##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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FORM 10-Q



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(MARK ONE)
 
[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTER ENDED JUNE 30, 2001
 
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
 
SAGENT TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | 94-3225290
(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)

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 such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [   ]

As of August 9, 2001, Registrant had 45,849,742 shares of common stock
issued and outstanding.



1



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TABLE OF CONTENTS



|                               |                                                                                           |                                                           |  |  |  |  |  | 
|------------------------------ | ----------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                             
|                               |                                                                                           | UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS          
|                               |                                                                                           | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|                               |                                                                                           | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|                               |                                                                                           | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS     
|                               | ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.                       
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                        
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                  
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                              
|                               | ITEM 5. OTHER INFORMATION.                                                               
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                 
|SIGNATURES                    
|INDEX TO EXHIBITS             



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##### Table of Contents



SAGENT TECHNOLOGY, INC. QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2001
INDEX

|                  |                                                                                                                 |  |    |    | 
|----------------- | --------------------------------------------------------------------------------------------------------------- |  | -- | -- | 
|                  | PAGE NO.                                                                                                       
|                  |                                                                                                                
|PART I            | FINANCIAL INFORMATION                                                                                          
|                 
|Item 1.           | Unaudited Condensed Consolidated Financial Statements:                                                         
|                 
|                  | Condensed Consolidated Balance Sheets
June 30, 2001 and December 31, 2000                                       |  |    | 3 
|                 
|                  | Condensed Consolidated Statements of Operations for the
three months and six months endedJune 30, 2001 and 2000 |  |    | 4 
|                 
|                  | Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2001 and 2000                 |  |    | 5 
|                 
|                  | Notes to Unaudited Condensed Consolidated Financial Statements                                                  |  |    | 6 
|                 
|Item 2.           | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  |    | 10
|                 
|Item 3.           | Quantitative and Qualitative Disclosures About Market Risk                                                      |  |    | 19
|                 
|PART II.          | OTHER INFORMATION                                                                                               | 
|                 
|Item 1.           | Legal Proceedings                                                                                               |  |    | 20
|                 
|Item 2.           | Changes in Securities and Use of Proceeds                                                                       |  |    | 20
|                 
|Item 4.           | Submission of
Matters to a Vote of Security Holders                                                             |  |    | 21
|                 
|Item 6.           | Exhibits and
Reports on Form 8-K                                                                                |  |    | 21
|                 
|SIGNATURES        |                                                                                                                 |  | 22
|                 
|INDEX TO EXHIBITS |                                                                                                                 |  | 23



2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




SAGENT TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |         |   |        | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------- | -------- | ------ | ------------ | ------- | - | ------ | 
|                                               |                                                                                                                                                                                                         |  |                                            |         | June 30, |        | December 31,
|                                               |                                                                                                                                                                                                         |  |                                            |         | 2001     |        | 2000        
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |             
|Assets                                        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                                                                                                                                                                               |  | $                                          | 11,504  |          |        | $            | 6,372   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net of allowance for doubtful
accounts of $819 in 2001 and $4,968 in 2000                                                                                                          |  |                                            | 15,507  |          |        |              | 14,667  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Other current assets                                                                                                                                                                                    |  |                                            | 5,353   |          |        |              | 6,261   |  
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total current assets                       |         |          | 32,364 |              |         |   | 27,300 | 
|                                              
|                                              
|                                              
|                                              
|Property and equipment, net                    |                                                                                                                                                                                                         |  | 7,542                                      |         |          |        | 5,718        |        
|                                              
|                                              
|                                              
|                                              
|Goodwill, net                                  |                                                                                                                                                                                                         |  | 7,993                                      |         |          |        | 7,323        |        
|                                              
|                                              
|                                              
|                                              
|Other assets                                   |                                                                                                                                                                                                         |  | 1,942                                      |         |          |        | 2,595        |        
|                                              
|                                              
|                                              
|                                              
|Notes receivable from officers                 |                                                                                                                                                                                                         |  | 3,059                                      |         |          |        | 3,151        |        
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total assets                               |         | $        | 52,900 |              |         | $ | 46,087 | 
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|Liabilities and Stockholders Equity           |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                                                                                                                                                                                        |  | $                                          | 2,972   |          |        | $            | 3,296   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued liabilities                                                                                                                                                                                     |  |                                            | 5,890   |          |        |              | 5,842   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred revenue                                                                                                                                                                                        |  |                                            | 8,639   |          |        |              | 8,352   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Current portion of capital lease obligations                                                                                                                                                            |  |                                            | 2,516   |          |        |              | 1,037   |  
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total current liabilities                  |         |          | 20,017 |              |         |   | 18,527 | 
|                                              
|                                              
|                                              
|                                              
|Deferred rent                                  |                                                                                                                                                                                                         |  | 162                                        |         |          |        | 245          |        
|                                              
|                                              
|                                              
|                                              
|Long-term portion of capital lease obligations |                                                                                                                                                                                                         |  | 2,207                                      |         |          |        | 650          |        
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total liabilities                          |         |          | 22,386 |              |         |   | 19,422 | 
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|Stockholders equity:                          |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, par value $.001 per share; authorized: 70,000
shares in June 30, 2001 and December 31, 2000; Issued and
outstanding 36,747 and 29,829 at June 30, 2001 and
December 31,2000, respectively |  |                                            | 37      |          |        |              | 30      |  
|                                              
|                                              
|                                              
|                                              
|                                               | Additional paid-in capital                                                                                                                                                                              |  |                                            | 117,327 |          |        |              | 97,354  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred stock compensation                                                                                                                                                                             |  |                                            | (1,348  | )        |        |              | (1,566  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Notes receivable from stockholders                                                                                                                                                                      |  |                                            | (2,521  | )        |        |              | (2,423  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated other comprehensive income                                                                                                                                                                  |  |                                            | 147     |          |        |              | 211     |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated deficit                                                                                                                                                                                     |  |                                            | (83,128 | )        |        |              | (66,941 | )
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total stockholders equity                 |         |          | 30,514 |              |         |   | 26,665 | 
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        
|                                               |                                                                                                                                                                                                         |  | Total liabilities and stockholders equity |         | $        | 52,900 |              |         | $ | 46,087 | 
|                                               |                                                                                                                                                                                                         |  |                                            |         |          |        |              |        

See accompanying notes to unaudited condensed consolidated financial statements.



3



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##### Table of Contents






SAGENT TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |        |        | 
|--------------------------------------------------------------------------- | ------------------------------ | ------------------------ | ------ | ------------------ | ------ | ---------------- | ------ | ------ | ------ | ---- | ------- | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                            |                                |                          |        | Three Months Ended |        | Six Months Ended
|                                                                            |                                |                          |        | June 30,           |        | June 30,        
|                                                                            |                                |                          |        |                    |        |                 
|                                                                            |                                |                          |        | 2001               |        | 2000             |        | 2001   |        | 2000
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |     
|Revenue:                                                                    |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | License                        |                          | $      | 7,407              |        |                  | $      | 11,046 |        |      | $       | 12,874 |        |   | $      | 19,690 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Service                        |                          |        | 5,844              |        |                  |        | 6,456  |        |      |         | 11,388 |        |   |        | 12,349 |       
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                            |                                | Total net revenue        |        |                    | 13,251 |                  |        |        | 17,502 |      |         |        | 24,262 |   |        |        | 32,039 | 
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net cost of revenue:                                                        |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | License                        |                          |        | 867                |        |                  |        | 437    |        |      |         | 1,598  |        |   |        | 956    |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Service                        |                          |        | 2,917              |        |                  |        | 2,478  |        |      |         | 6,163  |        |   |        | 4,666  |       
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                            |                                | Total cost of revenue    |        |                    | 3,784  |                  |        |        | 2,915  |      |         |        | 7,761  |   |        |        | 5,622  | 
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Gross profit                                                                |                                |                          | 9,467  |                    |        |                  | 14,587 |        |        |      | 16,501  |        |        |   | 26,417 |       
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Operating expenses:                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Sales and marketing            |                          |        | 9,825              |        |                  |        | 9,210  |        |      |         | 18,420 |        |   |        | 18,003 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Research and development       |                          |        | 3,553              |        |                  |        | 4,276  |        |      |         | 7,406  |        |   |        | 8,315  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | General and administrative     |                          |        | 2,257              |        |                  |        | 1,719  |        |      |         | 6,823  |        |   |        | 3,202  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Merger and integration credits |                          |        |                   |        |                  |        | (1,950 | )      |      |         |       |        |   |        | (1,950 | )     
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                                            |                                | Total operating expenses |        |                    | 15,635 |                  |        |        | 13,255 |      |         |        | 32,649 |   |        |        | 27,570 | 
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Income (loss) from operations                                               |                                |                          | (6,168 | )                  |        |                  | 1,332  |        |        |      | (16,148 | )      |        |   | (1,153 | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Other income (expenses), net                                                |                                |                          | (108   | )                  |        |                  | 208    |        |        |      | 18      |        |        |   | 683    |       
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net income (loss) before income taxes                                       |                                |                          | (6,276 | )                  |        |                  | 1,540  |        |        |      | (16,130 | )      |        |   | (470   | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Provision for income taxes                                                  |                                |                          | 32     |                    |        |                  | 7      |        |        |      | 57      |        |        |   | 17     |       
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net income (loss)                                                           |                                | $                        | (6,308 | )                  |        | $                | 1,533  |        |        |      | (16,187 | )      |        |   | (487   | )     
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Basic net income (loss) per share                                           |                                | $                        | (0.17  | )                  |        | $                | 0.05   |        |        | $    | (0.46   | )      |        | $ | (0.02  | )     
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Number of shares used in calculation of
basic net income (loss) per share   |                                |                          | 36,478 |                    |        |                  | 28,046 |        |        |      | 34,918  |        |        |   | 27,935 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Diluted net income (loss) per share                                         |                                | $                        | (0.17  | )                  |        | $                | 0.05   |        |        | $    | (0.46   | )      |        | $ | (0.02  | )     
|                                                                            |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Number of shares used in calculation of
diluted net income (loss) per share |                                |                          | 36,478 |                    |        |                  | 29,652 |        |        |      | 34,918  |        |        |   | 27,935 |       

See accompanying notes to unaudited condensed consolidated financial statements.



4



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##### Table of Contents






SAGENT TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |         |       |  |        |  
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------- | ------- | -------------------- | ----- | ---------------- | ------- | ------- | ----- |  | ------ | -
|                                                                      |                                                                                          |                                                    |         |                      |       | Six Months Ended
|                                                                      |                                                                                          |                                                    |         |                      |       | June 30,        
|                                                                      |                                                                                          |                                                    |         |                      |       |                 
|                                                                      |                                                                                          |                                                    |         |                      |       | 2001             |         | 2000   
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Cash flows from operations:                                           |                                                                                          |                                                    |         |                      |       |                  |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Net loss                                                              |                                                                                          | $                                                  | (16,187 | )                    |       | $                | (487    | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net loss to net cash used in
operating activities:              |                                                    |         |                      |       |                  |         |         |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Depreciation and amortization                      |         |                      | 3,159 |                  |         |         | 2,580 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Allowance for doubtful accounts                    |         |                      | 937   |                  |         |         | 200   | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Stock-based employee compensation                  |         |                      | 218   |                  |         |         |      | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Accrued interest on notes receivable from officers |         |                      | (131  | )                |         |         |      | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Officer
notes forgiven                             |         |                      | 125   |                  |         |         |      | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          | Change in operating assets and liabilities:        |         |                      |       |                  |         |         |       | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Accounts receivable  |       |                  | (926    | )       |       |  | (3,693 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Other current assets |       |                  | 1,011   |         |       |  | (3,298 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Other assets         |       |                  | 430     |         |       |  | 147    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Accounts payable     |       |                  | (480    | )       |       |  | 868    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Accrued liabilities  |       |                  | (702    | )       |       |  | (4,306 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Deferred revenue     |       |                  | (55     | )       |       |  | (126   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Deferred
rent        |       |                  | (83     | )       |       |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                          |                                                    |         | Accrued merger costs |       |                  |        |         |       |  | (2,837 | )
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Net cash used in operating activities                                 |                                                                                          |                                                    | (12,684 | )                    |       |                  | (10,952 | )      
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Cash flows from investing activities:                                 |                                                                                          |                                                    |         |                      |       |                  |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Sale of marketable securities                                                            |                                                    |         |                     |       |                  |         | 37,704  |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchase of marketable securities                                                        |                                                    |         |                     |       |                  |         | (31,836 | )    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Acquisition of Sagent do Brazil and others                                               |                                                    |         |                     |       |                  |         | (1,166  | )    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Other business
acquisitions, net of cash acquired                                        |                                                    |         | (88                  | )     |                  |         | (900    | )    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cash acquired in purchase of Sagent Asia/Pacific Pte. Ltd                                |                                                    |         | 2,298                |       |                  |         |        |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Purchases of property and equipment                                                      |                                                    |         | (128                 | )     |                  |         | (4,427  | )    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from disposal of property and equipment                                         |                                                    |         |                     |       |                  |         | 1,210   |      
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Net cash provided by investing activities                             |                                                                                          |                                                    | 2,082   |                      |       |                  | 585     |        
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Cash flows from financing activities:                                 |                                                                                          |                                                    |         |                      |       |                  |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from capital lease financing                                                    |                                                    |         |                     |       |                  |         | 548     |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Payments of principal under capital lease obligations                                    |                                                    |         | (707                 | )     |                  |         | (346    | )    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Proceeds from issuance of common stock                                                   |                                                    |         | 16,505               |       |                  |         | 1,810   |      
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Net cash provided by financing activities                             |                                                                                          |                                                    | 15,798  |                      |       |                  | 2,012   |        
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Effect of exchange rate changes                                       |                                                                                          |                                                    | (64     | )                    |       |                  | 147     |        
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Net increase (decrease) in cash and cash equivalents                  |                                                                                          |                                                    | 5,132   |                      |       |                  | (8,208  | )      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Cash and cash equivalents, beginning of the period                    |                                                                                          |                                                    | 6,372   |                      |       |                  | 15,910  |        
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Cash and cash equivalents, end of the period                          |                                                                                          | $                                                  | 11,504  |                      |       | $                | 7,702   |        
|                                                                      |                                                                                          |                                                    |         |                      |       |                  |         |        
|Supplemental disclosure of cash flow information:                     |                                                                                          |                                                    |         |                      |       |                  |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cash payments for interest                                                               |                                                    | $       | 345                  |       |                  | $       | 82      |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cash payments for taxes                                                                  |                                                    | $       | 34                   |       |                  | $       | 6       |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Supplemental disclosure of non-cash investing and
financing activity: |                                                                                          |                                                    |         |                      |       |                  |         |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Issuance of common stock to Sagent do Brazil                                             |                                                    | $       |                     |       |                  | $       | 500     |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Equipment acquired under capital leases                                                  |                                                    | $       | 3,744                |       |                  | $       |        |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Warrants issued in connection with private placement                                     |                                                    | $       | 469                  |       |                  |         |        |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Issuance of common stock to acquire additional interest
in Sagent Asia/Pacific Pte. Ltd. |                                                    | $       | 3,475                |       |                  |         |        |      

See accompanying notes to unaudited condensed consolidated financial statements.



5



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##### Table of Contents






SAGENT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except where noted)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business. Sagent Technology, Inc., (Sagent), develops, markets and supports
software designed to address organizations information access, analysis and
delivery needs. Sagent, formerly Savant Software, Inc., was incorporated under
the laws of the State of California in April 1995 and reincorporated in
Delaware in 1998.

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 year amounts have been
reclassified to conform to the current year presentation. In the opinion of
management, the 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, 2001 and December 31, 2000, the
operating results for the three and six months ended June 30, 2001 and 2000
and cash flows for the six months ended June 30, 2001 and 2000. These financial
statements and notes should be read in conjunction with Sagents audited
financial statements and notes thereto for the year ended December 31, 2000,
included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 6, 2001. The results of operations for the three and six
months ended June 30, 2001 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2001.

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

Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect 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. Actual results could differ from those estimates.

Cash and cash equivalents. Cash and cash equivalents include all highly liquid
investments with an original maturity of three months or less at the time of
purchase. Sagents cash equivalents at June 30, 2001 and December 31, 2000
consisted of deposits in domestic banks and money market funds.

Business risk and concentration of credit risk. Financial instruments which
potentially subject Sagent to concentrations of credit risk consist primarily
of trade accounts receivable. Sagent maintains allowances for potential credit
losses on trade accounts receivable and such losses to date have been within
managements expectations. There were no customers with balances due to Sagent
in excess of 10% of aggregate accounts receivable at June 30, 2001 or December
31, 2000.

Goodwill and other intangible assets. The costs of businesses acquired in
excess of the fair value of net assets acquired (goodwill), are amortized over
their estimated useful lives. If events or changes in circumstances indicate
the goodwill and other long-lived assets will not be recoverable, as determined
by a comparison of the carrying value of the asset to forecasted undiscounted
cash flows expected to be generated by the asset, the carrying value is reduced
to net realizable value. There were no such reductions in carrying value during
the six months ended June 30, 2001 or 2000.

Revenue recognition. Revenue consists principally of fees for licenses of
Sagents software products, maintenance, consulting, and training. Sagent
recognizes revenue using the residual method in accordance with Statement of
Position 97-2 (SOP 97-2), Software Revenue Recognition, as amended by SOP
98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions. Under the residual method, revenue is recognized in a
multiple element arrangement in which Company-specific objective evidence of
fair value exists for all of the undelivered elements in the arrangement, but
does not exist for one or more of the delivered elements in the arrangement.
Company-specific objective evidence of fair value of maintenance and other
services is based on the Companys customary pricing for such maintenance
and/or services when sold separately. At the outset of the arrangement with



6



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##### Table of Contents



the customer, the Company defers revenue for the fair value of its undelivered
elements (e.g., maintenance, consulting, and training) and recognizes revenue
for the remainder of the arrangement fee attributable to the elements initially
delivered in the arrangement (i.e., software product) when the basic criteria
in SOP 97-2 have been met. If such evidence of fair value for each undelivered
element of the arrangement does not exist, all revenue from the arrangement is
deferred until such time that evidence of fair value does exist or until all
elements of the arrangement are delivered.

Under SOP 97-2, revenue attributable to an element in a customer arrangement is
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, collectibility is probable, and the
arrangement does not require services that are essential to the functionality
of the software. If at the outset of the customer arrangement, the Company
determines that the arrangement fee is not fixed or determinable, revenue is
recognized when the arrangement fee becomes due and payable. If at the outset
of the customer arrangement, the Company determines that collectability is not
probable, revenue is recognized as the arrangement fee is collected.

The Companys specific policies for recognition of license revenues and
services revenues are as follows:

License revenue. The Company recognizes revenue from sales of software licenses
to end users upon: determination that persuasive evidence of an arrangement
exists; delivery of the software to a customer; determination that collection
of a fixed or determinable license fee is probable; and determination that no
undelivered services are essential to the functionality of the licensed
software.

If consulting services are essential to the functionality of the licensed
software, then both the license revenue and the consulting service revenue are
recognized as the services are performed. The Companys arrangements generally
do not include services that are essential to the functionality of the
software.

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 of the Company have been satisfied.
However, if the contract stipulates a non-refundable royalty payment to be paid
in advance of any resales, revenue is recognized upon execution of the
contract.

Service revenue. Maintenance contracts generally call for the Company 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 it is
determined that the Company has fulfilled its obligations resulting from the
services contract.

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

Software development costs. Software development costs are included in product
development and are expensed as incurred. After technological feasibility is
established, material software development costs are capitalized in accordance
with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. The period between achieving technological feasibility, which Sagent
has defined as the establishment of a working model, typically occurring when
the beta testing commences, and the general availability of such software has
been short, and software development costs qualifying for capitalization have
been insignificant.

Net income (loss) per share. Basic net income (loss) per share is computed by
dividing the net income (loss) available to common stockholders for the period
by the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed by dividing the net income
(loss) for the period by the weighted average number of common and common
equivalent shares outstanding during the period. Options, warrants and
convertible preferred stock are not included in the computation of diluted net
income (loss) per share for those periods in which the Company incurred a loss because the effect would be
antidilutive.

Accumulated other comprehensive income. Accumulated other comprehensive income
consists of cumulative foreign currency translation adjustments which
were a loss of $111 and $64 for the three and six months ended
June 30, 2001 and a gain of $58 and $147 for the three and six months
ended June 30, 2000. There was no
significant tax effect on the components of other comprehensive income for the
three months ended June 30, 2001 and 2000.



7



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##### Table of Contents



NOTE 2. GOODWILL

Goodwill is comprised of the following:

|               |                              |  |        |    |          |   |              |       |  |   |       |       | 
|-------------- | ---------------------------- |  | ------ | -- | -------- | - | ------------ | ----- |  | - | ----- | ----- | 
|               |                              |  | Useful |    | June 30, |   | December 31,
|               |                              |  | Life   |    | 2001     |   | 2000        
|               |                              |  |        |    |          |   |             
|Goodwill, net: |                              |  |        |    |          |   |              |       |  |   |       |      
|              
|              
|              
|              
|               | Sagent UK                    |  |        | 5  |          |   | $            | 2,107 |  |   | $     | 2,496 | 
|              
|              
|              
|              
|               | Sagent France S.A.           |  |        | 5  |          |   |              | 762   |  |   |       | 863   | 
|              
|              
|              
|              
|               | Sagent GmbH                  |  |        | 5  |          |   |              | 2,118 |  |   |       | 2,378 | 
|              
|              
|              
|              
|               | Sagent do Brazil             |  |        | 5  |          |   |              | 854   |  |   |       | 971   | 
|              
|              
|              
|              
|               | Smarter Software, Inc.       |  |        | 10 |          |   |              | 517   |  |   |       | 615   | 
|              
|              
|              
|              
|               | Sagent Asia/Pacific Pte. Ltd |  |        | 5  |          |   |              | 1,445 |  |   |       |      | 
|              
|              
|              
|              
|               | Sagent Benelux               |  |        | 5  |          |   |              | 190   |  |   |       |      | 
|               |                              |  |        |    |          |   |              |       |  |   |       |      
|               |                              |  |        |    |          | $ | 7,993        |       |  | $ | 7,323 |      
|               |                              |  |        |    |          |   |              |       |  |   |       |      

NOTE 3. OTHER ASSETS

Other assets is comprised of the following:

|              |                                            |   |          |     |              |   |       |     | 
|------------- | ------------------------------------------ | - | -------- | --- | ------------ | - | ----- | --- | 
|              |                                            |   | June 30, |     | December 31,
|              |                                            |   | 2001     |     | 2000        
|              |                                            |   |          |     |             
|Other assets: |                                            |   |          |     |              |   |       |    
|             
|             
|             
|             
|              | Investment in Sagent Asia/Pacific Pte. Ltd |   | $        |    |              |   | $     | 830 | 
|             
|             
|             
|             
|              | Investment in NetAcumen                    |   |          | 759 |              |   |       | 759 | 
|             
|             
|             
|             
|              | Deposits                                   |   |          | 993 |              |   |       | 942 | 
|             
|             
|             
|             
|              | Other                                      |   |          | 190 |              |   |       | 64  | 
|              |                                            |   |          |     |              |   |       |    
|              |                                            | $ | 1,942    |     |              | $ | 2,595 |    
|              |                                            |   |          |     |              |   |       |    

The investment in NetAcumen is accounted for under the cost method. Investment
in Sagent Asia/Pacific Pte. Ltd., a joint venture between Sagent and eGlobal,
is accounted for under the equity method as of December 31, 2000. Sagents
ownership interest in NetAcumen, Inc. was 9.79% as of June 30, 2001 and
December 31, 2000. Sagents ownership interest in Sagent Asia/Pacific Pte. Ltd.
was 53% (see Note 5) and 19.99% as of June 30, 2001 and December 31, 2000
respectively. There were no sales to NetAcumen for the six months ended June
30, 2001 and June 30, 2000.

NOTE 4. PRIVATE PLACEMENT

In February 2001, Sagent completed a private placement of approximately 5,750
shares of its common stock and received proceeds of $16,113, net of $562 in
offering costs. Such offering costs include the issuance to certain
placement agents of warrants to purchase 210 shares of its common stock with an estimated
fair value of $469. This estimated fair value was calculated using
Black-Scholes option pricing model with the following factors and assumptions:
expected volatility of 130%, contractual life of 5 years, stock price of $2.78
on the date of grant, exercise price of $2.90, and risk free interest rate of
5% per annum.

NOTE 5. INVESTMENT IN SUBSIDIARIES

On January 19, 2001, Sagent acquired an additional 33% interest in Sagent
Asia/Pacific Pte. Ltd from eGlobal, a privately held company that specializes
in distribution of technology services in Singapore. In consideration for 950
shares of Sagents common stock, valued at $3.5 million, Sagent received an
additional 2,113 common shares of Sagent Asia/Pacific Pte. Ltd. This brings the
total interest of Sagent in Sagent Asia/Pacific Pte. Ltd to 53% as of March 31,
2001. The acquisition was recorded under the purchase method of accounting. In
connection with the acquisition, Sagent recorded goodwill of $1,516, which is
being amortized on a straight-line basis over a period of five years
and acquired net assets of approximately $2,790 consisting primarily of cash and
accounts receivable. The
results of operations of Sagent Asia/Pacific Pte. Ltd. have been included in
our consolidated results from the date of the acquisition. No minority interest
in the losses of Sagent Asia/Pacific has been recognized because the minority
interest holders are not required to make additional capital contributions.

On April 9, 2001, Sagent acquired 100% interest in Sagent Benelux for cash of
$100 and the assignment of a portion of Sagents outstanding accounts
receivable valued at $200 to the Selling Shareholders. The acquisition was recorded under the purchase
method of accounting. In connection with the acquisition, Sagent recorded goodwill of $197, which is being
amortized on a straight-line basis over a period of five years. The results of
operations of Sagent Benelux have been included in our consolidated results
from the date of the acquisition.



8



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##### Table of Contents



NOTE 6. LITIGATION

From October 20, 2000 to November 27, 2000, several class action lawsuits were
filed in the United States District Court on behalf of individual investors who
purchased our common stock between October 21, 1999 and April 18, 2000. The
claims allege that we misrepresented our 1999 and 2000 prospects. The court
recently consolidated the complaints and selected a lead plaintiff and counsel.
A consolidated amended complaint was filed in April 2001.

On November 17, 2000, a derivative lawsuit was filed by a purported Sagent
shareholder in the Superior Court of California for the County of San Mateo. On
February 9, 2001, a second derivative lawsuit was filed in the Superior Court
of Santa Clara. The complaints name certain of our present and former officers
and directors as defendants. The complaint in Santa Clara County also named an
investment bank retained by us and an employee of that firm as defendants. We
have also been named as a nominal defendant. The principal allegation of the
complaints is that the defendants breached their fiduciaries duties to us. In
July 2001, the two cases were coordinated for pretrial purposes in the Santa
Clara County Superior Court.

At June 30, 2001, the Company has not
accrued any litigation expense related to the matters above, as such
expenses have not yet been deemed probable and estimable.

NOTE 7. LOANS TO OFFICERS

At June 30, 2001 and December 30, 2000, loans to officers represent five year
promissory notes to key executives. These promissory notes are full recourse.
For the six months ended June 30, 2001, Sagent has forgiven a total $125 from
the balance due from two of the officers. Such amounts have been
recorded in general and administrative expense.

NOTE 8. COMMITMENTS

Sagent leases various facilities under noncancelable operating leases and has
acquired certain computer and other equipment under capital lease obligations
which are collateralized by the related assets. Future minimum lease payments
under these commitments at June 30, 2001 are as follows:

|                                        |  |                  |       |                |  |   |       |  
|--------------------------------------- |  | ---------------- | ----- | -------------- |  | - | ----- | -
|                                        |  | Operating Leases |       | Capital Leases
|                                        |  |                  |       |               
|Remaining 2001                          |  | $                | 1,607 |                |  | $ | 1,681 |  
|                                       
|                                       
|                                       
|                                       
|2002                                    |  |                  | 3,104 |                |  |   | 2,853 |  
|                                       
|                                       
|                                       
|                                       
|2003                                    |  |                  | 2,387 |                |  |   | 1,086 |  
|                                       
|                                       
|                                       
|                                       
|2004                                    |  |                  | 620   |                |  |   | 16    |  
|                                       
|                                       
|                                       
|                                       
|Thereafter                              |  |                  | 104   |                |  |   |      |  
|                                        |  |                  |       |                |  |   |       |  
|Total minimum lease payments            |  | $                | 7,822 |                |  | $ | 5,636 |  
|                                        |  |                  |       |                |  |   |       |  
|Less: amount representing interest      |  |                  |       |                |  |   | (913  | )
|                                        |  |                  |       |                |  |   |       |  
|Present value of minimum lease
payments |  |                  |       |                |  | $ | 4,723 |  
|                                       
|                                       
|                                       
|                                       
|Current portion                         |  |                  |       |                |  |   | 2,516 |  
|                                        |  |                  |       |                |  |   |       |  
|Long-term portion                       |  |                  |       |                |  | $ | 2,207 |  
|                                        |  |                  |       |                |  |   |       |  

NOTE 9. SUBSEQUENT EVENTS

From July 27, 2001 through August 1, 2001, Sagent issued and sold 9,115 shares
of its common stock for an average price per share of $1.84 in a private
placement. The net proceeds to Sagent from the offering, after deducting the
expenses of the offering, were approximately $16.0 million. In connection with
the private sale, Sagent also issued warrants to purchase 456 shares of its
common stock at an exercise price of $1.84 per share.



9



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##### Table of Contents






|        |                                                                                  
|------- | ---------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Certain information contained or incorporated by reference in this quarterly
report on Form 10-Q is forward-looking in nature. All statements included or
incorporated by reference in this quarterly report on Form 10-Q, made by our
management or preceded by an asterisk (*), other than statements of historical
fact, are forward-looking statements. Examples of forward-looking statements
include, without limitation, statements regarding our expectations, beliefs,
estimates, intentions or strategies regarding the future, our license and
service revenues, our research and development plans, our sales and
administrative costs, our in-process research and development expenses, pending
litigation, and the sufficiency of our cash position. All forward-looking
statements included in this report on 10-Q are based on information available
to us on the date hereof, and we assume no obligation to update any such
forward-looking statements. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of a number
of factors, including, but not limited to, those set forth below under the
heading Risk Factors That May Affect Future Results and elsewhere in this
quarterly report on Form 10-Q.

OVERVIEW

We provide business intelligence solutions that enable enterprises to win,
retain, and grow new customers and improve operational effectiveness. 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. We refer to our products as business
intelligence solutions because they enable organizations to rapidly make more informed,
intelligent decisions and to spread that ability across the enterprise.

Revenue

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

We derive our revenue from license fees for software products and fees for
services relating to the software products, including consulting, training,
software and data updates, technical support and real-time marketing services
over the Internet.

We recognize revenue from sales of software licenses to end users upon:
determination that persuasive evidence of an arrangement exists; delivery of
the software to a customer; determination that collection of a fixed or
determinable license fee is probable; and determination that no undelivered
services are essential to the functionality of the licensed software.

If consulting services are essential to the functionality of the licensed
software, then both the license revenue and the consulting service revenue are
recognized as the services are performed. Our arrangements regarding sales of
software licenses generally do not include services that are essential to the
functionality of the software.

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.

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 the Company has fulfilled
our obligations resulting from the services contract.

Statement of Position, 97-2, Software Revenue Recognition (SOP 97-2) was
issued in 1997 by the American Institute of Certified Public Accountants
(AICPA) and amended by Statements of Position 98-4 and 98-9. We adopted SOP
97-2 effective January 1, 1998. Based on our reading and interpretation of
SOPs 97-2, 98-4 and 98-9, we believe our current revenue recognition policies
and practices are consistent with SOPs 97-2, 98-4, and 98-9.



10



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##### Table of Contents



Cost of Revenue

Cost of revenue from license sales consists primarily of royalties, product
packaging, shipping, media and documentation. Cost of services consists
primarily of salaries and benefits of consulting, customer service and training
personnel and fees paid to third party providers of data and data updates.

Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation, travel, marketing programs, and branch sales facilities.

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, quality assurance,
testing and facilities.

General and Administrative. General and administrative expenses consist
primarily of personnel costs for Sagents finance, human resources, information
systems and general management, goodwill amortization as well as legal and bad debt reserves.

RESULTS OF OPERATIONS

The following tables set forth for the periods presented, certain data, from
our unaudited condensed consolidated statements of operations, including data
as a percentage and dollar amount of total revenue. The information contained
in the tables below should be read in conjunction with the Unaudited Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
quarterly report on Form 10-Q.

|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |    |     | 
|-------------------------------------------------------- | ------------------------------ | ------------------------ | --- | ------------------ | --- | ---------------- | -- | ---- | --- | ---- | --- | -- | --- |  | -- | -- | --- | 
|Table I: Data presented as a percentage of total revenue
|                                                        
|                                                         |                                |                          |     | Three Months Ended |     | Six Months Ended
|                                                         |                                |                          |     | June 30,           |     | June 30,        
|                                                         |                                |                          |     |                    |     |                 
|                                                         |                                |                          |     | 2001               |     | 2000             |    | 2001 |     | 2000
|                                                         |                                |                          |     |                    |     |                  |    |      |     |     
|Revenue:                                                 |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | License                        |                          |     | 56                 | %   |                  |    | 63   | %   |      |     | 53 | %   |  |    | 62 | %  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Service                        |                          |     | 44                 |     |                  |    | 37   |     |      |     | 47 |     |  |    | 38 |    
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                         |                                | Total revenue            |     |                    | 100 |                  |    |      | 100 |      |     |    | 100 |  |    |    | 100 | 
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Net cost of revenue:                                     |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | License                        |                          |     | 7                  |     |                  |    | 2    |     |      |     | 7  |     |  |    | 3  |    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Service                        |                          |     | 22                 |     |                  |    | 14   |     |      |     | 25 |     |  |    | 15 |    
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                         |                                | Total cost of revenue    |     |                    | 29  |                  |    |      | 16  |      |     |    | 32  |  |    |    | 18  | 
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Gross profit                                             |                                |                          | 71  |                    |     |                  | 84 |      |     |      | 68  |    |     |  | 82 |   
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Operating expenses:                                      |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Sales and marketing            |                          |     | 74                 |     |                  |    | 53   |     |      |     | 76 |     |  |    | 56 |    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Research and development       |                          |     | 27                 |     |                  |    | 24   |     |      |     | 31 |     |  |    | 26 |    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | General and administrative     |                          |     | 17                 |     |                  |    | 10   |     |      |     | 28 |     |  |    | 10 |    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Merger and integration credits |                          |     |                   |     |                  |    | (11  | )   |      |     |   |     |  |    | (6 | )  
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|                                                         |                                | Total operating expenses |     |                    | 118 |                  |    |      | 76  |      |     |    | 135 |  |    |    | 86  | 
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Income (loss) from operations                            |                                |                          | (47 | )                  |     |                  | 8  |      |     |      | (67 | )  |     |  | (4 | ) 
|                                                        
|                                                        
|                                                        
|                                                        
|Other income (expenses), net                             |                                |                          | (1  | )                  |     |                  | 1  |      |     |      |    |    |     |  | 2  |   
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Net income (loss) before income taxes                    |                                |                          | (48 | )                  |     |                  | 9  |      |     |      | (67 | )  |     |  | (2 | ) 
|                                                        
|                                                        
|                                                        
|                                                        
|Provision for income taxes                               |                                |                          | 0   |                    |     |                  | 0  |      |     |      | 0   |    |     |  | 0  |   
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   
|Net income (loss)                                        |                                |                          | (48 | )%                 |     |                  | 9  | %    |     |      | (67 | )% |     |  | (2 | )%
|                                                         |                                |                          |     |                    |     |                  |    |      |     |      |     |    |     |  |    |   



11



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##### Table of Contents



|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |        |        | 
|-------------------------------------------------------- | ------------------------------ | ------------------------ | ------ | ------------------ | ------ | ---------------- | ------ | ------ | ------ | ---- | ------- | ------ | ------ | - | ------ | ------ | ------ | 
|Table II: Data presented in dollar amount (in thousands)
|                                                        
|                                                         |                                |                          |        | Three Months Ended |        | Six Months Ended
|                                                         |                                |                          |        | June 30,           |        | June 30,        
|                                                         |                                |                          |        |                    |        |                 
|                                                         |                                |                          |        | 2001               |        | 2000             |        | 2001   |        | 2000
|                                                         |                                |                          |        |                    |        |                  |        |        |        |     
|Revenue:                                                 |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | License                        |                          | $      | 7,407              |        |                  | $      | 11,046 |        |      | $       | 12,874 |        |   | $      | 19,690 |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Service                        |                          |        | 5,844              |        |                  |        | 6,456  |        |      |         | 11,388 |        |   |        | 12,349 |       
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                         |                                | Total revenue            |        |                    | 13,251 |                  |        |        | 17,502 |      |         |        | 24,262 |   |        |        | 32,039 | 
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net cost of revenue:                                     |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | License                        |                          |        | 867                |        |                  |        | 437    |        |      |         | 1,598  |        |   |        | 956    |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Service                        |                          |        | 2,917              |        |                  |        | 2,478  |        |      |         | 6,163  |        |   |        | 4,666  |       
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                         |                                | Total cost of revenue    |        |                    | 3,784  |                  |        |        | 2,915  |      |         |        | 7,761  |   |        |        | 5,622  | 
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Gross profit                                             |                                |                          | 9,467  |                    |        |                  | 14,587 |        |        |      | 16,501  |        |        |   | 26,417 |       
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Operating expenses:                                      |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Sales and marketing            |                          |        | 9,825              |        |                  |        | 9,210  |        |      |         | 18,420 |        |   |        | 18,003 |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Research and development       |                          |        | 3,553              |        |                  |        | 4,276  |        |      |         | 7,406  |        |   |        | 8,315  |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | General and administrative     |                          |        | 2,257              |        |                  |        | 1,719  |        |      |         | 6,823  |        |   |        | 3,202  |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Merger and integration credits |                          |        |                   |        |                  |        | (1,950 | )      |      |         |       |        |   |        | (1,950 | )     
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|                                                         |                                | Total operating expenses |        |                    | 15,635 |                  |        |        | 13,255 |      |         |        | 32,649 |   |        |        | 27,570 | 
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Income (loss) from operations                            |                                |                          | (6,168 | )                  |        |                  | 1,332  |        |        |      | (16,148 | )      |        |   | (1,153 | )     
|                                                        
|                                                        
|                                                        
|                                                        
|Other income (expenses), net                             |                                |                          | (108   | )                  |        |                  | 208    |        |        |      | 18      |        |        |   | 683    |       
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net income (loss) before income taxes                    |                                |                          | (6,276 | )                  |        |                  | 1,540  |        |        |      | (16,130 | )      |        |   | (470   | )     
|                                                        
|                                                        
|                                                        
|                                                        
|Provision for income taxes                               |                                |                          | 32     |                    |        |                  | 7      |        |        |      | 57      |        |        |   | 17     |       
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       
|Net income (loss)                                        |                                | $                        | (6,308 | )                  |        | $                | 1,533  |        |        | $    | (16,187 | )      |        | $ | (487   | )     
|                                                         |                                |                          |        |                    |        |                  |        |        |        |      |         |        |        |   |        |       

Revenue

Total revenue decreased 24% to $13.3 million for the three months ended June
30, 2001 from $17.5 million for the corresponding period in 2000. For the six
months ended June 30, 2001, total revenue decreased 24% to $24.3 million from
$32.0 million for the corresponding period in 2000. We believe that this
decline is attributed to a slower domestic market demand for software products in a
generally weakened economic and information technology purchasing environment.

However, international revenues increased 33% to
$3.2 million for the three months ended June 30, 2001 from
$2.4 million for the corresponding period in 2000, international
revenues increased 41% to $5.5 million for the six months ended
June 30, 2001 from $3.9 million for the corresponding
period in 2000. This increase is attributed mainly to expansion of
our international operations as well as stronger overseas market
demand.

License revenue decreased 33% to $7.4 million for the three months ended June
30, 2001 from $11.0 million for the corresponding period in 2000. For the six
months ended June 30, 2001, license revenue decreased 35% to 12.9 million from
$19.7 million for the corresponding period in 2000. The decrease was primarily
attributed to a slower domestic market demand. In addition to this decline
in license revenue in absolute dollars, our license revenue is also declining
as a percentage of our total revenue.

Service revenue decreased 9% to $5.8 million for the three months ended June
30, 2001 from $6.5 million for the corresponding period in 2000. For the six
months ended June 30, 2001, service revenue decreased 7% to $11.4 million from
$12.3 million for the corresponding period in 2000. Decreases in
service revenue were
due to declines in consulting and training services attributed to a slow down in
the economy and a decline in new license revenue in the second half of 2000 and
the first quarter of 2001. The increase in service revenue as a percentage of
total revenue from the corresponding periods in the prior year was due in large
part to the overall decline in license revenue.

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 $0.9 million and $0.4 million for the three months ended June 30,
2001 and 2000, respectively, representing 12% and 4% of license revenue for the
three months ended June 31, 2001 and 2000, respectively. Our cost of license
revenue was $1.6 million and $1.0 million for the six months ended June 30,
2001 and 2000 respectively, representing 12% and 5% of license revenue for the
six months ended June 30, 2001 and 2000, respectively. The increase as a
percentage of license revenue was primarily due to impairment of royalty
prepayments recognized during the six months period ended June 30, 2001, as we
do not expect to utilize these prepayments.



12



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Cost of service consists primarily of personnel costs associated with providing
software maintenance, technical support, training and consulting services. Our
cost of service revenue was $2.9 million and $2.5 million for the three months
ended June 30, 2001 and 2000, respectively, representing 50% and 38% of service
revenue for the three months ended June 30, 2001 and 2000, respectively. Our
cost of service revenue was $6.2 million and $4.7 million for the six months
ended June 30, 2001 and 2000, respectively, representing 54%
and 38% of service revenue for the six months ended June 30, 2001 and 2000,
respectively. The increase as a percentage of net service revenue was due
primarily to additional support personnel and to outsourcing online services in
2001.

Gross Profit

Gross profit declined to 71% for the three months ended June 30, 2001 from 84%
for the same period in the prior year. Our gross profit declined to 68% for the
six months ended June 30, 2001 from 82% for the same period in the prior year.
The decline was mainly attributed to lower new license revenue, and as a
result, lower consulting and training revenue that is usually associated with
new licenses. Furthermore, the cost of revenue for license and service
increased as was discussed in the preceding paragraph.

Sales and Marketing

Sales and marketing expenses consist primarily of compensation, travel,
marketing programs, and branch sales facilities. Sales and marketing expenses
increased 7% to $9.8 million for the three months ended June 30, 2001 from $9.2
million for the three months ended June 30, 2000. For the six months
ended June 30, 2001, sales and marketing expenses increased 2% to $18.4 million
from $18.0 million for the same six months in the prior year. Sales and
marketing expenses represented 74% and 53% of total net revenues for the three
months ended June 30, 2001 and 2000, respectively. Sales and marketing expenses
represented 76% and 56% of total net revenue for the six months ended
June 30, 2001, and 2000, respectively. The increase as a percentage of net
total revenue was attributable to a decline in net revenue and an increase in
sales and marketing expenses in the 2001 period. In 2001, we have focused our
efforts to grow our revenue domestically and internationally; as a result, we
acquired and established additional subsidiaries in Asia Pacific, Benelux, and
Australia that contributed to an increase in the absolute dollar amount of
sales and marketing 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, quality assurance, testing and facilities.
Research and development expenses decreased 17% to $3.6 million for the three
months ended June 30, 2001 from $4.3 million for the three months ended June
30, 2000. For the six months ended June 30, 2001, research and
development expenses decreased 11% to $7.4 million from $8.3 million for the
same six months in the prior year. Research and development expenses
represented 27% and 24% of total net revenues for the three months ended June
30, 2001 and 2000, respectively. Research and development expenses represented
31% and 26% of total net revenues for the six months ended June 30,
2001, and 2000 respectively. The increase as a percentage of net total revenue
was primarily attributable to a decline in net revenue. The decline
in absolute dollar amount in research and development expenses was
attributable
to cost cutting measures and controlling discretionary spending to align
the total expenditures of our company with our revenue.

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, bad debt expenses, and amortization of goodwill. General and Administrative
expenses increased 31% to $2.3 million for the three months ended June 30, 2001
from $1.7 million for the three months ended June 30, 2000. During the six
month period ended June 30, 2001, general and administrative expenses increased
113% to $6.8 million from $3.2 million for the same six months in the
prior year. General and Administrative expenses represented 17% and 10% of
total net revenues for the three months ended June 30, 2001 and 2000,
respectively. General and administrative expenses represented 28% and 10% of
total net revenues for the six months ended June 30, 2001, and 2000,
respectively. The increase as percentage of net total revenue was primarily
attributable to a decline in net revenue. The increase in absolute dollar
amount for the three months ended June 30, 2001 was mainly due to an
increase in amortization of goodwill and intangibles and higher executive
compensation expenses. The increase in absolute dollar amount for the six
months ended June 30, 2001 was primarily due to bad debt expenses,
higher professional services fees, and increases in amortization of goodwill, and higher executive compensation expenses.



13



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LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, we had cash and cash equivalents totaling $11.5 million, an
increase of $5.1 million from December 31, 2000. Since inception, we have
funded our operations primarily by private sales of equity securities, the use
of equipment leases and the initial public offering of our common stock in
April 1999, and not from cash generated by our business.

In February 2001, we completed a private placement of approximately 5.8 million
shares of our common stock and received proceeds of $16.1 million, net of $0.6
million in offering costs. In connection with the private placement, we also
issued to certain placement agents warrants to purchase 210 shares of our
common stock.

In August 2001, we completed a private placement of approximately 9.1 million
shares of our common stock and received proceeds of $16.0 million, net of $0.8
million in offering costs. In connection with the private placement, we also
issued to certain placement agents warrants to purchase 456 shares of our
common stock.

Net cash used in operating activities was $12.7 million and $11.0 million for
the six months ended June 30, 2001 and 2000, respectively.

In June 2000, we entered into a $10 million bank line of credit agreement
collateralized by certain of our assets. The credit line allowed for advances
against eligible accounts receivable in an aggregate amount not to exceed the
lesser of the committed revolving line or the borrowing base, less any
outstanding letters of credit. Advances against the revolving line bore
interest at the banks prime rate plus 1%. The line of credit
expired in June 2001.

*We believe that our current cash and cash equivalents, together with equipment
lease lines, will be sufficient to meet our operating requirements for the next
twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value and
the corresponding derivative gains or losses be either reported in the
statement of operations or as a deferred item depending on the type of hedge
relationship that exists with respect to any derivatives. Sagent adopted SFAS
No. 133 in its quarter ended March 31, 2001. The adoption of the SFAS 133 has
not had a material effect on the Sagents consolidated results of operations or financial
position for the three or six months ended June 30, 2001.

In October 2000, the Financial Accounting Standards
Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. This statement supercedes and replaces the guidance in Statement
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS 125 or Statement 125). SFAS No. 140
provides accounting and reporting guidance for transfers and servicing of
financial assets and extinguishments of liabilities. The provisions of SFAS No.
140 will become effective for transactions entered into after March 31, 2001.
The adoption of SFAS No. 140 has not had a material effect on Sagents
consolidated financial statements.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible
Assets. SFAS No. 141 requires business combinations initiated after June 30, 2001
to be accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets separate from goodwill. Recorded
goodwill and intangibles will be evaluated against this criteria and may result
in certain intangibles being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill maybe separately identified and recognized apart
from goodwill. SFAS No. 142 requires the use of a nonamortization approach to
account for purchased goodwill and certain intangibles. Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into results
of operations, but instead would be reviewed for impairment and written down
and charged to results of operations only in the periods in which the recorded
value of goodwill and certain intangibles is more than its fair value. The
provisions for each statement which apply to goodwill and intangible assets
acquired prior to June 30, 2001, will be adopted by the Company on January 1,
2002.

Sagent is currently assessing the impacts of
adoption of SFAS No. 141 and SFAS No. 142.
Sagent amortized $1,075 and $1,152 of goodwill during the six months ended June
30, 2001 and 2000, respectively.



14



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##### Table of Contents



RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

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 quarterly report on Form 10-Q, before you
decide whether to buy our common stock. 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 or
your investment.

We have a history of losses, and we may not achieve profitability in the
future.

For the six months ended June 30, 2001, we incurred net losses of $16.2
million. We incurred net losses of $23.7 million, $12.1 million, and $15.1
million for the years ended December 31, 2000, 1999 and 1998, respectively. As
of June 30, 2001, we had an accumulated deficit of $83.1 million. We cannot
assure you that we will achieve profitability, and if we do achieve
profitability, that we will be able to sustain profitability.

We may need to raise additional capital in the
future to fund our operations.

Since our inception, we have funded our operations primarily through sales of
equity securities, and not from cash generated by our business. During the
last six months, we have completed two separate private offerings of our common
stock. In February 2001, we sold 5.8 million shares of our common stock to a
group of private investors, raising approximately $16.1 in net proceeds. In
August 2001, we completed the sale of 9.1 million shares of our common stock to
a group of private investors, netting approximately $16.0 million in proceeds.

Although we believe that our current cash and cash equivalents and any net cash
provided by operations will be sufficient to meet anticipated cash needs for
the next twelve months, a revenue shortfall could require us to reduce
operations or raise additional funds through equity or debt financings. We
cannot assure you any equity or debt financing will be available to us on
favorable terms, if at all, or that if available, such financing will not be
dilutive to our stockholders. If we are unable to raise additional capital, we
will take actions to conserve our cash balances, including significantly
reducing our operating expenses, downsizing our staff and closing existing
branch offices, all of which could have a material adverse effect on our
business, financial condition and our ability to reduce losses or generate
profits.

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 include:



| |  |  | varying size, timing and contractual terms of orders for our products;                                                                                       
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | lengthy sales cycles associated with our products;                                                                                                           
|
| |  |  | 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; and                                                      
|
| |  |  | subcontracting to more expensive consulting organizations to
help provide implementation, support and training services when our
own capacity is constrained.



15



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##### Table of Contents



A slowing economy and reductions in information technology spending may
negatively affect our revenues.

Our revenues may be negatively affected by the increasingly uncertain economic
conditions both in the market generally and in our industry. If the economy
continues to slow, some companies may reduce their budgets for spending on
information technology and business software. As a consequence, our sales
cycle may become longer with some customers, and other prospective customers
may postpone, reduce, or even forego the purchase of our products and services,
which could negatively affect our revenues.

Enterprise intelligence software markets may not
grow.

Since all of our revenues are attributable to the sale of enterprise
intelligence software and related maintenance, consulting and training
services, if the market for enterprise intelligence software does not grow, our
business will not grow. We expect enterprise intelligence software and
services to account for substantially all of our revenue for the foreseeable
future. Although demand for enterprise intelligence software has grown in
recent years, the market may not continue to grow or, even if the market does
grow, businesses may not adopt our products.

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

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 currently receive a
significant portion of our revenues from direct sales, but we intend to
increase sales through indirect sales channels in the future.

We intend to derive revenues from indirect sales channels by selling our
software through value-added resellers (VARs) and original equipment
manufacturers (OEMs). These VARs and OEMs offer our software products to their
customers together with consulting and implementation services or integrate our
software solutions with other software. Our ability to increase our revenues
is dependent on entering into relationships with these VARs and OEMs.

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.

Pending litigation could harm our business.

From October 20, 2000 to November 27, 2000, several class action lawsuits were
filed in the United States District Court on behalf of the individual investors
who purchased our common stock between October 21, 1999 and April 18, 2000.
The claims allege that we misrepresented our prospects for 1999 and the first
quarter of 2000. The court recently consolidated the complaints and selected
a lead plaintiff and counsel. A consolidated amended complaint was filed in
April 2001.

On November 17, 2000, a derivative lawsuit was filed by a purported Sagent
shareholder in the Superior Court of California. On February 9, 2001, a second
derivative lawsuit was filed. The complaints name certain of our present and
former officers and directors as defendants. The principal allegation of the
complaints is that the defendants breached their fiduciary duties to Sagent.

The uncertainty associated with unresolved lawsuits could harm our business and
financial condition. The continued defense of the lawsuits may result in the
diversion of our managements time and attention away from business operations.
The lawsuits could also have the effect of discouraging potential acquirers
from bidding for us or reducing the consideration they would otherwise be
willing to pay in connection with an acquisition. In addition, although we are
unable to determine the amount, if any, that we may be required to pay in
connection with the resolution of these lawsuits by settlement or otherwise,
the size of any such payment could seriously harm our financial condition.

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



16



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Our management team has not been with us for a significant length of time. Ben
C. Barnes, our Chief Executive Officer, joined us in August 2000, replacing
founder Ken Gardner. David Eliff, our Chief Financial Officer, joined us in
May 2000. Jack Peters, Senior Vice President, Sales Americas, Robert Flynn,
Senior Vice President, Marketing, Arthur Parker, President/General
Manager Europe, Middle East and Africa and Larry Scroggins, Senior Vice
President, Business Development, joined us in September 2000, November 2000,
January 2001 and February 2001, respectively. Most 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, in part, on equity incentives to attract and retain employees, and the
performance of our stock price may impair our ability to attract and retain
qualified personnel.

The market price of our common stock has fluctuated substantially since our
initial public offering in April 1999, and has experienced a significant
decline since the first quarter of 2000. We have relied historically on our
ability to attract and retain employees using equity incentives, and any
perception by potential or existing employees that our equity incentives are
less attractive could harm our ability to attract and retain qualified
employees.

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;
| | - |  | ----------------------------------------

17



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| |  |  | 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;                                                                                      
|
| |  |  | 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 software that we have licensed from Opalis S.A. to perform key
functions of our Sagent Automation product that automates common tasks in
managing data. We also rely on software we have licensed from Microsoft
Corporation to allow users to be able to customize the user interface provided
by our Sagent Design Studio product. These licenses may not continue to be
available to us on commercially reasonable terms. The loss of either of these
licenses could result in delays or reductions of shipments of our product suite
until equivalent software could be developed, identified, licensed and
integrated. If customers require the automation and/or the user interface
customization features when licenses for either of those is not available, they
may delay or decline to purchase our product suite.

Failure of commercial users to accept Internet solutions could limit our future
growth.

A key element of our strategy is to offer users the ability to access, analyze
and report information from a data server through a Web browser. Our growth
may be limited if businesses do not accept Internet solutions or perceive them
to be cost-effective. Continued viability of the Internet depends on several
factors, including:



| |  |  | Third parties abilities to develop new enabling technologies in a timely manner;
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | The Internets ability to handle increased activity;                             
|
| |  |  | The Internets ability to operate as a fast, reliable and secure network; and    
|
| |  |  | Potential changes in government regulation.                                      

Moreover, critical issues concerning the commercial use of the Internet,
including data corruption, cost, ease of use, accessibility and quality of
service, remain unresolved and may negatively affect commerce and communication
on the Internet. These issues will need to be addressed in order for the
market for our products and services to grow.

We have expanded our international operations but may encounter a number of
problems in managing overseas operations, which could limit our
future growth.

We may not be able to successfully market, sell, deliver and support our
products and services internationally. Our failure to manage our international
operations effectively could limit the future growth of our business.
International sales represented approximately 13% of our total revenue for the
year ended December 31, 2000 and 23% for the first six months ended June 30,
2001. We conduct our international sales through local subsidiaries in the
United Kingdom, Germany, France, Japan, Brazil, Asia/Pacific, Benelux, and
Australia and through distributor relationships in South Africa and Iberica.
The expansion of our existing international operations and entry into
additional international markets will require management attention and
significant financial resources.

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



18



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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.

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 have anti-takeover defenses that could delay or prevent an acquisition of
our company.

Provisions of our certificate of incorporation, bylaws, other agreements and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders. Our board of directors
could choose not to negotiate with an acquirer that it did not feel was in the
strategic interests of our company. If the acquirer was discouraged from
offering to acquire us, or prevented from successfully completing a hostile
acquisition by the anti-takeover measures, you could lose the opportunity to
sell your shares at a favorable price.




|        |                                                           
|------- | ----------------------------------------------------------
|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 That May Affect Results.

INTEREST RATE RISK

At June 30, 2001 we had cash and cash
equivalents totaling $11.5 million. If market interest rates
decline, then our interest income would decline accordingly.

FOREIGN CURRENCY EXCHANGE RATE RISK



19



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Substantially all of our revenue recognized to date has been denominated in
U.S. dollars and a significant portion of such revenue has been realized outside of
the United States. To the extent that we engage in international sales
denominated in U.S. dollars, an increase in the value of the U.S. 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 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.

EQUITY PRICE RISK

We do not own any significant public company equity investments. Therefore, we believe
we are not currently exposed to any direct equity price risk.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

From October 20, 2000 to November 27, 2000, several class action lawsuits were
filed in the United States District Court on behalf of the individual investors
who purchased our common stock between October 21, 1999 and April 18, 2000.
The claims allege that we misrepresented our prospects for 1999 and the first
quarter of 2000. The court recently consolidated the complaints and selected a
lead plaintiff and counsel. A consolidated amended complaint was filed in
April 2001.

On November 17, 2000, a derivative lawsuit was filed by a purported Sagent
shareholder in the Superior Court of California for the County of San Mateo.
On February 9, 2001, a second derivative lawsuit was filed in the Superior
Court of California for the County of Santa Clara. The complaints name certain
of our present and former officers and directors as defendants. The complaint
in Santa Clara County also named an investment bank retained by us and an
employee of that firm as defendants. We have also been named as a nominal
defendant. The principal allegation of the complaints is that the defendants
breached their fiduciary duties to us. In July 2001, the two cases were
coordinated for pretrial purposes in the Superior Court of California for the
County of Santa Clara.

From time to time, we may be involved in litigation relating to claims arising
in the ordinary course of business. We establish reserves for such claims when
a loss is probable and the amount of such loss is reasonably
estimable. As of June 30, 2001, no such claims were probable and
reasonably estimable.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)  Recent Sales of Unregistered Securities.

In January 2001, we issued an aggregate of 950 shares of our unregistered
common stock to eGlobal Technology Services Holdings Limited, valued at $3.5
million, in consideration for an additional 33% interest in an entity jointly
owned by us and eGlobal called Sagent (Asia Pacific) Pte. Ltd. We relied upon
Section 4(2) of the Securities Act in connection with the sale of the shares.
The investor represented that it had such knowledge and experience in financial
and business matters that it was capable of evaluating the merits and risks of
the investment.

In February 2001, we sold an aggregate of 5,750 shares of our unregistered
common stock at a price per share of $2.90 to certain investors for an
aggregate cash consideration of approximately $16.1 million, net of $0.6
million in offering costs. In connection with such sale, we also issued to
certain placement agents in consideration of services rendered warrants to
purchase 210 shares of our unregistered common stock at an exercise price of
$2.90 per share. We relied upon Regulation D, Rule 506, of the Securities Act
in connection with the sale of the shares and the issuance of the warrants.
The sale of shares of common stock and the issuance of the warrants were made
in compliance with all the terms of Rule 501 and 502 of Regulation D.

In August 2001, we sold an aggregate of 9,115 shares of our unregistered common
stock at a price per share of $1.84 to certain investors for an aggregate cash
consideration of approximately $16.0 million, net of $0.8 million in offering
costs. In connection with such sale, we also issued to certain placement
agents in consideration of services rendered warrants to purchase 456 shares of
our



20



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##### Table of Contents



unregistered common stock at an exercise price of $1.84 per share. We relied
upon Regulation D, Rule 506, of the Securities Act in connection with the sale
of the shares and the issuance of the warrants. The sale of shares of common
stock and the issuance of the warrants were made in compliance with all the
terms of Rule 501 and 502 of Regulation D.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Sagents Annual Meeting of Stockholders was held on June 12, 2001. At that
time, there were present in person or by proxy 25,432,295 shares representing
69% of the 36,512,762 shares entitled to vote. Stockholders elected two
directors nominated in the May 2, 2001 Notice of Annual Meeting and Proxy
Statement, incorporated herein by reference, to hold office for a term of three
years. Additionally, the stockholders ratified the appointment of KPMG LLP as
Sagents independent auditors for the year ending December 31, 2001, and
approved a 250,000 increase in number of shares available for issuance under
the 1999 Employee Stock Purchase Plan.

Result of stockholder voting were as follows:



| |    |                      
| | -- | ---------------------
| | 1. | Election of Directors

| |                |  |           |            |                |  |  |         | 
| | -------------- |  | --------- | ---------- | -------------- |  |  | ------- | 
| | Nominee        |  | Votes for |            | Votes withheld
| |                |  |           |            |               
| | Keith Maib     |  |           | 24,959,744 |                |  |  | 472,551 | 
|
|
|
|
| | Andre Boisvert |  |           | 25,028,840 |                |  |  | 403,455 | 



| |    |                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------
| | 2. | Proposal to ratify the appointment of KPMG
LLP as
independent auditors for the year ending December 31, 2001.

| |            |  |         |        |         |  |  |        | 
| | ---------- |  | ------- | ------ | ------- |  |  | ------ | 
| | For        |  | Against |        | Abstain
| |            |  |         |        |        
| | 25,364,988 |  |         | 46,490 |         |  |  | 20,817 | 



| |    |                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------
| | 3. | Increase in the number of shares authorized for issuance under 1999
Employee Stock Purchase Plan by 250,000.

| |            |  |         |         |         |  |  |        | 
| | ---------- |  | ------- | ------- | ------- |  |  | ------ | 
| | For        |  | Against |         | Abstain
| |            |  |         |         |        
| | 25,009,133 |  |         | 385,491 |         |  |  | 37,671 | 




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

No reports on
Form 8-K were filed during the quarter ended June 30, 2001.

Sagent filed a Form 8-K on August 7, 2001, relating to the closing of the
sale of 9.1 million shares of its common stock for an average price of $1.84
in a private placement.



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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 to be signed on its behalf
by the undersigned thereunto duly authorized.

|                       |                                                                                                                                         |            
|---------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | -----------
|                       | SAGENT TECHNOLOGY, INC.                                                                                                                
|                      
|Dated: August 14, 2001 | /s/                                                                                                                                     | David Eliff
|                       |                                                                                                                                        
|                       | David Eliff
Executive Vice President, Finance & Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)



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INDEX TO EXHIBITS

|          |  |                                                                                                                                                                          |  |  |  | 
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|NUMBER    |  | TITLE                                                                                                                                                                    |  |  |  | 
|          |  |                                                                                                                                                                          |  |  |  | 
|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(1)    |  | Sixth Amended and Restated Registration Rights Agreement, dated as of February 24, 1998, between the
Registrant and the parties named therein.                          
|         
|         
|         
|         
|4.3(1)    |  | Common Stock Registration Rights Agreement, dated as of September 14, 1998, between the Registrant and Robert
Hawk.                                                     
|         
|         
|         
|         
|4.4(1)    |  | Common Stock Rights Agreement dated February 15, 2001 between the Registrant and the parties named therein.                                                             
|         
|         
|         
|         
|4.5(1)    |  | Registration Rights Agreement dated January 19, 2001 between the Registrant and eGlobal Technology Holding
Limited.                                                     
|         
|         
|         
|         
|4.6(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)   |  | Amended and Restated 1995 Stock Plan and related agreements.                                                                                                            
|         
|         
|         
|         
|10.3(1)   |  | 1998 Stock Plan and related agreements.                                                                                                                                 
|         
|         
|         
|         
|10.4(1)   |  | 1999 Employee Stock Purchase Plan and related agreements.                                                                                                               
|         
|         
|         
|         
|10.5(1)   |  | 1999 Director Option Plan and related agreements.                                                                                                                       
|         
|         
|         
|         
|10.6(1)   |  | Master Equipment Lease Agreement, dated August 7, 1995, between the Registrant and Lighthouse Capital
Partners, L.P.                                                    
|         
|         
|         
|         
|10.7(1)   |  | Master Lease Agreement, dated as of September 26, 1998, between the Registrant and Dell Financial Services L.P.                                                         
|         
|         
|         
|         
|10.8(1)   |  | Loan and Security Agreement, dated as of July 16, 1997, between the Registrant and Venture Banking Group, a
division of Cupertino National Bank, and amendments thereto.
|         
|         
|         
|         
|10.9(1)   |  | Standard Office Lease, dated June 1, 1998, by and between the Registrant and Asset Growth Partners, Ltd., and
the First Amendment thereto.                              
|         
|         
|         
|         
|10.10(1)+ |  | Development and Licensing Agreement, dated January 22, 1997, between the Registrant and Abacus Concepts, Inc.                                                           
|         
|         
|         
|         
|10.11(1)+ |  | Microsoft License and Distribution Agreement, dated August 23, 1996, between the Registrant and Microsoft
Corporation.                                                  
|         
|         
|         
|         
|10.12(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.             
|         
|         
|         
|         
|10.13(1)  |  | Form of Sagent Technology, Inc. End User Software License Agreement.                                                                                                    
|         
|         
|         
|         
|10.14(1)+ |  | OEM Software License Agreement, effective March 31, 1998, between the Registrant and Siebel Systems, Inc.                                                               
|         
|         
|         
|         
|10.15(1)  |  | Form of Sagent Technology, Inc. Software Maintenance and Technical Support Agreement.                                                                                   
|         
|         
|         
|         
|10.16(1)  |  | Form of Sagent Technology, Inc. Agreement for Consulting Services.                                                                                                      
|         
|         
|         
|         
|10.17(1)  |  | Form of Sagent Technology, Inc. Agreement for Subcontractor Consulting Services.                                                                                        
|         
|         
|         
|         
|10.18(1)  |  | Form of Evaluation Agreement.                                                                                                                                           
|         
|         
|         
|         
|10.19(1)  |  | Note, dated February 1, 1998, of W. Virginia Walker.                                                                                                                    
|         
|         
|         
|         
|10.20(1)  |  | Note, dated February 1, 1998, of W. Virginia Walker.                                                                                                                    
|         
|         
|         
|         
|10.21(1)+ |  | Solution Provider Agreement, effective June 27, 1997, between the Registrant and Unisys Corporation.                                                                    
|         
|         
|         
|         
|10.22(1)  |  | Executive Change of Control Policy.                                                                                                                                     
|         
|         
|         
|         
|10.23(1)+ |  | Software License and Services Agreement, dated March 31, 1998, between the Registrant and Siebel Systems, Inc.                                                          
|         
|         
|         
|         
|10.24(1)  |  | Common Stock Purchase Agreement, dated February 28, 1999, between the Registrant and Klaus S. Luft.                                                                     
|         
|         
|         
|         
|10.25(1)  |  | Notes, dated February 5, 1999, between the Registrant and Tom Lounibos.                                                                                                 
|         
|         
|         
|         
|10.26(1)  |  | Note, dated March 15, 1999, of Kenneth C. Holcomb.                                                                                                                      



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|         |  |                                                                                                                                            |  |  |  | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|NUMBER   |  | TITLE                                                                                                                                      |  |  |  | 
|         |  |                                                                                                                                            |  |  |  | 
|        
|        
|        
|        
|10.27(1) |  | Nonexclusive International Software Value Added Reseller (VAR) Agreement, dated December 8, 1997, between
the Registrant and Opalis S.A.
|        
|        
|        
|        
|10.28(2) |  | Employment Agreement dated August 4, 2000 between the Registrant and Ben C. Barnes.                                                       
|        
|        
|        
|        
|10.29(2) |  | Offer letter dated May 9, 2000 between the Registrant and David Eliff.                                                                    
|        
|        
|        
|        
|10.30(2) |  | Note dated October 4, 2000 between the Registrant and Paul Wray.                                                                          
|        
|        
|        
|        
|10.31(2) |  | Common Stock Purchase Agreement dated February 15, 2001 between the Registrant and the parties named therein.                             
|        
|        
|        
|        
|10.32(3) |  | Service Agreement, dated January 1, 2001, between the Registrant and Arthur Parker.                                                       
|        
|        
|        
|        
|10.33(4) |  | Stock Purchase Agreement dated July 23, 2001 between the Registrant and the parties named therein.                                        



---





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



24