SAGENT TECHNOLOGY, INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
(Unaudited) 
(In thousands, except where noted) 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

    1. Description of Business and Summary of Significant Accounting Policies 

        Basis of Presentation 

        The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Company's financial position at September 30, 2002 and December 31, 2001, the operating results for the three and nine months ended September 30, 2002 and 2001, and cash flows for the nine months ended September 30, 2002 and 2001. 

        These financial statements and notes should be read in conjunction with Sagent's audited financial statements and notes thereto for the year ended December 31, 2001, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2002. The results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 

        Business 

        Sagent offers a complete business intelligence software platform that allows business users and Information Technology (IT) departments to work together to integrate, analyze, deliver and understand information. Sagent's technology and proven implementation methodology reduce the time and expense required to deploy custom business intelligence solutions. Sagent technology also forms the basis for multiple partner solutions that address the needs of specific vertical and functional application areas. 

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

        Principles of Consolidation 

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

        Use of Estimates 

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include accounting for litigation contingencies and the valuation of accounts receivable. Sagent's current estimated range of liability related to some of the pending litigation is based on claims for which we can estimate the amount and range of loss. Sagent analyzes current accounts receivable for a reserve for doubtful accounts based on historical bad debts, customer credit-worthiness, the current business environment and historical experience with the customer. The allowance includes specific reserves for accounts where collection is no longer probable. Actual results could differ from those estimates. 

        Foreign Currency Translation 

        The functional currencies of our foreign subsidiaries are their respective local currencies. Sagent translates the balance sheet accounts of the Company's foreign operations from foreign currencies into U.S. dollars at period-end exchange rates while income and expenses are translated at average exchange rates during the period. Gains and losses from translation adjustments are included in stockholders' equity in the consolidated balance sheet caption "Accumulated other comprehensive income (loss)". Currency transaction gains and losses on inter-company accounts stated in a currency other than the functional currency, are recognized in current operations and have not been significant to Sagent's operating results in any period. The effect of foreign currency rate exchange on cash and cash equivalents has not been significant in any period. 

        Cash and Cash Equivalents 

        Cash and cash equivalent include all highly liquid investments with an original maturity of three months or less at the time of purchase. Sagent's cash and cash equivalents at September 30, 2002 and December 31, 2001 consisted of deposits in banks and money market funds. 

        Restricted Cash 

        Certain of our lease agreements require us to provide standby letters of credit to guarantee payment. As of September 30, 2002, $775 of  standby letters of credit were issued against the restricted cash.

        Concentration of Credit Risk 

        Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. Sagent maintains its cash and cash equivalents with high quality financial institutions. Sagent maintains allowances for potential credit risks and for estimated future sales returns. Sales returns to date have not been material. Actual credit losses to date have been within management's expectations. As of September 30, 2002 and December 31, 2001, there were no customers with balances due to Sagent in excess of 10% of aggregate accounts receivable. 

        Property and Equipment 

        Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to five years. Depreciation commences upon placing the asset in service. Capital leases are recorded at the lesser of the fair value of the leased asset at the inception of the lease or the present value of the minimum lease payments as of the beginning of the lease term. Leased assets are amortized on a straight-line basis over the estimated useful life of the asset or the lease term. Leasehold improvements are amortized over the shorter of the useful life or the remaining lease term. Sagent reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 

        Goodwill 

        Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations. In 2001, Sagent amortized goodwill on a straight-line basis over its expected useful life ranging from one to five years. 

        Sagent adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and other Intangible Assets" on January 1, 2002. Sagent ceased amortization of goodwill effective January 1, 2002 and evaluates its goodwill for impairment, in accordance with Company's policy stated below. 

        Impairment of Long-Lived Assets and Goodwill 

        Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" became effective in 2002. In lieu of amortization, we are required to perform impairment reviews of our goodwill at least annually. 

        Sagent reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful lives of the assets are no longer appropriate. Factors considered important which could trigger an impairment review include, but are not limited to changes in economic and industry trends, changes in the strategies of the company in sales and marketing and research and development, changes in projected future operating results, changes in the mode of operations and the exit from facilities and significant declines in Sagent's stock price for a significant period of time. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures any impairment based on a projected discounted cash flow method using a discount rate commensurate with the risk inherent in th e Company's current business model. 

        The following table presents pro forma net loss per share information for the three and nine months periods ended September 30, 2001, adjusted to exclude the amortization related to goodwill that is no longer being amortized under SFAS No. 142: 

        Due to changes in the Company's overall business strategy, Sagent decided to close its Brazil office, and as a result impaired all of the goodwill related to Sagent Brazil of $728 during the three months ended September 30, 2002. The total asset impairments of $1,001 presented in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2002 also includes impairments of notes from shareholders. 

        Revenue Recognition 

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

        Statement of Position, 97-2, "Software Revenue Recognition" (SOP 97-2) was issued in 1997 by the American Institute of Certified Public Accountants (AICPA) and amended by Statements of Position 98-4 and 98-9. We adopted SOP 97-2 effective January 1, 1998. 

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

        Sagent recognizes revenue from sales of software licenses to end users upon contract execution, provided all shipment obligations have been met, fees are fixed or determinable, collection is probable, and vendor specific objective evidence exists to allocate the total fee between all delivered and undelivered elements of the arrangement. If vendor specific objective evidence does not exist to allocate the total fee to all delivered and undelivered elements of the arrangement, revenue is deferred until the earlier of a) when such evidence does exist for the undelivered elements, or b) when all elements are delivered. 

        Sagent's customers at times require consulting and implementation services which include evaluating their business needs, identifying the data sources necessary to meet these needs and installing the software solution in a manner that fulfills their needs. Our arrangements related to sales of software licenses generally do not include services that are essential to the functionality of the software. Where consulting services would be essential to the functionality of the licensed software, both the license revenue and the consulting service revenue are recognized as the services are performed. When licenses are sold together with consulting and implementation services, license fees are recognized upon shipment, provided that a) the above revenue recognition criteria are met, b) payment of the license fees is not dependent upon performance of the consulting services, and c) the services do not include significant alterations to the features and functionality of the s oftware. 

        Revenue for transactions with enterprise application vendors, OEMs, and distributors is generally recognized when the licenses are resold or utilized by the reseller and all related obligations on our part have been satisfied. However, if the contract stipulates a non-refundable royalty payment to be paid in advance of any resale, revenue is recognized upon execution of the contract, provided all other revenue recognition criteria have been met. 

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

        Deferred Revenue 

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

        Software Development Costs 

        Software development costs are included in product development and are expensed as incurred. After technological feasibility is established, material software development costs are capitalized in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed." The period between achieving technological feasibility, which Sagent has defined as the establishment of a working model, typically occurring when the beta testing commences, and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. No software development costs have been capitalized for the periods ended September 30, 2002 and December 31, 2001 since the timing of achieving technological feasibilities and general availability has not been materially different. 

        Stock-Based Compensation 

        Sagent accounts for stock issued to employees in accordance with Accounting Principles Board Opinion No. 25 ("APB 25") "Accounting for Stock Issued to Employees" as interpreted by FIN 44 "Accounting for Certain Transactions Involving Stock Compensation" and complies with the disclosure provision of SFAS Statement No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation". Under APB No. 25, compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price of the option. Stock compensation is being amortized over the vesting period of the individual awards in a manner consistent with the method described in FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option Award Plus." In addition, the Company accounts for stock issued to non-employees in accordance with the provisions of SFAS 123. Pursuant to SFAS 123, stock-based compensation is accounted for at the fair value of the equity instruments issued, or at the fair value of the consideration received, whichever is more reliably measurable. 

        Income Taxes 

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

        Net Loss Per Share 

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

        Reclassification 

        Certain amounts in the prior period condensed consolidated statements of operations were reclassified to conform with the current year presentation. 

        Recently Adopted Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. Since the requirement is to recognize the obligation when incurred, approaches that have been used in the past to accrue the asset retirement obligation over the life of the asset are no longer acceptable. Statement No. 143 also requires the enterprise to record the contra to the initial obligation as an increase to the carrying amount of the related long-lived asset (i.e., the associated asset retirement costs) and to depreciate that cost over the remaining useful life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e., accretion expense) and changes in the estim ated future cash flows underlying the initial fair value measurement. The provision of SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We do not expect the adoption of SFAS No. 143 to have a material effect on our consolidated results of operations or financial position. 

        In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of business. The provision will be effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. The Company adopted the provisions of SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material effect on our consolidated results of operations or financial position. 
 

NOTE 2. COMPREHENSIVE LOSS 

        Comprehensive income (loss) is the total of net income (loss) and all other revenues, expenses, gains and losses recorded directly in equity. Sagent's "other comprehensive loss" consists of foreign currency translation adjustments. There was no significant tax effect on the components of other comprehensive loss for the three and nine months period ended September 30, 2002 and 2001. 

NOTE 3. OTHER CURRENT ASSETS

     Other current assets consist of:

Included in prepaid licenses are licensed technologies purchased from third parties, which are integrated into our products and services prior to deployment. These licensed technologies are being amortized ratably over the term of the license, generally for a period of two years.  

NOTE 4. OTHER ASSETS 

Other assets are comprised of the following: 

        The investment in NetAcumen, prior to its acquisition by Responsys, was accounted for under the cost method. On January 16, 2002, Responsys, Inc. acquired 100% of NetAcumen, and NetAcumen became a wholly owned subsidiary of Responsys. As a result of the Responsys common stock Sagent received in the acquisition, Sagent's ownership interest in Responsys is 0.62% as of September 30, 2002. Sagent continues to account for its investment in Responsys under the cost method. During the three months ended September 30, 2002, Sagent recognized a $529 loss in investment in Responsys due to an other than temporary decline in the fair market value of the investment, which is included in other income (expense) in the consolidated statements of operations. For the three and nine months ended September 30, 2002, Sagent recorded total contract value of  $0 and $119 from sales to Responsys. For the three and nine months ended September 30, 2001, Sagent recorded total contract value of $31 from sales to NetAcumen. 

NOTE 5. LITIGATION 

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

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

        From October 20, 2000 to November 27, 2000, several class action lawsuits were filed in the United States District Court on behalf of the individual investors who purchased Company common stock between October 21, 1999 and April 18, 2000. The claims allege that the Company misrepresented its prospects for 1999 and the first quarter of 2000. Thereafter, the court consolidated the complaints and selected a lead plaintiff and counsel. A consolidated amended complaint was filed in April 2001. Sagent filed a motion to dismiss the consolidated amended complaint. On September 28, 2001, the court granted Sagent's motion, and gave the plaintiffs leave to amend the complaint. On December 28, 2001, the class plaintiffs filed a second amended complaint. Sagent filed a motion to dismiss that complaint on February 15, 2002. The hearing on Sagent's motion was held on June 3, 2002. On June 5, 2002, the Court issued an order granting in part and denying in part Sagent's motion to di smiss the second amended complaint. 

        Thereafter, the plaintiffs filed a third amended complaint. Sagent has moved to strike certain portions of that complaint on the grounds that those particular allegations were dismissed by the Court from the prior complaint. On August 26, 2002, the court sustained Sagent's motion to strike certain portions of the complaint. Sagent has answered the complaint. Because certain claims survived the motion to dismiss the prior complaint, and the discovery stay is no longer in effect for those allegations, the parties are engaging in discovery. 

        On November 17, 2000, a derivative lawsuit was filed by a purported Company shareholder in the Superior Court of California for the County of San Mateo (the "Fanucci Complaint"). On February 9, 2001, a second derivative lawsuit was filed in the Superior Court of California for the County of Santa Clara (the "Hu Complaint"). The complaints name certain of the Company's present and former officers and directors as defendants. The Hu Complaint also names an investment bank retained by the Company and an employee of that investment bank as defendants. The Company has also been named as a nominal defendant in each complaint. The principal allegation of the complaints is that the defendants breached their fiduciary duties to the Company through the dissemination of allegedly misleading and inaccurate information and other allegations. In July 2001, the two cases were coordinated for pretrial purposes in the Superior Court of California for the County of Santa Clara. The Company filed a motion to dismiss the Fanucci Complaint, on the grounds that, among other things, the plaintiff had failed to make a pre-suit demand on the board of directors as required by Delaware law. The officer and director defendants joined in that motion, and also moved to dismiss on the grounds that the complaint fails to allege the asserted causes of action against the individual defendants. Similar motions were filed concerning the Hu Complaint. The parties agreed to stay the Hu Complaint indefinitely, pending the outcome of the Fanucci matter, and the court entered an order staying the Hu Complaint on January 11, 2002. Thereafter, on January 16, 2002, the Fanucci plaintiff filed a motion to transfer and/or remand that case back to the Superior Court for San Mateo County where it was originally filed. The court heard oral arguments on the defendants' motion to dismiss the Fanucci Complaint, and the plaintiffs' transfer motion on January 28, 2002. On March 1, 2002, the court issued an order sustaining the Company's motion to dismiss, granting the plaintiff leave to amend the complaint, denying the plaintiff's motion to transfer and/or remand the Fanucci case to San Mateo County, and ordering the Company to produce a limited quantity of documents to the plaintiff. 

        The Fanucci plaintiff filed an amended complaint in April 2002. Sagent and the individual defendants each filed a motion to dismiss to that complaint. The Court heard oral argument on July 9, 2002 and thereafter sustained the motions to dismiss, holding that the nominal plaintiff did not have standing to litigate the complaint where he had failed to make a pre-suit demand on the Company's Board of Directors as required by Delaware law. The plaintiffs have not filed an amended complaint to date. 

        In October 2001, infoUSA, Inc. filed a complaint against Sagent in the District Court of Douglas County, Nebraska, seeking amounts infoUSA claims are owed under a license agreement between Sagent and infoUSA. The amount of the claim is $900,000, plus interest. A default judgment for the full amount of the claim was entered against Sagent on December 20, 2001, for failure by Sagent to respond to the initial complaint. Sagent filed a motion to set aside the default judgment in January 2002. On February 22, 2002, the court granted Sagent's motion to set aside the default judgment, and allowed Sagent to file its answer to the complaint. Currently, Sagent and infoUSA are engaged in pretrial discovery; no trial date has been set. 

        In November and December 2001, several class action lawsuits were filed in the United States District Court for the Northern District of California on behalf of investors who purchased Company common stock between May 11, 2001 and November 28, 2001. The complaints allege that the Company and certain of its officers and directors violated the Securities Exchange Act of 1934, as amended. Thereafter, the court consolidated the complaints and selected a lead plaintiff and counsel. A consolidated complaint was filed in April 2002. The complaint alleges that during the class period, the defendants caused the Company's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. Sagent filed a motion to dismiss that complaint on April 18, 2002. On August 14, 2002, the court issued an order sustaining Sagent's motion to dismiss, granting the plaintiff leave to amend the complaint. The plaintiffs have submitted papers to the Court stating their intent not to file an amended complaint.

        In February 2002, two derivative lawsuits were filed by purported Company shareholders in the United States District Court for the Northern District of California. The complaints name certain of the Company's present and former officers and directors as defendants. The principal allegation of the complaints is that the defendants breached their fiduciary duties to the Company through the dissemination of allegedly misleading and inaccurate information and other allegations. The cases have been consolidated and the plaintiffs have not yet filed a consolidated complaint. The defendants filed a notion to dismiss, which is currently scheduled to be heard by the Court on December 18, 2002.

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

        In March 2002, Sagent filed suit against MICROS Systems, Inc. ("MICROS") in Santa Clara County California alleging that MICROS had breached a contract to purchase from Sagent certain software and a related service agreement. The value of that contract is $136,000. MICROS removed the case to the United States District Court for the Northern District of California and the case was subsequently transferred to the United States District Court for the District of Maryland, where it is currently pending. MICROS has asserted a counterclaim against Sagent, alleging various torts and breaches of duties. MICROS' counterclaim seeks in excess of $1 million in damages. The parties are in the early stages of discovery.

        Sagent and Smart Online, Inc. ("Smart Online") entered into a Mutual OEM Agreement effective September 19, 2000. Disputes arose related to the relationship between the parties and Smart Online filed a lawsuit in North Carolina. Sagent filed a lawsuit in California and Smart Online filed a Cross-complaint in the California action. The parties entered into a Settlement and Mutual Release Agreement effective July 16, 2002, which terminated the relationship between the parties and waived and released all disputes without any cost to either party. 

        In connection with a dispute that arose with certain consultants over Sagent's operations in Brazil, in October 2002 Sagent entered into a Settlement Agreement with the Brazilian consultants and their consulting company. The consultants had filed a lawsuit against Sagent. The Settlement Agreement calls for Sagent to pay $400,000 to the consultants in full settlement of all claims, at which time the lawsuit will be dismissed. Sagent accrued the settlement amount as of September 30, 2002, and paid it  in October 2002, and Company expects the lawsuit to be dismissed shortly.

        In early 2000, the Company entered into a software license agreement with Mountain Energy Corporation ("MEC"). MEC filed for bankruptcy in October 2000. The Company recently received a letter from the MEC bankruptcy trustee alleging that the Company had recently received certain preferential payment and demanding that the Company disgorge those payments. The amount in controversy is approximately $1,040,000.

NOTE 6. RESTRUCTURING COSTS 

       In December 2001, Sagent implemented a restructuring plan aimed at streamlining the underlying cost structure to better position Sagent for growth and improved operating results. As part of the restructuring plan, Sagent consolidated the Florida facility and implemented a reduction in workforce of approximately 14% or 51 employees and contractors through March 31, 2002.

        During the second quarter of 2002, Sagent implemented a new restructuring plan to be executed during the three months ended September 30, 2002. The major element of the restructuring plan was to terminate certain employees; as a result, Sagent had a reduction in force by approximately 29% or 74 employees, which brought Sagent's total headcount to 184 worldwide. The reductions came from all areas of the Company, and the terminations were substantially completed by September 30, 2002. Sagent's Chief Executive Officer and President and its Executive Vice President and Chief Marketing Officer stepped down as part of this restructuring. Further, Sagent decided to proceed with closing its Brazil office and discontinuing its marketing services due to changes in the strategy of the Company. The purpose of the restructuring was to bring operating expenses in line with net revenues with the goal of achieving cash flow breakeven in the near future and strategically focusing the Company on its core business. 
 

    We incurred $4.9 million restructuring and related charges for the nine months ended September 30, 2002. As of September 30, 2002, the remaining restructuring accrual is summarized as follow: