |                                                                                       |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|Cash flows from investing activities:                |                                                                                       |                                                                                  |                              
|                                                     | Capital expenditures                                                                  |                                                                                  |                              
|                                                     | Proceeds from sale of assets                                                          |                                                                                  |                              
|                                                     | Acquisition of business, including purchase of acquired business' secured debt        |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|Cash flows from financing activities:                |                                                                                       |                                                                                  |                              
|                                                     | Proceeds from issuance of long-term debt and line of credit                           |                                                                                  |                              
|                                                     | Principal payments on long-term debt, capital leases, and line of credit              |                                                                                  |                              
|                                                     | Proceeds received from debenture offering                                             |                                                                                  |                              
|                                                     | Principal payments on debentures                                                      |                                                                                  |                              
|                                                     | Proceeds from issuance of common stock (including $627,364 of accrued
offering costs) |                                                                                  |                              
|                                                     | Payment of accrued offering costs                                                     |                                                                                  |                              
|                                                     | Proceeds from exercise of stock options, warrants and employee stock purchases        |                                                                                  |                              
|                                                     | Purchase of treasury stock                                                            |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|                                                     | Effect of foreign currency translation                                                |                                                                                  |                              
|                                                     |                                                                                       |                                                                                  |                              
|Net increase (decrease) in cash and cash equivalents |                                                                                       |                                                                                  | (869,616                     
|Cash and cash equivalents at beginning of year       |                                                                                       |                                                                                  | 6,567,811                    
|                                                     |                                                                                       |                                                                                  |                              
|Cash and cash equivalents at end of year             |                                                                                       | $                                                                                | 5,698,195                    
|                                                     |                                                                                       |                                                                                  |                              

See accompanying notes.

F-5

---



Sento Corporation and Subsidiaries

Consolidated Statements of Cash Flows

|                                                                      |                                                                      | Year Ended           
|--------------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------
|
|Supplemental disclosures of cash flow information                     |                                                                      |                      
|                                                                      | Cash paid for interest                                               |                      
|                                                                      | Cash paid for taxes                                                  |                      
|Noncash investing and financing activities:                           |                                                                      |                      
|                                                                      | Assets acquired under capital leases and notes payable               |                      
|                                                                      | Conversion of debentures for common stock                            |                      
|                                                                      | Common stock cancelled to satisfy receivable                         |                      
|Assets acquired and liabilities assumed through business acquisition: |                                                                      |                      
|Assets acquired:                                                      |                                                                      |                      
|                                                                      | Receivables                                                          |                      
|                                                                      | Property and equipment                                               |                      
|                                                                      | Other assets, including $1,366,201 of intangible assets              |                      
|                                                                      |                                                                      |                      
|                                                                      |                                                                      | Total assets acquired
|Less liabilities assumed:                                             |                                                                      |                      
|                                                                      | Accounts payable                                                     |                      
|                                                                      | Accrued contingent consideration                                     |                      
|                                                                      | Long-term debt and capital leases                                    |                      
|                                                                      | Other liabilities, including $75,000 of accrued purchase liabilities |                      
|                                                                      |                                                                      |                      
|                                                                      |                                                                      | Net cash paid        
|                                                                      |                                                                      |                      

See accompanying notes.

F-6

---



1.    Description of Business

Sento Corporation (Sento) is a global provider of call and contact center solutions for customer acquisition, customer service, service intervention and technical
support for a diversified portfolio of organizations. These services include self-help, live chat, Web collaboration, email, and telephone. Sento deploys a distributed workforce strategy
and customer-centric applications to provide customer care and support. Sento conducts its principal business through its wholly-owned subsidiaries Sento Technical Services Corporation and Xtrasource
Acquisition, Inc.

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.

Allowance for Doubtful Accounts

The Company has established an allowance for doubtful accounts to reserve for uncollectible accounts receivable. Receivables are reviewed on an
account-by-account basis to determine the probability of collection. Management judgment is exercised in determining the probability of collection. Factors considered in making
this judgment are the age of the receivable, the financial resources of clients, previous client history and recent client communications. Credit losses have generally been within management's
expectations with the exception of a specific reserve recorded in fiscal 2005 of $475,000 for a financially distressed client. However, there can be no assurance that future credit losses will be
within amounts estimated by management.

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 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.

Costs
associated with software developed for internal use are either expensed or capitalized pursuant to the provisions of Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Amounts capitalized are amortized over the estimated useful life
of the software, generally three years.

Financial Instruments

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

Intangible Assets

Intangible assets consist of customer contracts and a customer base acquired through the acquisition of Xtrasource. The Company engaged an independent valuation
expert to determine the value of these assets which are being amortized on a straight line basis over their expected useful life of five years. Management intends to review these assets for impairment
on an annual basis. The Company anticipates incurring amortization expense related to these assets of $273,240 per year for fiscal years ending March 31, 2006 through March 31, 2009 and
amortization expense of $136,647 for the fiscal year ending March 31, 2010.

F-7

---



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.

Revenue Recognition

Revenue is 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. Revenue is recognized when the services have been provided to the end customer and the customer interaction is completed.

The
Company primarily generates revenue by delivering technical assistance to users of its customers' products through the use of live chat, Web collaboration, email and telephone
interactions. Revenue is recognized as the service is provided, based on the terms of the underlying customer contract, generally based on a monthly, hourly, per minute or per call rate. The Company
also provides licenses to its customers for the use of certain of its customer contact software tools that are hosted by the Company. In these arrangements, the customers are charged a monthly fee
based on the number of users. Revenue under these arrangements is recognized as the service is provided.

Revenues
generated from professional and consulting services are recognized as the service is provided, based on time and materials incurred at contractually agreed upon rates.

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, which has been determined as if the Company had accounted for its employee stock options under the fair value method.

The
fair values of stock option grants for the years presented were determined using the Black-Scholes option pricing model and the following assumptions: expected stock price volatility
of 66% to 76%, risk-free interest rates ranging from 2.7% to 3.8%, weighted average expected option lives of 5 years, and no dividend yield. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. In addition, option valuation models require the input of highly
subjective assumptions including expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect their fair value, in management's opinion, the existing models do not necessarily provide a reliable measure of the fair value of stock options
and restricted stock.

F-8

---



The
Company's pro forma information is as follows:

|                                                      |  |             |  | 2005 |            | 2004 |  
|----------------------------------------------------- |  | ----------- |  | ---- | ---------- | ---- | -
|Net income (loss) attributable to common stockholders |  | As reported |  | $    | (1,836,160 | )    | $
|                                                      |  | Pro forma   |  | $    | (2,299,184 | )    | $
|Basic and diluted income (loss) per share             |  | As reported |  | $    | (0.49      | )    | $
|                                                      |  | Pro forma   |  | $    | (0.61      | )    | $

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.

Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to $163,109 and $82,497 in fiscal 2005 and 2004, respectively.

Net Loss Per Common Share

Basic loss per share is computed in accordance with Statement of Financial Accounting Standards No. 128,Earnings Per
Share. Basic net 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 loss per share
reflects the potential dilution that could occur from common shares issueable through stock options, warrants, and other convertible securities, if dilutive. The computation of diluted net loss per
share does not assume exercise or conversion of securities that would have an antidilutive effect on net loss per common share. During the years ended March 31, 2005 and 2004, stock options and
warrants for the purchase of 259,601 and 646,101 shares of common stock, respectively, were excluded from the computation of diluted net loss per share as the impact would have been antidilutive.

Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income. Other comprehensive income in 2005 includes certain changes in equity of the Company
that are excluded from net loss. There were no items of other comprehensive loss during fiscal 2004.

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. Two customers accounted for 46% of revenues for the year ended March 31, 2005. These two customers accounted for 28% and 18%,
respectively of fiscal 2005 revenue.
Two customers accounted for 47% of revenues for the year ended March 31, 2004. These two customers accounted for 29% and 18%, respectively, of fiscal 2004 revenue.

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 U.S. generally accepted accounting principles. Actual results could differ from
those estimates.

F-9

---



Reclassifications

Certain items in the fiscal 2004 consolidated financial statements have been reclassified to conform to the fiscal 2005 presentation.

3.    Property and Equipment

Property and equipment consisted of the following:

March 31,
2005

March 31,
2004Leasehold improvements

$
1,027,363

$
1,713,258Furniture, fixtures, equipment and software


10,382,930


8,127,35911,410,293


9,840,617Less accumulated depreciation


(7,378,661
)

(5,620,057
)$
4,031,632

$
4,220,560


Depreciation
for the fiscal 2005 and fiscal 2004 years was $1,644,242 and $1,478,989, respectively. Depreciation expense includes amortization of assets acquired under capital
leases.

4.    Notes Payable and Capital Leases

Effective March 31, 2005, the Company renewed its line of credit with a bank that allows the Company to borrow up to $3,000,000 or 80% of eligible accounts
receivable. The line of credit accrues interest at 1% over of the bank's prime rate (5.75% as of March 31, 2005) and matures on March 31, 2007. There were no amounts drawn on this line
of credit at March 31, 2005.

Effective
March 31, 2005, the Company also entered into a new term debt agreement with a bank for equipment financing. The loan allows for minimum $100,000 draws with a maximum of
$1,000,000 through March 31, 2006. The Company is required to make interest-only payments equal to 1.5% over the bank's prime rate during the draw-down period. At the
end of the draw-down period, the Company will be required to pay monthly installments of principal and interest over 36 months. Substantially all of the assets of the Company serve
as collateral for the Company's existing bank debt and the above loan and line of credit.

The
foregoing loan agreements call for the Company to maintain certain liquidity or profitability and net worth covenants. The Company was in compliance with all debt covenants at
March 31, 2005.

During
April 2003, the Company issued a warrant to the bank, in connection with obtaining credit facilities, to purchase 60,000 shares of common stock at $1.79 per share. The
relative fair value of the warrant of $42,000 (as determined using the Black Scholes valuation model with the following assumptions: contractual life3 years;
volatility66%; risk free interest rate3.34%) was recorded as a debt discount and is being amortized to interest expense over the life of the underlying debt. During fiscal
2004, $16,000 of interest expense was recognized related to the amortization of the debt discount. During 2004, the bank exercised the above warrant utilizing cashless exercise provisions by tendering
all 60,000 warrants for a net 47,655 shares of common stock.

F-10

---



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

|                                                                                                                   |  | March 31,
2005 |           | March 31,
2004 |  
|------------------------------------------------------------------------------------------------------------------ |  | -------------- | --------- | -------------- | -
|7.5% note payable in monthly installments totaling $23,260, including interest, secured by furniture and equipment |  | $              | 556,534   |                |  
|8.5% note payable in monthly installments totaling $22,150, including interest, secured by furniture and equipment |  |                | 702,076   |                |  
|3.5% note payable in quarterly installments totaling $13,773, including interest, secured by equipment             |  |                | 105,963   |                |  
|6.0% note payable in monthly installments totaling $25,131, including interest, secured by furniture and equipment |  |                |          |                | $
|6.7% note payable in monthly installments totaling $1,973, including interest, secured by equipment                |  |                |          |                |  
|8.0% note payable in monthly installments of $28,555 plus interest, secured by furniture and equipment             |  |                |          |                |  
|8.0% note payable in monthly installments of $8,333 plus interest, secured by furniture and equipment              |  |                |          |                |  
|10.0% notes payable in monthly installments of $2,719 plus interest, secured by furniture and equipment            |  |                |          |                |  
|                                                                                                                   |  |                |           |                |  
|Gross installment notes payable                                                                                    |  |                | 1,364,573 |                |  
|Less: discount on installment notes payable                                                                        |  |                | (14,006   | )              |  
|                                                                                                                   |  |                |           |                |  
|Net installment notes payable                                                                                      |  |                | 1,350,567 |                |  
|Present value of net minimum capital lease payments                                                                |  |                | 354,391   |                |  
|                                                                                                                   |  |                |           |                |  
|Total debt and capital leases                                                                                      |  |                | 1,704,958 |                |  
|Less: current portion                                                                                              |  |                | (745,699  | )              |  
|                                                                                                                   |  |                |           |                |  
|Long-term debt and capital leases, net of current portion                                                          |  | $              | 959,259   |                | $
|                                                                                                                   |  |                |           |                |  

Capital
leases are for equipment. The majority of these leases have bargain purchase provisions. Future minimum capital lease payments, excluding taxes, insurance and other costs, and
aggregate maturities of installment notes payable as of March 31, 2005 were as follows:

|                                                    |      | Capital
Leases |         | Notes
Payable
|--------------------------------------------------- | ---- | -------------- | ------- | -------------
|Fiscal Year                                         |      |                |         |              
|                                                    | 2006 |                | $       | 297,794      
|                                                    | 2007 |                |         | 87,897       
|                                                    | 2008 |                |         |             
|                                                    |      |                |         |              
|Total payments                                      |      |                | 385,691 |              
|                                                    |      |                |         |              
|Less amounts representing interest                  |      |                | (31,300 | )            
|                                                    |      |                |         |              
|Present value of net minimum capital lease payments |      | $              | 354,391 |              
|                                                    |      |                |         |              

F-11

---



5.    Convertible Debentures

In February 2000, the Company issued $1,287,000 of convertible subordinated debentures in $1,000 units consisting of one $990 debenture and warrants to
purchase 100 shares of common stock. On April 15, 2003, the Company completed a refinancing of its convertible subordinated debentures whereby all of the February 2000 debentures were
repaid or exchanged for new convertible subordinated debentures. In total, the Company issued 1,002 units at $1,000 each, consisting of one $990 debenture and warrants to purchase 250 shares of the
Company's common stock at $2.25 per share. During 2004, all of the outstanding convertible debentures were converted into common stock and certain debenture holders exercised warrants utilizing
cashless exercise provisions by tendering 37,500 warrants for a net 21,428 shares of common stock. During fiscal 2005, 204,250 warrants were tendered for a net 167,853 shares of common stock under the
cashless exercise provisions of the warrants.

Based
on the terms of the debentures and pursuant to the provisions of Emerging Issues Task Force Issue No. 00-27 regarding certain convertible instruments, it was
determined that the debentures included a beneficial conversion feature. Based on the value of the warrants issued with the debentures, as described below, and the stated conversion terms of the
debentures, the beneficial conversion feature was determined

to
have an implied value of approximately $53,000. This amount was reflected as a debt discount and an increase to additional paid-in capital to be amortized to interest
expense over the term of the debt. Upon conversion of the debentures in 2004, the remaining debt discount related to the beneficial conversion feature was recognized as interest expense.

The
Company also issued warrants for the purchase of 50,000 shares of common stock to a placement agent for services rendered in conjunction with the refinancing. All 50,000 of these
warrants were exercised for cash during fiscal 2005. Warrants for 37,500 shares of common stock were exercised at $1.60 per share, and warrants for 12,500 shares common stock were exercised at $2.25
per share. The relative fair value of the warrant of $36,000 (as determined using the Black Scholes valuation model with the following assumptions: contractual life3 years;
volatility66%; risk free interest rate3.34%) was recorded as a deferred financing cost (included in other assets) and additional paid-in capital and was amortized
to interest expense in fiscal 2004.

6.    Income Taxes

As of March 31, 2005 and 2004, the Company had federal and state net operating loss carryforwards of approximately $10,537,000 and $8,255,000 respectively.
The net operating loss and credit carryforwards will expire at various dates beginning in 2020 through 2025, if not utilized.

F-12

---



Income
tax expense from continuing operations consists of the following:

Current

Deferred

TotalYear ended March 31, 2005:Federal

$


$


$
State


3,292





Foreign


139,981





$
143,273

$


$
Year ended March 31, 2004:Federal

$


$


$
State








Foreign








$


$


$



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

Year EndedMarch 31
2005

March 31
2004Computed "expected" tax benefit

$
(562,704
)
$
(498,178
)Increase (decrease) in income taxes resulting from:State income taxes, net of federal tax benefit


(51,323
)

(48,352
)Change in valuation allowance


733,000


759,000Nondeductible meals and entertainment and other


90,355


33,797Change in estimates and return to accrual differences


(66,055
)

(246,267
)Income tax expense

$
143,273

$



F-13

---



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

March 31,
2005

March 31,
2004Deferred tax assets:Net operating loss carryforwards

$
3,930,000

$
3,079,000Deferred and accrued compensation


100,000


80,000Intangible assets


166,000


131,000Accrued liabilities


122,000


Allowances and reserves


249,000


99,000Stock-based compensation


6,000


489,000Other, net


8,000


6,000Deferred tax assets


4,581,000


3,884,000Deferred tax liabilities:Property and equipment


(26,000
)

(62,000
)Net deferred tax assets


4,555,000


3,822,000Valuation allowance


(4,555,000
)

(3,822,000
)Total

$


$



Domestic
and foreign components of income (loss) before income taxes are as follows:

March 31,
2005

March 31,
2004Domestic

$
(2,056,505
)
$
(1,465,230
)Foreign


401,493


Total

$
(1,655,012
)
$
(1,465,230
)


Utilization
of the Company's net operating loss carryforwards is limited to the future taxable income of the Company. Under the "change of ownership" provisions of the Internal Revenue
Code, utilization of the net operating loss carryforwards may be subject to an annual limitation.

The
net valuation allowance increased by $733,000 and $759,000 during the years ended March 31, 2005 and 2004, respectively.

7.    Operating Leases

The Company has non-cancelable operating leases for equipment and office space. The Company incurred rent expense of $1,356,778 and $845,748 for the
years ended March 31, 2005 and March 30, 2004, respectively. The Company subleases space in two of its facilities under non-cancelable operating

F-14

---



leases.    Future
minimum rent payments, and amounts due under subleases, under non-cancelable operating leases are as follows:

Minimum
Lease
Payment

Amounts
Due Under
Subleases

Net Amount
After
SubleasesFiscal Year2006

$
1,814,867

$
146,142

$
1,668,7252007


1,549,721


46,752


1,502,9692008


1,399,000


46,752


1,352,2482009


1,143,051


15,584


1,127,4672010


727,336


727,336


8.    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
fiscal years 2005 and 2004.

9.    Common Stock

Issuance of Common Stock

In March 2004, the Company completed a private placement for the sale of 634,962 shares of common stock at a price of $10.56 per share, resulting in net
proceeds of $5,988,861. The terms of the private placement required the Company to file a registration statement covering such shares of common stock.

In
conjunction with the private placement, the Company issued warrants for the purchase of 126,993 shares of common stock. The warrants are exercisable beginning in
September 2004, have a term of three and one-half years, and an exercise price of $12.67. In certain circumstances, the Company may have the right to call the warrants. The Company
also issued warrants to purchase 30,000 shares of common stock, with the same terms, to a placement agent for services rendered in conjunction with the private placement.

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 1,025,000 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 non-management members of the Board of Directors generally have
a five-year term. The number of shares granted, vesting period, and price per share are determined by the Board of Directors. Stock options generally vest over one to four years. At
March 31, 2005, there were 248,259 additional shares available for future grant under the Plan.

F-15

---



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

|                                         |  | 2005     |   | 2004
|---------------------------------------- |  | -------- | - | ----
|
|Balance outstanding at beginning of year |  | 403,535  |   | $   
|Granted                                  |  | 191,700  |   |     
|Exercised                                |  | (168,752 | ) |     
|Forfeited                                |  | (23,864  | ) |     
|                                         |  |          |   |     
|Balance outstanding at end of year       |  | 402,619  |   |     
|                                         |  |          |   |     
|Exercisable at end of year               |  | 149,881  |   | $   
|                                         |  |          |   |     

The
following table summarizes information about stock options outstanding at March 31, 2005:

|Exercise Price |  | Number
Outstanding
at
March 31, 2005 |  | Weighted-
Average
Remaining
Contractual Life |  | Weighted-
Average
Exercise
Price |       | Number
Exercisable
at
March 31, 2005 |         | Weighted-
Average
Exercise
Price
|-------------- |  | ------------------------------------ |  | -------------------------------------------- |  | -------------------------------- | ----- | ------------------------------------ | ------- | --------------------------------
|
|$1.60          |  | 170,675                              |  | 7.6                                          |  | $                                | 1.60  |                                      | 106,809 |                                 
|1.65-4.61      |  | 47,644                               |  | 8.6                                          |  |                                  | 3.86  |                                      | 15,417  |                                 
|4.99           |  | 6,500                                |  | 7.4                                          |  |                                  | 4.99  |                                      | 2,343   |                                 
|5.00           |  | 33,750                               |  | 4.6                                          |  |                                  | 5.00  |                                      | 14,062  |                                 
|5.32           |  | 15,000                               |  | 4.6                                          |  |                                  | 5.32  |                                      | 5,000   |                                 
|6.31           |  | 25,000                               |  | 9.5                                          |  |                                  | 6.31  |                                      |        |                                 
|7.95           |  | 25,000                               |  | 9.3                                          |  |                                  | 7.95  |                                      |        |                                 
|8.07           |  | 7,400                                |  | 9.3                                          |  |                                  | 8.07  |                                      |        |                                 
|8.23           |  | 65,400                               |  | 9.1                                          |  |                                  | 8.23  |                                      |        |                                 
|18.00          |  | 6,250                                |  | 4.0                                          |  |                                  | 18.00 |                                      | 6,250   |                                 
|               |  |                                      |  |                                              |  |                                  |       |                                      |         |                                 
|               |  | 402,619                              |  | 7.8                                          |  | $                                | 4.48  |                                      | 149,881 |                                 
|               |  |                                      |  |                                              |  |                                  |       |                                      |         |                                 

On
April 23, 2003, the Company's Board of Directors approved an employee stock option exchange program ("Exchange Program"), pursuant to which the Company granted options to
purchase 313,592 shares of the Company's common stock at an exercise price of $1.60 per share in exchange for options to purchase 377,342 shares of the Company's common stock at exercise prices in
excess of $2.00 per share. The new options issued under the Exchange Program are subject to variable option accounting in accordance with FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation. Under variable option accounting, the Company is required to recognize compensation
expense in its consolidated statements of operations for any increase in the market price of the Company's common stock above $1.60 (the market price at the effective date of the exchange). This
compensation must be recorded on a quarterly basis until the new options issued under the Exchange Program are exercised, forfeited or expire unexercised. The impact of the new options issued under
the Exchange Program on the Company's consolidated financial statements will depend on quarterly fluctuations in the Company's common stock price and the dates of exercises, forfeitures or
cancellations of the new options by employees. Moreover, because the precise amount of compensation expense will depend on the market price of the Company's common stock at the end of each quarterly

F-16

---



period,
the Company will not be able to forecast in advance the amount of compensation expense that it will incur in any future period. During the fiscal years ended March 31, 2005 and 2004,
the Company recognized stock based compensation benefit (expense) of $346,337 and $(1,562,108), respectively, to reflect adjustments to the value of the options due to the changes in market price of
the Company's common stock above the exercise price of $1.60 per share.

Employee Stock Purchase Plan

The Company has adopted a stock purchase plan under which 175,000 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 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, 2005, the Company had sold 90,634 shares to employees of
the Company under this plan.

Stock Warrants

The Company has periodically issued warrants in exchange for consulting services to non-employees. Warrants to non-employees for services
have been accounted for pursuant to Emerging Issues Task Force Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. Accordingly, the warrants are periodically revalued based on the then fair market value of the underlying common
stock during the performance period. The Company recognized non-employee stock based compensation expense of $239,558 and $22,917 for the fiscal years ended March 31, 2005 and 2004,
respectively.

In
January 2004, the Company entered into a consulting agreement with terms that required the Company to issue the consultant warrants to purchase 5,000 shares of common stock
each month. As of March 31, 2005 warrants to purchase 60,000 shares of common stock were outstanding under this agreement. The warrants vest 25% every three months from the date of issuance,
have a term of three and one-half years, and have an exercise price of $3.00 per share. No further warrants will be issued under this agreement as the agreement has been terminated. The
value of these warrants, as determined using the Black-Scholes valuation model, were recognized during the performance period as opposed to the vesting schedule since the period of performance has
ended.

Outstanding
warrants to purchase shares of the Company's common stock, as of March 31, 2005, are as follows:

|Warrants                                                     |  | Fiscal
Year
Issued |  | Number
Of
Warrants |  | Exercise
Price |  | Expiration          
|------------------------------------------------------------ |  | ------------------ |  | ------------------ |  | -------------- |  | --------------------
|Consultant for services                                      |  | 2004               |  | 20,000             |  | 2.70           |  | August 2005         
|Purchasers of convertible debentures                         |  | 2004               |  | 6,250              |  | 2.25           |  | April 2006          
|Consultant for services                                      |  | 2005               |  | 60,000             |  | 3.00           |  | July 2007-April 2008
|Private placement of common stock                            |  | 2004               |  | 126,992            |  | 12.67          |  | September 2007      
|Placement agent in conjunction with issuance of common stock |  | 2004               |  | 30,000             |  | 12.67          |  | September 2007      
|                                                             |  |                    |  |                    |  |                |  |                     
|                                                             |  |                    |  | 243,242            |  |                |  |                     
|                                                             |  |                    |  |                    |  |                |  |                     

F-17

---



Treasury Stock

On February 28, 2005, Sento's Board of Directors approved a stock buy-back plan authorizing Sento to repurchase up to 10% of its then
outstanding common stock over a one-year period. The purchase price, amount of shares per purchase, and the specific purchase dates are subject to approval by Sento's Board of Directors
and compliance with regulations of the Securities and Exchange Commission. As of March 31, 2005, Sento had repurchased 59,799 shares of common stock at a total cost of $203,681.

10.    Related Party Transactions

In March of 1999, Sento entered into a consulting agreement with GT Investments, a company that is wholly owned by Gary B. Filler, who served as Sento's Chairman
until September 2004. Under the agreement, Sento paid GT Investments a monthly fee for services provided by Mr. Filler. The total expense incurred by Sento under its arrangement with GT
Investments was $33,000 for the fiscal year ended March 31, 2005 and $66,000 for the fiscal year ended March 31, 2004. The consulting agreement was cancelled in September 2004.

During
fiscal 2005, the Company acquired the assets of Xtrasource, Inc. (see note 12). Under the provisions of the purchase agreement, the Company agreed to pay the former
shareholders of Xtrasource, Inc. a quarterly earnout consisting of 30% of earnings before interest, taxes, depreciation and amortization generated from the Xtrasource operations ("EBITDA"). In
addition, the Company has agreed to advance the former shareholders of Xtrasource, Inc. up to $200,000 (line of credit) for the payment of their portion of closing costs for the transaction and
for the settlement of liabilities not assumed by the Company in the acquisition. These advances are to be repaid by reductions in the earnout payments to the former shareholders. Thomas C. Tyler, the
Company's current Senior Vice President of Sales and Marketing is one of the former shareholders of Xtrasource, Inc. As of March 31, 2005, the Company has not paid any contingent earnout
relating to the Xtrasource acquisition. However, the Company has accrued contingent consideration of $907,898 for this acquisition. This accrued amount includes a reduction of $84,729 for advances
through March 31, 2005 against the $200,000 line of credit.

11.    Facilities Consolidation

In January 2005, Sento approved a plan to consolidate its Utah contact center facilities from three locations into one "super center" by July 2005.
As part of this plan, $220,000 of expense was charged to Sento's statement of operations for fiscal 2005. Approximately $100,000 of this expense relates to the impairment of leasehold improvements in
a contact center that Sento stopped using in March 2005. The remaining expense relates to accrued facilities and relocation costs for the abandoned facility.

12.    Business Acquisition

Effective October 1, 2004, the Company, through its wholly-owned subsidiary, Xtrasource Acquisition, Inc. ("Acquisition"), acquired substantially
all of the assets of Xtrasource, Inc. ("Xtrasource"), a non-affiliated, privately-held Delaware corporation with approximately $10 million in annual sales.
Acquisition agreed to pay the former owners of Xtrasource a quarterly contingent earnout of 30% of earnings before interest, taxes, depreciation and amortization generated from the Xtrasource
operations ("Earnout") for the quarterly periods between the closing and September 30, 2009 (with a maximum aggregate cap of $6.5 million). Earnout payments are subject to various
reduction and offset rights including, but not limited to, reductions for debt payments (to secured and unsecured creditors) and working capital deficiencies. Acquisition has granted the former owners
of Xtrasource a line of

F-18

---



credit
of no more than $200,000 to enable the former owners of Xtrasource to pay costs and expenses associated with closing its Brazilian subsidiary, which Acquisition did not acquire (nor assume its
liabilities), and for ordinary course expenses related to the transaction. Amounts drawn on the line of credit will be deducted from Earnout payments. As of March 31, 2005, the Company had
advanced $84,729, including interest, under the line of credit which is included as a deduction to the accrued contingent consideration in the accompanying consolidated financial statements. The
Company's consolidated operating results contain the operating results of the acquired business from October 1, 2004 through March 31, 2005.

The
acquired assets consist of call center operations with facilities in the United States, the Netherlands and France. Xtrasource offers integrated customer solutions, including help
desk, technical assistance, and live web chat. The purchase of Xtrasource provides the Company with a larger geographic footprint and additional language skills to enhance customer service. The
purchase also allows the Company to broaden its product offerings. The purchase was accounted for as follows:

Assets acquired and liabilities assumed through business acquisition:Receivables

$
1,835,911Property and equipment


201,810Other assets, including $1,366,201 of intangible assets


1,690,560Total assets acquired


3,728,281Less liabilities assumed:Accounts payable


1,030,978Accrued contingent consideration


907,898Long-term debt and capital leases


51,680Other liabilities, including $75,000 of accrued purchase liabilities


850,548Net cash paid

$
887,177


The
intangible assets acquired consist primarily of the Xtrasource customer contracts and customer base. These intangible assets are being amortized over the expected useful life of five
years. As of March 31, 2005, the Company's intangible assets consist entirely of the intangible assets acquired through this transaction. The carrying value of intangible assets at
March 31, 2005 totaled $1,229,607, net of $136,594 of accumulated amortization.

The
accrued contingent consideration represents the Company's estimate of the Earnout liability. This estimate is based on the Company's forecasts of Xtrasource's earnings through
September 2009. The actual amounts eventually paid for the Earnout could differ materially from management's estimate.

F-19

---



13.    Geographic Information

Sento operates contact and call centers in the United States and Europe. The Company has attributed the following geographic area net revenue and
long-lived assets based on physical location of operations centers for the fiscal years ended March 31, 2005 and 2004:

March 31,
2005

March 31,
2004Net revenue:United States

$
27,407,000

$
21,396,000Europe


4,379,000


Consolidated total

$
31,786,000

$
21,396,000Long-lived assets:United States

$
4,246,000

$
4,353,000Europe


1,312,000


Consolidated total

$
5,558,000

$
4,353,000


14.    Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R, Share-Based
Payment(SFAS 123R), which requires the measurement of all share-based payments to employees, including grants of employee stock
options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. The Company is required to adopt the accounting provisions of
SFAS 123R for reporting periods beginning after December 15, 2006. The Company's pro forma disclosures currently permitted under SFAS 123 no longer will be an alternative to
financial statement recognition under SFAS 123R. Although the Company has not yet determined whether the adoption of SFAS 123R will result in amounts that are similar to the current pro
forma disclosures under SFAS 123, management is evaluating the requirements under SFAS 123R and expects the adoption could have a significant impact on Company's consolidated statements
of operations and net income/loss per share.

15.    Subsequent Events

On April 15, 2005, the Company completed its stock buy-back program. Subsequent to March 31, 2005, the Company purchased 16,938 shares
of its common stock for $55,939 bringing the total common stock purchased under the buy-back program to 76,737 at a total cost of $259,620.

F-20

---