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


FORM 10-K

     (Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

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 333-71369

SAGENT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

 
Delaware
94-3225290
  (State or other jurisdiction of incorporation or organization) 
(I.R.S. Employer Identification Number)

800 W. El Camino Real, Suite 300
Mountain View, CA    94040
(Address of principal executive offices including zip code)

(650) 815-3100
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value
(Title of Class)


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 [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 29, 2000 based on the closing sales price of the Company's Common Stock, as reported on The NASDAQ Stock Market, was approximately $5,229,000. Shares of Common Stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 29, 2000, Registrant had 29,985,111 shares of Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive in the Proxy statement for the Annual Meeting of Stockholders.

SAGENT TECHNOLOGY, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

TABLE OF CONTENTS

PART I

Item 1. Business

Item 2. Properties

Item 3. Legal Proceedings

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

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Results of Operations

Liquidity and Capital Resources

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

Signatures







PART I

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER "FACTORS THAT MAY AFFECT FUTURE RESULTS" UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN, OR INCORPORATED BY REFERENCE INTO, THIS REPORT.

ITEM 1. BUSINESS

     Sagent Technology is a provider of Real-time eBusiness 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 in real-time. Sagent's products and services provide a way for an organization's employees, customers, and partners to use the World Wide Web 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. We refer to our products as "Real-time eBusiness Intelligence" solutions because they enable organizations to rapidly make more informed, intelligent decisions and to spread that ability across the enterprise.

BACKGROUND

     Today, information about an organization's customers, products and operations is one of its most important strategic assets. In particular, as organizations have begun to pursue more complex operational strategies, their need for timely information has increased. In addition, as businesses continue to streamline their organizational structures to improve time to market and responsiveness to rapidly changing market conditions, decision making authority is expected to become more distributed, thus heightening the need for broader dissemination of information throughout the enterprise. Most recently, the rapid adoption of the Internet and the Web has given organizations the ability to share information internally and externally on a cost-effective basis and has dramatically increased the number of people who can receive and access information.

     To be successful in the Internet age, companies must use the World Wide Web to grow their top-line revenue-identifying, winning, and keeping successful customers-and to manage their bottom-line organizational performance-monitoring operational and financial data to track the "health" of their enterprise. Increased competition places a premium on finding and retaining customers, while reduced margins and shortened business cycles make it crucial to control costs and streamline operations. Organizations need to put all of their information assets to work to attract and retain customers, while at the same time increasing operational efficiencies.

     The Internet offers new ways of identifying, qualifying and selling to customers while they are at a company's web site, call center, or store location. Many businesses use data about customers' prior buying habits to target marketing activities and create compelling offers for new products or services. But this historical data only delivers part of the picture. Integrating the data businesses collect during each customer interaction with value-added external information-such as demographic, firmographic, and geographic content-provides a clearer picture of who a company's customers are and what they really need. This enables companies to improve customer relationships and identify new opportunities for selling, cross-selling, and up-selling.

     In addition to gaining a better understanding of customers, today's companies also require a clear picture of their own operations in order to succeed in the competitive environment of eBusiness. Enterprises need to understand exactly what is happening within their organization and use that knowledge to rapidly reshape and transform the way they run their business. Companies that cannot respond to changing market conditions will be quickly surpassed by their more nimble competitors.

     To improve the timeliness and quality of critical business decisions, companies must give front-line managers the ability to rapidly develop, track, and respond to key business metrics. Empowering employees to make better operational decisions requires an information supply chain that delivers a thorough understanding of business processes. Unfortunately, the critical business information companies need to facilitate strategic decision-making is often locked up in multiple, disparate applications, databases, and legacy systems.

SAGENT'S PRODUCTS

     Sagent provides Real-time eBusiness Intelligence solutions to help companies maximize revenue, reduce costs, and streamline business processes. These solutions include:

SOFTWARE PRODUCTS

     Our main product, the Sagent Solution, gathers data from a variety of sources, such as relational databases, mainframe databases, and the Internet, and organizes that data into a common structure or repository known as a data mart. A data mart is used to more efficiently manage a subset of corporate data focused on the needs of a specific group of users. Once data is organized into our data mart, the Sagent Solution product suite allows organizations to more efficiently analyze the data and provides access to the information through personal computers, reports, and, importantly, through Web browsers over the Internet. We also provide design, systems engineering and education services to facilitate successful customer implementations.

     The Sagent Solution includes a number of components:

     Customers purchase the Sagent Solution product suite for three primary reasons. First, it combines in one integrated product key functions that a customer requires, such as extracting information from multiple data sources and providing end-users with the capability to analyze information and publish reports. This saves time and money otherwise spent combining many different products from many different vendors. Second, the Sagent Solution product suite can handle a very large number of users and a very large amount of data. This allows our product suite to scale to the increasing numbers of employees or customers who need access to information from inside organizations or through the Internet. Third, the Sagent product suite is designed for the Internet. Sagent has invested significant resources in technology to rapidly distribute information over the Web.

     Through our December, 1999 acquisition of Qualitative Marketing Software, Inc (QMS), Sagent also provides tools and services for data quality, enhancement and profiling. These products enable our customers to supplement the data they already have with value-added external information-such as demographic, firmographic, and geographic content. This enables a number of important applications for marketing, customer service, and customer relationship management, including:

SERVICES

     To complement its product offering, Sagent also offers professional consulting and educational services to help customers achieve fast and full value from their implementation of the Sagent Solution. Sagent Professional Services, or SPS, provides a wealth of product and industry experience-from project definition and application development to deployment, training, and ongoing support.

MARKETING AND CUSTOMERS

     Sagent currently has more than 1,000 customers around the world and across such diverse industries as e-commerce, financial services, healthcare, insurance, and telecommunications. These include such market leaders as Sony Online Entertainment, MapQuest.com, GE Capital, Outpost.com, Ticketmaster, Kemper National Insurance, Royal & SunAlliance, United Healthcare and AT&T. Sagent has several strategic relationships, including ADP, Advent, CommerceOne, Compaq, EDS, IBM, Microsoft, Siebel and USinternetworking.

     Sagent is focused on building market awareness and acceptance of Sagent and its products as well as on developing strategic partnerships. Sagent's marketing strategy includes several components: image and awareness building, direct marketing to both prospective and existing customers, a strong Web presence, and marketing activities with key local and global partners. Sagent's corporate marketing strategy includes extensive public relations activities, corporate advertising, presentations at conferences and trade shows, and working with key analysts and other market influencers. Sagent's direct marketing activities include participation in selected trade shows and conferences, targeted advertising, direct mail efforts to existing and prospective customers, and local, regional and Web-based seminars. Sagent's corporate Web site is also used to generate leads for follow-up by Sagent's sales organization. Sagent's partner and channel marketing activities help to recruit, train, support and conduct cooperative marketing with technology partners, resellers and VARs. These programs help to foster strong relationships between Sagent and its partners. The marketing organization also provides a wide-range of programs, materials and events to support the sales organization in its efforts.

     The sales and marketing staff is based at Sagent's corporate headquarters in Mountain View, California. Sagent also has field sales offices in 29 locations around the United States.

PRODUCT DEVELOPMENT

     Sagent intends to continue making substantial investments in research and development and related activities to maintain and enhance the company's product lines. Product development is based upon a consolidation of the requirements from existing customers, technical support and engineering. The development group infrastructure provides documentation, quality assurance and delivery and support capabilities (as well as product design and implementation) for Sagent's products.

     Continued integration of the Sagent Solution platform products with the tools and services acquired from QMS will be a major development focus in 2000. There can be no assurance that Sagent will be able to complete these engineering activities in a timely or successfully manner, and the failure to do so could have a material adverse effect upon Sagent's business, operating results and financial condition.

COMPETITION

     Sagent operates in an intensely competitive, highly fragmented, and rapidly changing market. Sagent's current and potential competitors offer a variety of software solutions and generally fall within five categories:

     The variety of current and potential competitors, and the emerging nature of the market makes Sagent's competitive position uncertain. Sagent has experienced and expects to continue experiencing increased competition from current and potential competitors, many of whom have significantly greater financial, technical, marketing and other resources than Sagent. Such competitors may be able to devote greater resources to the development, promotion and sales of their products than Sagent, or to respond more quickly to changes in customer requirements and/or evolving technology. Sagent anticipates additional competition as other vendors enter the market and new products and technologies are introduced. Increased competition could result in price reductions, fewer customer orders, reduced gross margins, longer sales cycles and loss of market share, any of which could materially and adversely affect Sagent's business, operating results and financial condition.

     Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of Sagent's prospective customers. Sagent's current or future indirect channel partners may establish cooperative relationships with current or potential competitors of Sagent, thereby limiting Sagent's ability to sell its products through particular distribution channels. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. Such competition could materially adversely affect Sagent's ability to obtain new licenses, and maintenance and support renewals for existing licenses, on terms favorable to Sagent. Further, competitive pressures may require Sagent to reduce the price of its products, which could have a material adverse effect on Sagent's business, operating results and financial condition. There can be no assurance that Sagent will be able to compete successfully against current and future competitors, and the failure to do so could have a material adverse effect upon Sagent's business, operating results and financial condition.

     Sagent competes on the basis of the following factors:

     Sagent believes it presently competes favorably with respect to each of these factors. However, Sagent's market is still evolving and there can be no assurance that Sagent will be able to compete successfully against current and future competitors, and the failure to do so successfully could have a material adverse effect on Sagent's business, operating results and financial condition.

INTELLECTUAL PROPERTY

     Sagent currently relies primarily on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. Sagent also believes that factors such as the technological and creative skills of its personnel, new product developments, frequent product enhancements, name recognition and reliable product maintenance are essential to establishing and maintaining a technology leadership position.

     Sagent seeks to protect its software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. There can be no assurance that Sagent's patent application will result in the issuance of a patent, or if issued, will not be invalidated, circumvented or challenged, or that the rights granted thereunder, if any, will provide competitive advantages to Sagent or that any of Sagent's future patent applications, if any, will be issued with the scope of the claims sought by Sagent, if at all.

     There can be no assurance that others will not develop technologies that are similar or superior to Sagent's technology or design around any patent that may come to be owned by Sagent. Despite Sagent's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of Sagent's products or to obtain and use information that Sagent regards as proprietary. Policing unauthorized use of Sagent's products is difficult, and while Sagent is unable to determine the extent to which piracy of its software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect Sagent's proprietary rights as fully as do the laws of the United States. There can be no assurance that Sagent's means of protecting its proprietary rights in the United States or abroad will be adequate or that competitors will not independently develop similar technology.

     Sagent has entered into source code escrow agreements with a number of customers and indirect channel partners requiring release of source code. Such agreements provide that the contracting party will have a limited, non- exclusive right to use the code subject to the agreement in the event that:

     Sagent expects that software product developers will increasingly be subject to infringement claims as the number of products and competitors in Sagent's industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could:

     Such royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. In the event of a successful claim of product infringement against Sagent and its failure or inability to license the infringed or similar technology, Sagent's business, operating results and financial condition could be materially adversely affected.

     Finally, in the future Sagent may rely upon software that it may license from third parties, including software that may be integrated with Sagent's internally developed software and used in Sagent's products to perform key functions. There can be no assurance that these third-party software licenses will be available on commercially reasonable terms. Sagent's inability to obtain or maintain any third party software licenses could result in shipment delays or reductions until equivalent software could be developed, identified, licensed and integrated, which could have a material adverse effect on Sagent's business, operating results and financial condition.

EMPLOYEES

     As of December 31, 1999, Sagent had 320 employees, including 129 in sales and marketing, 70 in services and support, 91 in research and development and 30 in general and administrative functions. Sagent believes its employee relations are good. Sagent's success depends to a significant degree upon the continued contributions of its key management, engineering, sales and marketing personnel, many of whom would be difficult to replace.

     Sagent believes its future success will also depend in large part upon its ability to attract and retain highly skilled managerial, engineering, sales and marketing and finance personnel. Competition for such personnel is intense, and there can be no assurance that Sagent will be successful in attracting and retaining such personnel. The loss of the services of any of the key personnel, the inability to attract or retain qualified personnel in the future, or delays in either hiring required personnel, or the rate at which new people become productive, particularly sales personnel and engineers, could have a material adverse effect on Sagent's business, operating results and financial condition.

ITEM 2. PROPERTIES

    Sagent's principal offices currently occupy approximately 34,000 square feet in Mountain View, California pursuant to a lease which expires in October 2003. Sagent leases research facilities in Boulder Colorado and office space in Clearwater Florida and has 29 short-term executive suites leases in North America, including locations in: 


    o California                             o New Jersey
    o Colorado                               o New York
    o Connecticut                            o Ohio
    o Florida                                o Ontario
    o Georgia                                o Pennsylvania
    o Illinois                               o Texas
    o Maryland                               o Virginia
    o Kansas                                 o Washington
    o Massachusetts                          o Wisconsin
    o Michigan

    Sagent believes that its facilities are adequate for the next 12 months and that, if required, suitable additional space will be available on commercially reasonable terms to accommodate expansion of Sagent's operations.

ITEM 3. LEGAL PROCEEDINGS

     On March 22, 1999 Timeline, Inc. filed a complaint against Sagent in Federal District Court alleging that Sagent's DMS product suite infringes one or more of the claims of a Timeline patent. Sagent filed its original answer to the Complaint and asserting, among other things, that the Timeline patent was invalid and unenforceable. Sagent is presently rigorously defending the suit. The Lawsuit has been set for trial on July 10, 2000.

     On December 23, 1999, QMS and Sagent were served with a demand for arbitration prepared by the Corum Group Ltd. ("Corum"). The arbitration demand was filed with the American Arbitration Association in Seattle, and has been assigned the file number 75 181 004485 99. In its demand, Corum claims that QMS breached an agreement to convey to Corum a certain percentage of the consideration received by QMS as a result of its acquisition by Sagent. QMS had terminated the contract in question, which had involved the provision of strategic counseling services by Corum to QMS, in 1998. The arbitration demand does not specify any damages figure; however, shortly before the arbitration demand was served, Corum presented QMS with an invoice for 99,718 shares of Sagent stock. No date has been set for the arbitration. Sagent is currently investigating the allegations of the arbitration demand.

     From time to time, Sagent may be involved in litigation relating to claims arising out of its ordinary course of business. Sagent provides for costs relating to these matters when a loss is probably and the amount is reasonably estimable. Appropriate reserves have been established for such claims. Sagent believes that, inlcuding the matters described above, there are no claims or actions pending or threatened against Sagent, the ultimate disposition of which would have a material impact on Sagent's financial position or results of operations.

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

     We did not submit any matters to a vote of security holders during the fourth quarter of fiscal 1999.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our Common Stock is traded on the National Market of The Nasdaq Stock Market under the symbol "SGNT." The following table lists the high and low closing sales prices of our Common Stock for the periods indicated. 


                                                        High       Low
                                                      --------- ---------
Year Ended December 31, 1999:
  Fourth Quarter.....................................   $29.94     $7.88
  Third Quarter......................................   $13.50     $8.31
  Second Quarter.....................................   $15.56     $6.38

     At February 29, 2000, there were approximately 329 stockholders of record of our Common Stock, as shown in the records of our transfer agent.

     We have never declared or paid cash dividends on our Common Stock. We expect to retain future earnings, if any, for use in the operation of our business and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

     The following selected consolidated financial data are qualified by reference to, and should be read in conjunction with, Sagent's Consolidated Financial Statements and related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this From 10-K. 


                                            Year Ended December 31,
                             --------- ----------------------------------------
                               1999      1998       1997      1996      1995
                             --------- --------- ---------- --------- ---------
                                      (in thousands, except per share data)
Net revenues................  $48,001   $25,001    $12,322    $2,917    $1,438
Net income (loss)........... ($12,092) ($15,056)   ($7,188)  ($6,854)      $84
Net income (loss) per
common share:
  Basic.....................   ($0.54)   ($2.50)    ($1.46)   ($1.89)    $0.04
  Diluted...................   ($0.55)   ($2.60)    ($1.43)   ($1.89)    $0.04
Total assets................  $66,704   $18,617    $11,586    $7,577      $532
Long-term obligations.......   $1,491    $4,062     $5,363    $2,782      $224
Retained earnings
  (accumulated deficit)..... ($43,237) ($31,145)  ($16,089)  ($8,901)      $93

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF SAGENT TECHNOLOGY, INC., WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "FACTORS THAT MAY AFFECT FUTURE RESULTS," "BUSINESS" AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.

The information required by this item is set forth in the section of Management's Discussion and Analysis of Financial Condition and Results of Operations Captioned "Disclosures about Market Rate Risk."

All statements, trend analysis and other information contained in the following discussion relative to markets for Sagent's products and trends in revenues, gross margins and anticipated expense levels, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend" and other similar expressions constitute forward-looking statements. These forward-looking statements are subject to business and economic risks and uncertainties, and Sagent's actual results of operations may differ materially from those contained in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors" as well as other risks and uncertainties referenced in this prospectus.

OVERVIEW

     Sagent Technology is a provider of Real-time eBusiness Intelligence Solutions that enable enterprises to win, retain, and grow new customers and improve operational effectiveness. Sagent develops, markets, and supports products and services that help businesses collect, analyze, understand, and act on customer and operational information in real-time. Sagent's products and services provide a way for an organization's employees, customers, and partners to use the World Wide Web 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. We refer to our products as "Real-time eBusiness Intelligence" solutions because they enable organizations to use our software and services to rapidly make more informed, intelligent decisions and to spread that ability across the enterprise. Sagent was incorporated in April 1995, and began selling the first products during the fourth quarter of 1996.

Business Combinations

     Sagent has made a number of acquisitions. On December 11, 1999, we completed our merger with Qualitative Marketing Services, Inc. (QMS), a company that delivers real-time value added customer information and marketing services on the web. In connection with this transaction Sagent issued approximately 2.5 million shares of common stock to acquire all outstanding stock of QMS and assumed all options to purchase QMS stock. The transaction was accounted for as a pooling of interests and all of Sagent's historical financial statements have been restated to reflect the acquisition. QMS was formed and incorporated in 1994.

    During 1999 and 1998 Sagent acquired a number of companies which were accounted for as a purchase transactions, including:

     Sagent's consolidated revenues increased to $48.0 million, $25.0 million and $12.3 million in 1999, 1998, and 1997, respectively. Sagent had consolidated net losses of $12.1 million, $15.1 million and $7.2 million in 1999, 1998 and 1997, respectively, and total stockholders' equity and accumulated deficit of $43.4 and $43.2 million, respectively as of December 31, 1999. Although revenues have grown significantly during these periods, there can be no assurance that such growth will continue, nor that Sagent can achieve or sustain profitability in the future.

     Sagent sells its software products directly to end user customers through our direct sales force and through indirect channel partners such as enterprise application vendors, resellers and distributors. Enterprise application vendors generally integrate our products with their applications and will embed them into their products or resell them with their products. Our other indirect channel partners, principally resellers and distributors, sell our software products to end user customers. Sagent's revenues are derived primarily from license fees for software products and to a lesser extent, fees for services relating to the software products, including consulting, training, software and data updates, technical support and real time marketing services on the web.

     License revenues from product sales directly to end user customers are recognized upon shipment of the product, after execution of a license agreement or a definitive purchase order, provided no significant vendor obligation exists, the fee is fixed and determinable, and collection is deemed probable. If an acceptance period is provided, revenue is recognized upon the earlier of customer acceptance or the expiration of that period. Generally, Sagent recognizes license revenues from enterprise application vendors based on sell-through of Sagent's products. However, if the contract stipulates an advance, non-refundable royalty payment, revenue is recognized upon execution of the contract.

     Service revenues from consulting and training are recognized as the services are provided. Service revenues from maintenance and data updates are recognized on a straight-line basis over the term of the related agreement, which are typically one to three years. Service revenues are charged separately from licenses.

     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. Sagent adopted SOP 97-2 effective January 1, 1998. Based on our reading and interpretation of SOPs 97-2, 98-4 and 98-9, we believe our current revenue recognition policies and practices are materially consistent with SOPs 97-2, 98-4, and 98-9.

     Sagent sells its products outside of the United States through its subsidiaries located in the United Kingdom, France, Germany, Japan, and through our distributors in Benelux, Spain, and South Africa. Revenues from licenses and services to customers outside the United States represented approximately $5.9 million, and $1.4 million, in 1999 and 1998, respectively. Revenues outside of the United States were not significant in 1997.

     Historically, as a result of the comparatively lower international sales activities and the absence of significant exchange rate fluctuation, Sagent's business, financial condition and operating results have not been materially affected by exchange rates.

     Sagent has agreements with its distributors in Spain, Benelux, and the Pacific Rim under which the Sagent has an option to acquire such distributors. Any such acquisition may have the effect of diluting existing stockholders, reducing Sagent's available cash for working capital and other purposes, requiring substantial management attention, or increasing operating, amortization and integration expenses.

     In December 1999, Sagent entered into joint venture and distributor agreements with eGlobal Technology Services Pte. Ltd, a Singapore holding company. Under the terms of the joint venture agreement, Sagent and eGlobal agreed to form distributors in eight Pacific Rim countries. eGlobal and Sagent, agreed to equity funding obligations totaling $4 million and $1 million, respectively in exchange for which eGlobal and Sagent will receive ownership interests of 80.01% and 19.99%, respectively in each of the distributors. Revenues from licenses and services sold to eGlobal during 1999 were $1 million.

RESULTS OF OPERATIONS FISCAL YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

     The following table sets forth certain statement of operations data as a percentage of total revenues for the periods indicated: 

                                                     Years Ended December 31,
                                                 --------------------------------
                                                   1999       1998        1997
                                                 ---------  ---------  ----------
Revenues:
  Licenses......................................     71.1 %     62.4 %      69.9 %
  Services......................................     28.9       37.6        30.1
                                                 ---------  ---------  ----------
     Total revenues.............................    100.0      100.0       100.0
                                                 ---------  ---------  ----------
Cost of revenues:
  Licenses......................................      5.9        2.4         1.6
  Services......................................     15.2       27.5         8.4
  Amortization of abandoned development
    projects....................................      3.3         --         --
                                                 ---------  ---------  ----------
     Total cost of revenues.....................     24.5       29.8        10.0
                                                 ---------  ---------  ----------
Gross profit....................................     75.5       70.2        90.0
                                                 ---------  ---------  ----------
Operating expenses:
  Sales and marketing...........................     56.0       63.7        54.6
  Research and development......................     26.0       33.7        40.3
  General and administrative....................     10.6       22.9        52.0
  Merger and integration charges................      9.7         --         --
  Acquired in-process research
    and development.............................       --        9.7         --
                                                 ---------  ---------  ----------
     Total operating expenses...................    102.3      130.0       146.9
                                                 ---------  ---------  ----------
Loss from operations............................    (26.7)     (59.8)      (56.9)
Other income (expense), net.....................      2.1       (1.1)       (0.3)
                                                 ---------  ---------  ----------
Loss before income taxes........................    (24.6)     (60.9)      (57.2)
Income tax expense (benefit)....................      0.5       (0.7)        1.1
                                                 ---------  ---------  ----------
Net loss........................................    (25.2)%    (60.2)%     (58.3)%
                                                 =========  =========  ==========

REVENUES

     Sagent's total revenues increased to $48.0 million, $25.0 million and $12.3 million in 1999, 1998 and 1997, respectively, representing increases of $23.0 million or 92% from 1998 to 1999 and $12.7 million or 103% from 1997 to 1998. Sagent had no customer that accounted for more than 10% of its revenues in 1999, 1998, or 1997.

     License revenues increased to $34.1, $15.6 million and $8.6 million in 1999, 1998 and 1997, respectively, representing increases of $18.5 million or 119% from 1998 to 1999 and $7.0 million or 81% from 1997 to 1998. These increases were primarily due to increased acceptance of the Sagent Solution, expansion in the domestic and international direct sales organization and expansion in the reseller channels resulting in increases in the number of licenses sold and average transaction size. Sagent anticipates that license revenues, which have represented a significant portion of Sagent's total revenues, will continue to represent the substantial majority of its revenues for the foreseeable future.

     Service revenues were $13.9 million, $9.4 million and $3.7 million in 1999, 1998 and 1997, respectively, representing increases of $4.5 million or 48% from 1998 to 1999 and $5.7 million or 154% from 1997 to 1998. These increases were due to increases in all components of service revenues - consulting, training and maintenance related to the increase in the number of licenses sold and the increased average transaction size. Training and consulting services relating to the acquisition of Talus further increased service revenues from 1997 to 1998 and 1998 to 1999.

COST OF REVENUES

     Cost of revenues from license sales consists primarily of royalties, product packaging, shipping, media and documentation. Cost of revenues from license sales was $2.8 million, $.6 million and $.2 million in 1999, 1998 and 1997, respectively, representing 8.2%, 3.8% and 2.3% of license revenue in the respective periods. The absolute dollar increases were primarily due to increased license revenue. The percentage increases resulted from increased costs for royalties and documentation.

     Cost of services consists primarily of costs associated with personnel, and third parties performing these services and fees to data providers for data updates. Cost of service revenues was $7.3 million, $6.9 million, and $1.0 million in 1999, 1998 and 1997, respectively, representing 52.6%, 73.2%, and 28.1% of services revenue in the respective periods. The absolute dollar increases were primarily due to increases in technical support staff and consultants added in 1998 as a result of the Talus acquisition. The percentage decrease from 1998 to 1999 was due to improved utilization of consulting personnel and a reduced reliance on outside consultants to provide consulting and training services after the acquisition of Talus. The percentage increase from 1997 to 1998 was due to the increased infrastructure costs associated with supporting the Talus professional consultants. Sagent expects these costs will continue to grow in absolute dollars for the foreseeable future.

    Amortization related to abandoned development projects. During 1999, QMS abandoned certain product development projects as changes in technology and competitive factors eliminated their viability as successful products. Prior to 1999, certain software development costs related to these development projects had been capitalized. Upon abandonment of the development efforts, the carrying value of such development costs of $1.6 million was charged to cost of goods sold.

OPERATING EXPENSES

     Stock options granted below fair market value. During 1999 and 1998, employees of QMS were granted certain options at prices below fair value. Expenses of $2.8 million and $ .3 million related to the grant of these options were recognized during 1999 and 1998, respectively. Such expense was not significant during 1997. Such expense is included as operating expenses as follows: 



                                         Year Ended December 31,
                                         ---------------------
                                            1999       1998
                                         ---------- ----------
  Sales and marketing................       $1,262        $84
  Research and development...........        1,260        162
  General and administrative.........          233         16
                                         ---------- ----------
                                            $2,755       $262
                                         ========== ==========

     Sales and marketing expenses consist primarily of compensation, travel, marketing programs, and facilities. Sales and marketing expenses were $26.9 million, $15.9 million and $6.7 million in 1999, 1998 and 1997, respectively, representing 56.0%, 63.7%, and 54.6% of total revenue in the respective periods. The absolute dollar increases in 1999 and 1998 reflect the hiring of additional personnel in connection with building the direct and reseller channels, and increased sales commissions associated with increasing revenues. In addition, 1998 amounts, reflect the creation of user conferences, expanded advertising campaigns and design of the Enterprise Intelligence seminar series. The percentage decrease from 1998 to 1999 was attributable to the increase in revenue in 1999 and a slower level of increasing sales resources in the QMS group from the prior year. The percentage increase from 1997 to 1998 reflects the building of the QMS sales organization. Sagent believes that as it continues to expand its direct sales and presales support organization, its third-party partnering relationships and its indirect channel sales organization on a worldwide basis, sales and marketing expenses will continue to increase in absolute dollars, although such expenses may vary as a percentage of total revenues.

     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 were $12.5 million, $8.4 million and $5.0 million in 1999, 1998 and 1997, respectively, representing 26.0%, 33.7% and 40.3% of total revenues in the respective periods. The dollar increase in 1999 was due to a significant investment in the form of additional personnel to develop localization enhancements of existing products for foreign countries and the development of other software products. The absolute dollar increase in 1998 was primarily due the hiring of additional developers and increased contractor costs related to the localization of Sagent's software for use in Japan. The percentage decreases result from increasing revenues. Sagent believes that significant investment for research and development is essential to the Company's future success and will continue to commit substantial resources to research and development in the future. Sagent anticipates that research and development expenditures will continue to increase in absolute dollars, although such expenses may vary as a percentage of total revenues.

     General and administrative expenses consist primarily of personnel costs for Sagent's finance, human resources, information systems and general management as well as legal and bad debt reserves. General and administrative expenses were $5.1 million, $5.7 million and $6.4 million for 1999, 1998 and 1997, respectively, representing 10.6%, 22.9% and 52.0% of total revenues in the respective periods. The absolute dollar decreases were primarily due to increased efficiencies and reduced reliance on third party professional fees. The percentage decreases were attributable to reduced costs combined with increased revenues. Sagent expects general and administrative expenses to rise in absolute dollars as it expands staffing to support operations, but to decrease as a percentage of total revenue.

MERGER RELATED CHARGES

     As a result of the business combination with QMS on December 11, 1999, accounted for as a pooling of interests, Sagent incurred merger-related costs of $4.6 million. These costs included transaction costs, write-off of duplicate equipment and other assets, and severance pay and outplacement for nine employees. As of December 31, 1999 there was a balance of $4.1 million remaining as accrued merger related costs.

ACQUIRED IN PROCESS TECHNOLOGY

     As a result of the business combination with Talus in February 1998, Sagent acquired certain in-process technology. This technology under development consisted of analytical software applications for high technology, manufacturing, food service and hospitality industries. After considering such factors as degree of completion, technological uncertainties, costs incurred, and projected costs to complete, Sagent expensed $2.4 million of in-process technology and allocated $517 of the purchase price to additional intangible assets, primarily non-compete agreements and the value of an assembled workforce.

TAXES

     At December 31, 1999, Sagent had available net operating loss carryforwards for federal and state income tax purposes of approximately $26.6 million and $14.3 million, respectively. These carryforwards expire from 2003 to 2019. In addition, Sagent has net operating losses for federal and state purposes of approximately $5.0 million and $3.4 million, respectively, the tax benefit of which will be credited to equity when realized. At December 31, 1999, Sagent also had available research and development credit carryforwards for federal and state income tax purposes of approximately $1.0 million and $417, respectively. These carryforwards expire from 2010 to indefinitely.

     For federal and state tax purposes, a portion of Sagent's net operating loss carryforwards may be subject to certain limitation on annual utilization due to changes in ownership, as defined by federal and state tax law.

     Due to the uncertainty surrounding the realization of the deferred tax asset in future tax returns, Sagent has placed a valuation allowance against its net deferred tax assets. The difference between the statutory rate of approximately 40.0% (34% federal and 6.0% state, net of federal benefits) and the tax benefit of zero recorded by Sagent is primarily due to Sagent's full valuation allowance against its net deferred tax assets.

LITIGATION

     On March 22, 1999 Timeline, Inc. filed a complaint against Sagent in Federal District Court alleging that Sagent's DMS product suite infringes one or more of the claims of a Timeline patent. Sagent filed its original answer to the Complaint and asserting, among other things, that the Timeline patent was invalid and unenforceable. Sagent is presently rigorously defending the suit. The Lawsuit has been set for trial on July 10, 2000.

     On December 23, 1999, QMS and Sagent were served with a demand for arbitration prepared by the Corum Group Ltd. ("Corum"). The arbitration demand was filed with the American Arbitration Association in Seattle, and has been assigned the file number 75 181 004485 99. In its demand, Corum claims that QMS breached an agreement to convey to Corum a certain percentage of the consideration received by QMS as a result of its acquisition by Sagent. QMS had terminated the contract in question, which had involved the provision of strategic counseling services by Corum to QMS, in 1998. The arbitration demand does not specify any damages figure; however, shortly before the arbitration demand was served, Corum presented QMS with an invoice for 99,718 shares of Sagent stock. No date has been set for the arbitration. Sagent is currently investigating the allegations of the arbitration demand.

     From time to time, Sagent may be involved in litigation relating to claims arising out of its ordinary course of business. Sagent provides for costs relating to these matters when a loss is probably and the amount is reasonably estimable. Appropriate reserves have been established for such claims. Sagent believes that, inlcuding the matters described above, there are no claims or actions pending or threatened against Sagent, the ultimate disposition of which would have a material impact on Sagent's financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1999, Sagent had cash, cash equivalents and marketable securities totaling $38.2 million, a increase of $34.8 million from December 31, 1998. Since inception, Sagent has funded its operations primarily through private sales of equity securities, the use of equipment leases and a bank line of credit and the initial public offering of its common stock, not from cash generated by the business.

     Net cash used in operating activities was $7.6 million, $10.7 million and $5.2 million in 1999, 1998, and 1997, respectively. For such periods, net cash used in operating activities was primarily a result of funding ongoing operations, depreciation and a charge related to stock option compensation.

     Sagent's investing activities have primarily consisted of investments in and maturities of marketable securities, purchases and sales of property and equipment and acquisitions. Net cash used in investing activities was $25.4 million, $5.1 million, and $1.8 million in 1999, 1998 and 1997, respectively. Investing activities included $1.1 million associated with the acquisition of the distributor in the U.K in 1999. Investing activities included $2.7 million associated with the acquisition of Talus in 1998. Sagent will pay approximately $2.8 million in 2000 associated with the 1999 acquisition of its distributors in France and Germany and $1 million associated with a joint venture providing distributor services in the Pacific Rim. Sagent expects that such acquisitions will continue if and business conditions warrant in countries where Sagent has a presence.

     Sagent's financing activities have primarily included sales of stock and the use of equipment lease lines. During 1999, Sagent's net proceeds from the initial public offering of its stock totaled $46.3 million. In addition, proceeds from the exercise of stock options and warrants totaled $2.5 million, $.4 million and $.2 million in 1999, 1998 and 1997, respectively. Proceeds from the issuance of preferred stock totaled $10.4 million and $5.2 million in 1998 and 1997, respectively. During 1998 and 1997 capital leases financed the acquisition of property and equipment, primarily computer hardware and software, and leasehold improvements and furniture. Proceeds from such leases totaled $4.3 million and $1.2 million, in 1998 and 1997, respectively. Capital lease payments were $4.9 million, $.8 million, $.6 million in 1999, 1998 and 1997, respectively.

     During 1999, Sagent entered into a $4 million line of credit agreement with a bank collateralized by the assets of Sagent. The line consists of 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 bear interest at the bank's prime rate, 8.5% at December 31, 1999. As of December 31, 1999 there were no advances on the line of credit. The line expires in April 2000.

     Sagent believes that the net proceeds from the offering, together with existing sources of liquidity, will be sufficient to meet its working capital and anticipated capital expenditure requirements for at least the next 12 months. Thereafter, Sagent may require additional funds to support its working capital requirements or for other purposes, and may seek, even before such time, to raise additional funds through public or private equity financing or from other sources. There can be no assurance that additional financing will be available at all, or that if available, such financing will be obtainable on terms acceptable to Sagent or that are not dilutive to its stockholders.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY UNCERTAIN

     You should not rely on forward-looking statements in this form 10-K. This Form 10-K also contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions to identify such forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10- K. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described below and elsewhere in this Form 10-K.

LIMITED OPERATING HISTORY , UNCERTAINTY OF FUTURE OPERATING RESULTS

     We commenced operations in June 1995 but we did not begin selling our first products until the fourth quarter of 1996, and a number of new products and new versions of existing products were subsequently introduced. As a result, we have experienced the risks and difficulties frequently encountered by early stage companies, particularly companies in new and rapidly evolving markets. We incurred net losses and losses from operations for the period ended December 31, 1995 and each of year ended thereafter. As of December 31, 1999, we had an accumulated deficit of approximately $43.2 million. Since inception, we have funded our business primarily from the sale of our stock and by borrowing funds, not from cash generated by our business We expect to continue to incur significant sales and marketing, research and development and general and administrative expenses Although our revenues have grown in each year since formation, we cannot be certain that we will sustain or increase our revenues or improve our operating results in the future.

QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY

     We believe that quarter-to-quarter comparisons of our operating results are not a good indication of future performance. Although our operating results have generally improved from quarter to quarter in the past, our future operating results may not follow any past trends. It is likely that in some future quarter our operating results may be below the expectation of public market analysts and investors due to factors beyond our control, and as a result, the price of our common stock may fall.

     Factors which may cause our future operating results to be below expectations and cause our stock price to fall include:

     We plan to significantly increase our operating expenses to expand our administration, consulting and training, maintenance and technical support, research and development and sales and marketing groups. Our operating expenses are based on our expectations of future revenues and are relatively fixed in the short term. If revenues fall below our expectations in any quarter and we are not able to quickly reduce our spending in response, our operating results would be lower than expected and our stock price may fall.

WE MAY LOSE EXISTING CUSTOMERS OR BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO NOT DEVELOP NEW PRODUCTS

     If we are not able to maintain and improve our product line and develop new products that keep pace with competitive product introductions and technological developments, satisfy diverse and evolving customer requirements and achieve market acceptance, we may lose existing customers or be unable to attract new customers. We may not be successful in developing and marketing this new version, other product enhancements or new products that respond to technological advances by others on a timely or cost- effective basis, or that these products, if developed, will achieve market acceptance.

     We have experienced delays in releasing new products and product enhancements and may experience similar delays in the future. These 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.

CHANGES IN INTERNET TECHNOLOGY AND OPERATING SYSTEM STANDARDS MAY IMPEDE MARKET ACCEPTANCE FOR OUR PRODUCTS

     Rapidly changing Internet technology and operating system standards may impede market acceptance for our products. We have a software application known as WebLink that allows users to query, analyze and report business information from a Web browser. This product has been designed based upon prevailing Internet technology. If new Web technologies emerge that are incompatible with deployment of our WebLink applications, our WebLink product may become obsolete and existing and potential new customers may seek alternatives to our products. We may not be able to quickly adapt our products to any new Internet technology. Additionally, our products allow connectivity to databases on a variety of operating systems, including mainframes, AS/400, UNIX and Windows NT. However, our application server component currently runs only on the Windows NT operating system. Therefore, our ability to increase sales of our products will depend on the continued acceptance of the Windows NT operating system. To the extent that potential customers use UNIX operating systems as their application server, we would need to develop a UNIX product. The development of a UNIX product would require us to commit a substantial investment of resources, and we may not successfully introduce such a product on a timely or cost-effective basis, or at all, which could lead potential customers to choose alternatives to our products.

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 revenues 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.

     We are focusing our selling efforts on large, enterprise-wide implementations of our products, and we expect such sales to constitute an increasing portion of any future revenue growth. While we have devoted significant resources to promoting market awareness of our products and the problems such products address, we do not know whether these efforts will be sufficient to support significant growth in the market for Enterprise Intelligence products.

IF OUR RELATIONSHIPS WITH CHANNEL PARTNERS ARE NOT SUCCESSFUL AND IF WE CANNOT RECRUIT ADDITIONAL CHANNEL PARTNERS WE MAY NOT BE ABLE TO EXPAND OUR SALES

     In addition to our direct sales force, we rely on successful relationships with a variety of channel partners, such as enterprise application vendors, resellers and distributors, for licensing and support of our products in the United States and internationally. If we cannot maintain successful relationships with these partners and cannot recruit additional strategic partners, we believe that we will have difficulty expanding the sales of our products. Our enterprise application vendor partners resell our products incorporated in their own software application. In addition, our channel partners offer products of several different companies, including, in some cases, products that compete with our products. These strategic partners may not develop or customize our applications to their needs or devote adequate resources to selling our products.

     We intend to expand our relationships with strategic partners and to increase the proportion of our customers licensed through these indirect channels. We may not be able to maintain strategic partnerships and attract additional strategic partners that will market our products effectively and will be qualified to provide timely and cost-effective customer support and service. Further, our relationships with our strategic partners may not generate enough royalty revenue to offset the significant resources used to develop these channels. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Sales and Marketing."

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH SUCCESSFULLY OR SUSTAIN AND MANAGE GROWTH RATES WE HAVE EXPERIENCED IN THE PAST

     Our growth has placed, and our anticipated future growth will continue to place, a significant strain on our management systems and controls. If we cannot effectively establish and improve our processes we may not be able to manage our growth successfully or sustain and manage the growth rates we have experienced in the past.

     We have grown rapidly and will need to continue to grow in all areas of operation in order to execute our business strategy. Our total number of employees grew from 152 on December 31, 1998 to 320 on December 31, 1999, and we anticipate further significant increases in the number of employees. Sustaining our growth has placed significant demands on management as well as on our administrative, operational and financial resources and controls. In particular, we need to substantially upgrade our enterprise resource planning functions, including accounting, order entry and customer entry, which will become insufficient as we grow. We also will need to institute new systems such as human resource management and time and billing. See "Business -- Sales and Marketing."

WE INTEND TO EXPAND INTERNATIONAL OPERATIONS BUT WE MAY ENCOUNTER A NUMBER OF PROBLEMS IN DOING SO 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 12.2% of our total revenue for the year ended December 31, 1999. We conduct our international sales through local subsidiaries in the United Kingdom, Germany, France, Japan and Canada and through distributor relationships in, Benelux, South Africa and eight Pacific Rim countries. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources to open additional international offices and hire international sales personnel. Localizing our products is difficult and may take longer than we anticipate due to difficulties in translation and delays we may experience in recruiting and training international staff. In addition, we currently have limited experience in developing local versions of our products, as well as marketing, selling and supporting our products and services overseas. See "Business -- Sales and Marketing."

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 turn-key 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. See "Business -- Competition."

OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO OUR LENGTHY SALES AND IMPLEMENTATION CYCLES FOR OUR PRODUCTS WHICH COULD CAUSE OUR STOCK PRICE TO FALL

     Because our products and services have lengthy sales and implementation cycles, it is difficult for us to forecast the timing and recognition of revenues from sales of our products and services. Since we are unable to control many of the factors that will influence our customers' buying decisions, the lengthy sales cycle could cause our operating results to be below the expectations of analysts and investors, which could cause our stock price to fall.

     A key element of our strategy is to market our products and services to large organizations with significant data management and access needs. These customers take an extended time evaluating our products before purchasing them. The period of time between initial customer contact and a purchase order may span six months or more. Our products have had, and we expect them to continue to have, an even longer sales cycle in international markets than in the United States and Canada. During the evaluation period, a variety of factors may lead customers to not purchase or scale down orders of our products including:

     In addition, we often must provide a significant level of education to our prospective customers regarding the use and benefit of our products, which may cause additional delays during the evaluation and acceptance process. See "Business -- Sales and Marketing."

OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE

     Our future success depends upon the continued service of our executive officers and other key employees as well as our ability to hire a significant number of new employees. We are particularly dependent on the continued services of employees in our professional services and sales groups. Competition for these individuals is intense, and we may not be able to attract, assimilate or retain additional highly qualified personnel in the future.

     In particular, it would be difficult for us to replace the services of Kenneth C. Gardner, our co-founder, President and Chief Executive Officer, John E. Zicker, our co-founder, Executive Vice President, Technology, and Chief Technology Officer, Vince De Gennaro, our Executive Vice President, Sales, Malcolm G.R. Hobbs, Vice President, Marketing, and W. Virginia Walker, our Executive Vice President, Finance and Administration and Chief Financial Officer. We do not maintain "key-person" life insurance policies covering any of our employees.

OUR ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS AND DILUTE STOCKHOLDER VALUE

     We intend to make investments in or acquire complementary companies, products and technologies. We have limited organizational experience in these matters and will need to develop the relevant skills if we are to be successful in any such endeavor. Any development of these skills could consume management's time and other resources. If we buy a company, we could have difficulty in assimilating that company's operations. In addition, we may be unsuccessful in retaining the key personnel of the acquired company. Moreover, we currently do not know and cannot predict the accounting treatment of any such acquisition, in part because we cannot be certain what accounting regulations, conventions or interpretations may prevail in the future. If we acquire complementary technologies or products, we could experience difficulties assimilating the acquired technology or products into our operations. These difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses. Furthermore, we may have to incur debt or issue equity securities to pay for any future acquisitions, the issuance of which could be dilutive to our existing stockholders, and adversely affect the price of our common stock.

    We have no significant history of operations on a combined basis with QMS which we acquired in December 1999 in a stock exchange transaction. Accordingly, the historical financial statements and pro forma financial information presented in this From 10-k may not be indicative of the results that would have been obtained had the acquisition occurred prior to the commencement of the periods covered therein. We may not be successful in integrating the operations and personnel of QMS into our business, icorporating the QMS products and any other acquired technologies into our product lines, derive significant future sales from QMS products. We may also not be able to establish and maintain uniform standards, controls procedures and policies, or avoid the impairment of relationships with employees and customers as a result of changes in management. To the extent that we are unable to do these things, our business, financial condition and results of operations would be materially affected.

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 would 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:

     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 MAY NEED TO BRING INFRINGEMENT CLAIMS OR BE SUBJECTED TO INFRINGEMENT -- TIMELINE, INC. HAS FILED AN INFRINGEMENT SUIT AGAINST US

     Our intellectual property is important to our business. We expect that we could be subject to intellectual property infringement claims as the number of our competitors grows and the functionality of our applications overlaps with competitive offerings. These claims, even if not meritorious, could be expensive and divert our attention from operating our company. If we become liable to third parties for infringing their intellectual property rights, we would be required to pay a substantial damage award and to develop noninfringing technology, obtain a license or cease selling the applications that contain the infringing intellectual property. We may be unable to develop noninfringing technology or obtain a license on commercially reasonable terms, or at all. In addition, we may not be able to protect against misappropriation of our intellectual property. Third parties may infringe upon our intellectual property rights, we may not detect this unauthorized use and we may be unable to enforce our rights.

     If we become subject to litigation it could be costly and time consuming to defend and distract us from focusing on our business and operations.

     On March 22, 1999 Timeline, Inc. filed a complaint against Sagent in Federal District Court alleging that Sagent's DMS product suite infringes one or more of the claims of a Timeline patent. Sagent filed its original answer to the Complaint and asserting, among other things, that the Timeline patent was invalid and unenforceable. Sagent is presently rigorously defending the suit. The Lawsuit has been set for trial on July 10, 2000. See "Business - - - Legal Proceedings."

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 which 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.

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.

IF WE DO NOT KEEP PACE WITH TECHNOLOGICAL CHANGE OUR PRODUCT 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 an systems. Internet selling system technology is complex and new products enhancements can require long development and testing periods. If our products were to be incompatible with a 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.

OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES WILL HAVE SIGNIFICANT CONTROL OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TO YOUR VOTE

     Our executive officers and directors, together with their affiliates, beneficially own a significant percentage of our outstanding common stock following as of February 29, 2000. These stockholders, if acting together, will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or similar transactions even if other stockholders disagree.

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 UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS FOR US, CAUSE THE MARKET PRICE FOR SAGENT COMMON STOCK TO FALL AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK

     If our board of directors issues preferred stock potential acquirers may not make acquisition bids for us, our stock price may fall and the voting rights of existing stockholders may diminish as a result. Sagent's board of directors has the authority to issue up to 15,556,000 shares of preferred stock in one or more series. The board of directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. Sagent has no current plans to issue any shares of preferred stock.

WE HAVE BROAD DISCRETION HOW WE INVEST AND MAY NOT YIELD A FAVORABLE RETURN

     We intend to invest available funds for general corporate purposes, including working capital, capital expenditures and repayment of long-term indebtedness, and may use a portion to acquire other businesses, products or technologies. Our management may invest in ways with which the stockholders may not agree. Pending any such uses, we plan to continue to invest in investment-grade, interest-bearing securities. We cannot predict that such investments will yield a favorable return.

SHARES ELIGIBLE FOR FUTURE SALE COULD CAUSE OUR STOCK PRICE TO FALL

     If our stockholders sell substantial amounts of our common stock in the public, the market price of our common stock could fall. Such sales also might make it more difficult for Sagent to sell equity or equity-related securities in the future at a time and price that we deem appropriate. As of December 31, 1999 we had 27.9 million shares of common stock outstanding.

WE DO NOT INTEND TO PAY DIVIDENDS AND YOU MAY NOT EXPERIENCE A RETURN ON INVESTMENT WITHOUT SELLING SHARES

     We have never declared or paid any cash dividends on our capital stock. Therefore, you will not experience a return on your investment in our common stock without selling your shares since we currently intend on retaining future earnings to fund our growth and do not expect to pay dividends in the foreseeable future. See "Dividend Policy."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this item is set forth in our Financial Statements and Notes thereto beginning at page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

     None.

PART III

Certain information required by Part III is omitted from this report because Sagent will file a definitive proxy statement within 120 days after the end of its fiscal year pursuant to Regulation 14A (the "Proxy Statement") for its Annual Meeting of Stockholders, and the information included in the Proxy Statement is incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information concerning our executive officers as of December 31, 1999.

 
Name
Age
Positon
Kenneth C. Gardner
49
President, Chief Executive Officer and Director
John E. Zicke
43
Executive Vice President, Technology, Chief Technology Officer and Director
W. Virginia Walker
54
Executive Vice President, Finance and Administration, and Chief Financial Officer
Thomas M. Lounibos
43
Executive Vice President, Sales
Malcolm G.R. Hobbs
41
Vice President, Marketing
Shanda Bahles (a)(b)
44
Director
Richard W. Shapero(a)(b)
52
Director
Jeffrey T. Webber
47
Director
Klaus S. Luft
58
Director
Keith A. Maib
41
Director

    (a) Member of the Audit Committee.

    (b) Member of the Compensation Committee.

     Kenneth C. Gardner. Mr. Gardner has been President, Chief Executive Officer and a director since commencement of operations in June 1995. From March 1994 until March 1995, Mr. Gardner was Vice President of Products at Borland International, Inc., which has since changed its name to Inprise Corporation, an enterprise applications company. From February 1992 until March 1994, Mr. Gardner was President, Chief Executive Officer and a co- founder of ReportSmith, Inc., a database report applications company, which was purchased by Borland in 1994. Mr. Gardner is a director of ObjectSwitch Corp., Data Sage, Inc., CommerceOne Inc, and NetAcumen. Mr. Gardner received his B.S.C. degree in Finance from the University of Louisville.

     John E. Zicker. Mr. Zicker has been Executive Vice President, Technology, Chief Technology Officer and a director since Sagent's commencement of operations in June 1995. From March 1994 until May 1995, Mr. Zicker was Director of Client/Server Development at Borland International, Inc. From February 1992 until March 1994, Mr. Zicker was Vice President of Technology and a co-founder of ReportSmith, Inc. Mr. Zicker has 13 years experience in software development and image processing at NASA Ames Research Center, Lawrence Livermore Laboratories and the Stanford Linear Accelerator Center. Mr. Zicker received his B.S. degree in Electrical Engineering at the University of California at Davis and his M.S. degree in Electrical Engineering from the University of Wisconsin at Madison.

     W. Virginia Walker. Ms. Walker has been Executive Vice President, Finance and Administration, and Chief Financial Officer since January 1998. From June 1996 to January 1998, Ms. Walker pursued personal interests. From November 1995 until June 1996, Ms. Walker was Executive Vice President of Finance and Administration, Chief Financial Officer and Secretary of JTS Corporation, a publicly traded disk drive manufacturer. From May 1985 until September 1995, Ms. Walker worked at Scios Nova, Inc., a publicly traded biopharmaceutical company, where she held the positions of Vice President of Finance and Administration and Chief Financial Officer. Ms. Walker received her B.S. degree in Business Administration, Accounting from San Jose State University.

     Thomas M. Lounibos. Mr. Lounibos has been Executive Vice President, Sales and Marketing since January 1999. Mr. Lounibos was Sagent's Executive Vice President, Worldwide Sales, from October 1998 until January 1999 and was Sagent's Vice President, Sales from March 1996 until October 1998. From October 1995 until March 1996, Mr. Lounibos was Vice President of Sales for ParcPlace-DigiTalk Incorporated, an object-oriented programming tools company, and from November 1993 until October 1995 Mr. Lounibos was Vice President of Sales for DigiTalk, Incorporated, which was acquired by ParcPlace Incorporated. Prior to joining DigiTalk, Incorporated, Mr. Lounibos worked for Knowledgeware, Incorporated, a software company, where he served as Vice President of Sales--Western United States and Vice President of Marketing. Mr. Lounibos received his B.S. degree in Business Economics from the University of San Francisco. On March 6, 1999, Mr. Lounibos resigned.

     Malcolm G.R. Hobbs. Malcolm Hobbs has been Vice President, Marketing since April 1999. From July 1997 to April 1999, Mr. Hobbs was Vice President, Corporate Communications at Oracle Corporation. From 1993 to 1997 Mr. Hobbs held marketing and business development positions at Apple Computer, culminating in the position of Senior Director of Internet Marketing. From 1989 to 1992 Mr. Hobbs was Director of Product Management at Frame Technology. Prior to Frame Technology, Mr. Hobbs served in a variety of Product Marketing, Product Management, Marketing Communications and Business Development roles at Frame Technology, Interleaf, Inc. Ashton-Tate, and General Computer Corporation. Mr. Hobbs holds a B.A. from Occidental College in Diplomacy and World Affairs.

     Shanda Bahles. Ms. Bahles has been a director of Sagent since May 1995. Since May 1991, Ms. Bahles has been a General Partner of El Dorado Ventures, a venture capital firm. Ms. Bahles joined El Dorado Ventures as an associate in June 1987. From 1979 to 1985, Ms. Bahles held various engineering, marketing and management positions with Millennium Systems, Inc., a systems integration company, and Fortune Systems Corporation, a workstation manufacturer. Ms. Bahles is a director of Pilot Network Services, Inc., a publicly traded company, and Women.com Networks, Inc., Poet Holdings, Inc. and MS2, Inc., which are privately held companies. Ms. Bahles received her B.S.E.E. and M.B.A. degrees from Stanford University.

     Richard W. Shapero. Mr. Shapero has been a director of Sagent since May 1995. Since April 1993, Mr. Shapero has been a General Partner of Crosspoint Venture Partners, a venture capital firm. From January until June 1992, Mr. Shapero was Chief Operating Officer of Shiva Corporation, a networking company. Previously, he was a Vice President of Sun Microsystems, Inc., Senior Director of Marketing of AST Research, Inc. and held marketing and sales positions at Informatics General Corporation and UNIVAC's Communications Division. Mr. Shapero is a director of Covad Communications Group, Inc., a publicly traded company, and Digital Island, Inc., Diamond Lane Communications Corporation, NetBoost Corporation, Fabrik Communications, Inc., ObjectSwitch Corp., Jetstream Communications, Inc., AristaSoft Corporation and iBeam Broadcasting Corporation, which are privately held companies. Mr. Shapero received his B.A. degree in English from the University of California at Berkeley.

     Jeffrey T. Webber. Mr. Webber has been a director of Sagent since September 1995. Mr. Webber founded, and since January 1991 has served as President of, R.B. Webber & Company, Inc., a management consulting firm. From 1987 to January 1991, he was a partner of Edgar, Dunn & Company, a management consulting firm. Mr. Webber serves as a director of CommerceOne and Persistence Software, Inc., publicly traded companies, and, enCommerce, Inc. Spear Technologies, Inc., AvantGo, g Force Systems, Net Accumen, eGlyphs and Workwise Software, Inc., which are privately held companies. Mr. Webber received his B.A. degree in American Studies from Yale University.

     Klaus S. Luft. Mr. Luft is the founder and President of MATCH -- Market Access for Technology Services GmbH, a provider of sales and marketing services to high technology companies, since February 1994. Mr. Luft is also the founder, limited partner and President of ISAR-Vermogensverwaltung GbR mbH. Since August 1990, Mr. Luft has served as an International Advisor and Vice-Chairman of Goldman Sachs Europe Limited, an investment bank. From March 1986 to November 1989, Mr. Luft was Chief Executive Officer of Nixdorf Computer AG, a manufacturer of computer systems in Paderborn, Germany, where he also held various other executive positions in marketing, manufacturing and finance for more than 17 years. Mr. Luft is a director of Dell Computer Corporation, a publicly traded company. Mr. Luft received his German Arbitur in Bruchsal, Germany.

     Keith A. Maib. Mr. Maib is President, Chief Executive Officer and a Director of PennCorp Financial Group, a life insurance holding company. PennCorp is the parent company of Southwestern Life Insurance Company and Security Life and Trust Insurance Company. Mr. Maib joined PennCorp in July of 1998 to lead a turnaround and restructuring of the company, which is currently underway. He was previously Chief Financial Officer of Acordia, Inc., a property and casualty insurance broker, a partner at Coopers & Lybrand, the Chief Operating Officer of Borland, Inc., a software manufacturer and a partner at Price Waterhouse. Keith graduated in 1981 from the University of Kansas with a B.S. in Accounting.

BOARD OF DIRECTORS AND COMMITTEES

     Sagent's board of directors consists of seven directors divided into three classes with each class serving for a term of three years. At each annual meeting of stockholders, directors will be elected by the holders of the common stock to succeed those directors whose terms are expiring. Mr. Shapero and Ms. Bahles terms expire in 2000. Mr. Webber's term expires in 2001. Messrs. Gardner and Zicker terms expire in 2002. Mr. Maib's term expires in 2003.

     The board of directors has a compensation committee and an audit committee. The compensation committee, which is comprised of Ms. Bahles and Mr. Shapero, administers the amended 1995 stock option plan, the 1998 stock option plan and the 1999 employee stock purchase plan and all matters concerning executive compensation. The audit committee, which is comprised of Ms. Bahles and Mr. Shapero, approves Sagent's independent auditors, reviews the results and scope of annual audits and other accounting related services, and evaluates Sagent's internal audit and control functions. Each of these committees was established in February 1997.

DIRECTOR COMPENSATION

     Sagent does not pay any compensation to directors for serving in that capacity. It does reimburse directors for expenses incurred in attending board meetings. The board has the discretion to grant options to non-employee directors pursuant to the director option plan. See " -- 1999 Director Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The compensation committee is currently comprised of Ms. Bahles and Mr. Shapero. Neither of these individuals has at any time been an officer or employee of Sagent. Prior to formation of the compensation committee, all decisions regarding executive compensation were made by the full board of directors. No interlocking relationship exists between Sagent's board of directors or compensation committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

     Sagent's certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation shall not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for:

     These provisions are permitted under Delaware law.

     Sagent's bylaws provide that Sagent shall indemnify its directors and executive officers and may indemnify its other officers and employees and agents and other agents to the fullest extent permitted by law. Sagent believes that indemnification under its bylaws covers at least negligence and gross negligence on the part of indemnified parties. Sagent's bylaws also permit Sagent to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification.

     Sagent has entered into agreements to indemnify its directors and officers, in addition to indemnification provided for in Sagent's bylaws. These agreements, among other things, indemnify Sagent's directors and officers for certain expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Sagent, arising out of such person's services as a director or officer of Sagent, any subsidiary of Sagent or any other company or enterprise to which the person provides services at the request of Sagent. In addition, Sagent has obtained directors' and officers' insurance providing indemnification for certain of Sagent's directors, officers and employees for certain liabilities. Sagent believes that these provisions, agreements and insurance are necessary to attract and retain qualified directors and officers.

     At present, there is no pending litigation or proceeding involving any director, officer, employee or agent of Sagent where indemnification will be required or permitted. Sagent is not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item 11 is incorporated herein by reference to the information set forth under the caption "Executive Compensation" in the 2000 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item 12 is incorporated herein by reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 2000 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item 13 is incorporated herein by reference to the information set forth under the caption "Certain Relationships and Related Transactions" in the 2000 Proxy Statement.

PART IV

ITEM 14. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

SAGENT TECHNOLOGY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     The following are filed as a part of this Annual Report and included in Item 8:

(a)1. FINANCIAL STATEMENTS

Report of Independent Accountants

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders' Equity and Comprehensive Income

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(a)2. FINANCIAL STATEMENT SCHEDULE

Report of Independent Accountant

Schedule II--Valuation and Qualifying Accounts

(a)3. EXHIBITS

     On a Form 8-k dated November 30, 1999, filed on December 15, 1999 and amended on February 11, 2000, Sagent disclosed it's acquisitions of Sagent Technology, GmbH and Sagent France S.A.

     On a Form 8-k dated December 11, 1999, filed on December 22, 1999 and amended on February 28, 2000, Sagent disclosed it's acquisition Qualitative Marketing Services, Inc.





REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
Sagent Technology, Inc.

     In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows present fairly, in all material respects, the financial position of Sagent Technology, Inc. and its subsidiaries at December 31, 1999 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

/S/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
March 10, 2000





SAGENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 


                                                        As of December 31,
                                                      ---------------------
                                                         1999       1998
                                                      ---------- ----------
                           Assets
Current assets:
  Cash and cash equivalents.........................    $15,910     $3,383
  Marketable securities.............................     22,309         --
  Accounts receivable, net of allowance for
     doubtful accounts of $630 in 1999 and $508
     in 1998........................................     11,027      6,546
  Prepaid assets....................................      4,576      1,620
                                                      ---------- ----------
     Total current assets...........................     53,822     11,549
Property and equipment, net.........................      3,676      3,832
Goodwill and other intangible assets, net...........      7,895      2,543
Other assets........................................      1,311        693
                                                      ---------- ----------
     Total assets...................................    $66,704    $18,617
                                                      ========== ==========

               Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable..................................     $1,151     $2,899
  Accrued liabilities...............................     10,034      4,667
  Accrued merger costs..............................      4,109         --
  Deferred revenue..................................      5,910      2,535
  Current portion of capital lease
     obligations....................................        635      2,155
                                                      ---------- ----------
     Total current liabilities......................     21,839     12,256
Deferred revenue....................................      1,140        319
Long-term portion of capital lease
   obligations......................................        351      3,743
                                                      ---------- ----------
     Total liabilities..............................     23,330     16,318
                                                      ---------- ----------
Commitments and contingencies (Note 5)

Stockholders' equity:
  Convertible preferred stock, par value $.001
     per share; Authorized: 15,556 shares in 1999
     and 1998; Issued and outstanding: none in
     1999 and 14,544 in 1998........................         --         15
  Common stock, par value $.001 per share;
     Authorized: 70,000 shares in 1999 and
     25,000 shares in 1998; Issued and
     outstanding: 27,896 shares in 1999
     and 6,200 shares in 1998.......................         28          6
  Additional paid-in capital........................     89,135     33,844
  Notes receivable from stockholders................     (2,625)      (522)
  Accumulated deficit...............................    (43,237)   (31,145)
  Accumulated translation adjustment................         73        101
                                                      ---------- ----------
     Total stockholders' equity.....................     43,374      2,299
                                                      ---------- ----------
     Total liabilities and stockholders'
       equity.......................................    $66,704    $18,617
                                                      ========== ==========

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





SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 


                                                      Year Ended December 31,
                                                 --------------------------------
                                                   1999       1998        1997
                                                 ---------  ---------  ----------
REVENUES:
  Licenses......................................  $34,130    $15,613      $8,619
  Services......................................   13,871      9,388       3,703
                                                 ---------  ---------  ----------
     Total revenues, net........................   48,001     25,001      12,322
                                                 ---------  ---------  ----------
COST OF REVENUES:
  Licenses......................................    2,834        588         194
  Services......................................    7,315      6,870       1,040
  Amortization of abandoned development
    projects....................................    1,600         --         --
                                                 ---------  ---------  ----------
     Total cost of revenues.....................   11,749      7,458       1,234
                                                 ---------  ---------  ----------
Gross profit....................................   36,252     17,543      11,088
                                                 ---------  ---------  ----------
OPERATING EXPENSES:
  Sales and marketing...........................   26,862     15,920       6,729
  Research and development......................   12,466      8,431       4,969
  General and administrative....................    5,111      5,723       6,406
  Merger and integration charges................    4,646         --         --
  Acquired in-process research
    and development.............................       --      2,425         --
                                                 ---------  ---------  ----------
     Total operating expenses...................   49,085     32,499      18,104
                                                 ---------  ---------  ----------
Loss from operations............................  (12,833)   (14,956)     (7,016)
Interest income (expense).......................    1,005       (290)       (233)
Other income (expense)..........................       (1)         8         198
                                                 ---------  ---------  ----------
Loss before income taxes........................  (11,829)   (15,238)     (7,051)
Income tax expense (benefit)....................      263       (182)        137
                                                 ---------  ---------  ----------
Net loss........................................ ($12,092)  ($15,056)    ($7,188)
                                                 =========  =========  ==========

Net loss per share:
  Basic.........................................   ($0.54)    ($2.50)     ($1.46)
                                                 =========  =========  ==========

  Diluted.......................................   ($0.55)    ($2.60)     ($1.43)
                                                 =========  =========  ==========

Number of shares used in calculation of net
  loss per share:
  Basic.........................................   22,221      6,026       4,935
  Diluted.......................................   21,868      5,797       4,935

The accompanying notes are an integral part of these