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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



(Mark One)

|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the period ended June 30, 2003



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission file number 000-25315



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SAGENT TECHNOLOGY, INC.

(Exact name of Registrant as specified in its Charter)



|Delaware                                                       |  | 94-3225290                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)



800 W. El Camino
Real, Suite 300

Mountain View, CA 94040

(Address of Principal Executive Offices including Zip Code)



(650) 815-3100

(Registrants Telephone Number, Including Area Code)



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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x



As of August 6, 2003,
Registrant had 47,109,843 shares of common stock issued and outstanding.



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SAGENT TECHNOLOGY, INC.



QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED June 30, 2003



TABLE OF CONTENTS



|                                  |  |                                                                                       |  | Page No.
|--------------------------------- |  | ------------------------------------------------------------------------------------- |  | --------
|                                  | 
|PART I.     FINANCIAL INFORMATION |  |                                                                                      
|                                  |  |                                                                                      
|Item 1.                           |  | Financial Statements:                                                                 |  |         
|                                  |  |                                                                                      
|                                  |  | Unaudited Condensed Consolidated Balance Sheets                                       |  | 3       
|                                  |  |                                                                                      
|                                  |  | Unaudited Condensed Consolidated Statements of Operations                             |  | 4       
|                                  |  |                                                                                      
|                                  |  | Unaudited Condensed Consolidated Statements of Cash Flows                             |  | 5       
|                                  |  |                                                                                      
|                                  |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                      |  | 6       
|                                  |  |                                                                                      
|Item 2.                           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15      
|                                  |  |                                                                                      
|Item 3.                           |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 26      
|                                  |  |                                                                                      
|Item 4.                           |  | Controls and Procedures                                                               |  | 26      
|                                  | 
|PART II.    OTHER INFORMATION     |  |                                                                                      
|                                  |  |                                                                                      
|Item 1.                           |  | Legal Proceedings                                                                     |  | 27      
|                                  |  |                                                                                      
|Item 4.                           |  | Submission of Matters to a Vote of Security Holders                                   |  | 27      
|                                  |  |                                                                                      
|Item 6.                           |  | Exhibits and Reports on Form 8-K                                                      |  | 27      
|                                  | 
|SIGNATURES                        |  | 28                                                                                   
|                                  | 
|INDEX TO EXHIBITS                 |  | 29                                                                                   



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PART I FINANCIAL INFORMATION



Item 1.Financial Statements



SAGENT TECHNOLOGY, INC.



UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands except per share data)



|                                                                                                                                                                                           |  | June 30, 2003 |          |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | -------- | - | ----------------- | -
|ASSETS                                                                                                                                                                                     |  |               |          |   |                   |  
|Current Assets                                                                                                                                                                             |  |               |          |   |                   |  
|Cash and cash equivalents                                                                                                                                                                  |  | $             | 4,830    |   |                   | $
|Restricted cash                                                                                                                                                                            |  |               | 100      |   |                   |  
|Accounts receivable, net of allowance for doubtful accounts of $1,262 in 2003 and $1,389 in 2002                                                                                           |  |               | 7,453    |   |                   |  
|Other current assets                                                                                                                                                                       |  |               | 1,106    |   |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total current assets                                                                                                                                                                       |  |               | 13,489   |   |                   |  
|Property and equipment, net                                                                                                                                                                |  |               | 1,781    |   |                   |  
|Goodwill                                                                                                                                                                                   |  |               | 6,784    |   |                   |  
|Notes receivable from officers                                                                                                                                                             |  |               |         |   |                   |  
|Other assets                                                                                                                                                                               |  |               | 386      |   |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total assets                                                                                                                                                                               |  | $             | 22,440   |   |                   | $
|                                                                                                                                                                                           |  |               |          |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                             |  |               |          |   |                   |  
|Current Liabilities                                                                                                                                                                        |  |               |          |   |                   |  
|Accounts payable                                                                                                                                                                           |  | $             | 2,544    |   |                   | $
|Accrued liabilities                                                                                                                                                                        |  |               | 4,773    |   |                   |  
|Deferred revenue                                                                                                                                                                           |  |               | 8,751    |   |                   |  
|Current portion of capital lease obligation                                                                                                                                                |  |               | 84       |   |                   |  
|Short-term debt                                                                                                                                                                            |  |               | 7,000    |   |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total current liabilities                                                                                                                                                                  |  |               | 23,152   |   |                   |  
|Other long-term liabilities                                                                                                                                                                |  |               | 70       |   |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total liabilities                                                                                                                                                                          |  |               | 23,222   |   |                   |  
|Minority Interest                                                                                                                                                                          |  |               |         |   |                   |  
|Stockholders Equity (Deficit)                                                                                                                                                             |  |               |          |   |                   |  
|Common stock, par value $.001 per share; Authorized: 70,000 shares at June 30, 2003 and December 31, 2002; Issued and outstanding:
47,110 at June 30, 2003 and 46,424 at December 31, 2002 |  |               | 47       |   |                   |  
|Additional paid-in capital                                                                                                                                                                 |  |               | 135,346  |   |                   |  
|Accumulated other comprehensive loss                                                                                                                                                       |  |               | (91      | ) |                   |  
|Accumulated deficit                                                                                                                                                                        |  |               | (136,084 | ) |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total stockholders equity (deficit)                                                                                                                                                       |  |               | (782     | ) |                   |  
|                                                                                                                                                                                           |  |               |          |   |                   |  
|Total liabilities and stockholders equity (deficit)                                                                                                                                       |  | $             | 22,440   |   |                   | $
|                                                                                                                                                                                           |  |               |          |   |                   |  



The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.



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SAGENT TECHNOLOGY, INC.



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)



|                                                              |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | -
|                                                              |  | 2003                        |        |   | 2002                      |  
|Revenue:                                                      |  |                             |        |   |                           |  
|License                                                       |  | $                           | 4,022  |   |                           | $
|Service                                                       |  |                             | 3,556  |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Total revenue                                                 |  |                             | 7,578  |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Cost of revenue:                                              |  |                             |        |   |                           |  
|License                                                       |  |                             | 584    |   |                           |  
|Service                                                       |  |                             | 1,425  |   |                           |  
|Impairment of licensed technology                             |  |                             |       |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Total cost of revenue                                         |  |                             | 2,009  |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Gross profit                                                  |  |                             | 5,569  |   |                           |  
|                                                              |  |                             |        |  
|Operating expenses:                                           |  |                             |        |   |                           |  
|Sales and marketing                                           |  |                             | 3,927  |   |                           |  
|Research and development                                      |  |                             | 2,278  |   |                           |  
|General and administrative                                    |  |                             | 1,076  |   |                           |  
|Stock-based compensation                                      |  |                             |       |   |                           |  
|Restructuring costs (credits)                                 |  |                             |       |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Total operating expenses                                      |  |                             | 7,281  |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Loss from operations                                          |  |                             | (1,712 | ) |                           |  
|Interest income (expense), net                                |  |                             | (166   | ) |                           |  
|Other income (expense), net                                   |  |                             | (30    | ) |                           |  
|                                                              |  |                             |        |   |                           |  
|Net loss before income taxes                                  |  |                             | (1,908 | ) |                           |  
|Provision for income taxes                                    |  |                             | 160    |   |                           |  
|                                                              |  |                             |        |   |                           |  
|Net loss                                                      |  | $                           | (2,068 | ) |                           | $
|                                                              |  |                             |        |   |                           |  
|Basic and diluted net loss per share                          |  | $                           | (0.04  | ) |                           | $
|                                                              |  |                             |        |   |                           |  
|Shares used in computing basic and diluted net loss per share |  |                             | 46,684 |   |                           |  



The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.



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SAGENT TECHNOLOGY, INC.



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)



|                                                                            |  | Six Months EndedJune 30, |       
|--------------------------------------------------------------------------- |  | ------------------------ | ------
|                                                                            |  | 2003                     |       
|Cash flows from operations:                                                 |  |                          |       
|Net loss                                                                    |  | $                        | (6,695
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                          |       
|Depreciation and amortization                                               |  |                          | 1,410 
|Amortization of warrant cost                                                |  |                          | 1,715 
|Accrued interest on short-term loan                                         |  |                          | 143   
|Asset impairments                                                           |  |                          |      
|Restructuring costs                                                         |  |                          | (5    
|Net loss on disposal of property and equipment                              |  |                          |      
|Gain from sale and collection of officer and shareholder notes              |  |                          | (562  
|Stock-based compensation                                                    |  |                          |      
|Minority interest in earnings of subsidiary                                 |  |                          | (131  
|Changes in operating assets and liabilities:                                |  |                          |       
|Accounts receivable                                                         |  |                          | (496  
|Other current assets                                                        |  |                          | 1,096 
|Other assets                                                                |  |                          | 379   
|Accounts payable                                                            |  |                          | (267  
|Accrued liabilities                                                         |  |                          | (1,610
|Deferred revenue                                                            |  |                          | 252   
|Other long-term liabilities                                                 |  |                          | (51   
|                                                                            |  |                          |       
|Net cash used in operating activities                                       |  |                          | (4,822
|                                                                            |  |                          |       
|Cash flows from investing activities:                                       |  |                          |       
|Purchase of property and equipment                                          |  |                          | (22   
|Proceeds from the sale and collection of officer and shareholder notes      |  |                          | 1,435 
|Purchase of minority interest                                               |  |                          | (300  
|                                                                            |  |                          |       
|Net cash provided by investing activities                                   |  |                          | 1,113 
|                                                                            |  |                          |       
|Cash flows from financing activities:                                       |  |                          |       
|Payments of principal under capital lease obligations                       |  |                          | (1,328
|Restricted cash                                                             |  |                          | 775   
|Proceeds from short-term debt                                               |  |                          | 7,000 
|Payments of short-term debt                                                 |  |                          | (7,143
|Repurchase of warrant                                                       |  |                          | (500  
|Proceeds from exercise of stock options and warrants                        |  |                          | 69    
|                                                                            |  |                          |       
|Net cash used in financing activities                                       |  |                          | (1,127
|                                                                            |  |                          |       
|Effect of exchange rate changes                                             |  |                          | (45   
|                                                                            |  |                          |       
|Net decrease in cash and cash equivalents                                   |  |                          | (4,881
|                                                                            |  |                          |       
|Cash and cash equivalents, beginning of the period                          |  |                          | 9,711 
|                                                                            |  |                          |       
|Cash and cash equivalents, end of the period                                |  | $                        | 4,830 
|                                                                            |  |                          |       
|Supplemental disclosure of cash flow information:                           |  |                          |       
|Cash payments for interest                                                  |  | $                        | 238   
|Cash payments for taxes                                                     |  | $                        | 201   
|Supplemental disclosure of non-cash investing and financing activity:       |  |                          |       
|Equipment acquired under capital leases                                     |  | $                        | 11    



The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.





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SAGENT TECHNOLOGY, INC.



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except where noted)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



1.Description of Business and Summary of Significant Accounting Policies



Business



We offer a business intelligence software platform that allows business users and information technology (IT) departments to work together to integrate,
analyze, deliver and understand information. Our technology and implementation methodology reduces the time and expense required to deploy custom business intelligence solutions.



We were incorporated in California in April 1995 under the name Savant Software, Inc. In June 1995, we changed our name to
Sagent Technology, Inc. In September 1998, we reincorporated in Delaware. References in this quarterly report to Sagent, we, our and us refer to Sagent Technology, Inc. and its subsidiaries, unless the
context otherwise requires.



Basis of Presentation



The unaudited condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In the opinion of management, the condensed consolidated
financial statements reflect all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Companys financial position at June 30, 2003 and December 31, 2002, and the operating results for the three
and six months ended June 30, 2003 and 2002 and cash flows for the six months ended June 30, 2003 and 2002. These condensed consolidated financial statements and notes should be read in conjunction with our audited consolidated financial statements
and notes thereto for the year ended December 31, 2002, included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 17, 2003. The results of operations for the six months ended June 30, 2003
are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.



The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities and commitments in the normal course of business. We have incurred significant losses, including a net loss of $2.1 and $6.7 million for the three and six months ended June 30, 2003
and $22.2 million for the twelve months ended December 31, 2002. As of June 30, 2003, we have an accumulated deficit of $136.1 million and a working capital deficit of $9.7 million. These matters raise substantial doubt about our ability to continue
as a going concern. On April 15, 2003, we entered into an Asset Purchase Agreement with Group 1 Software (see details in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations under heading
Sales of AssetPlan of Liquidation). There can be no assurance that these efforts will be successful. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.



Principles of
Consolidation



The consolidated financial statements
include the accounts of Sagent Technology, Inc., and its wholly owned subsidiaries, Qualitative Marketing Software, Inc. (QMS), Sagent U.K., Ltd., Sagent Technology GmbH, Sagent France, S.A., Sagent Benelux, Sagent Technology Japan KK, Sagent
Asia/Pacific Pte Ltd., Sagent Australia Pty Ltd, Sagent de Brazil and Sagent de Mexico. All significant intercompany accounts and transactions have been eliminated in consolidation.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such
estimates include, but are not limited to, the accounting for litigation contingencies and the allowance for doubtful accounts, goodwill impairments, and income taxes. Our current estimated range of loss related to some of the pending litigation is
based on claims for which we can estimate the amount and range of loss. In addition, we also analyze the collectibility of accounts receivable based on historical bad debt experience, customer credit-worthiness, the



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current business environment and historical experience with the customer and provide an allowance for doubtful accounts.
The allowance includes specific reserves for accounts where collection is deemed to be no longer probable and a general reserve based on historical experience. Actual results could differ from those estimates.



Restricted Cash



Restricted cash as of June 30, 2003 consists of $100 held in escrow to
fulfill terms of a contractual agreement.



Concentration
of Credit Risk



Financial instruments that potentially
subject us to concentrations of credit risk are comprised principally of cash and cash equivalents and trade accounts receivable. We invest excess cash through banks, primarily in highly liquid securities, and have investment policies and procedures
that are reviewed periodically to minimize credit risk.



With
respect to accounts receivable, we perform ongoing credit evaluations of our customers and generally do not require collateral. We maintain reserves for potential credit losses on customer accounts when deemed necessary. Actual credit losses to date
have been within managements expectations. At June 30, 2003 there is one customer, which accounted for 12% of accounts receivable. No customer accounted for more than 10% of accounts receivable at December 31, 2002. For the three and six
months ended June 30, 2003 or 2002, no customer accounted for more than 10% of revenue.



Goodwill



Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired in business combinations. Prior to January 2002, we amortized goodwill on a straight-line basis over its expected useful life ranging from
one to five years.



In July 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires goodwill to be tested for impairment on an annual basis and
between annual tests in certain circumstances and written down when impaired, rather than being amortized as previous accounting standards required. We performed the goodwill impairment test as of December 31, 2002. There was no impairment of
goodwill recorded for the three and six months ended June 30, 2003 and 2002, respectively.



Impairment of Long-Lived Assets



Long-lived assets and other identifiable assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Factors considered important which could trigger an impairment review include, but are not limited to, economic and industry trends, changes in our strategies in sales and marketing and research and development, changes in projected future operating
results, changes in the mode of operations, the exit from facilities and significant declines in our stock price for an extended period time. When we determine that the carrying value of long-lived assets may not be recoverable based upon the
existence of one or more of the above indicators, impairment is measured based on a projected discounted cash flow method using a discount rate commensurate with the risk inherent in our current business model.



Revenue Recognition



We license software products directly to our customers and through channel
partners such as independent software vendors, resellers and distributors. Independent software vendors generally integrate our products with their applications or resell them with their products. Our other channel partners, principally resellers
and distributors, sell our software products to end user customers.



We derive revenue from license fees for software products and fees for services relating to the software products, including consulting, training, software and data updates and technical support.



We recognize revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition (SOP 97-2), as amended by SOP 98-4 and 98-9 and generally recognize revenue when all of the following criteria are met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred, 3) the fee is
fixed or determinable, and 4) collectibility is probable. We define each of the four criteria above as follows:



Persuasive evidence of an arrangement existsIt is our customary practice to have a written contract, which is signed by both the customer and us, or
a purchase order from those customers that have previously negotiated a standard end-user license arrangement or original equipment manufacturer (OEM) arrangement, prior to recognizing revenue on an arrangement.



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Delivery has occurredOur software may be either physically or electronically delivered to the
customer. For those products that we deliver physically, our standard transfer terms are FOB shipping point. For an electronic delivery of software, delivery is considered to have occurred when the customer has been provided with the access codes
that allow the customer to take immediate possession of the software. If undelivered products or services exist in an arrangement that are essential to the functionality of the delivered product, delivery is not considered to have occurred until
these products or services are delivered.



The fee is fixed or
determinableThe fee our customers pay for products is negotiated at the outset of an arrangement. Arrangement fees are generally due within six months or less. Arrangements with payment terms extending beyond these customary payments terms are
considered neither to be fixed nor determinable, and revenue from such arrangements is recognized as payments become due and payable.



Collectibility is probableCollectibility is assessed on a customer-by-customer basis. We assess collectibility based on a number of factors,
including past transaction history with the customers and their credit worthiness. New customers are subjected to a credit review process, which evaluates the customers financial position and ultimately their ability to pay. We obtain and
review credit reports from the third-party credit reporting agencies for new customers with which we are not familiar. If we determine that collection of a fee is not probable, we defer the fee and recognize revenue at the time collection becomes
probable, which is generally upon receipt of cash. The determination regarding the probability of collection ultimately relies on management judgment. If changes in conditions cause management to determine that this criteria is not met for certain
future transactions, revenue recognized for any reporting period could be adversely affected.



Revenue for transactions with enterprise application vendors, OEMs, and distributors is generally recognized when the licenses are resold or utilized by the reseller and all related obligations on our part have been
satisfied. However, if the contract stipulates a non-refundable royalty payment to be paid in advance of any resale, revenue is recognized upon execution of the contract, provided all other revenue recognition criteria have been met. We report the
revenue generated through distributors on a gross basis only if we act as the principal in the transaction and assume the risks and rewards of ownership, such as the risk of loss for collection, delivery and returns. In these cases we reflect the
distributors fees under sales and marketing expenses. If the above conditions do not exist, we record revenue based on the net amount retained (that is, the amount billed to the customer less the amount paid to the distributor.)



We allocate revenue on software arrangements involving multiple elements to
the delivered element using the residual method. Our determination of fair value of the undelivered elements in multiple-element arrangements is based on vendor-specific objective evidence (VSOE). We sell our data and professional services
separately, and have established VSOE of fair value on this basis. We have established VSOE of fair value for maintenance services for arrangements less than $1 million through selling such services separately. VSOE of fair value for maintenance
services for arrangements greater than $1 million is determined based upon the customers contractual annual renewal rates. Accordingly, assuming all other revenue recognition criteria are met, revenue from licenses is recognized upon delivery
using the residual method in accordance with SOP 98-9, and revenue from data, maintenance and professional services are recognized ratably over their respective terms.



We usually license software products on a perpetual basis. If vendor specific objective evidence does not exist to allocate
the total fee to all delivered and undelivered elements of the arrangement, revenue is deferred until the earlier of a) when such evidence does exist for the undelivered elements, or b) when all elements are delivered.



Our customers may require consulting and implementation services which
include evaluating their business needs, identifying the data sources necessary to meet these needs and installing the software solution in a manner that fulfills their needs. When licenses are sold together with consulting and implementation
services, license fees are recognized upon shipment, provided that a) the above revenue recognition criteria are met, b) payment of the license fees is not dependent upon performance of the consulting services, c) the services do not include
significant alterations to the features and functionality of the software and d) VSOE of services has been established as discussed above. To date, services have not been essential to the functionality of the software products for substantially all
software agreements.



Maintenance contracts generally call for
us to provide technical support and software updates and upgrades to customers. Maintenance revenue is recognized ratably over the term of the maintenance contract, generally on a straight-line basis when all revenue recognition requirements are
met. Other service revenue, primarily training and consulting, is generally recognized at the time the service is performed and when it is determined that we have fulfilled our obligations resulting from the service contract.



Deferred Revenue



Deferred revenue represents amounts invoiced to customers under certain
license, maintenance and service agreements for which the revenue earnings process has not been completed.



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Capitalized Software



Development costs incurred in the research and development of new software products and enhancements to existing software
products are expensed as incurred until technological feasibility in the form of a working model has been established. To date, capitalized costs for our software development have not been material.



Stock-Based Compensation



We account for stock awards issued to employees in accordance with
Accounting Principles Board Opinion No. 25 (APB 25) Accounting for Stock Issued to Employees as interpreted by FIN 44 Accounting for Certain Transactions Involving Stock Compensation and comply with the disclosure
provisions of FASB Statement No. 123 (SFAS 123) Accounting for Stock-Based Compensation. Under APB 25, compensation expense is based on the difference, if any, on the date of the grant, between the fair value of our stock and
the exercise price of the award. Stock compensation is being amortized over the vesting period on a straight-line basis. In addition, we account for stock issued to non-employees in accordance with the provisions of SFAS 123. Pursuant to SFAS 123,
stock-based compensation is accounted for at the fair value of the equity instruments issued, or at the fair value of the consideration received, whichever is more reliably measurable.



Had compensation cost for our stock-based compensation awards been determined using the fair value under SFAS 123 as
calculated using the Black-Scholes option pricing model, our net loss and basic and diluted net loss per share would have been increased to the pro forma amounts indicated below:



|                                                                                                                          |  | Three Months Ended June 30, |        |   | Six Months Ended June 30 |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------ | -
|                                                                                                                          |  | 2003                        |        |   | 2002                     |  
|Net lossas reported                                                                                                      |  | $                           | (2,068 | ) |                          | $
|Add: stock-based compensation expense included in reported net loss, net of related tax effect                            |  |                             | 0      |   |                          |  
|Deduct: total stock-based employee compensation expense determined under the fair value method for all awards, net of
tax |  |                             | (1,185 | ) |                          |  
|                                                                                                                          |  |                             |        |   |                          |  
|Net losspro forma                                                                                                        |  | $                           | (3,253 | ) |                          | $
|                                                                                                                          |  |                             |        |   |                          |  
|Basic and diluted net loss per share:                                                                                     |  |                             |        |   |                          |  
|As reported                                                                                                               |  | $                           | (0.04  | ) |                          | $
|                                                                                                                          |  |                             |        |   |                          |  
|Pro forma                                                                                                                 |  | $                           | (0.07  | ) |                          | $
|                                                                                                                          |  |                             |        |   |                          |  



There were no options
granted to employees during the three months ended June 30, 2003.



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Income Taxes



We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. We record a valuation allowance to reduce the net
tax asset to an amount for which realization is more likely than not. We have recorded a valuation allowance for substantially all of our deferred tax assets, except to the extent of deferred tax liabilities, as we are presently unable to conclude
that it is more likely than not that net deferred tax assets will be realized.



Guarantees



We
enter into standard indemnification provisions within our software license agreements with our customers and technology partners. Pursuant to these provisions, we typically indemnify, defend and hold harmless the indemnified party for losses
suffered or incurred by the indemnified party in connection with any U.S. patent, copyright or other intellectual property infringement claim by any third party with respect to our products. The term of these indemnification provisions is generally
perpetual any time after execution of the license agreement. The maximum potential amount of future payments that we could be required to make under these indemnification provisions is unlimited. We have, in the past, incurred costs to defend
intellectual property lawsuits.



We generally warrant that our
software products will perform in all material respects in accordance with our standard published specifications. Historically, costs related to this warranty have not been significant.



We have agreements in place with our directors and officers whereby we indemnify them for certain events or occurrences
while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a director and
officer insurance policy, which may enable us to recover a portion of any future amounts paid.



Net Loss Per Share



Basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common shares outstanding, net of shares subject to repurchase during the period. Diluted net
loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period. Options and warrants were not included in the computation of diluted net loss per
share because the effect would be anti-dilutive.



NOTE 2. COMPREHENSIVE
LOSS



Comprehensive income (loss) is the total of net
income (loss) and all other revenues, expenses, gains and losses recorded directly in equity. Sagents other comprehensive loss consists of foreign currency translation adjustments. There was no significant tax effect on the
components of other comprehensive loss for the three and six months ended June 30, 2003 and 2002.



|                                        |  | Three MonthsEnded June 30, |        |   | Six MonthsEnded June 30, |  
|--------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | -
|                                        |  | 2003                       |        |   | 2002                     |  
|Net loss                                |  | $                          | (2,068 | ) |                          | $
|Other comprehensive loss:               |  |                            |        |   |                          |  
|Foreign currency translation adjustment |  |                            | (77    | ) |                          |  
|                                        |  |                            |        |   |                          |  
|Comprehensive loss                      |  | $                          | (2,145 | ) |                          | $
|                                        |  |                            |        |   |                          |  



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NOTE 3. OTHER CURRENT ASSETS



Other current assets consists of:



|                 |  | June 30,2003 |       | December 31,2002
|---------------- |  | ------------ | ----- | ----------------
|Prepaid licenses |  | $            | 226   |                 
|Deferred charges |  |              |      |                 
|Other            |  |              | 880   |                 
|                 |  |              |       |                 
|Total            |  | $            | 1,106 |                 
|                 |  |              |       |                 



Included in prepaid
licenses are licensed technologies purchased from third parties, which are integrated into our products prior to deployment. These licensed technologies are being amortized ratably to cost of revenue over the term of the license, generally for a
period of two to five years on either a per unit or straight-line basis.



The deferred charges of $669 as of December 31, 2002 related to closing and legal fees incurred in connection with short-term debt financing. For the three months ended March 31, 2003, we recognized $669 interest
expense resulting from the change in the nature of this short-term debt (see Note 6 for details), which is included in interest income (expense), net in the unaudited condensed consolidated statements of operations.



NOTE 4. GOODWILL



Goodwill is comprised of the following:



|                             |  | June 30,2003 |       | December 31, 2002
|---------------------------- |  | ------------ | ----- | -----------------
|Goodwill:                    |  |              |       |                  
|Sagent UK                    |  | $            | 1,746 |                  
|Sagent France SA             |  |              | 645   |                  
|Sagent GmbH                  |  |              | 1,787 |                  
|Sagent Asia/Pacific Pte. Ltd |  |              | 2,455 |                  
|Sagent Benelux               |  |              | 151   |                  
|                             |  |              |       |                  
|Total                        |  | $            | 6,784 |                  
|                             |  |              |       |                  



On March 17, 2003 our
Board approved the acquisition of the remaining 47% interest in Sagent Asia/Pacific Pte. Ltd. for a total purchase price of $300 plus the forgiveness of amounts owed by the minority interest holder. The transaction was completed on April 1, 2003. As
a result, we recorded $66 in additional goodwill at June 30, 2003.



NOTE 5. ACCRUED LIABILITIES



Accrued
liabilities consists of the following:



|                                           |  | June 30,2003 |       | December 31, 2002
|------------------------------------------ |  | ------------ | ----- | -----------------
|Employee compensation and benefits         |  | $            | 1,614 |                  
|Sales and marketing                        |  |              | 1,284 |                  
|Sales taxes                                |  |              | 233   |                  
|Software royalties                         |  |              | 477   |                  
|Restructuring and related charges (Note 8) |  |              | 171   |                  
|Other                                      |  |              | 994   |                  
|                                           |  |              |       |                  
|Total                                      |  | $            | 4,773 |                  
|                                           |  |              |       |                  



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NOTE 6. SHORT-TERM DEBT



On April 15, 2003, we entered into an Asset Purchase Agreement with Group 1 Software, Inc. (Nasdaq: GSOF). Subject to the
terms and conditions of the Asset Purchase Agreement, Group 1 will pay us up to $17 million, in exchange for substantially all of our assets, including all intellectual property, accounts receivable, cash on hand, certain contracts, property &
equipment and other designated assets, and the assumption of specified liabilities. The purchase price of $17 million is payable through the cancellation of the secured bridge loans referred to below, with the remainder to be paid in cash. The
purchase price of $17 million may be reduced, based on changes in the value of the acquired assets and assumed liabilities prior to the closing. On May 7, 2003, Group 1s board of directors approved the Asset Purchase Agreement.



Concurrent with the signing of the Asset Purchase Agreement, Group 1 provided
us with $5 million in bridge financing, secured by all of our assets. Of that amount, approximately $3.1 million was used to pay all amounts owed to CDC Software Corporation under a settlement agreement. Under the terms of the bridge financing,
Group 1 agreed to lend us an additional $2 million after the Asset Purchase Agreement was approved by Group 1s board of directors.



On April 15, 2003, Sagent and Group 1 closed on the first $5 million of the total bridge loan financing. The net proceeds to us from the $5 million loan,
after settlement of $3.1 million to CDC, were approximately $1.9 million. The loan bears interest rate of 12% per annum. The principal amount of the loan was due and payable on July 31, 2003.



On May 16, 2003, Sagent and Group 1 closed on the remaining $2 million of the
total bridge loan financing and we received net proceeds of $2 million. The loan bears interest rate of 12% per annum. The principal amount of the loan was due and payable on July 31, 2003.



On July 31, 2003, Group 1 agreed to extend the due date of the existing loan
to Sagent from July 31, 2003 to September 30, 2003 and to increase the borrowing limit of the loan from $7 million to $9 million.



For the three and six months ended June 30, 2003, we incurred interest expense of $155 and $2,797, respectively, which is included in interest income
(expense), net in the unaudited condensed consolidated statements of operations. The $155 interest expense related to the bridge loan financing with Group 1 while the $2,797 interest expense related to the bridge loan financing with Group 1 and
secured loan with CDC, the accretion of the loan discount attributable to the fair value of the related warrants and the amortization of deferred debt-offering charges under the secured loan with CDC.



NOTE 7. LITIGATION



From time to time, we have been subject to litigation including the pending litigation described below. Because of the
uncertainties related to both the amount and range of loss on the pending litigation, in most cases management is unable to make a reasonable estimate of the liability that could result from an unfavorable outcome. As additional information becomes
available, we will assess its potential liability and revise our estimates. Pending or future litigation could be costly, could cause the diversion of managements attention and could upon resolution, have a material adverse affect on our
business, result of operations, financial condition and cash flow.



In addition, we are engaged in certain legal and administrative proceedings incidental to our normal business activities and believe that these matters will not have a material adverse effect on our financial position, result of operations
or cash flow.



From October 20, 2000 to November 27, 2000,
several class action lawsuits were filed in the United States District Court for the Northern District of California on behalf of purchasers of our common stock between October 21, 1999 and April 18, 2000. The parties have settled the lawsuit. Our
$5.5 million contribution to the settlement was funded by our directors and officers insurance carriers. On April 28, 2003, the Court approved the settlement and issued a final judgment and order of dismissal with prejudice as to all
parties



On November 17, 2000, a derivative lawsuit was filed
by a purported Company shareholder in the Superior Court of California for the County of San Mateo (the Fanucci Complaint). On February 9, 2001, a second derivative lawsuit was filed in the Superior Court of California for the
County of Santa Clara (the Hu Complaint). The parties have settled those lawsuits. As part of the settlement, we agreed to adopt certain corporate governance provisions and to pay $200 in attorneys fees and expenses to
derivative plaintiffs counsel; the payment is being funded by our directors and officers insurance carrier. The payment is contingent on both the Courts approval of the settlement, and the dismissal with prejudice of the
federal derivative action. The Superior Court issued a final order approving the settlement and dismissing the case with prejudice on August 5, 2003.



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In October 2001, infoUSA, Inc. filed a complaint against us in the District Court of Douglas County,
Nebraska, seeking amounts infoUSA claims are owed under a license agreement between Sagent and infoUSA. The amount of the claim is $900, plus interest. A default judgment for the full amount of the claim was entered against us on December 20, 2001,
for failure by us to respond to the initial complaint. We filed a motion to set aside the default judgment in January 2002. On February 22, 2002, the court granted our motion to set aside the default judgment, and allowed us to file its answer to
the complaint. The parties entered into a Settlement and Mutual Release Agreement effective January 20, 2003. The Settlement Agreement calls for us to pay $700 to infoUSA in full settlement of all claims, at which time the lawsuit will be dismissed.
As of June 30, 2003, the remaining payout of $275 was included in accounts payable in the condensed consolidated financial statements. In accordance with the agreement, we paid $150 in January 2003, $137 in April and June 2003, respectively, and
will pay $137 quarterly through December 31, 2003.



In November
and December 2001, several class action lawsuits were filed in the United States District Court for the Northern District of California on behalf of purchasers of our stock between May 11, 2001 and November 28, 2001. The complaints alleged that we
and certain of our officers and directors violated the Securities Exchange Act of 1934 in connection with our restatement of our condensed consolidated financial statements for the first and second quarters of 2001, resulting from a fraud scheme
perpetrated on us by a former employee who falsely claimed to have made sales of our products to the federal government. A consolidated complaint was filed in April 2002, and on September 11, 2002, the court dismissed the complaint with leave to
amend. Thereafter, on October 16, 2002, the plaintiffs filed a notice of their intent to stand on the complaint, without further amendment. On July 18, 2003, upon the defendants unopposed motion, the Court issued a judgment on the merits
against plaintiffs, and in our favor and certain of our officers.



Beginning in February 2002, three derivative lawsuits were filed by purported Company shareholders in the United States District Court for the Northern District of California. The complaints name certain of our present and former officers
and directors as defendants. The complaints allege that the defendants breached their fiduciary duties to us through the dissemination of allegedly misleading and inaccurate information. The plaintiffs filed a consolidated complaint on August 26,
2002. The defendants moved to dismiss that complaint on October 10, 2002. No order has yet been issued. As a result of the settlement of the state court derivative actions, we expect that the federal plaintiffs will move to dismiss this action.



Following its investigation of the circumstances that lead the
restatement of our financial statements for the first and second quarters of 2001, and the revision of our condensed consolidated financial statements for the third quarter of 2001; we entered the Department of Defenses (DOD)
Voluntary Disclosure Program. On June 7, 2002, we filed with the DOD a report of our investigation which revealed that a single non-officer employee was solely responsible for submitting false documents to us which purportedly showed that we had
entered into contracts with the federal government, and that we had unwittingly submitted requests for payment to U.S. government agencies not knowing that the employee had fabricated those contracts in order to defraud us of various payments and
benefits including commission payments.



In March 2002, we
filed suit against MICROS Systems, Inc. (MICROS) in Santa Clara County California alleging that MICROS had breached a contract to purchase from us certain software and a related service agreement. The value of that contract is $136.
MICROS removed the case to the United States District Court for the Northern District of California and the case was subsequently transferred to the United States District Court for the District of Maryland, where it is currently pending. MICROS has
asserted a counterclaim against us, alleging various torts and breaches of duties. MICROS counterclaim seeks in excess of $1 million in damages. On August 5, 2003, the US District Court for the State of Maryland granted Sagents motion
for summary judgment in the amount of $123 plus pre-judgment interest in the amount of $11. Under the Federal rules of Appellate Procedure, Micros has 30 days to appeal the rulings.



In early 2000, we entered into a software license agreement with Mountain Energy Corporation (MEC). MEC filed
for bankruptcy in October 2000. We recently received a letter from the MEC bankruptcy trustee alleging that we had recently received certain preferential payments and demanding that we disgorge those payments. The amount in controversy is
approximately $1 million. The range of this probable loss contingency is estimated to be between $62 and $937. As of June 30, 2003 and December 31, 2002, we accrued an amount which represents managements best estimate pursuant to the
provisions of SFAS No. 5 Accrual of Loss Contingencies.



In late 1999, we entered into a software license agreement with Convergent Communications Services, Inc. (CCS). CCS filed for bankruptcy in April 19, 2001. In June 2003, we received a letter from the CCS bankruptcy trustee on
April 17, 2003 alleging that we had recently received certain preferential payments and demanding that we disgorge those payments. The amount in controversy is approximately $115. We have initiated our discovery in this matter, but no accrual has
been made to date.



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NOTE 8. RESTRUCTURING COSTS



During the second quarter of 2002, we implemented a restructuring plan, which was executed during the remainder of 2002. The
major element of the restructuring plan was to terminate certain employees; as a result, we had a reduction in force of approximately 36% or 94 employees. The reductions came from all areas of our Company, and the terminations were substantially
completed by December 31, 2002. Our Chief Executive Officer and President, our Executive Vice PresidentSales, and Chief Marketing Officer stepped down as part of this restructuring. Further, we decided to proceed with closing several domestic
sales offices and international sales offices in Brazil, Mexico and the Netherlands. We also discontinued our marketing services business due to changes in our strategy. The purpose of the restructuring was to bring operating expenses in line with
net revenues with the goal of achieving cash flow breakeven in the near future and strategically focusing our Company on its core business. The restructuring was substantially completed during 2002.



As of June 30, 2003, the remaining restructuring accrual is summarized as
follow:



|                                        |  | Severance |      |   | Lease Termination Costs |   |      | Total | 
|--------------------------------------- |  | --------- | ---- | - | ----------------------- | - | ---- | ----- | 
|Accrual balance as of December 31, 2002 |  | $         | 301  |   |                         | $ | 306  |       | 
|Cash paid in 2003                       |  |           | (153 | ) |                         |   | (135 | )     | 
|Non-cash charges applied in 2003        |  |           | (143 | ) |                         |   | 0    |       | 
|Non-cash credit in 2003                 |  |           | (5   | ) |                         |   | 0    |       | 
|                                        |  |           |      |   |                         |   |      |       | 
|Accrual balance at June 30, 2003        |  | $         | 0    |   |                         | $ | 171  |       | 
|                                        |  |           |      |   |                         |   |      |       | 



Non-cash charge of
$143 represented application of the remaining unpaid severance benefit of a former Chief Executive Officer against his loan balance in accordance with his separation agreement made in August of 2002. We expect to pay the remaining accrual balance,
primary related to the vacated leases within the next several quarters.



NOTE 9. RELATED PARTY TRANSACTIONS



Agreements and Arrangement with Former Executive Officers



Prior to August 2000, the Company made loans to certain executive officers of the Company, either in connection with their employment or for the exercise of stock options. These loans were carried at amounts deemed to
be collectible. During the second quarter of 2003 we collected $1,435 and recorded a gain of $561, which is reflected under general and administrative expenses in the unaudited condensed consolidated statements of operations for the period ended
June 30, 2003.



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





The following discussion and analysis contains forward-looking
statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally preceded by words that imply a future state such as expected or
anticipated or imply that a particular future event or events will occur such as will. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and that actual results could be materially
different from those discussed in this report. The section below entitled Risk Factors and similar discussions in our other SEC reports filed with the SEC discuss some of the important risk factors that may affect our business, results
of operations and financial condition. Copies of our reports filed with the SEC are available from us without charge and on the SECs website at www.sec.gov. You should carefully consider those risks, in addition to the other information in
this report and in our other filings with the SEC, before deciding to invest in our company or to maintain or increase your investment. You should not place undue reliance on our forward-looking statements, as they are not guarantees of future
results, levels of activity or performance and represent our expectations only as of the date they are made.



OVERVIEW



We
offer a business intelligence software platform that allows business users and information technology (IT) departments to work together to integrate, analyze, deliver and understand information. Our technology and implementation methodology reduce
the time and expense required to deploy business intelligence solutions. We develop, market, and support products and services that help businesses collect, analyze, understand, and act on customer and operational information both in batch and in
real-time. Our products and services provide a way for an organizations employees, customers, and partners to use the Internet to examine the internal data they already have and to supplement that data with external, value-added information
such as demographic, geographic, or other content and data feeds.



Recent
Major Developments





Sale of AssetsPlan of Liquidation



On April 15, 2003, we entered into an Asset Purchase Agreement with Group 1 Software, Inc. Subject to the terms and conditions of the Asset Purchase
Agreement, Group 1 will pay us up to $17 million, in exchange for substantially all of our assets, including all intellectual property, accounts receivable, cash on hand, certain contracts, property and equipment and other designated assets, and the
assumption of specified liabilities. The purchase price of $17 million is payable through the cancellation of the secured bridge loans referred to below, with the remainder to be paid in cash. The purchase price of $17 million may be reduced based
on changes in the value of the acquired assets and assumed liabilities prior to the closing.



Group 1 had a period of time to complete their due diligence review of our assets and liabilities, after which Group 1s board of directors considered the Asset Purchase Agreement for approval. On May 7, 2003
Group 1s board of directors approved the Asset Purchase Agreement.



Subject to approval by our stockholders and satisfaction of the other closing conditions set forth in the Asset Purchase Agreement, we expect that the sale of assets will be consummated near the end of the third
calendar quarter of 2003 or early in the fourth calendar quarter of 2003. After the closing of the sale of assets, and following the expiration of our indemnity obligations four months after the closing, we will, subject to approval by our
stockholders, wind up our operating business, effect a complete liquidation and dissolution of the Company, and distribute any remaining cash to our stockholders. We expect to complete the liquidation and final distribution prior to the end of the
current calendar year.



Concurrent with the signing of the
Asset Purchase Agreement, Group 1 provided us with $5 million in bridge financing, secured by all of our assets. Of that amount, approximately $3.1 million was used to pay all amounts owed to CDC under a settlement agreement. Under the terms of the
bridge financing, Group 1lent us an additional $2 million after the Asset Purchase Agreement was approved by Group 1s board of directors on May 7, 2003. We received the additional $2 million from Group 1 on May 16, 2003.



On July 31, 2003, Group 1 agreed to extend the due date of the existing loan
to Sagent from July 31, 2003 to September 30, 2003 and to increase the borrowing limit of the loan from $7 million to $9 million. As of today, there were no advances against the additional borrowing.



Debt Financing with CDC



In October 2002, we entered into an agreement with CDC to obtain secured
loans of up to $7 million in the aggregate. As part of this agreement, CDC was entitled to receive warrants to purchase 8 million shares of our common stock at a price of $0.10



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per share as the loan was funded. In addition, certain financial advisors also received warrants to purchase an aggregate of 400,000 shares of our common
stock at $0.10 per share. As of December 31, 2002, we had closed on all $7 million of the loan facility. The net proceeds to us, after payment of expenses, were approximately $6.6 million.



On March 19, 2003, we received a notice from CDC declaring that an event of
default had occurred under the loan agreements. CDC declared the entire principal amount under the loans to be immediately due and payable, and asserted control over our bank deposit accounts. On March 20, 2003, CDC caused approximately $4.6 million
that was in our deposit accounts to be transferred to a bank account in Hong Kong. We disputed that an event of default existed under the loans. On April 4, 2003, the parties entered into a settlement agreement by which CDC would be permitted to
retain the funds transferred to Hong Kong on March 20, 2003 and we agreed to pay the remaining amounts due plus interest, and to pay $500 to CDC in exchange for all 8 million warrants and for CDCs expenses. On April 15, 2003, using funds
derived from a new secured bridge financing from Group 1 Software, Inc., we paid the amounts due under the settlement agreement. Under the terms of the settlement agreement, Sagent and CDC were to each dismiss their lawsuits. On April 18, 2003, both
parties dismissed their lawsuits.



Critical Accounting Policies



Our discussion and analysis of our financial condition
and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated
financial statements requires us to make estimates and judgments (reference to note 1basis of presentation) that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, intangible assets and goodwill and contingent liabilities. We base our estimates on
historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



Management believes the Companys critical accounting policies are those related to revenue recognition, valuation allowance, valuation of long-lived
assets including acquired intangibles and contingent liabilities. Management believes these policies to be critical because they are both important to the portrayal of the Companys financial condition and results, and they require management
to make judgments and estimates about matters that are inherently uncertain. Additional information about these critical accounting policies may be found in the Companys 2002 Form 10-K in Item 7, Management s Discussion and
Analysis of Financial Condition and Results of Operations, under the heading Critical Accounting Policies.



Revenue (Amount in thousands)



|              |  | Three Months Ended |       |   | Six Months Ended |  
|------------- |  | ------------------ | ----- | - | ---------------- | -
|              |  | 6/30/03            |       |   | 6/30/02          |  
|              |  | Amount             |       | % |                  |  
|License       |  | $                  | 4,022 |   | 53               | %
|Service       |  |                    | 3,556 |   | 47               | %
|              |  |                    |       |   |                  |  
|Total Revenue |  | $                  | 7,578 |   | 100              | %
|              |  |                    |       |   |                  |  



Total revenue was $7.6
and $9.2 million for the three months ended June 30, 2003 and 2002, respectively, representing a decrease of 18% or $1.6 million. For the six months ended June 30, 2003 and 2002, total revenue was $15.0 and $20.5 million, respectively, representing
a decrease of 27% or $5.5 million.



License revenue was $4.0
and $4.8 million for the three months ended June 30, 2003 and 2002, respectively, representing a decrease of 16% or $0.8 million. For the six months ended June 30, 2003 and 2002, license revenue was $7.9 and $10.9 million, respectively, representing
a decrease of 28% or $3 million.



Service revenue was $3.6 and
$4.5 million for the three months ended June 30, 2003 and 2002, respectively, representing a decrease of 20% or 0.9 million. For the six months ended June 30, 2003 and 2002, service revenue was $7.1 and $9.6 million, respectively, representing a
decrease of 26% or $2.5 million.



During the three and six months ended June 30, 2003 and 2002, our customers and potential customers purchasing decisions were impacted by, among other factors: (i) the overall
weakness in the global economy, (ii) continued reductions in capital expenditures, (iii) uncertainties in the application software industry as a result of speculation of further consolidation within the industry, and (iv) concerns about our
viability. As a result, many of our customers and potential customers have: (i) delayed the initiation of the purchasing process, (ii) increased the evaluation time to complete a software purchase, due in part to increased competition and the
uncertainty in the application software industry and us in particular, and/or (iii) reduced their capital expenditure budgets, thereby restricting their software purchases to well defined current needs.



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|                  |  | Three MonthsEnded June 30, |       | Six MonthsEnded June 30,
|----------------- |  | -------------------------- | ----- | ------------------------
|                  |  | 2003                       |       | 2002                    
|Revenue:          |  |                            |       |                         
|U.S.A. (Domestic) |  | $                          | 4,921 |                         
|International     |  |                            | 2,657 |                         
|                  |  |                            |       |                         
|Total net revenue |  | $                          | 7,578 |                         
|                  |  |                            |       |                         



Our international
revenue was 35% of the total revenue or $2.7 million and 42% or $3.8 million for the three months ended June 30, 2003 and 2002, respectively, representing a decrease of $1.1 million or 29%. For the six months period ended June 30, 2003, our
international revenue was 40% of total revenue or $6.0 million and 38% or $7.8 million for the corresponding revenue in 2002, representing a decrease of $1.8 million or 23%. We expect international revenue will continue to account for a significant
portion of our revenue in the foreseeable future.



Cost
of Revenue



Cost of revenue from license sales
consists primarily of royalties, product packaging, shipping, media, and documentation. Our cost of revenue for license sales was $0.6 million and $0.5 million for the three months ended June 30, 2003 and 2002, respectively, representing 15% and 10%
of license revenue in the respective period. Our cost of revenue for license sales was $1.1 million for both the six months ended June 30, 2003 and 2002, representing 14% and 10% of license revenue in the respective period. Our cost of license
revenue as a percentage of license revenue increased over the same period in prior year was primarily attributed to additional third party royalties in 2003.



Cost of service revenue consists primarily of personnel costs associated with providing software maintenance, technical support, training and consulting
services. Our cost of service revenue was $1.4 and $2.0 million for the three months ended June 30, 2003 and 2002, respectively, representing 40% and 45% of service revenue in the respective period. Our cost of service revenue was $2.9 and $4.3
million for the six months ended June 30, 2003 and 2002, respectively, representing 40% and 45% of service revenue in the respective period. The decline was mainly attributed to a reduction in salary related expenses as a result of our restructuring
effort implemented in 2002.



Further, during the three months
ended June 30, 2002, we booked an impairment charge of $1.2 million related to purchase technology that we no longer expected to utilize in the future.



Gross Margin



Gross margins increased to 73% for the three months ended June 30, 2003 from 60% for the corresponding period in 2002. For the six months ended June 30,
2003, gross margin increased to 74% from 68% for the corresponding period in 2002. The increases were mainly due to an impairment charge for the purchased technology that we recognized in 2002.



Operating Expenses(Amount in thousands, percentage in terms of total
revenue)



|                              |  | Three Months Ended |       |   | Six Months Ended |  
|----------------------------- |  | ------------------ | ----- | - | ---------------- | -
|                              |  | 6/30/03            |       |   | 6/30/02          |  
|                              |  | Amount             |       | % |                  |  
|Sales and marketing           |  | $                  | 3,927 |   | 52               | %
|Research and development      |  |                    | 2,278 |   | 30               | %
|General and administrative    |  |                    | 1,076 |   | 14               | %
|Stock-based compensation      |  |                    |      |   |                 |  
|Restructuring costs (credits) |  |                    |      |   |                 |  
|                              |  |                    |       |   |                  |  
|Total operating expenses      |  | $                  | 7,281 |   | 96               | %
|                              |  |                    |       |   |                  |  



Sales and
Marketing



Sales and marketing expenses consist
primarily of personnel costs for sales and marketing, sales commissions, sales and marketing programs, sales operations, branch sales facilities and distributors commissions. Sales and marketing expenses were $3.9 and $7.2 million for the
three months ended June 30, 2003 and 2002, respectively, representing 52% and 77% of total



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revenue in the respective periods. The decline of $3.3 million or 46% was primarily attributable to a $2.1 million
decrease in salary and related expenses due to a reduction in headcount from 131 to 68, a $0.6 million reduction in discretionary marketing and travel related expenses and $0.3 million decrease in facility and related expenses due to closing of
several sales offices in 2002. For the six months ended June 30, 2003, the decline of $6.2 million is primarily attributable to a $4.2 million decrease in salary related expenses resulted from headcount reduction, a $1.2 million reduction in
discretionary marketing and travel related expense and $0.5 million in facility related expenses.



Research and Development



Research and development expenses consist primarily of personnel and related costs associated with the development of new products, the enhancement and
localization of existing products and quality assurance testing. Research and development expenses were $2.3 and $3.3 million for the three months ended June 30, 2003 and 2002, respectively, representing 30% and 36% of total revenue in the
respective periods. The decline of $1.0 million or 30% was primarily attributable to $1.0 million reduction in salary and related expenses due to a reduction in headcount from 61 to 42. For the six months ended June 30, 2003, the decline of $2.2
million is primarily attributable to a $2.1 million decrease in salary related expenses resulted from headcount reductions.



General and Administrative



General and administrative expenses consist primarily of personnel costs for finance, human resources, information systems and general management as well
as legal, accounting and bad debt expenses. General and administrative expenses were $1.1 and $1.3 million for the three months ended June 30, 2003 and 2002, respectively, representing 14% of total revenue in both periods. The decline of $0.2
million or 13% was primarily attributed to a reduction of $0.4 million in bad debt expense, a $0.6 million recovery of notes from former officers offset by an increase of $0.3 million in legal fees and the impact of retaining a higher percentage and
dollar amount of the overhead charges due to the significant reduction in the other departments headcount which serves as the basis for the allocation. For the six months ended June 30, 2003, the decline of $0.3 million was primarily attributed to a
$0.6 million recovery of notes from former officers offset by an increase of $0.2 million in legal fees and the impact of retaining a higher percentage and dollar amount of the overhead charges.



Interest income (expense), net



The increase of $0.2 million in interest expense, net for the three months
ended June 30, 2003 compared to the same period ended June 30, 2002 was due primarily to interest expense recognized from the bridge loan financing started in April 2003. For the six months ended June 30, 2003, the net increase of $2.8 million in
interest expense consisted of $0.4 million interest expense recognized on the short-term debt, a $1.7 million accretion of the loan discount attributable to the fair value of related warrants and $0.7 million amortization of deferred costs.



LIQUIDITY AND CAPITAL RESOURCES



On April 15, 2003, we entered into an Asset Purchase Agreement with Group 1
Software, Inc. Subject to the terms and conditions of the Asset Purchase Agreement, Group 1 will pay us up to $17 million, in exchange for substantially all of our assets, including all intellectual property, accounts receivable, cash on hand,
certain contracts, property & equipment and other designated assets, and the assumption of specified liabilities.



Concurrent with the signing of the Asset Purchase Agreement, Group 1 provided us with $5 million in bridge financing, secured by all of our assets. Of
that amount, approximately $3.1 million was used to pay all amounts owed to CDC under a settlement agreement. Under the terms of the bridge financing, Group 1 lent us an additional $2 million after the Asset Purchase Agreement was approved by Group
1s board of directors on May 7, 2003. We received the additional $2 million from Group 1 on May 16, 2003.



On July 31, 2003, Group 1 agreed to extend the due date of the existing loan to Sagent from July 31, 2003 to September 30, 2003 and to increase the
borrowing limit of the loan from $7 million to $9 million. As of today, there were no advances against the additional borrowing.



We believe that with the net proceeds of approximately $3.9 million from the Group 1 loan and the ability to borrow an additional $2 million from Group 1,
together with cash from operations, we will have sufficient funds to remain in operation through the end of the third calendar quarter. If we do not complete the asset sale transaction with Group 1 on a timely basis, we will need to obtain
additional financing or take other measures to enable us to continue operations.



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Moreover, there is still a risk that the asset sale will not close if our stockholders do not approve the
sale of assets to Group 1 or if any other closing condition is not met. If we do not complete the transaction with Group 1, there is a significant possibility that we will not be able to raise additional funds or take other actions to the extent and
in the timeframe necessary to remain in operation.



As of June
30, 2003, our principal source of liquidity consisted of $4.8 million of unrestricted cash and cash equivalents and $0.1 million restricted cash in the form of a money market account and certificate of deposit. Since inception, we have funded our
operations primarily through private sales of equity securities, the use of equipment leases and the initial public offering of our common stock in April 1999, not from cash generated by our business.



Net cash provided by investing activities was $1.1 million, which primarily
was due to $1.4 million sale and collection of former officer and shareholder notes, offset by $0.3 million used to purchase the remaining 47% minority interest in our Asia/Pacific subsidiary. Net cash provided by investing activities was $0.3
million for the six months ended June 30, 2002, due primarily to $0.4 million collection of notes due from shareholder, offset by $0.1 million in purchase of equipment.



Net cash used by financing activities was $1.1 million due primarily to the repurchase of warrants and payments of capital
lease obligations. Net cash used by financing activities was $1.3 million for the six months ended June 30, 2002, due primarily to payments of capital lease obligations.



Net cash used in operating activities was $4.8 million and $6.4 million for the six months ended June 30, 2003 and 2002,
respectively. For such periods, net cash used in operating activities was primarily the result of the funding of our ongoing operations.



Accounts receivable increased by 7% in the second quarter of 2003 compared with December 31, 2002 balance. The increase was due primarily to an increase
in accounts receivable days sales outstanding (DSO). We calculate our DSO on a net basis by dividing the average accounts receivable at the beginning and the end of the quarter by the revenue for the quarter multiplied by the number of
business days during that quarter DSO was at 79 and 75 as of June 30, 2003 and December 31, 2002, respectively.



The following is a summary of our future minimum payments under contractual obligations as of June 30, 2003:



|(amount in millions)         |  | Remaining of 2003 |     | 2004 |   | 2005 and thereafter |  | Total
|---------------------------- |  | ----------------- | --- | ---- | - | ------------------- |  | -----
|Short-term debt (see Note 6) |  | $                 | 7.0 |      | $ |                    |  | $    
|Capital Leases               |  |                   | 0.1 |      |   | 0.1                 |  |      
|Operating Leases             |  |                   | 2.0 |      |   | 0.5                 |  |      
|Purchase obligation          |  |                   | 0.3 |      |   | 0                   |  |      
|Restructuring                |  |                   | 0.2 |      |   | 0                   |  |      
|                             |  |                   |     |      |   |                     |  |      
|Total                        |  | $                 | 9.6 |      | $ | 0.6                 |  | $    
|                             |  |                   |     |      |   |                     |  |      



We have entered into
several agreements to lease facilities in California and several other states as well as in other countries in which we have sales operations. We are also under obligation to pay certain maintenance fees to third party vendors.



Purchase obligations relate to our settlement of the commitments with infoUSA
pertaining to software maintenance for the acquired technology and data renewal contracts.



Restructuring consists primarily of personnel and facility related costs for vacated operating leases. The purpose of the restructuring was to bring operating expenses in line with net revenues with the goal of
achieving cash flow breakeven in the near future and strategically focusing our efforts on core businesses as discussed in Note 8 of the accompanying unaudited condensed consolidated financial statements and notes thereto.



Our ability to maintain and grow sales and manage our expenses will have a
direct impact on our liquidity and capital resources. Factors, which are reasonably likely to impact our ability to maintain or grow revenues, are as follows:



| |  |  | general economic conditions and the information technology spending environment;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the growth or contraction of the enterprise intelligence software market;
| | - |  | -------------------------------------------------------------------------



| |  |  | competition from other participants in the enterprise intelligence software market;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | our ability to expand our direct and indirect sales channels;
| | - |  | -------------------------------------------------------------



| |  |  | our ability to maintain and expand our marketing, technology and distribution relationships;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | our access to licensed technologies integrated in our products and services;
| | - |  | ----------------------------------------------------------------------------



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| |  |  | market acceptance of Internet solutions;
| | - |  | ----------------------------------------



| |  |  | our ability to manage our international expansion;
| | - |  | --------------------------------------------------



| |  |  | our ability to protect our intellectual property rights; and
| | - |  | ------------------------------------------------------------



| |  |  | our ability to anticipate and respond to technological change.
| | - |  | --------------------------------------------------------------



RECENT ACCOUNTING PRONOUNCEMENTS



Consolidation of Variable Interest Entities



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No.
51, Consolidated Financial Statements, addresses consolidation by business enterprises of certain variable interest entities where there is a controlling financial interest in a variable interest entity or where the variable interest
entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. The interpretation applies immediately to variable interest entities created after January 31, 2003 and
applies in the first year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. We do not have any ownership in any variable interest
entities as of June 30, 2003. We will apply the consolidation requirement of FIN 46 in future periods if we should own any interest in any variable interest entity.



Accounting for Certain Financial Instruments



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 addresses certain financial instruments that, under previous guidance, could be accounted for as equity, but now must be classified as liabilities in statements of financial position. These financial
instruments include: 1) mandatory redeemable financial instruments, 2) obligations to repurchase the issuers equity shares by transferring assets, and 3) obligations to issue a variable number of shares. SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The implementation of SFAS No. 150 is not expected to have a material effect on
our consolidated financial statements.



RISK FACTORS



Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about risks, together with the other information contained in this report, before you decide whether to buy our common stock or maintain your investment. Additional risks and uncertainties not
known to us or that we now believe to be unimportant could also impair our business. If any of the following risks actually occur, our business, results of operations and financial condition could suffer significantly. As a result, the market price
of our common stock could decline, and you may lose all of your investment.



We have entered into an agreement to sell substantially all of our assets. However, there can be no assurance that the sale of assets will actually be consummated.



On April 15, 2003, we entered into an Asset Purchase Agreement with Group 1
Software, Inc, pursuant to which Group 1 will pay us up to $17 million for substantially all of our assets. We cannot consummate the sale of assets to Group 1 until our stockholders approve the transaction. At the first special stockholders meeting
held to consider approval of the transaction, we failed to obtain sufficient votes from stockholders to meet the quorum requirements under Delaware law and our bylaws, which is a majority of the outstanding shares of common stock. We have scheduled
a new stockholders meeting for September 30, 2003 to again consider approval of the transaction. If we do not complete the transaction with Group 1, there is a significant possibility that we will not be able to raise additional funds or take other
actions to the extent and in the timeframe necessary to remain in operation.



Even if we consummate the sale of assets to Group 1 Software, we cannot assure you of the amount, if any, that will be distributed to our stockholders under the plan of liquidation.



Even if the sale of assets to Group 1 is consummated, we cannot assure you
that there will be a distribution of any meaningful cash to our stockholders upon our dissolution. We expect that up to $9 million of the $17 million purchase price will be paid in the form of debt forgiveness. Further, the net amount of $8 million
in cash is subject to reduction, possibly by a substantial amount, to account for changes in value of the transferred assets and assumed liabilities prior to closing.



Prior to any distribution to our stockholders, we will need to satisfy all outstanding obligations to creditors. We will
also attempt to convert any non-cash assets into cash. Uncertainties as to the precise net value of our non-cash assets and the ultimate



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amount of our liabilities make it impracticable to predict the aggregate net value, if any, ultimately distributable to our stockholders. The actual nature
and amount of all distributions will depend in part upon our ability to convert our remaining non-cash assets into cash. We may not be successful in selling our non-cash assets, in which case we may not generate meaningful cash, if any, to return to
our stockholders.



We may not be able to settle all of
our obligations to creditors.



We have current and
future obligations to creditors. These include, without limitation, long-term contractual obligations associated with business agreements with customers, including certain product warranties, and other third parties. As part of the wind down
process, we will attempt to settle our obligations with our creditors. We may not, however, succeed in doing so. If we cannot reach an agreement with a creditor concerning an obligation, that creditor may choose to bring a lawsuit against us. Any
litigation could delay or even prevent us from completing the plan of dissolution. Moreover, amounts required to settle our obligations to creditors will reduce the amount of remaining capital available for distribution to stockholders.



We will continue to incur claims, liabilities and expenses, which
will reduce the amount available for distribution to stockholders.



Claims, liabilities and expenses from operations (such as operating costs, salaries, directors and officers insurance, payroll and local taxes, legal, SEC, accounting and consulting fees and miscellaneous
office expenses) will continue to be incurred as we wind down. These expenses will reduce the amount of assets available for ultimate distribution to stockholders. If available cash and amounts received on the sale of non-cash assets are not
adequate to provide for our obligations, liabilities, expenses and claims, we may not be able to distribute meaningful cash, or any cash at all, to our stockholders.



Distribution of cash, if any, to our stockholders could be delayed.



Our Board of Directors has not established a firm timetable for
distributions to our stockholders, and we are currently unable to predict the precise timing of any distribution, if any, pursuant to our wind down. The timing of distribution, if any, will depend on and could be delayed by, among other things, the
timing of sales of our non-cash assets, claim settlements with creditors and the amounts paid out under warranty claims. Additionally, a creditor could seek an injunction against the making of distributions to our stockholders on the ground that the
amounts to be distributed were needed to provide for the payment of our liabilities and expenses. Additionally, we could seek protection from creditors under the federal bankruptcy code. Any action of this type could delay or substantially diminish,
or eliminate, the amount available for distribution to our stockholders.



If we fail to create an adequate contingency reserve for payment of our expenses and liabilities, our stockholders could be held liable for payment to our creditors of each such stockholders pro rata share
of amounts owed to the creditors in excess of the contingency reserve, up to the amount actually distributed to such stockholder.



If the plan of dissolution is ratified and approved by our stockholders, we will file a Certificate of Dissolution with the State of Delaware dissolving
Sagent. Pursuant to the Delaware General Corporation Law, we will continue to exist for three years after the dissolution becomes effective or for such longer period as the Delaware Court of Chancery shall direct, for the purpose of prosecuting and
defending suits against us and enabling us gradually to close our business, to dispose of our property, to discharge our liabilities and to distribute to our stockholders any remaining assets. Under the Delaware General Corporation Law, in the event
we fail to create an adequate contingency reserve for payment of our expenses and liabilities during this three-year period, each stockholder could be held liable for payment to our creditors of such stockholders pro rata share of amounts owed
to creditors in excess of the contingency reserve, up to the amount actually distributed to such stockholder.



However, the liability of any stockholder would be limited to the amounts previously received by such stockholder from us (and from any liquidating trust
or trusts) in the dissolution. Accordingly, in such event a stockholder could be required to return all distributions previously made to such stockholder. In such event, a stockholder could receive nothing from us under the plan of dissolution.
Moreover, in the event a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a stockholder incurring a net tax cost if the stockholders repayment of an amount previously
distributed does not cause a commensurate reduction in taxes payable. There can be no assurance that the contingency reserve established by us will be adequate to cover any expenses and liabilities.



Our stock transfer books will close on the date we file the certificate
of dissolution with the Delaware Secretary of State, after which it will not be possible for stockholders to publicly trade our stock.



We intend to close our stock transfer books and discontinue recording transfers of our common stock at the close of business on the date we file the
Certificate of Dissolution with the Delaware Secretary of State, referred to as the final record date. Thereafter, certificates representing our common stock shall not be assignable or transferable on our books except by will, intestate
succession or operation of law. The proportionate interests of all of our stockholders shall be fixed on the basis of their respective stock holdings at the close of business on the final record date, and, after the final record date, any
distributions made by us shall be made solely to the stockholders of record at the close of business on the final record date, except as may be



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necessary to reflect subsequent transfers recorded on our books as a result of any assignments by will, intestate succession or operation of law.



We will continue to incur the expenses of complying with public
company reporting requirements.



We have an obligation
to continue to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, even though compliance with such reporting requirements is economically burdensome. In
order to curtail expenses, we intend to, after filing our Certificate of Dissolution, seek relief from the Securities and Exchange Commission from the reporting requirements under the Exchange Act. We anticipate that, if such relief were granted, we
would continue to file current reports on Form 8-K to disclose material events relating to our liquidation and dissolution along with any other reports that the Securities and Exchange Commission might require. However, the Securities and Exchange
Commission may not grant any such relief.



There is
substantial doubt regarding our ability to continue as a going concern.



The accompanying consolidated financial statements have been prepared on a going concern basis, which means that they were prepared on the assumption that we would have a continuity of operations, realization of
assets and liquidation of liabilities and commitments in the normal course of business. In recent years, we have a history of losses and may continue to incur future losses. We have incurred net losses of $2.1 million and $6.6 million for the three
months ended June 30, 2003 and 2002, respectively. For the six months ended June 30, 2003 and 2002, our losses were $6.7 million and $10.3 million, respectively. These losses combined with our current cash position, raise substantial doubt about our
ability to continue as a going concern. We will need to generate significant revenues to achieve cash breakeven and profitability. There can be no assurance that we will be successful in our efforts to reach cash breakeven or profitability. Even if
we achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis. If we fail to achieve and sustain both cash breakeven and profitability, the price of our stock may decline substantially.



Dependence on Certain Customers / Distributors.



All of our business in Japan is through indirect channels through such
distributors as Kawatetsu Systems, Inc., Nihon, Unisys, and Fujitsu. Such distributors are not obligated to purchase any minimum level of products from the Company. Significant reductions in product sales to such distributors would materially and
adversely affect the Companys business, financial condition and results of operations.



Risk of International Sales; European and Pacific Rim Market Risks



For the three months ended June 30, 2003 and 2002 approximately 35% and 42%, respectively, of our total revenues were derived from markets outside of the
North America. For the six months ended June 30, 2003 and 2002 approximately 40% and 38%, respectively, of our total revenues were derived from markets outside of the North America. We expect that sales to the Pacific Rim and Europe will continue to
represent a significant portion of its business. However, there can be no assurance that our Pacific Rim or European operations will continue to be successful.



Our international business may be affected by changes in demand resulting from localized economic and market conditions. In addition, our international
business may be affected by fluctuations in currency exchange rates and currency restrictions. We have offices in a number of foreign countries, the operating expenses of which are also subject to the effects of fluctuations in foreign exchange
rates. Financial exposure may result due to the timing of the transactions and movement of exchange rates. Our international business may further be affected.



Variations in our quarterly operating results due to such factors as changes in demand for our products and changes in our mix of revenues may
cause our stock price to decline.



We expect our
quarterly operating results to fluctuate. We therefore believe that quarter-to-quarter comparisons of our operating results may not be a good indication of our future performance, and you should not rely on them to predict our future performance or
the future performance of our stock price. Our short-term expense levels are relatively fixed and are based on our expectations of future revenues. As a result, a reduction in revenue in a quarter may harm our operating results for that quarter. In
the past, our operating results have fallen below the expectations of market analysts and investors. If we fall short of market expectations in future quarters, the price of our common stock may fall. Factors that may cause our operating results to
fluctuate on a quarterly basis are as follows:



| |  |  | varying size, timing and contractual terms of orders for our products;
| | - |  | ----------------------------------------------------------------------



| |  |  | lengthy sales cycles associated with our products;
| | - |  | --------------------------------------------------





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| |  |  | changes in the mix of revenue attributable to higher-margin product license revenue as opposed to lower-margin service revenue;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | customers decisions to defer orders or implementations, particularly large orders or implementations, from one quarter to the next;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | announcements or introductions of new products by our competitors;
| | - |  | ------------------------------------------------------------------



| |  |  | our ability to hire, train and retain sufficient engineering, consulting, training and sales staff;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | subcontracting to more expensive consulting organizations to help provide implementation, support and training services when our own capacity is constrained; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limited ability to forecast timing and amount of software licensing.
| | - |  | --------------------------------------------------------------------



We have transferred from the Nasdaq SmallCap Market to the Nasdaq Over-the-Counter Bulletin Board.



In August 2002, we received a notification from The Nasdaq Stock Market that
we are out of compliance with the minimum bid price requirement of $1.00 per share set forth in Marketplace Rule 4450(a)(5). Therefore, our common stock is subject to delisting from The Nasdaq National Market. We determined to transition to the
Nasdaq SmallCap Market, which would extend the period for which we would be able to regain compliance with the minimum price requirement. In September 2002, Nasdaq informed us that it has approved our application to list our common stock on the
Nasdaq SmallCap Market. In November 2002, Nasdaq notified us that we met the initial listing criteria for the SmallCap Market, other than minimum bid price, and that we have until May 6, 2003 to regain compliance with the minimum bid price
requirement. On May 7, 2003, Nasdaq notified us that we have until August 4, 2003 to regain compliance. The extension was granted due to our qualification with the $5 million stockholders equity requirement under Marketplace rule 4310(c)(2)(A)
as reflected in our balance sheet as of December 31, 2003. On July 3, 2003, our common stock was delisted from the NASDAQ as a result of deficiencies relating to the listing standards for stockholders equity requirement of $2.5 million as
reflected in our balance sheet as of March 31, 2003.



Beginning
on July 3, 2003 our common stock began trading on the Nasdaq Over-The-Counter Bulletin Board (OTCBB). Trading on the Nasdaq OTCBB could seriously limit the liquidity of our common stock and impair our potential to raise future capital
through the sale of our common stock, which could have a material adverse effect on our business. Trading on the Nasdaq OTCBB could also reduce the ability of holders of our common stock to purchase or sell shares as quickly and as inexpensively as
they have done historically, and may have an adverse effect on the trading price of our common stock. Trading of our stock on the Nasdaq OTCBB could also adversely affect relationships with vendors and customers.



If we fail to expand our direct and indirect sales channels, we will
not be able to increase revenues.



Competition for
highly qualified sales personnel is intense, and we may not be able to recruit and maintain the kind and the number of sales personnel we need. Hiring highly qualified customer service and account management personnel is very competitive in the
software industry due to the limited number of people available with the necessary technical skills and understanding of the space.



In order to grow our business, we need to increase market awareness and sales of our products and services. To achieve this goal, we need to increase both
our direct and indirect sales channels. If we fail to do so, this failure could harm our ability to increase revenues.



We expect as part of our strategy to increase international sales principally through both direct and indirect sales. Our ability to develop and maintain
direct and indirect channels will significantly affect our ability to penetrate international markets.



We have a relatively new management team and there is no guarantee that they will be successful in managing our business.



Our management team has not been with us for a significant length of time.
In July 2002, Ben Barnes, our President and Chief Executive Officer stepped down, and Andre Boisvert, our Chairman, assumed the role of CEO. In January 2003, Steven R. Springsteel, our Chief Financial Officer and Chief Operating Officer also stepped
down, and Patricia Szoka was appointed as Chief Accounting Officer. Ms. Szoka, our Chief Accounting Officer, joined us in August 2001.



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The following table lists each of our officers and the month and year that each of them joined our
company:



|Name           |  | Position                                               |  | Joined Sagent 
|-------------- |  | ------------------------------------------------------ |  | --------------
|Andre Boisvert |  | President and Chief Executive Officer                  |  | September 2002
|Patricia Szoka |  | Chief Accounting Officer                               |  | August 2001   
|Arthur Parker  |  | President/General ManagerEurope, Middle East & Africa |  | January 2001  
|Stephen Walden |  | Vice President and General ManagerCentrus             |  | June 1996     



All of these employees
serve at-will and may elect to pursue other opportunities at any time. If our management team is unable to work effectively together to accomplish our business objectives, our ability to grow our business could be severely impaired.



If we do not keep pace with technological change, our
products may be rendered obsolete and our business may fail.



Our industry is characterized by rapid technological change, changes in customer requirements, frequent new product introductions and enhancements and emerging industry standards. In order to achieve broad customer acceptance, our products
must be compatible with major software and e-commerce applications and operating systems. We must continually modify and enhance our products to keep pace with changes in these applications and systems. If our products were to be incompatible with
popular new systems or applications, our business would be significantly harmed. In addition, the development of entirely new technologies replacing existing software could lead to new competitive products that have better performance or lower
prices than our products and could render our products obsolete.



Delays or problems in the installation or implementation of our new releases may cause customers to forego purchases of our products to purchase those of our competitors.



Our markets are highly competitive and competition could harm our ability to sell products and services and reduce our
market share.



Competition could seriously harm our
ability to sell additional software and maintenance and support renewals on prices and terms favorable to us. Additionally, if we cannot compete effectively, we may lose market share. The markets for our products are intensely competitive and
subject to rapidly changing technology. We compete against providers of decision support software, data warehousing software and enterprise application software. We also compete with providers of e-Business software, which allows for the electronic
delivery of products and services that enable commerce among businesses and end users. Companies in each of these areas may expand their technologies or acquire companies to support greater enterprise intelligence functionality and capability,
particularly in the areas of query response time and the ability to support large numbers of users. We may also face competition from vendors of products and turnkey solutions for e-Business applications that include internet based information
functionality.



Many of our competitors have longer operating
histories, significantly greater financial, technical, marketing or other resources, or greater name recognition than we do. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer
requirements.



We rely on marketing, technology and
distribution relationships that may generally be terminated at any time, and if our current and future relationships are not successful, our growth may be limited.



We rely on marketing and technology relationships with a variety of companies that, in part, generate leads for the sale of
our products. These marketing and technology relationships include relationships with:



| |  |  | system integrators and consulting firms;
| | - |  | ----------------------------------------



| |  |  | vendors of e-commerce and internet software;
| | - |  | --------------------------------------------



| |  |  | vendors of software designed for customer relationship management or for management of organizations operational information;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | vendors of key technology and platforms;
| | - |  | ----------------------------------------



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| |  |  | demographic data providers; and
| | - |  | -------------------------------



| |  |  | an application service provider and an internet hoster.
| | - |  | -------------------------------------------------------



If we cannot maintain successful marketing and technology relationships or cannot enter into additional marketing and technology relationships, we may
have difficulty expanding the sales of our products and our growth may be limited.



If we lose key licenses we may be required to develop or license alternatives, which may cause delays or reductions in sales.



We rely on third-party technologies, and if we are unable to use or integrate these technologies, our product and service
development may be delayed.



We rely on MainWin from MainSoft
to deliver the Solaris versions of the Data Load, Data Access, and WebLink Servers. MainWin is the Windows API ported to Sun Solaris. In addition, Visual Basic for Applications has been embedded in Design Studio and Information Studio to allow
customization. We rely on interfaces from Microsoft and Crystal Decisions to integrate Microsoft Excel and Crystal Reports as display options in Design Studio, Information Studio, and WebLink. The Opalis Robot from Opalis provides the basis for the
Sagent Automation tool. Automation is a dependency-scheduling tool with extensive integration with operating system level tasks. Opalis may not provide a stable Solaris version in the timeframe expected by our customers. The basis for the Sagent
Portal is Citrix XPS portal product. Citrix may discontinue this product or not make it available on the needed operating systems in a commercially viable time schedule. The DirectLink for R/3 product we offer to connect to SAP is based on
metadata browsing technology and pool table connectivity from Server Enterprises. DirectLink for Mainframes, which provides connectivity to mainframe data sources, is enabled by technology from Striva and Cross Access.



We have been, and may be subject to future, intellectual property
infringement claims.



We may be subject, from time to
time, to claims that we are infringing the intellectual property rights of others. Any litigation regarding intellectual property rights may be costly to defend or settle, and may divert the attention of our management and key personnel from our
business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license
agreements. In December 2000, we settled an infringement claim brought by Timeline, Inc. Under the terms of the settlement, we paid Timeline $600,000 and issued 600,000 shares of our common stock to Timeline. We may be subject to similar or more
costly claims in the future or may become subject to an injunction against use of our products. A successful claim of patent or other intellectual property infringement against us would have an immediate material adverse effect on our business and
financial condition.



If we are unable to protect our
intellectual property rights, this inability could weaken our competitive position, reduce our revenue and increase our costs.



Our success depends in large part on our proprietary technology. We rely on a combination of copyright, trademark and trade secrets, confidentiality
procedures and licensing arrangements to establish and protect our proprietary rights. We may be required to spend significant resources to monitor and police our intellectual property rights. If we fail to successfully enforce our intellectual
property rights, our competitive position may be harmed.



Other
software providers could copy or otherwise obtain and use our products or technology without authorization. They also could develop similar technology independently, which may infringe our proprietary rights. We may not be able to detect
infringement and may lose a competitive position in the market before we do so. In addition, competitors may design around our technology or develop competing technologies. The laws of some foreign countries do not protect proprietary rights to the
same extent, as do the laws of the United States.



If we
discover software defects we may have product-related liabilities which may lead to loss of revenue or delay in market acceptance for our products.



Our software products are internally complex and may contain errors, defects or failures, especially when first introduced or when new versions are
released. We test our products extensively prior to releasing them; however, in the past we have discovered software errors in some of our products after their introduction. Despite extensive testing, we may not be able to detect and correct errors
in products or releases before commencing commercial shipments, which may result in loss of revenue or delays in market acceptance.



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Our license agreements with our customers typically contain provisions designed to limit our exposure to
potential product liability claims. All domestic and international jurisdictions may not enforce these limitations. Although we have not experienced any product liability claims to date, we may encounter such claims in the future. Product liability
claims, whether or not successful, brought against us could divert the attention of management and key personnel and could be expensive to defend.



We are subject to changes in Financial Accounting Standards, which may affect our reported revenue, or the way we conduct business.



We prepare our financial statements in conformity
with accounting principles generally accepted in the United States of America (GAAP). GAAP are subject to interpretation by the Financial Accounting Standard Board, the American Institute of Certified Public Accountants (AICPA), the SEC
and various bodies appointed by these organizations to interpret existing rules and create new accounting policies. Accounting policies affecting software revenue recognition, in particular, have been the subject of frequent interpretations, which
have had a profound affect on the way we license our products. As a result of the recent enactment of the Sarbanes-Oxley Act and the related scrutiny of accounting policies by the SEC and the various national and international accounting industry
bodies, we expect the frequency of accounting policy changes to accelerate. Future changes in financial accounting standards, including pronouncements relating to revenue recognition, may have a significant effect on our reported results and may
even affect our reporting of transactions completed before the change is effective.



Item 3.Quantitative and Qualitative Disclosure About Market Risk.



The following discusses our exposure to market risk related to changes in interest rates, foreign currency exchange rates and equity prices. This
discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors including those set forth in Risk Factors.



INTEREST RATE RISK



Our exposure to market risk related to changes in interest rates is primarily due to our highly liquid investments. We do
not use derivative financial instruments. The primarily objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. Our investments consist primarily of highly liquid investments and
certificate of deposits. Due to the nature of our investments, we believe that there is no material risk exposure. All investments are carried at cost, which is approximates market value. At June 30, 2003 and December 31, 2002, we had $4.8 million
and $9.7 million, respectively, in cash and cash equivalents.



FOREIGN
CURRENCY EXCHANGE RATE RISK



A high percentage of
operations are based in the United States, and, accordingly, the majority of our transactions are denominated in U.S. Dollars. However, we do have foreign-based operations where transactions are denominated in foreign currencies and are subject to
exchange rate risk with respect to fluctuations in the relative value of currencies. Currently, we have operations in Asia Pacific, Europe and Australia and conduct transactions in the local currency of each location. To date, the impact of any
fluctuation in the relative value of other currencies has not been material due to relative size of the operations. However, we will continue to monitor our exposure to currency fluctuations, and, when appropriate, may use financial hedging
techniques in the future to minimize the effect of these fluctuations, we cannot assure you that exchange rate fluctuations will not harm our business in the future. An increase in the value of the United States dollar relative to foreign currencies
could make our products less competitive in international markets. Although we will continue to monitor our exposure to currency fluctuations and, when appropriate, may use economic hedging techniques in the future to minimize the effect of these
fluctuations, we can make no assurances that exchange rate fluctuations will not adversely affect our financial results in the future. Through June 30, 2003, we have not engaged in foreign currency hedging activities.



Item 4.Controls and Procedures



Evaluation of disclosure controls and procedures.Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to
ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission
rules and forms.



Changes in internal control over financial
reporting.There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.



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PART IIOTHER INFORMATION



Item 1.Legal Proceedings



See Note 7. Litigation of the notes to the unaudited condensed consolidated financial statements under Item 1 Part 1.



Item 2.Changes in Securities and Use of Proceeds



(c) Recent Sales of Unregistered Securities. None



Item 3.Defaults upon Senior Securities.Not applicable.



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



A Special Meeting of Stockholders was held on July 15, July 22 and July 28, 2003, however a quorum was not present on any of the dates. The stockholders
were asked to vote on the following three proposals:



| | 1. |  | To approve the proposed sale of all of Sagents operating assets to Group 1 Software, Inc. described in more detail in the proxy statement.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | To approve the Plan of Complete Liquidation and Dissolution of Sagent Technology, Inc.
| | -- |  | --------------------------------------------------------------------------------------



| | 3. |  | Following the consummation of the asset sale in Proposal 1, to amend Sagents Amended and Restated Certificate of Incorporation to remove the name Sagent.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 5.Other
Information.Not applicable.



Item 6.Exhibits and Reports on Form 8-K



(a) Exhibits



THE EXHIBITS LISTED IN THE ACCOMPANYING INDEX TO EXHIBITS ARE INCORPORATED BY REFERENCE AS PART OF THIS FORM 10-Q.



(b) Reports on Form 8-K



On April 17, 2003, we filed a Form 8-K to report that we entered into the
Asset Purchase Agreement dated April 15, 2003 with Group 1.



On
April 18, 2003, we filed a Form 8-K to report that we obtained a bridge loan from Group 1 in the principal amount of $5 million, secured by substantially all of our assets.



On May 15, 2003, we filed a Form 8-K to report that we issued a press release reporting the financial results for the three
months ended March 31, 2003.



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.



SAGENT TECHNOLOGY, INC./s/    ANDRE
BOISVERTAndre BoisvertPresident and Chief Executive Officer






|
|

|
|

Dated:  August 14, 2003



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INDEX TO EXHIBITS



|Number |      |  | Title                                                                                                                                                      
|------ | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|       |     
|2.1    | (10) |  | Asset Purchase Agreement dated April 15, 2003 between the Registrant and Group 1 Software, Inc.                                                            
|       |     
|3.1    | (1)  |  | Certificate of Incorporation of Registrant.                                                                                                                
|       |     
|3.2    | (1)  |  | Amended and Restated Certificate of Incorporation of Registrant.                                                                                           
|       |     
|3.3    | (1)  |  | Bylaws of Registrant.                                                                                                                                      
|       |     
|4.1    | (1)  |  | Form of Registrants Common Stock Certificate.                                                                                                             
|       |     
|4.2    | (2)  |  | Common Stock Rights Agreement dated February 15, 2001 between the Registrant and the parties named therein.                                                
|       |     
|4.3    | (4)  |  | Common Stock Rights Agreement dated July 23, 2001 between the Registrant and the parties named therein.                                                    
|       |     
|10.1   | (1)* |  | Form of Indemnification Agreement entered into by Registrant with each of its directors and executive
officers.                                            
|       |     
|10.2   | (1)* |  | 1998 Stock Plan and related agreements.                                                                                                                    
|       |     
|10.3   | (1)* |  | 1999 Employee Stock Purchase Plan and related agreements.                                                                                                  
|       |     
|10.4   | (1)* |  | 1999 Director Option Plan and related agreements.                                                                                                          
|       |     
|10.6   | (1)* |  | Master Equipment Lease Agreement, dated September 28, 1998 between the Registrant and Dell Financial Services,
L.P.                                        
|       |     
|10.7   | (1)  |  | Standard Office Lease, dated June 1, 1998, by and between the Registrant and Asset Growth Partners, Ltd., and the Amendment
thereto.                       
|       |     
|10.8   | (1)+ |  | Development and Licensing Agreement, dated January 22, 1997, between the Registrant and Abacus Concepts, Inc.                                              
|       |     
|10.9   | (1)+ |  | Microsoft License and Distribution Agreement, dated August 23, 1996, between the Registrant and Microsoft
Corporation.                                     
|       |     
|10.10  | (1)+ |  | Sagent KK Non-Exclusive Japanese Distribution Agreement, dated as of December 17, 1997, between Sagent KK Japan and Kawasaki Steel
Systems R&D Corporation.
|       |     
|10.11  | (1)  |  | Form of Sagent Technology, Inc. End User Software License Agreement.                                                                                       
|       |     
|10.12  | (1)+ |  | OEM Software License Agreement, effective March 31, 1998, between the Registrant and Siebel Systems, Inc.                                                  
|       |     
|10.13  | (1)  |  | Form of Sagent Technology, Inc. Software Maintenance and Technical Support Agreement.                                                                      
|       |     
|10.14  | (1)  |  | Form of Sagent Technology, Inc. Agreement for Consulting Services.                                                                                         
|       |     
|10.15  | (1)  |  | Form of Sagent Technology, Inc. Agreement for Subcontractor Consulting Services.                                                                           
|       |     
|10.16  | (1)  |  | Form of Evaluation Agreement.                                                                                                                              
|       |     
|10.17  | (1)  |  | Notes, dated February 1, 1999 between the Registrant and Virginia Walker.                                                                                  
|       |     
|10.18  | (1)  |  | Notes, dated February 1, 1999 between the Registrant and Virginia Walker.                                                                                  
|       |     
|10.19  | (1)+ |  | Solution Provider Agreement, effective June 27, 1997, between the Registrant and Unisys Corporation.                                                       
|       |     
|10.20  | (1)* |  | Executive Change of Control Policy.                                                                                                                        
|       |     
|10.21  | (1)+ |  | Software License and Services Agreement, dated March 31, 1998, between the Registrant and Siebel Systems,
Inc.                                             
|       |     
|10.24  | (1)  |  | Nonexclusive International Software Value Added Reseller (VAR) Agreement, dated December 8, 1997, between the
Registrant and Opalis S.A.                 
|       |     
|10.25  | (2)* |  | Employment Agreement dated August 4, 2000, between the Registrant and Ben C. Barnes.                                                                       
|       |     
|10.26  | (2)* |  | Offer letter dated May 9, 2000, between the Registrant and David Eliff.                                                                                    
|       |     
|10.27  | (2)  |  | Common Stock Purchase Agreement dated February 15, 2001, between the Registrant and the parties named
therein.                                             
|       |     
|10.28  | (3)* |  | Service Agreement, dated January 1, 2001, between the Registrant and Arthur Parker.                                                                        
|       |     
|10.29  | (4)  |  | Stock Purchase Agreement dated July 23, 2001, between the Registrant and the parties named therein.                                                        
|       |     
|10.30  | (6)* |  | Offer letter dated October 9, 2001, between the Registrant and Richard Ghiossi.                                                                            
|       |     
|10.31  | (6)* |  | Offer letter dated October 31, 2001, between the Registrant and Steven R. Springsteel, and addendum dated November 16,
2001.                               
|       |     
|10.32  | (6)* |  | Settlement Agreement and Mutual Release dated December 31, 2001, between the Registrant and Kenneth C.
Gardner.                                            
|       |     
|10.33  | (7)* |  | Agreement dated July 22, 2002, between the Registrant and Steven R. Springsteel.                                                                           
|       |     
|10.34  | (7)* |  | Agreement dated July 22, 2002, between the Registrant and Andre M. Boisvert.                                                                               



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|Number |       |  | Title                                                                                                                                                                                         
|------ | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |      
|10.35  | (7)*  |  | Agreement dated August 1, 2002, between the Registrant and John Maxwell.                                                                                                                      
|       |      
|10.36  | (7)*  |  | Separation Agreement and Release executed on October 7, 2002, between the Registrant and Ben C. Barnes.                                                                                       
|       |      
|10.37  | (7)*  |  | Separation Agreement and Release executed on September 30, 2002, between the Registrant and Richard
Ghiossi.                                                                                  
|       |      
|10.38  | (8)   |  | Investors Rights Agreement, dated November 1, 2002, between the Registrant and CDC Software
Corporation.                                                                                     
|       |      
|10.39  | (8)   |  | Note and Warrant Purchase Agreement, dated October 24, 2002, between the Registrant and CDC Software
Corporation.                                                                             
|       |      
|10.40  | (8)   |  | Security Agreement, dated October 24, 2002, between the Registrant and CDC Software Corporation.                                                                                              
|       |      
|10.41  | (8)   |  | Security Promissory Note, dated November 1, 2002, between the Registrant and CDC Software Corporation.                                                                                        
|       |      
|10.42  | (8)   |  | Warrant, dated November 1, 2002, issued by Registrant to CDC Software Corporation.                                                                                                            
|       |      
|10.43  | (8)   |  | Security Promissory Note, dated December 31, 2002, between the Registrant and CDC Software Corporation.                                                                                       
|       |      
|10.44  | (8)   |  | Warrant, dated December 31, 2002, issued by Registrant to CDC Software Corporation.                                                                                                           
|       |      
|10.45  | (9)   |  | Warrant, dated November 1, 2002, issued by Registrant to Baruch Halpern and Shoshana Halpern.                                                                                                 
|       |      
|10.46  | (9)   |  | Warrant, dated November 1, 2002, issued by Registrant to David Dohrmann.                                                                                                                      
|       |      
|10.47  | (9)   |  | Warrant, dated December 31, 2002, issued by Registrant to Baruch Halpern and Shoshana Halpern.                                                                                                
|       |      
|10.48  | (9)   |  | Warrant, dated December 31, 2002, issued by Registrant to David Dohrmann.                                                                                                                     
|       |      
|10.49  | (11)* |  | Amendment to Employment Agreement dated January 20, 2003, between the Registrant and Andre M. Boisvert.                                                                                       
|       |      
|16.1   | (5)   |  | Letter dated as of October 18, 2000 from PricewaterhouseCoopers LLP to the Securities and Exchange
Commission.                                                                                
|       |      
|31.1   |       |  | Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 
|       |      
|31.2   |       |  | Certification of Chief Accounting Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|       |      
|32.1   |       |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002                                             
|       |      
|32.2   |       |  | Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002                                            

---

|(1) |  | Incorporated by reference to the exhibits to the Registrants Registration Statement on Form S-1 (No. 333-71369), declared effective by the Securities and Exchange Commission
(SEC) on April 14, 1999.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference to the exhibits to the Registrants Annual Report on Form 10-K for the year ended December 31, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated by reference to the exhibit to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated by reference to the exhibits to the Registrants Current Report on Form 8-K filed with the SEC on August 7, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated by reference to the exhibit to the Registrants Current Report on Form 8-K filed with the SEC on October 19, 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Incorporated by reference to the exhibit to the Registrants Annual Report on Form 10-K filed with the SEC on April 1, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated by reference to the exhibit to the Registrants Quarterly Report on Form 10-Q filed with the SEC on November 14, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated by reference to the exhibit to the Registrants Form S-3 filed with the SEC on December 31, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(9) |  | Incorporated by reference to the exhibit to the Registrants Form S-3/A filed with the SEC on March 14, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------

|(10) |  | Incorporated by reference to the exhibit to the Registrants Current Report on 8-K filed with the SEC on April 17, 2003.
|---- |  | ------------------------------------------------------------------------------------------------------------------------

|(11) |  | Incorporated by reference to the exhibit to the Registrants Quarterly Report on Form 10-Q filed with the SEC on May 15, 2003.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------

|* |  | Denotes management contract or compensatory plan or arrangement.
|- |  | ----------------------------------------------------------------

|+ |  | Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30