##### 









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K/A


AMENDMENT NO. 1


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2004


Commission file number 0-26123


ONLINE RESOURCES CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                        
|------------------------------------------------------------------ |  | ---------------------------------------
|Delaware                                                           |  | 52-1623052                             
|(State or other jurisdiction of incorporation or
    organization) |  | (I.R.S. Employer Identification Number)
|                                                                  
|4795 Meadow Wood Lane, Suite 300                                   |  |                                        
|Chantilly, Virginia                                                |  | 20151                                  
|(Address of principal executive offices)                           |  | (Zip code)                             

(703) 653-3100


(Registrants telephone number, including area code)






Title of Each Class




x o


x


x o




DOCUMENTS INCORPORATED BY REFERENCE












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ONLINE RESOURCES CORPORATION


FORM 10-K


TABLE OF CONTENTS


|                                           |  |                                                                                                                      |    |      |    | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                           |  |                                                                                                                      |    | Page |   
|                                           |  |                                                                                                                      |    |      |   
|Amendment No. 1 Overview                   |  |                                                                                                                      | 2  |     
|PART I                                     |  |                                                                                                                      |    |     
|Item 1:                                    |  | Business Overview                                                                                                    |    |      | 2  | 
|Item 2:                                    |  | Properties                                                                                                           |    |      | 22 | 
|Item 3:                                    |  | Legal Proceedings                                                                                                    |    |      | 22 | 
|Item 4:                                    |  | Submission of Matters to a Vote of Security Holders                                                                  |    |      | 22 | 
|PART II                                    |  |                                                                                                                      |    |     
|Item 5:                                    |  | Market for the Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities |    |      | 23 | 
|Item 6:                                    |  | Selected Financial Data                                                                                              |    |      | 24 | 
|Item 7:                                    |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations, restated                  |    |      | 25 | 
|Item 7A:                                   |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |    |      | 37 | 
|Item 8:                                    |  | Consolidated Financial Statements and Supplementary Data                                                             |    |      | 37 | 
|Index to consolidated financial statements |  |                                                                                                                      | 37 |     
|Item 9:                                    |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                             |    |      | 61 | 
|Item 9A:                                   |  | Controls and Procedures                                                                                              |    |      | 61 | 
|PART III                                   |  |                                                                                                                      |    |     
|Item 10:                                   |  | Directors and Executive Officers of the Company                                                                      |    |      | 62 | 
|Item 11:                                   |  | Executive Compensation                                                                                               |    |      | 62 | 
|Item 12:                                   |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholders Matters                  |    |      | 62 | 
|Item 13:                                   |  | Certain Relationships and Related Transactions                                                                       |    |      | 62 | 
|Item 14:                                   |  | Principal Accountant Fees and Services                                                                               |    |      | 62 | 
|PART IV                                    |  |                                                                                                                      |    |     
|Item 15:                                   |  | Exhibits and Financial Statement Schedules                                                                           |    |      | 63 | 
|Signatures                                 |  |                                                                                                                      | 67 |     



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS










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Amendment No. 1 Overview






Accounting for Contingencies, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities.









PART I





Item 1.     Business
Overview




2



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our
    QuotienSM
    product line is designed for banks, credit unions and other
    depository financial institutions. We provide a fully integrated
    suite of web-based banking and payment services, giving clients
    a single point of accountability, an enhanced experience for
    their users and the marketing processes to drive Internet
    channel adoption. We also offer our electronic bill payment
    services on a stand-alone basis. Our bill payment service uses
    our patented payments gateway, which leverages the nations
    real-time electronic funds transfer, also known as EFT,
    infrastructure. By debiting end-users accounts in
    real-time, we are able to improve the speed, cost and quality of
    payments, while eliminating the risk that bills will be paid
    against unavailable funds. We process over $10 billion in
    bill payments annually.
|
| |  | Our
    IncurrentSM
    product line is designed for credit card issuers and processors.
    Cardholders may access their account information, view
    transactions, set up payments and perform other self-service
    functions. Additionally, we offer card issuers a low-cost,
    web-based inquiry service, which allows cardholders to clearly
    identify merchants in disputed card transactions. We also offer
    a web-based tool that improves collections of late and
    delinquent funds in a private, non-confrontational manner.
    Incurrent Solutions, Inc. (Incurrent), which we
    acquired in December 2004, developed our credit card services.
    We plan to adapt and offer our payment and relationship
    management services to credit card issuers and processors as
    well.                                                                                           
|
| |  | Our
    CertnFundsSM
    product line has been recently introduced and is designed for
    e-commerce providers, primarily payment acquirers and large
    online billers. These services, which enable real-time debit for
    a variety of web-originated consumer payments and fund
    transfers, use our patented EFT payments gateway. This gateway
    has operated for over 10 years as the backbone for our bank
    and credit union bill payment business. By routing their
    web-originated consumer payments through our CertnFunds
    platform, payment acquirers and billers can lower their
    transaction costs, and increase the speed and certainty of
    collections.                                                                                                                                                                                                                 





Our Industry






3



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| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | generate significantly higher revenues than offline customers by
    using more banking products and services and maintaining higher
    account balances;                                                                            
|
| |  | cost less to serve because online users tend to utilize more
    self-service functions and therefore interact with the more
    costly retail branch and call center service channels less
    frequently than offline customers; and
|
| |  | are less likely to move their accounts to other financial
    institutions than offline customers.                                                                                                                                    











| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | managing multiple technology vendors to provide account
    presentation, payments and other services;
|
| |  | providing integrated end-user support to an increasingly
    sophisticated client base;               
|
| |  | understanding how to evaluate and enhance channel profitability;
    and                              
|
| |  | maximizing the value of the channel by increasing adoption.                                           



4



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Our Solution




Our Technology Infrastructure.


Our Operating and Technical Expertise.


Our Integrated Marketing Process.


Our Support Services.


Our Strategy




Grow Our Client Base.


5



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Increase Adoption Rates.


Extend Target Markets. CertnFunds sm


Provide Additional Products and Services to Our Installed
Client Base. Money
HQ sm


Maintain and Leverage Technological Leadership.




Pursue Strategic Acquisitions.


Leverage Growth Over Our Relatively Fixed Cost Base.


Our Services




6



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Account Presentation Services.




| |   |                                                            
| | - | -----------------------------------------------------------
| |  | view transaction histories and account balances;           
|
| |  | review and retrieve current and past statements;           
|
| |  | transfer funds and balances;                               
|
| |  | initiate or schedule either one-time or recurring payments;
|
| |  | access and maintain account information; and               
|
| |  | perform many self-service administrative functions.        

Money
HQ sm


7



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Payments Services. Money
HQ sm








Relationship Management Services.






8



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Professional Services.


Third-Party Services.




| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | fully integrated bill payment and account retrieval through
    Intuits Quicken®;                    
|
| |  | check ordering available through Harland, Deluxe, Clarke
    American or Liberty;                     
|
| |  | inter-institution funds transfer and account aggregation
    provided by CashEdge;                    
|
| |  | check imaging provided by AFS, Bisys, Fiserv, FSI/ Vsoft,
    Empire, Intercept, and Mid-Atlantic; and
|
| |  | electronic statement through BIT Statement.                                                           

Sales and Marketing










Our Technology






| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | front-end servers  proprietary and commercial
    communications software and hardware providing Internet and
    private communications access to our platform for end-users;
|
| |  | middleware  proprietary and commercial software and
    hardware used to integrate end-user and financial data and to
    process financial transactions;                     

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| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | back-end systems  databases and proprietary software
    which support our account presentation and payments services; 
|
| |  | support systems  proprietary and commercial systems
    supporting our end-user service and other support services; and
|
| |  | enabling technology  software enabling clients and
    their end-users to easily access our platform.                  







10



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Proprietary Rights




11



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Competition














| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | industry trust and reliability;                                                     
|
| |  | technical capabilities, scalability, and security;                                  
|
| |  | speed to market;                                                                    
|
| |  | end-user service;                                                                   
|
| |  | ability to interface with financial services providers and their
    technology; and
|
| |  | operating effectiveness.                                                            

12



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Government Regulation












13



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Employees




RISK FACTORS


You should carefully consider the following risks before
investing in our common stock. These are not the only risks that
we may face. If any of the events referred to below occur, our
business, financial condition, liquidity and results of
operations could suffer. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.


Risks Related to Our Business


Prior to the third quarter of 2002, we had a history of net
losses; we have achieved net income profitability for all, but
two, fiscal quarters since the third quarter of 2002 and cannot
be sure that we will be profitable in all future periods.




We are dependent on the financial services industry, and
changes within that industry could reduce demand for our
products and services.




The failure to retain existing end-users or changes in their
continued use of our services will adversely affect our
operating results.




Any failure of our clients to effectively market our services
could have a material adverse effect on our business.




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Demand for low-cost or free online financial services and
competition may place significant pressure on our pricing
structure and revenues and may have an adverse effect on our
financial condition.




If we are unable to expand or adapt our services to support
our end-users needs, our business may be materially
adversely affected.




If we lose a material client, our business may be adversely
impacted.










Consolidation of the financial services industry could
negatively impact our business.




15



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Our failure to compete effectively in our markets would have
a material adverse effect on our business.








Our quarterly financial results are subject to fluctuations,
which could have a material adverse effect on the price of our
stock.




Our limited ability to protect our proprietary technology and
other rights may adversely affect our ability to compete.




Our failure to properly develop, market or sell new products
could adversely affect our business.




16



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If we are found to infringe the proprietary rights of others,
we could be required to redesign our products, pay royalties or
enter into license agreements with third parties.






| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | be expensive and time consuming to defend;                                                                                    
|
| |  | cause us to cease making, licensing or using products that
    incorporate the challenged intellectual property;              
|
| |  | require us to redesign our products, if feasible;                                                                             
|
| |  | divert managements attention and resources; and                                                                              
|
| |  | require us to pay royalties or enter into licensing agreements
    in order to obtain the right to use necessary technologies.



System failures could hurt our business and we could be
liable for some types of failures the extent or amount of which
cannot be predicted.




Security breaches could have a material adverse effect on our
business.






17



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The potential obsolescence of our technology or the offering
of new, more efficient means of conducting account presentation
and payments services could negatively impact our business.




We rely on internally developed software and systems as well
as third-party products, any of which may contain errors and
bugs.




The failure to attract or retain our officers and skilled
employees could have a material adverse effect on our
business.




We could be sued for contract or product liability claims and
lawsuits may disrupt our business, divert managements
attention or have an adverse effect on our financial results.




18



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Government regulation could interfere with our business.








If we cannot achieve and maintain a satisfactory rating from
the federal depository institution regulators, we may lose
existing clients and have difficulty attracting new clients.




We are exposed to increased costs and risks associated with
complying with increasing and new regulation of corporate
governance and disclosure standards.






19



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Risks Related to Incurrent


We may face difficulties in integrating the businesses of
Incurrent.






| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | the loss of key employees or end-users;                                           
|
| |  | the need to coordinate diverse organizations;                                     
|
| |  | difficulties in integrating administrative and other functions;                   
|
| |  | the loss of key members of Incurrent management following the
    acquisition; and
|
| |  | the diversion of our managements attention from our
    day-to-day operations.   



Our acquisition of Incurrent has increased the size of our
operations and the risks described in this annual report.




We made our acquisition of Incurrent on the basis of
available information, and Incurrent may have liabilities or
obligations that were not adequately disclosed.




Incurrent has given limited warranties and indemnities to us
in connection with its business, which have not yet expired and
may give rise to claims by us.




Incurrent may face competition from other companies, which
could have a material adverse effect on our business.




20



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Risks Related to Our Capital Structure


Our stock price is volatile.






| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | actual or anticipated variations in quarterly operating results;                                                   
|
| |  | announcements of technological innovations;                                                                        
|
| |  | new products or services offered by us or our competitors;                                                         
|
| |  | changes in financial estimates or ratings by securities analysts;                                                  
|
| |  | conditions or trends in the Internet and online commerce
    industries;                                           
|
| |  | changes in the economic performance and/or market valuations of
    other Internet, online service industries;     
|
| |  | announcements by us of significant acquisitions, strategic
    partnerships, joint ventures or capital commitments;
|
| |  | additions or departures of key personnel;                                                                          
|
| |  | future equity or debt offerings or acquisitions or our
    announcements of these transactions; and                
|
| |  | other events or factors, many of which are beyond our control.                                                     



We have a substantial number of shares of common stock,
including shares that may be issued upon exercise of options
under our equity compensation plan, in connection with the
Incurrent transaction and proposed under a filed registration
statement that, if sold, could affect the trading price of our
common stock.




Our stockholder rights plan contains provisions that could
discourage a takeover.




21



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Item 2.     Properties







Item 3.     Legal
Proceedings







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




22



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PART II







|        |                                                                                                                         
|------- | ------------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                     |  |      |       |  |      |   |       |      |  |   |       |  |  |   |       | 
|-------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                     |  | 2004 |       |  | 2003 |  
|                     |  |      |       |  |      |  
|Fiscal Quarter Ended |  | High |       |  | Low  |   |       | High |  |   | Low   | 
|                     |  |      |       |  |      |   |       |      |  |   |       | 
|First Quarter        |  | $    | 8.280 |  |      | $ | 5.700 |      |  | $ | 3.450 |  |  | $ | 2.500 | 
|Second Quarter       |  |      | 7.480 |  |      |   | 5.750 |      |  |   | 6.370 |  |  |   | 2.620 | 
|Third Quarter        |  |      | 7.270 |  |      |   | 5.900 |      |  |   | 7.400 |  |  |   | 5.240 | 
|Fourth Quarter       |  |      | 7.530 |  |      |   | 6.700 |      |  |   | 7.980 |  |  |   | 6.030 | 









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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |             |            | 
|----------------------------------------------------------------------------------------------- | ------------------------------- | ----------------------- | ---------- | ---------- | ------------- | - | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ----------- | ----------- | ---------- | 
|                                                                                                |                                 | Year Ended December 31, |           
|                                                                                                |                                 |                         |           
|                                                                                                |                                 | 2004                    |            |            | 2003          |   |            | 2002       |            |   | 2001       |            |            | 2000 |           
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|                                                                                                |                                 | (restated)(4)           |            |            | (restated)(4) |   |            |            |            |   |            |           
|Statement of Operations Data:                                                                   |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |            
|Revenues:                                                                                       |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |            
|                                                                                                | Service fees                    |                         | $          | 39,202,146 |               |   | $          | 33,606,782 |            |   | $          | 29,603,510 |            |      | $          | 21,679,291 |            |   | $           | 13,311,370  |           
|                                                                                                | Professional services and other |                         |            | 3,083,306  |               |   |            | 4,800,833  |            |   |            | 2,750,673  |            |      |            | 2,956,472  |            |   |             | 2,332,940   |           
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|                                                                                                |                                 | Total revenues          |            |            | 42,285,452    |   |            |            | 38,407,615 |   |            |            | 32,354,183 |      |            |            | 24,635,763 |   |             |             | 15,644,310 | 
|                                                                                                | Cost of revenues                |                         |            | 17,234,779 |               |   |            | 16,164,246 |            |   |            | 14,627,981 |            |      |            | 14,313,734 |            |   |             | 13,170,656  |           
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Gross profit                                                                                    |                                 |                         | 25,050,673 |            |               |   | 22,243,369 |            |            |   | 17,726,202 |            |            |      | 10,322,029 |            |            |   | 2,473,654   |            
|                                                                                                | General and administrative      |                         |            | 9,931,123  |               |   |            | 8,627,640  |            |   |            | 7,037,884  |            |      |            | 6,930,462  |            |   |             | 6,370,848   |           
|                                                                                                | Sales and marketing             |                         |            | 7,415,788  |               |   |            | 6,433,211  |            |   |            | 5,368,177  |            |      |            | 5,931,222  |            |   |             | 8,972,094   |           
|                                                                                                | Systems and development         |                         |            | 3,792,611  |               |   |            | 3,830,565  |            |   |            | 4,344,765  |            |      |            | 5,854,866  |            |   |             | 6,246,174   |           
|                                                                                                | Non-recurring charges           |                         |            |           |               |   |            |           |            |   |            |           |            |      |            | 209,434    |            |   |             |            |           
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|                                                                                                |                                 | Total expenses          |            |            | 21,139,522    |   |            |            | 18,891,416 |   |            |            | 16,750,826 |      |            |            | 18,925,984 |   |             |             | 21,589,116 | 
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Income (loss) from operations                                                                   |                                 |                         | 3,911,151  |            |               |   | 3,351,953  |            |            |   | 975,376    |            |            |      | (8,603,955 | )          |            |   | (19,115,462 | )          
|Other income (expense)                                                                          |                                 |                         | 181,901    |            |               |   | (1,234,081 | )          |            |   | (1,380,959 | )          |            |      | (2,291,756 | )          |            |   | 501,680     |            
|Gain from extinguishment of
    debt1                                                           |                                 |                         |           |            |               |   |           |            |            |   |           |            |            |      | 1,083,153  |            |            |   |            |            
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Income (loss) before change in accounting principle                                             |                                 |                         | 4,093,052  |            |               |   | 2,117,872  |            |            |   | (405,583   | )          |            |      | (9,812,558 | )          |            |   | (18,613,782 | )          
|Change in accounting
    principle2                                                             |                                 |                         |           |            |               |   |           |            |            |   |           |            |            |      |           |            |            |   | (216,818    | )          
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Income (loss) before income tax provision                                                       |                                 |                         | 4,093,052  |            |               |   | 2,117,872  |            |            |   | (405,583   | )          |            |      | (9,812,558 | )          |            |   | (18,830,600 | )          
|Income tax provision                                                                            |                                 |                         | 146,000    |            |               |   | 15,785     |            |            |   |           |            |            |      |           |            |            |   |            |            
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Net income (loss)                                                                               |                                 | $                       | 3,947,052  |            |               | $ | 2,102,087  |            |            | $ | (405,583   | )          |            | $    | (9,812,558 | )          |            | $ | (18,830,600 | )          
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Net income (loss) per share                                                                     |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |            
|                                                                                                | Basic                           |                         |            | 0.22       |               |   |            | 0.14       |            |   |            | (0.03      | )          |      |            | (0.82      | )          |   |             | (1.64       | )         
|                                                                                                | Diluted                         |                         |            | 0.20       |               |   |            | 0.13       |            |   |            | (0.03      | )          |      |            | (0.82      | )          |   |             | (1.64       | )         
|Pro forma, assuming the change in accounting principle is
    accounted for
    retroactively3: |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |            
|                                                                                                | Net loss                        |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             | (18,613,782 | )         
|                                                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |           
|Basic and diluted loss per share                                                                |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   | (1.62       | )          
|Shares used in calculation of income (loss) per share                                           |                                 |                         |            |            |               |   |            |            |            |   |            |            |            |      |            |            |            |   |             |            
|                                                                                                | Basic                           |                         |            | 18,057,270 |               |   |            | 15,140,538 |            |   |            | 13,520,642 |            |      |            | 12,026,476 |            |   |             | 11,487,192  |           
|                                                                                                | Diluted                         |                         |            | 20,128,093 |               |   |            | 16,685,602 |            |   |            | 13,520,642 |            |      |            | 12,026,476 |            |   |             | 11,487,192  |           

Notes:




| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1 | In May 2001, we used $2.2 million of our cash to repurchase
    $3.5 million of the 8% convertible subordinated notes,
    which payments resulted in a one-time gain of $1,083,153.                                                             
|
| | 2 | In the fourth quarter of 2000, we adopted a change in accounting
    principle for implementation fees, retroactive to
    January 1, 2000, under Staff Accounting Bulletin 101
    (SAB 101), Revenue Recognition in Financial
    Statements.
|
| | 3 | Pro forma (as if) amounts, assuming retroactive application of
    SAB 101 for period of change.                                                                                                                                                 
|
| | 4 | We restated our financial statements for the years ended
    December 31, 2004 and 2003. See footnote 2 in the
    Notes to Consolidated Financial Statements.                                                                                   

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##### 



|                                                |  |               |            |  |               |   |            |      |  |   |            |  |  |      |            |  |  |   |            | 
|----------------------------------------------- |  | ------------- | ---------- |  | ------------- | - | ---------- | ---- |  | - | ---------- |  |  | ---- | ---------- |  |  | - | ---------- | 
|                                                |  | December 31,  |           
|                                                |  |               |           
|                                                |  | 2004          |            |  | 2003          |   |            | 2002 |  |   | 2001       |  |  | 2000 |           
|                                                |  |               |            |  |               |   |            |      |  |   |            |  |  |      |           
|                                                |  | (restated)(4) |            |  | (restated)(4) |   |            |      |  |   |            | 
|Balance Sheet Data:                             |  |               |            |  |               |   |            |      |  |   |            |  |  |      |            |  |  |   |            | 
|Cash, cash equivalents and investments          |  | $             | 4,640,587  |  |               | $ | 13,038,406 |      |  | $ | 6,785,827  |  |  | $    | 7,703,622  |  |  | $ | 21,459,931 | 
|Working capital                                 |  |               | 10,055,658 |  |               |   | 14,744,093 |      |  |   | 8,650,044  |  |  |      | 8,785,201  |  |  |   | 21,338,693 | 
|Total assets                                    |  |               | 44,533,268 |  |               |   | 26,734,578 |      |  |   | 21,329,940 |  |  |      | 21,521,614 |  |  |   | 35,128,428 | 
|Notes payable, less current portion             |  |               |           |  |               |   |           |      |  |   | 12,000,000 |  |  |      | 13,000,000 |  |  |   | 20,000,000 | 
|Capital lease obligations, less current portion |  |               |           |  |               |   | 10,521     |      |  |   | 111,491    |  |  |      | 348,552    |  |  |   | 232,125    | 
|Other non-current liabilities                   |  |               | 1,998,286  |  |               |   | 302,535    |      |  |   | 355,662    |  |  |      | 566,539    |  |  |   | 1,193,404  | 
|Total liabilities                               |  |               | 9,711,633  |  |               |   | 4,378,202  |      |  |   | 15,831,810 |  |  |      | 17,183,999 |  |  |   | 25,923,458 | 
|Stockholders equity                            |  |               | 34,770,656 |  |               |   | 22,309,237 |      |  |   | 5,498,130  |  |  |      | 4,337,615  |  |  |   | 9,204,970  | 






|        |                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations (restated)



Restatement of Consolidated Financial Statements




Accounting for Contingencies, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities.






25



---



##### 





|                       |         |                          |            |      |          |   |            |          |  |   |            |      |  |   |            |      | 
|---------------------- | ------- | ------------------------ | ---------- | ---- | -------- | - | ---------- | -------- |  | - | ---------- | ---- |  | - | ---------- | ---- | 
|                       |         | Years Ended December 31, |           
|                       |         |                          |           
|                       |         | 2004                     |            |      | 2003     |  
|                       |         |                          |            |      |          |  
|                       |         | Previously               |            |      |          |   | Previously |          |  |  
|                       |         | Reported                 |            |      | Restated |   |            | Reported |  |   | Restated   |     
|                       |         |                          |            |      |          |   |            |          |  |   |            |     
|Service costs          |         | $                        | 14,894,206 |      |          | $ | 15,927,447 |          |  | $ | 14,020,014 |      |  | $ | 14,681,696 |     
|Gross profit           |         |                          | 26,083,914 |      |          |   | 25,050,673 |          |  |   | 22,905,051 |      |  |   | 22,243,369 |     
|Income from operations |         |                          | 4,944,392  |      |          |   | 3,911,151  |          |  |   | 4,013,635  |      |  |   | 3,351,953  |     
|Net income             |         |                          | 4,980,293  |      |          |   | 3,947,052  |          |  |   | 2,763,769  |      |  |   | 2,102,087  |     
|Net income per share:  |         |                          |            |      |          |   |            |          |  |   |            |      |  |   |            |     
|                       | Basic   |                          | $          | 0.28 |          |   | $          | 0.22     |  |   | $          | 0.18 |  |   | $          | 0.14 | 
|                       | Diluted |                          | $          | 0.25 |          |   | $          | 0.20     |  |   | $          | 0.17 |  |   | $          | 0.13 | 
|Comprehensive income   |         | $                        | 4,974,851  |      |          | $ | 3,945,450  |          |  | $ | 2,758,327  |      |  | $ | 2,143,784  |     



Overview












26



---



##### 





Critical Accounting Policies










Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use




SM Revenue Recognition in Financial Statements


27



---



##### 







Revenue Arrangements with
Multiple Deliverables


Accounting for Income Taxes




Financial Condition






28



---



##### 



Results of Operations




|                                          |                                  |                         |      |      |       |  |      |      |       |  |      |      |       | 
|----------------------------------------- | -------------------------------- | ----------------------- | ---- | ---- | ----- |  | ---- | ---- | ----- |  | ---- | ---- | ----- | 
|                                          |                                  | Year Ended December 31, |     
|                                          |                                  |                         |     
|                                          |                                  | 2004                    |      |      | 2003  |  |      | 2002 |      
|                                          |                                  |                         |      |      |       |  |      |      |      
|Statement of Operations Data:             |                                  |                         |      |      |       |  |      |      |       |  |      |     
|Revenues:                                 |                                  |                         |      |      |       |  |      |      |       |  |      |     
|                                          | Account presentation services    |                         |      | 7.1  | %     |  |      | 10.6 | %     |  |      | 16.4 | %    
|                                          | Payment services                 |                         |      | 66.9 |       |  |      | 54.8 |       |  |      | 47.2 |      
|                                          | Relationship management services |                         |      | 18.7 |       |  |      | 22.1 |       |  |      | 27.9 |      
|                                          | Professional services and other  |                         |      | 7.3  |       |  |      | 12.5 |       |  |      | 8.5  |      
|                                          |                                  |                         |      |      |       |  |      |      |      
|                                          |                                  | Total revenues          |      |      | 100.0 |  |      |      | 100.0 |  |      |      | 100.0 | 
|Costs and expenses:                       |                                  |                         |      |      |       |  |      |      |       |  |      |     
|                                          | Costs of revenues                |                         |      | 40.8 |       |  |      | 42.1 |       |  |      | 45.2 |      
|                                          |                                  |                         |      |      |       |  |      |      |      
|Gross margin                              |                                  |                         | 59.2 |      |       |  | 57.9 |      |       |  | 54.8 |     
|                                          | General and administrative       |                         |      | 23.5 |       |  |      | 22.5 |       |  |      | 21.8 |      
|                                          | Sales and marketing              |                         |      | 17.5 |       |  |      | 16.7 |       |  |      | 16.6 |      
|                                          | Systems and development          |                         |      | 9.0  |       |  |      | 10.0 |       |  |      | 13.4 |      
|                                          |                                  |                         |      |      |       |  |      |      |      
|                                          |                                  | Total expenses          |      |      | 50.0  |  |      |      | 49.2  |  |      |      | 51.8  | 
|                                          |                                  |                         |      |      |       |  |      |      |      
|Income from operations                    |                                  |                         | 9.2  |      |       |  | 8.7  |      |       |  | 3.0  |     
|Other income (expense), net               |                                  |                         | 0.4  |      |       |  | (1.9 | )    |       |  | (3.6 | )   
|Debt conversion expense                   |                                  |                         |     |      |       |  | (1.3 | )    |       |  | (0.7 | )   
|                                          |                                  |                         |      |      |       |  |      |      |      
|Income (loss) before income tax provision |                                  |                         | 9.6  |      |       |  | 5.5  |      |       |  | (1.3 | )   
|Income tax provision                      |                                  |                         | 0.3  |      |       |  |     |      |       |  |     |     
|                                          |                                  |                         |      |      |       |  |      |      |      
|Net income (loss)                         |                                  |                         | 9.3  | %    |       |  | 5.5  | %    |       |  | (1.3 | )%  
|                                          |                                  |                         |      |      |       |  |      |      |      



Year Ended December 31, 2004 Compared to the Year
Ended December 31, 2003


Revenues




29



---



##### 



|                                    |                                    |                |   |        |        |  |   |            |      |  |   |        |     |  |  |     |    |  
|----------------------------------- | ---------------------------------- | -------------- | - | ------ | ------ |  | - | ---------- | ---- |  | - | ------ | --- |  |  | --- | -- | -
|                                    |                                    | Year Ended     |   |        |       
|                                    |                                    | December 31,   |   |        | Change | 
|                                    |                                    |                |   |        |        | 
|                                    |                                    | 2004           |   |        | 2003   |  |   | Difference |      |  | % |       
|                                    |                                    |                |   |        |        |  |   |            |      |  |   |       
|Revenues (in millions):             |                                    |                |   |        |        |  |   |            |      |  |   |        |     |  |  |    
|                                    | Account presentation services      |                | $ | 3.0    |        |  | $ | 4.1        |      |  | $ | (1.1   | )   |  |  | -25 | % 
|                                    | Payment services                   |                |   | 28.3   |        |  |   | 21.0       |      |  |   | 7.3    |     |  |  | 34  | % 
|                                    | Relationship management services   |                |   | 7.9    |        |  |   | 8.5        |      |  |   | (0.6   | )   |  |  | -7  | % 
|                                    | Professional services and other    |                |   | 3.1    |        |  |   | 4.8        |      |  |   | (1.7   | )   |  |  | -36 | % 
|                                    |                                    |                |   |        |        |  |   |            |      |  |   |       
|                                    |                                    | Total revenues |   | $      | 42.3   |  |   | $          | 38.4 |  |   | $      | 3.9 |  |  |     | 10 | %
|Users and transactions
    (000s):3 |                                    |                |   |        |        |  |   |            |      |  |   |        |     |  |  |    
|                                    | Account presentation users         |                |   | 485    |        |  |   | 416        |      |  |   | 69     |     |  |  | 17  | % 
|                                    | Payment services users             |                |   | 776    |        |  |   | 528        |      |  |   | 248    |     |  |  | 47  | % 
|                                    | All services users                 |                |   | 1,125  |        |  |   | 841        |      |  |   | 284    |     |  |  | 34  | % 
|                                    | Payment transactions               |                |   | 37,123 |        |  |   | 24,825     |      |  |   | 12,298 |     |  |  | 50  | % 
|Adoption
    rates:3                |                                    |                |   |        |        |  |   |            |      |  |   |        |     |  |  |    
|                                    | Account presentation
    services1 |                |   | 22.4   | %      |  |   | 16.8       | %    |  |   | 5.6    | %   |  |  | 33  | % 
|                                    | Payment
    services2              |                |   | 8.2    | %      |  |   | 5.1        | %    |  |   | 3.1    | %   |  |  | 61  | % 








|  |                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1 | Represents the percentage of users subscribing to our account
    presentation services out of the total number of checking
    accounts enabled for account presentation services.
| 
|2 | Represents the percentage of users subscribing to our payment
    services out of the total number of checking accounts enabled
    for payment services.                          
| 
|3 | Excludes card division users.                                                                                                                                                      

Account Presentation Services.


Payment Services.


Relationship Management Services.


30



---



##### 





Professional Services and Other.


Costs
and Expenses


|                       |                          |                          |      |      |        |   |      |             |      |   |              |      |     |  |    |    |    |  
|---------------------- | ------------------------ | ------------------------ | ---- | ---- | ------ | - | ---- | ----------- | ---- | - | ------------ | ---- | --- |  | -- | -- | -- | -
|                       |                          | Year Ended               |      |      |       
|                       |                          | December 31,             |      |      | Change |  
|                       |                          |                          |      |      |        |  
|                       |                          | 20041                    |      |      | 20031  |   |      | Difference1 |      |   | % Difference |     
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|Revenues               |                          | $                        | 42.3 |      |        | $ | 38.4 |             |      | $ | 3.9          |      |     |  | 10 | % 
|Costs of revenues      |                          |                          | 17.3 |      |        |   | 16.1 |             |      |   | 1.2          |      |     |  | 7  | % 
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|Gross profit           |                          |                          | 25.0 |      |        |   | 22.3 |             |      |   | 2.7          |      |     |  | 13 | % 
|                       | Gross margin             |                          |      | 59   | %      |   |      | 58          | %    |   |              | 1    | %   |  |    | 2  | % 
|Operating expenses     |                          |                          |      |      |        |   |      |             |      |   |              |      |     |  |    |   
|                       | General & administrative |                          |      | 9.9  |        |   |      | 8.6         |      |   |              | 1.3  |     |  |    | 15 | % 
|                       | Sales & marketing        |                          |      | 7.4  |        |   |      | 6.5         |      |   |              | 0.9  |     |  |    | 15 | % 
|                       | Systems & development    |                          |      | 3.8  |        |   |      | 3.8         |      |   |              |     |     |  |    | -1 | % 
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|                       |                          | Total operating expenses |      |      | 21.1   |   |      |             | 18.9 |   |              |      | 2.2 |  |    |    | 12 | %
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|Income from operations |                          |                          | 3.9  |      |        |   | 3.4  |             |      |   | 0.5          |      |     |  | 17 | % 
|Other expense, net     |                          |                          |     |      |        |   | (1.3 | )           |      |   | 1.3          |      |     |  |    |   
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|Net income             |                          | $                        | 3.9  |      |        | $ | 2.1  |             |      | $ | 1.8          |      |     |  | 88 | % 
|                       |                          |                          |      |      |        |   |      |             |      |   |              |     
|                       | Diluted income per share |                          | $    | 0.20 |        |   | $    | 0.13        |      |   | $            | 0.07 |     |  |    | 54 | % 








|  |                                                                          
|- | -------------------------------------------------------------------------
|1 | In millions except for diluted income per share and per user
    metrics.

Costs of Revenues.


Gross Profit.


General and Administrative.


31



---



##### 



Sales and Marketing.


Systems and Development.


Income from Operations.


Other Expense, Net.


Net Income Per Share.


Year Ended December 31, 2003 Compared to the Year
Ended December 31, 2002


Revenues




32



---



##### 



|                                    |                                    |                |   |        |        |  |   |            |      |  |   |       |     |  |  |     |    |  
|----------------------------------- | ---------------------------------- | -------------- | - | ------ | ------ |  | - | ---------- | ---- |  | - | ----- | --- |  |  | --- | -- | -
|                                    |                                    | Year Ended     |   |        |       
|                                    |                                    | December 31,   |   |        | Change | 
|                                    |                                    |                |   |        |        | 
|                                    |                                    | 2003           |   |        | 2002   |  |   | Difference |      |  | % |      
|                                    |                                    |                |   |        |        |  |   |            |      |  |   |      
|Revenues (in millions):             |                                    |                |   |        |        |  |   |            |      |  |   |       |     |  |  |    
|                                    | Account presentation services      |                | $ | 4.1    |        |  | $ | 5.3        |      |  | $ | (1.2  | )   |  |  | -23 | % 
|                                    | Payment services                   |                |   | 21.0   |        |  |   | 15.3       |      |  |   | 5.7   |     |  |  | 38  | % 
|                                    | Relationship management services   |                |   | 8.5    |        |  |   | 9.0        |      |  |   | (0.5  | )   |  |  | -6  | % 
|                                    | Professional services and other    |                |   | 4.8    |        |  |   | 2.8        |      |  |   | 2.0   |     |  |  | 75  | % 
|                                    |                                    |                |   |        |        |  |   |            |      |  |   |      
|                                    |                                    | Total revenues |   | $      | 38.4   |  |   | $          | 32.4 |  |   | $     | 6.0 |  |  |     | 19 | %
|Users and transactions
    (000s):3 |                                    |                |   |        |        |  |   |            |      |  |   |       |     |  |  |    
|                                    | Account presentation users         |                |   | 416    |        |  |   | 403        |      |  |   | 13    |     |  |  | 3   | % 
|                                    | Payment services users             |                |   | 528    |        |  |   | 327        |      |  |   | 201   |     |  |  | 61  | % 
|                                    | All services users                 |                |   | 841    |        |  |   | 623        |      |  |   | 218   |     |  |  | 35  | % 
|                                    | Payment transactions               |                |   | 24,825 |        |  |   | 16,491     |      |  |   | 8,334 |     |  |  | 51  | % 
|Adoption
    rates:3                |                                    |                |   |        |        |  |   |            |      |  |   |       |     |  |  |    
|                                    | Account presentation
    services1 |                |   | 16.8   | %      |  |   | 11.2       | %    |  |   | 5.6   | %   |  |  | 50  | % 
|                                    | Payment
    services2              |                |   | 5.1    | %      |  |   | 4.2        | %    |  |   | 0.9   | %   |  |  | 21  | % 








|  |                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1 | Represents the percentage of users subscribing to our account
    presentation services out of the total number of checking
    accounts enabled for account presentation services.
| 
|2 | Represents the percentage of users subscribing to our payment
    services out of the total number of checking accounts enabled
    for payment services.                          
| 
|3 | Excludes card division users.                                                                                                                                                      

Account Presentation Services.


Payment Services.


33



---



##### 



Relationship Management Services.


Professional Services and Other.


Costs and Expenses


|                       |                                 |                          |      |      |        |   |      |             |      |   |              |      |     |  |     |     |    |  
|---------------------- | ------------------------------- | ------------------------ | ---- | ---- | ------ | - | ---- | ----------- | ---- | - | ------------ | ---- | --- |  | --- | --- | -- | -
|                       |                                 | Year Ended               |      |      |       
|                       |                                 | December 31,             |      |      | Change |  
|                       |                                 |                          |      |      |        |  
|                       |                                 | 20031                    |      |      | 20021  |   |      | Difference1 |      |   | % Difference |     
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|Revenues               |                                 | $                        | 38.4 |      |        | $ | 32.4 |             |      | $ | 6.0          |      |     |  | 19  | %  
|Costs of revenues      |                                 |                          | 16.1 |      |        |   | 14.7 |             |      |   | 1.4          |      |     |  | 10  | %  
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|Gross profit           |                                 | $                        | 22.3 |      |        | $ | 17.7 |             |      | $ | 4.6          |      |     |  | 26  | %  
|                       | Gross margin                    |                          |      | 58   | %      |   |      | 55          | %    |   |              | 3    | %   |  |     | 5   | % 
|Operating expenses     |                                 |                          |      |      |        |   |      |             |      |   |              |      |     |  |     |    
|                       | General & administrative        |                          |      | 8.6  |        |   |      | 7.0         |      |   | $            | 1.6  |     |  |     | 23  | % 
|                       | Sales & marketing               |                          |      | 6.5  |        |   |      | 5.4         |      |   |              | 1.1  |     |  |     | 20  | % 
|                       | Systems & development           |                          |      | 3.8  |        |   |      | 4.3         |      |   |              | (0.5 | )   |  |     | (12 | )%
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|                       |                                 | Total operating expenses |      |      | 18.9   |   |      |             | 16.7 |   |              |      | 2.2 |  |     |     | 13 | %
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|Income from operations |                                 |                          | 3.4  |      |        |   | 1.0  |             |      |   | 2.4          |      |     |  | 248 | %  
|Other expense, net     |                                 |                          | (1.3 | )    |        |   | (1.4 | )           |      |   | 0.1          |      |     |  |     |    
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|Net income (loss)      |                                 | $                        | 2.1  |      |        | $ | (0.4 | )           |      | $ | 2.5          |      |     |  |     |    
|                       |                                 |                          |      |      |        |   |      |             |      |   |              |     
|                       | Diluted income (loss) per share |                          | $    | 0.13 |        |   | $    | (0.03       | )    |   | $            | 0.16 |     |  |     |     |   








|  |                                                                                 
|- | --------------------------------------------------------------------------------
|1 | In millions except for diluted income (loss) per share and
    per user metrics.

Costs of Revenues.


Gross Profit.


34



---



##### 



General and Administrative.


Sales and Marketing.


Systems and Development. Money
HQ sm


Income from Operations.


Other Expense, Net.


Net Income (Loss) Per Share.


Liquidity and Capital Resources






35



---



##### 











|                          |                   |       |            |            |      |   |           |           |  |   |           |           |  |            |           |           |  |   |            |            | 
|------------------------- | ----------------- | ----- | ---------- | ---------- | ---- | - | --------- | --------- |  | - | --------- | --------- |  | ---------- | --------- | --------- |  | - | ---------- | ---------- | 
|                          |                   | Total |            |            | 2005 |   |           | 2006      |  |   | 2007      |           |  | Thereafter |          
|                          |                   |       |            |            |      |   |           |           |  |   |           |           |  |            |          
|Capital lease obligations |                   | $     | 10,573     |            |      | $ | 10,573    |           |  | $ |          |           |  | $          |          |           |  | $ |           |           
|Operating lease           |                   |       | 19,153,323 |            |      |   | 2,200,753 |           |  |   | 2,420,520 |           |  |            | 1,946,223 |           |  |   | 12,585,827 |           
|Purchase obligations      |                   |       | 880,000    |            |      |   | 410,000   |           |  |   | 350,000   |           |  |            | 120,000   |           |  |   |           |           
|                          |                   |       |            |            |      |   |           |           |  |   |           |           |  |            |          
|                          | Total obligations |       | $          | 20,043,896 |      |   | $         | 2,621,326 |  |   | $         | 2,770,520 |  |            | $         | 2,066,223 |  |   | $          | 12,585,827 | 
|                          |                   |       |            |            |      |   |           |           |  |   |           |           |  |            |          







36



---



##### 












|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk



|                                     |                   |                   |         |           |            |   |         |               |  |  |      |   | 
|------------------------------------ | ----------------- | ----------------- | ------- | --------- | ---------- | - | ------- | ------------- |  |  | ---- | - | 
|                                     |                   | December 31, 2004 |        
|                                     |                   |                   |        
|                                     |                   | Amortized Cost    |         |           | Fair Value |   |         | Interest Rate | 
|                                     |                   |                   |         |           |            |   |         |               | 
|U.S. government treasury obligations |                   | $                 | 798,682 |           |            | $ | 798,720 |               |  |  | 1.70 | %
|Mortgage backed securities           |                   |                   | 150,342 |           |            |   | 150,180 |               |  |  | 3.42 | %
|Commercial obligations               |                   |                   | 350,000 |           |            |   | 350,009 |               |  |  | 2.49 | %
|                                     |                   |                   |         |           |            |   |         |               | 
|                                     | Total investments |                   | $       | 1,299,024 |            |   | $       | 1,298,909     |  |  |      |   | 
|                                     |                   |                   |         |           |            |   |         |               | 




Item 8.     Consolidated
Financial Statements and Supplementary Data


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                     |  |  |    | 
|-------------------------------------------------------------------- |  |  | -- | 
|Managements Report on Internal Control Over Financial
    Reporting |  |  | 38 | 
|Reports of Independent Registered Accounting Firm                    |  |  | 39 | 
|Consolidated Balance Sheets                                          |  |  | 42 | 
|Consolidated Statements of Operations                                |  |  | 43 | 
|Consolidated Statements of Stockholders Equity                      |  |  | 44 | 
|Consolidated Statements of Cash Flows                                |  |  | 45 | 
|Notes to Consolidated Financial Statements                           |  |  | 46 | 

37



---



##### 



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING (as revised)








Internal
Control  Integrated Framework








38



---



##### 



Report of Independent Registered Public Accounting Firm


















39



---



##### 











| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP







40



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP





41



---



##### 



ONLINE RESOURCES CORPORATION


CONSOLIDATED BALANCE SHEETS


|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |             |            |            | 
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------- | ----------- | ---------- | ---------- | --------- | ----------- | ---------- | ---------- | 
|                                                    |                                                                                                                                                                                                                     | December 31,                               |                     
|                                                    |                                                                                                                                                                                                                     |                                            |                     
|                                                    |                                                                                                                                                                                                                     | 2004                                       |                      |             | 2003       |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     | (restated)                                 |                      |             | (restated) |           
|Assets                                              |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |            
|Current assets:                                     |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |            
|                                                    | Cash and cash equivalents                                                                                                                                                                                           |                                            | $                    | 3,341,678   |            |            | $         | 7,054,537   |           
|                                                    | Restricted cash                                                                                                                                                                                                     |                                            |                      | 1,650,723   |            |            |           | 595,520     |           
|                                                    | Investments                                                                                                                                                                                                         |                                            |                      | 1,298,909   |            |            |           | 5,983,869   |           
|                                                    | Accounts receivable (net of allowance of approximately $152,000
    and $67,000 at December 31, 2004 and 2003, respectively)                                                                                        |                                            |                      | 8,433,113   |            |            |           | 3,818,132   |           
|                                                    | Deferred implementation costs                                                                                                                                                                                       |                                            |                      | 460,600     |            |            |           | 493,689     |           
|                                                    | Prepaid expenses and other current assets                                                                                                                                                                           |                                            |                      | 2,634,961   |            |            |           | 910,631     |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     |                                            | Total current assets |             |            | 17,819,984 |           |             |            | 18,856,378 | 
|Property and equipment, net                         |                                                                                                                                                                                                                     |                                            | 13,099,829           |             |            |            | 7,344,170 |            
|Deferred implementation costs, less current portion |                                                                                                                                                                                                                     |                                            | 420,035              |             |            |            | 416,518   |            
|Goodwill                                            |                                                                                                                                                                                                                     |                                            | 11,272,463           |             |            |            |          |            
|Intangible assets                                   |                                                                                                                                                                                                                     |                                            | 1,569,800            |             |            |            |          |            
|Other assets                                        |                                                                                                                                                                                                                     |                                            | 351,157              |             |            |            | 117,512   |            
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     |                                            | Total assets         |             | $          | 44,533,268 |           |             | $          | 26,734,578 | 
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|Liabilities and stockholders equity                |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |            
|Current liabilities:                                |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |            
|                                                    | Accounts payable                                                                                                                                                                                                    |                                            | $                    | 1,654,650   |            |            | $         | 646,531     |           
|                                                    | Accrued expenses and other current liabilities                                                                                                                                                                      |                                            |                      | 3,159,743   |            |            |           | 1,255,993   |           
|                                                    | Accrued compensation                                                                                                                                                                                                |                                            |                      | 1,808,233   |            |            |           | 1,526,926   |           
|                                                    | Deferred revenues                                                                                                                                                                                                   |                                            |                      | 972,890     |            |            |           | 585,804     |           
|                                                    | Deferred rent obligation                                                                                                                                                                                            |                                            |                      | 158,237     |            |            |           |            |           
|                                                    | Capital lease obligation                                                                                                                                                                                            |                                            |                      | 10,573      |            |            |           | 97,031      |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     | Total current liabilities                  |                      |             | 7,764,326  |            |           |             | 4,112,285  |           
|Deferred revenues, less current portion             |                                                                                                                                                                                                                     |                                            | 379,036              |             |            |            | 302,535   |            
|Deferred rent obligation, less current portion      |                                                                                                                                                                                                                     |                                            | 1,524,828            |             |            |            |          |            
|Capital lease obligation, less current portion      |                                                                                                                                                                                                                     |                                            |                     |             |            |            | 10,521    |            
|Other long term liabilities                         |                                                                                                                                                                                                                     |                                            | 94,422               |             |            |            |          |            
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     |                                            | Total liabilities    |             |            | 9,762,612  |           |             |            | 4,425,341  | 
|Commitments and contingencies                       |                                                                                                                                                                                                                     |                                            |                     |             |            |            |          |            
|Stockholders equity                                |                                                                                                                                                                                                                     |                                            |                      |             |            |            |           |            
|                                                    | Series A convertible preferred stock, $0.01 par value;
    1,000,000 shares authorized; none issued at December 31,
    2004 and 2003                                                                               |                                            |                      |            |            |            |           |            |           
|                                                    | Series B junior participating preferred stock, $0.01 par
    value; 297,500 shares authorized; none issued at
    December 31, 2004 and 2003                                                                        |                                            |                      |            |            |            |           |            |           
|                                                    | Common stock, $0.0001 par value; 35,000,000 shares authorized;
    19,340,222 issued and 19,264,697 outstanding at
    December 31, 2004; and 17,887,727 issued and 17,812,202
    outstanding at December 31, 2003 |                                            |                      | 1,926       |            |            |           | 1,781       |           
|                                                    | Additional paid-in capital                                                                                                                                                                                          |                                            |                      | 114,647,954 |            |            |           | 106,128,290 |           
|                                                    | Accumulated deficit                                                                                                                                                                                                 |                                            |                      | (79,651,309 | )          |            |           | (83,598,361 | )         
|                                                    | Treasury stock, 75,525 shares at December 31, 2004 and 2003                                                                                                                                                         |                                            |                      | (227,800    | )          |            |           | (227,800    | )         
|                                                    | Accumulated other comprehensive (loss) income                                                                                                                                                                       |                                            |                      | (115        | )          |            |           | 5,327       |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     | Total stockholders equity                 |                      |             | 34,770,656 |            |           |             | 22,309,237 |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           
|                                                    |                                                                                                                                                                                                                     | Total liabilities and stockholders equity |                      | $           | 44,533,268 |            |           | $           | 26,734,578 |           
|                                                    |                                                                                                                                                                                                                     |                                            |                      |             |            |           

See accompanying notes to consolidated financial
statements.


42



---



##### 



ONLINE RESOURCES CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                       |                                    |                         |                              |            |            |            |           |            |            |            |          |            |            |            |  
|------------------------------------------------------ | ---------------------------------- | ----------------------- | ---------------------------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | ---------- | -------- | ---------- | ---------- | ---------- | -
|                                                       |                                    | Year ended December 31, |                             
|                                                       |                                    |                         |                             
|                                                       |                                    | 2004                    |                              |            | 2003       |            |           | 2002       |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    | (restated)              |                              |            | (restated) |            |           |           
|Revenues:                                              |                                    |                         |                              |            |            |            |           |            |            |            |          |           
|                                                       | Account presentation services      |                         | $                            | 3,029,527  |            |            | $         | 4,064,083  |            |            | $        | 5,309,558  |           
|                                                       | Payment services                   |                         |                              | 28,277,468 |            |            |           | 21,041,685 |            |            |          | 15,253,963 |           
|                                                       | Relationship management services   |                         |                              | 7,895,151  |            |            |           | 8,501,014  |            |            |          | 9,039,989  |           
|                                                       | Professional services and other    |                         |                              | 3,083,306  |            |            |           | 4,800,833  |            |            |          | 2,750,673  |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    |                         | Total revenues               |            |            | 42,285,452 |           |            |            | 38,407,615 |          |            |            | 32,354,183 |  
|Costs and expenses:                                    |                                    |                         |                              |            |            |            |           |            |            |            |          |           
|                                                       | Service costs                      |                         |                              | 15,927,447 |            |            |           | 14,681,696 |            |            |          | 13,020,405 |           
|                                                       | Implementation and other costs     |                         |                              | 1,307,332  |            |            |           | 1,482,550  |            |            |          | 1,607,576  |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    | Costs of revenues       |                              |            | 17,234,779 |            |           |            | 16,164,246 |            |          |            | 14,627,981 |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    | Gross profit            |                              |            | 25,050,673 |            |           |            | 22,243,369 |            |          |            | 17,726,202 |           
|                                                       | General and administrative         |                         |                              | 9,931,123  |            |            |           | 8,627,640  |            |            |          | 7,037,884  |           
|                                                       | Sales and marketing                |                         |                              | 7,415,788  |            |            |           | 6,433,211  |            |            |          | 5,368,177  |           
|                                                       | Systems and development            |                         |                              | 3,792,611  |            |            |           | 3,830,565  |            |            |          | 4,344,765  |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    |                         | Total expenses               |            |            | 21,139,522 |           |            |            | 18,891,416 |          |            |            | 16,750,826 |  
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|Income from operations                                 |                                    |                         | 3,911,151                    |            |            |            | 3,351,953 |            |            |            | 975,376  |           
|Other income (expense):                                |                                    |                         |                              |            |            |            |           |            |            |            |          |           
|                                                       | Interest income                    |                         |                              | 147,185    |            |            |           | 79,090     |            |            |          | 126,876    |           
|                                                       | Interest expense                   |                         |                              | (3,391     | )          |            |           | (817,603   | )          |            |          | (1,260,209 | )         
|                                                       | Other income (expense)             |                         |                              | 38,107     |            |            |           | (455       | )          |            |          | (35,072    | )         
|                                                       | Debt repurchase/conversion expense |                         |                              |           |            |            |           | (495,113   | )          |            |          | (212,554   | )         
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|                                                       |                                    |                         | Total other income (expense) |            |            | 181,901    |           |            |            | (1,234,081 | )        |            |            | (1,380,959 | )
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|Income (loss) before income tax provision              |                                    |                         | 4,093,052                    |            |            |            | 2,117,872 |            |            |            | (405,583 | )         
|Income tax provision                                   |                                    |                         | 146,000                      |            |            |            | 15,785    |            |            |            |         |           
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|Net income (loss)                                      |                                    | $                       | 3,947,052                    |            |            | $          | 2,102,087 |            |            | $          | (405,583 | )         
|                                                       |                                    |                         |                              |            |            |            |           |            |           
|Income (loss) per share:                               |                                    |                         |                              |            |            |            |           |            |            |            |          |           
|                                                       | Basic income (loss) per share      |                         | $                            | 0.22       |            |            | $         | 0.14       |            |            | $        | (0.03      | )         
|                                                       | Diluted income (loss) per share    |                         | $                            | 0.20       |            |            | $         | 0.13       |            |            | $        | (0.03      | )         
|Shares used in calculation of income (loss) per share: |                                    |                         |                              |            |            |            |           |            |            |            |          |           
|                                                       | Basic                              |                         |                              | 18,057,270 |            |            |           | 15,140,538 |            |            |          | 13,520,642 |           
|                                                       | Diluted                            |                         |                              | 20,128,093 |            |            |           | 16,685,602 |            |            |          | 13,520,642 |           

See accompanying notes to consolidated financial
statements.


43



---



##### 



ONLINE RESOURCES CORPORATION


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            |           |  
|-------------------------------------- | ----------------------------------------------------------------- | ------------ | ---------- | --------- | ---------- | - | ----- | ----------- | - | - | -------------- | ----------- | - | ------------ | ----------- | ---------- | ------------- | - | ------- | ------ |  | - | ------------- | ------- | - | ------ | ------ | ------- | - | - | -------- | ------- |  | - | ---------- | --------- | -
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             | Receivable |               |   |        
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                | Accumulated |   |              | From the    |            |               |  
|                                       |                                                                   | Common Stock |            |           | Additional |   |       |             |   |   |                |             |   | Other        |             |            | Sale of       |   |         | Total  | 
|                                       |                                                                   |              |            |           | Paid-in    |   |       | Accumulated |   |   | Deferred Stock |             |   | Treasury     |             |            | Comprehensive |   |         | Common |  |   | Stockholders |        
|                                       |                                                                   | Shares       |            |           | Amount     |   |       | Capital     |   |   | Deficit        |             |   | Compensation |             |            | Stock         |   |         | Income |  |   | Stock         |         |   | Equity |       
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|Balance at December 31, 2001           |                                                                   |              | 13,248,390 |           |            | $ | 1,325 |             |   | $ | 89,937,671     |             |   | $            | (85,294,865 | )          |               | $ | (60,924 | )      |  | $ | (148,581      | )       |   | $      | 25,370 |         |   | $ | (122,381 | )       |  | $ | 4,337,615  |          
|Comprehensive loss:                    |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            |          
|                                       | Net loss                                                          |              |            |          |            |   |       |            |   |   |                |            |   |              |             | (405,583   | )             |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | (405,583  | )
|                                       | Unrealized loss on available-for-sale securities                  |              |            |          |            |   |       |            |   |   |                |            |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        | (10,718 | ) |   |          |        |  |   |            | (10,718   | )
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|                                       | Comprehensive loss                                                |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            | (416,301  | )
|                                       | Exercise of common stock options                                  |              |            | 189,955   |            |   |       | 19          |   |   |                | 291,150     |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 291,169   |  
|                                       | Conversion of notes payable                                       |              |            | 295,031   |            |   |       | 30          |   |   |                | 1,141,818   |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 1,141,848 |  
|                                       | Issuance of common stock                                          |              |            | 29,395    |            |   |       | 2           |   |   |                | 45,906      |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 45,908    |  
|                                       | Cancellation of over-issued shares                                |              |            | (25,673   | )          |   |       | (3          | ) |   |                | 3           |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            |          |  
|                                       | Amortization of deferred stock compensation                       |              |            |          |            |   |       |            |   |   |                | (6,195      | ) |              |             |           |               |   |         | 60,924 |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 54,729    |  
|                                       | Surrender of stock subscription receivable                        |              |            | (30,677   | )          |   |       | (3          | ) |   |                | 3           |   |              |             |           |               |   |         |       |  |   |               | (79,219 | ) |        |        |        |   |   |          | 122,381 |  |   |            | 43,162    |  
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|Balance at December 31, 2002           |                                                                   |              | 13,706,421 |           |            |   | 1,370 |             |   |   | 91,410,356     |             |   |              | (85,700,448 | )          |               |   |        |        |  |   | (227,800      | )       |   |        | 14,652 |         |   |   |         |         |  |   | 5,498,130  |          
|Comprehensive income, restated:        |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            |          
|                                       | Net income, restated                                              |              |            |          |            |   |       |            |   |   |                |            |   |              |             | 2,102,087  |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 2,102,087 |  
|                                       | Unrealized loss on available-for-sale securities                  |              |            |          |            |   |       |            |   |   |                |            |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        | (9,325  | ) |   |          |        |  |   |            | (9,325    | )
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|                                       | Comprehensive income, restated                                    |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            | 2,092,762 |  
|                                       | Exercise of common stock options                                  |              |            | 746,911   |            |   |       | 75          |   |   |                | 2,167,806   |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 2,167,881 |  
|                                       | Issuance of common stock                                          |              |            | 1,357,556 |            |   |       | 136         |   |   |                | 4,450,328   |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 4,450,464 |  
|                                       | Conversion of notes payable                                       |              |            | 2,001,314 |            |   |       | 200         |   |   |                | 8,099,800   |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 8,100,000 |  
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|Balance at December 31, 2003, restated |                                                                   |              | 17,812,202 |           |            |   | 1,781 |             |   |   | 106,128,290    |             |   |              | (83,598,361 | )          |               |   |        |        |  |   | (227,800      | )       |   |        | 5,327  |         |   |   |         |         |  |   | 22,309,237 |          
|Comprehensive income, restated:        |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            |          
|                                       | Net income, restated                                              |              |            |          |            |   |       |            |   |   |                |            |   |              |             | 3,947,052  |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 3,947,052 |  
|                                       | Unrealized loss on available-for-sale securities                  |              |            |          |            |   |       |            |   |   |                |            |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        | (5,442  | ) |   |          |        |  |   |            | (5,442    | )
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|                                       | Comprehensive income, restated                                    |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            | 3,941,610 |  
|                                       | Exercise of common stock options                                  |              |            | 424,434   |            |   |       | 42          |   |   |                | 1,072,572   |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 1,072,614 |  
|                                       | Issuance of common stock                                          |              |            | 28,047    |            |   |       | 3           |   |   |                | 157,090     |   |              |             |           |               |   |         |       |  |   |               |        |   |        |        |        |   |   |          |        |  |   |            | 157,093   |  
|                                       | Issuance of common stock in connection with Incurrent acquisition |              |            | 1,000,014 |            |   |       | 100         |   |   |                | 7,290,002   |   |              |             |            |               |   |         |        |  |   |               |         |   |        |        |         |   |   |          |         |  |   |            | 7,290,102 |  
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       
|Balance at December 31, 2004, restated |                                                                   |              | 19,264,697 |           |            | $ | 1,926 |             |   | $ | 114,647,954    |             |   | $            | (79,651,309 | )          |               | $ |        |        |  | $ | (227,800      | )       |   | $      | (115   | )       |   | $ |         |         |  | $ | 34,770,656 |          
|                                       |                                                                   |              |            |           |            |   |       |             |   |   |                |             |   |              |             |            |               |   |         |        |  |   |               |         |   |        |       

See accompanying notes to consolidated financial
statements.


44



---



##### 



ONLINE RESOURCES CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |           |           |            |  
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ------------------------------------------------------ | ---------------------------------------------- | --------- | ---------- | ---------- | ----------- | --------- | --------- | --------- | ---------- | --------- | --------- | ---------- | -
|                                                                                                       |                                                              | Year ended December 31,                                |                                               
|                                                                                                       |                                                              |                                                        |                                               
|                                                                                                       |                                                              | 2004                                                   |                                                |           | 2003       |            |             | 2002      |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|                                                                                                       |                                                              | (restated)                                             |                                                |           | (restated) |            |             |          
|Operating activities                                                                                   |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |          
|Net income (loss)                                                                                      |                                                              | $                                                      | 3,947,052                                      |           |            | $          | 2,102,087   |           |           | $         | (405,583   | )        
|Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities: |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |          
|                                                                                                       |                                                              | Debt conversion expense                                |                                                |           |           |            |             |           | 495,113   |           |            |           | 212,554   |           
|                                                                                                       |                                                              | Depreciation and amortization                          |                                                |           | 3,665,074  |            |             |           | 3,137,072 |           |            |           | 2,679,727 |           
|                                                                                                       |                                                              | Amortization of debt issuance costs                    |                                                |           |           |            |             |           | 164,766   |           |            |           | 252,663   |           
|                                                                                                       |                                                              | Stock compensation                                     |                                                |           |           |            |             |           |          |           |            |           | 97,891    |           
|                                                                                                       |                                                              | Loss on disposal of assets                             |                                                |           | 38,014     |            |             |           |          |           |            |           |          |           
|                                                                                                       |                                                              | Provision for losses on accounts receivable            |                                                |           |           |            |             |           | (10,000   | )         |            |           | 88,000    |           
|                                                                                                       |                                                              | Net realized loss (gain) on investments                |                                                |           | 12,939     |            |             |           | (6,867    | )         |            |           | (10,035   | )         
|                                                                                                       |                                                              | Amortization of bond (discount) premium                |                                                |           | (37,590    | )          |             |           | 1,366     |           |            |           | (6,892    | )         
|                                                                                                       |                                                              | Changes in assets and liabilities, net of acquisition: |                                                |           |            |            |             |           |           |           |            |           |           |           
|                                                                                                       |                                                              |                                                        | Restricted cash                                |           |            | (1,102,342 | )           |           |           | (595,520  | )          |           |           |           |  
|                                                                                                       |                                                              |                                                        | Accounts receivable                            |           |            | (1,997,625 | )           |           |           | 17,669    |            |           |           | (1,278,063 | )
|                                                                                                       |                                                              |                                                        | Prepaid expenses and other current assets      |           |            | (1,592,810 | )           |           |           | (138,645  | )          |           |           | (22,789    | )
|                                                                                                       |                                                              |                                                        | Deferred implementation costs                  |           |            | 29,572     |             |           |           | 121,931   |            |           |           | 641,374    |  
|                                                                                                       |                                                              |                                                        | Other assets                                   |           |            | (78,645    | )           |           |           | 332,568   |            |           |           | 513,094    |  
|                                                                                                       |                                                              |                                                        | Accounts payable                               |           |            | 1,008,119  |             |           |           | (244,782  | )          |           |           | 166,629    |  
|                                                                                                       |                                                              |                                                        | Accrued expenses and other current liabilities |           |            | 1,674,427  |             |           |           | 1,055,277 |            |           |           | 374,436    |  
|                                                                                                       |                                                              |                                                        | Other long term liabilities                    |           |            | 94,422     |             |           |           |          |            |           |           |           |  
|                                                                                                       |                                                              |                                                        | Lease incentive obligation                     |           |            | 1,683,065  |             |           |           |          |            |           |           |           |  
|                                                                                                       |                                                              |                                                        | Deferred revenues                              |           |            | 463,587    |             |           |           | 888       |            |           |           | (559,468   | )
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Net cash provided by operating activities                                                              |                                                              |                                                        | 7,807,259                                      |           |            |            | 6,432,923   |           |           |           | 2,743,538  |          
|Investing activities                                                                                   |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |          
|Purchases of property and equipment                                                                    |                                                              |                                                        | (9,158,494                                     | )         |            |            | (2,677,013  | )         |           |           | (3,670,833 | )        
|Purchases of available-for-sale securities                                                             |                                                              |                                                        | (11,482,953                                    | )         |            |            | (12,658,680 | )         |           |           | (6,117,950 | )        
|Sales of available-for-sale securities                                                                 |                                                              |                                                        | 16,187,121                                     |           |            |            | 11,165,864  |           |           |           | 7,212,652  |          
|Acquisition of Incurrent, net of cash acquired                                                         |                                                              |                                                        | (8,198,520                                     | )         |            |            |            |           |           |           |           |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Net cash used in investing activities                                                                  |                                                              |                                                        | (12,652,846                                    | )         |            |            | (4,169,829  | )         |           |           | (2,576,131 | )        
|Financing activities                                                                                   |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |          
|Net proceeds from issuance of common stock                                                             |                                                              |                                                        | 1,229,707                                      |           |            |            | 6,618,345   |           |           |           | 337,077    |          
|Repayment of capital lease obligations                                                                 |                                                              |                                                        | (96,979                                        | )         |            |            | (217,852    | )         |           |           | (333,786   | )        
|Repurchase of notes payable                                                                            |                                                              |                                                        |                                               |           |            |            | (3,900,000  | )         |           |           |           |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Net cash provided by financing activities                                                              |                                                              |                                                        | 1,132,728                                      |           |            |            | 2,500,493   |           |           |           | 3,291      |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Net (decrease) increase in cash and cash equivalents                                                   |                                                              |                                                        | (3,712,859                                     | )         |            |            | 4,763,587   |           |           |           | 170,698    |          
|Cash and cash equivalents at beginning of year                                                         |                                                              |                                                        | 7,054,537                                      |           |            |            | 2,290,950   |           |           |           | 2,120,252  |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Cash and cash equivalents at end of year                                                               |                                                              | $                                                      | 3,341,678                                      |           |            | $          | 7,054,537   |           |           | $         | 2,290,950  |          
|                                                                                                       |                                                              |                                                        |                                                |           |            |            |             |           |          
|Supplemental information to statement of cash flows:                                                   |                                                              |                                                        |                                                |           |            |            |             |           |           |           |            |          
|                                                                                                       | Cash paid for interest                                       |                                                        | $                                              | 10,403    |            |            | $           | 830,170   |           |           | $          | 1,061,917 |          
|                                                                                                       | Income taxes paid                                            |                                                        |                                                | 37,274    |            |            |             | 48,500    |           |           |            |          |          
|                                                                                                       | Conversion of notes payable                                  |                                                        |                                                |          |            |            |             | 8,100,000 |           |           |            | 1,000,000 |          
|                                                                                                       | Net unrealized loss on investments                           |                                                        |                                                | (5,442    | )          |            |             | (9,325    | )         |           |            | (10,718   | )        
|                                                                                                       | Common stock issued in connection with Incurrent acquisition |                                                        |                                                | 7,290,102 |            |            |             |          |           |           |            |          |          

See accompanying notes to consolidated financial
statements.


45



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##### 



ONLINE RESOURCES CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |             
|-- | ------------
|1. | ORGANIZATION





|   |            
|-- | -----------
|2. | RESTATEMENT



Accounting for Contingencies, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities.








46



---



##### 



|   |                        
|-- | -----------------------
|2. | RESTATEMENT (CONTINUED)



|                                           |                                                |                    |             |           |          |  |             |           |  |  |             |           |  |  |             |           | 
|------------------------------------------ | ---------------------------------------------- | ------------------ | ----------- | --------- | -------- |  | ----------- | --------- |  |  | ----------- | --------- |  |  | ----------- | --------- | 
|                                           |                                                | As of December 31, |            
|                                           |                                                |                    |            
|                                           |                                                | 2004               |             |           | 2003     | 
|                                           |                                                |                    |             |           |          | 
|                                           |                                                | Previously         |             |           |          |  | Previously  |           |  | 
|                                           |                                                | Reported           |             |           | Restated |  |             | Reported  |  |  | Restated    |          
|                                           |                                                |                    |             |           |          |  |             |           |  |  |             |          
|Current assets:                            |                                                |                    |             |           |          |  |             |           |  |  |             |           |  |  |             |          
|                                           | Cash and cash equivalents                      |                    | $           | 4,992,401 |          |  | $           | 3,341,678 |  |  | $           | 7,650,057 |  |  | $           | 7,054,537 | 
|                                           | Restricted cash                                |                    |             |          |          |  |             | 1,650,723 |  |  |             |          |  |  |             | 595,520   | 
|                                           | Accounts receivable                            |                    |             | 8,516,471 |          |  |             | 8,433,113 |  |  |             | 3,935,513 |  |  |             | 3,818,132 | 
|Total current assets                       |                                                |                    | 17,903,342  |           |          |  | 17,819,984  |           |  |  | 18,973,759  |           |  |  | 18,856,378  |          
|Total assets                               |                                                |                    | 44,616,626  |           |          |  | 44,533,268  |           |  |  | 26,851,959  |           |  |  | 26,734,578  |          
|Current liabilities:                       |                                                |                    |             |           |          |  |             |           |  |  |             |           |  |  |             |          
|                                           | Accrued expenses and other current liabilities |                    |             | 1,509,020 |          |  |             | 3,159,743 |  |  |             | 660,473   |  |  |             | 1,255,993 | 
|Other long term liabilities                |                                                |                    | 133,580     |           |          |  | 94,422      |           |  |  | 51,219      |           |  |  |            |          
|Total liabilities                          |                                                |                    | 8,151,047   |           |          |  | 9,762,612   |           |  |  | 3,881,040   |           |  |  | 4,425,341   |          
|Accumulated deficit                        |                                                |                    | (77,956,386 | )         |          |  | (79,651,309 | )         |  |  | (82,936,679 | )         |  |  | (83,598,361 | )        
|Total stockholders equity                 |                                                |                    | 36,465,579  |           |          |  | 34,770,656  |           |  |  | 22,970,919  |           |  |  | 22,309,237  |          
|Total liabilities and stockholders equity |                                                |                    | 44,616,626  |           |          |  | 44,533,268  |           |  |  | 26,851,959  |           |  |  | 26,734,578  |          

|                       |         |                          |            |      |          |   |            |          |  |   |            |      |  |   |            |      | 
|---------------------- | ------- | ------------------------ | ---------- | ---- | -------- | - | ---------- | -------- |  | - | ---------- | ---- |  | - | ---------- | ---- | 
|                       |         | Years Ended December 31, |           
|                       |         |                          |           
|                       |         | 2004                     |            |      | 2003     |  
|                       |         |                          |            |      |          |  
|                       |         | Previously               |            |      |          |   | Previously |          |  |  
|                       |         | Reported                 |            |      | Restated |   |            | Reported |  |   | Restated   |     
|                       |         |                          |            |      |          |   |            |          |  |   |            |     
|Service costs          |         | $                        | 14,894,206 |      |          | $ | 15,927,447 |          |  | $ | 14,020,014 |      |  | $ | 14,681,696 |     
|Gross profit           |         |                          | 26,083,914 |      |          |   | 25,050,673 |          |  |   | 22,905,051 |      |  |   | 22,243,369 |     
|Income from operations |         |                          | 4,944,392  |      |          |   | 3,911,151  |          |  |   | 4,013,635  |      |  |   | 3,351,953  |     
|Net income             |         |                          | 4,980,293  |      |          |   | 3,947,052  |          |  |   | 2,763,769  |      |  |   | 2,102,087  |     
|Net income per share:  |         |                          |            |      |          |   |            |          |  |   |            |      |  |   |            |     
|                       | Basic   |                          | $          | 0.28 |          |   | $          | 0.22     |  |   | $          | 0.18 |  |   | $          | 0.14 | 
|                       | Diluted |                          | $          | 0.25 |          |   | $          | 0.20     |  |   | $          | 0.17 |  |   | $          | 0.13 | 
|Comprehensive income   |         | $                        | 4,974,851  |      |          | $ | 3,945,450  |          |  | $ | 2,758,327  |      |  | $ | 2,143,784  |     



|   |                                           
|-- | ------------------------------------------
|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates




Cash and Cash Equivalents




Fair Value of Financial Instruments




47



---



##### 



3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)




Concentration of Credit Risk




Allowance for Doubtful Accounts




Property and Equipment




Systems and Development




Goodwill and Intangible Assets


Business Combinations Goodwill and Other
Intangible Assets,


Impairment of Long-Lived Assets


Accounting for the
Impairment or Disposal of Long-Lived Assets,


48



---



##### 



3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)


Income Taxes




Reclassification




Revenue Recognition




SM






49



---



##### 



3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)


Major Customer




Advertising Costs




Net Income (Loss) Per Share




Comprehensive Income


Reporting Comprehensive Income,




|                                         |  |                         |           |   |            |   |           |      |  |   |          |  
|---------------------------------------- |  | ----------------------- | --------- | - | ---------- | - | --------- | ---- |  | - | -------- | -
|                                         |  | Year ended December 31, |          
|                                         |  |                         |          
|                                         |  | 2004                    |           |   | 2003       |   |           | 2002 | 
|                                         |  |                         |           |   |            |   |           |      | 
|                                         |  | (restated)              |           |   | (restated) |   |           |     
|Net income (loss)                        |  | $                       | 3,947,052 |   |            | $ | 2,102,087 |      |  | $ | (405,583 | )
|Unrealized loss on marketable securities |  |                         | (5,442    | ) |            |   | (9,325    | )    |  |   | (10,718  | )
|                                         |  |                         |           |   |            |   |           |      | 
|Total comprehensive income (loss)        |  | $                       | 3,941,610 |   |            | $ | 2,092,762 |      |  | $ | (416,301 | )
|                                         |  |                         |           |   |            |   |           |      | 

Stock-Based Compensation


Accounting for Stock Issued to
Employees Accounting for Stock-Based
Compensation  Transition and Disclosure Accounting for Stock-Based Compensation




50



---



##### 



3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)




|                        |  |                         |      |   |      |  |      |      |  |  |      |  
|----------------------- |  | ----------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                        |  | Year Ended December 31, |     
|                        |  |                         |     
|                        |  | 2004                    |      |   | 2003 |  |      | 2002 | 
|                        |  |                         |      |   |      |  |      |      | 
|Dividend yield          |  |                         |     |   |      |  |     |      |  |  |     |  
|Expected volatility     |  |                         | 84   | % |      |  | 91   | %    |  |  | 104  | %
|Risk-free interest rate |  |                         | 3.42 | % |      |  | 2.97 | %    |  |  | 4.91 | %
|Expected life in years  |  |                         | 5.2  |   |      |  | 5.2  |      |  |  | 6.6  |  



|                                     |                                                        |                         |           |            |            |   |           |            |   |   |            |            |  
|------------------------------------ | ------------------------------------------------------ | ----------------------- | --------- | ---------- | ---------- | - | --------- | ---------- | - | - | ---------- | ---------- | -
|                                     |                                                        | Year Ended December 31, |          
|                                     |                                                        |                         |          
|                                     |                                                        | 2004                    |           |            | 2003       |   |           | 2002       |  
|                                     |                                                        |                         |           |            |            |   |           |            |  
|                                     |                                                        | (restated)              |           |            | (restated) |   |           |           
|Net income (loss) as reported        |                                                        | $                       | 3,947,052 |            |            | $ | 2,102,087 |            |   | $ | (405,583   | )         
|Adjustment to net income (loss) for: |                                                        |                         |           |            |            |   |           |            |   |   |            |           
|                                     | Stock based compensation included in net income (loss) |                         |           |           |            |   |           |           |   |   |            | 97,891     |  
|                                     | Pro forma stock-based compensation expense             |                         |           | (2,244,518 | )          |   |           | (2,558,313 | ) |   |            | (4,567,065 | )
|                                     |                                                        |                         |           |            |            |   |           |            |  
|Pro forma net income (loss)          |                                                        | $                       | 1,702,534 |            |            | $ | (456,226  | )          |   | $ | (4,874,757 | )         
|                                     |                                                        |                         |           |            |            |   |           |            |  
|Basic net income (loss) per share    |                                                        |                         |           |            |            |   |           |            |   |   |            |           
|                                     | As reported                                            |                         | $         | 0.22       |            |   | $         | 0.14       |   |   | $          | (0.03      | )
|                                     | Pro forma                                              |                         | $         | 0.09       |            |   | $         | (0.03      | ) |   | $          | (0.36      | )
|Diluted net income (loss) per share  |                                                        |                         |           |            |            |   |           |            |   |   |            |           
|                                     | As reported                                            |                         | $         | 0.20       |            |   | $         | 0.13       |   |   | $          | (0.03      | )
|                                     | Pro forma                                              |                         | $         | 0.08       |            |   | $         | (0.03      | ) |   | $          | (0.36      | )

Recent Pronouncements


Share-Based Payment




|   |            
|-- | -----------
|4. | ACQUISITION



51



---



##### 



4.  ACQUISITION (CONTINUED)






|                                                                             |                                                               |                |        |       | 
|---------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------- | ------ | ----- | 
|                                                                             |                                                               | At             |       
|                                                                             |                                                               | December 31,   |       
|                                                                             |                                                               | 2004           |       
|                                                                             |                                                               |                |       
|                                                                             |                                                               | (in thousands) |       
|Current assets                                                               |                                                               | $              | 2,810  |      
|Property, plant and equipment                                                |                                                               |                | 300    |      
|Other assets                                                                 |                                                               |                | 155    |      
|Identifiable intangible assets (five year weighted-average
    useful life): |                                                               |                |        |      
|                                                                             | Purchased technology (five year weighted-average useful life) |                |        | 1,000 | 
|                                                                             | Customer list (five year weighted-average useful life)        |                |        | 570   | 
|                                                                             |                                                               |                |       
|                                                                             |                                                               |                | 1,570  |      
|                                                                             |                                                               |                |       
|                                                                             |                                                               |                | 4,835  |      
|Goodwill                                                                     |                                                               |                | 11,273 |      
|                                                                             |                                                               |                |       
|Total assets acquired                                                        |                                                               |                | 16,108 |      
|Current liabilities                                                          |                                                               |                | (558   | )    
|                                                                             |                                                               |                |       
|Total liabilities assumed                                                    |                                                               |                | (558   | )    
|                                                                             |                                                               |                |       
|Net assets acquired                                                          |                                                               | $              | 15,550 |      
|                                                                             |                                                               |                |       







|           |  |                                 |            |  |            |   |            | 
|---------- |  | ------------------------------- | ---------- |  | ---------- | - | ---------- | 
|           |  | For the year ended December 31, |           
|           |  |                                 |           
|           |  | 2004                            |            |  | 2003       |  
|           |  |                                 |            |  |            |  
|           |  | (restated)                      |            |  | (restated) |  
|Revenues   |  | $                               | 52,899,333 |  |            | $ | 48,180,905 | 
|Net income |  | $                               | 3,717,161  |  |            | $ | 2,200,540  | 



|   |            
|-- | -----------
|5. | INVESTMENTS



52



---



##### 



5.  INVESTMENTS (CONTINUED)






|                                   |  |                   |           |  |                   |   |           |                |  |   |            |  |  |   |           | 
|---------------------------------- |  | ----------------- | --------- |  | ----------------- | - | --------- | -------------- |  | - | ---------- |  |  | - | --------- | 
|                                   |  | December 31, 2004 |           |  | December 31, 2003 |  
|                                   |  |                   |           |  |                   |  
|                                   |  | Amortized Cost    |           |  | Fair Value        |   |           | Amortized Cost |  |   | Fair Value | 
|                                   |  |                   |           |  |                   |   |           |                |  |   |            | 
|US Government treasury obligations |  | $                 | 798,682   |  |                   | $ | 798,720   |                |  | $ | 3,119,026  |  |  | $ | 3,122,780 | 
|Mortgage backed securities         |  |                   | 150,342   |  |                   |   | 150,180   |                |  |   | 2,809,516  |  |  |   | 2,810,935 | 
|Corporate obligations              |  |                   | 350,000   |  |                   |   | 350,009   |                |  |   | 50,000     |  |  |   | 50,154    | 
|                                   |  |                   |           |  |                   |   |           |                |  |   |            | 
|                                   |  | $                 | 1,299,024 |  |                   | $ | 1,298,909 |                |  | $ | 5,978,542  |  |  | $ | 5,983,869 | 
|                                   |  |                   |           |  |                   |   |           |                |  |   |            | 



|       |  |                |           |  |            |   |           | 
|------ |  | -------------- | --------- |  | ---------- | - | --------- | 
|Due in |  | Amortized Cost |           |  | Fair Value |  
|       |  |                |           |  |            |  
|2005   |  | $              | 1,299,024 |  |            | $ | 1,298,909 | 

6.  PROPERTY AND EQUIPMENT




|                                                                        |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                        |  | December 31, |            
|                                                                        |  |              |            
|                                                                        |  | 2004         |             |   | 2003 |  
|                                                                        |  |              |             |   |      |  
|Central processing systems and terminals                                |  | $            | 22,883,521  |   |      | $ | 16,245,861  |  
|Office furniture and equipment                                          |  |              | 2,634,148   |   |      |   | 1,862,830   |  
|Central processing systems and terminals under capital leases           |  |              | 500,532     |   |      |   | 500,532     |  
|Office furniture and equipment under capital leases                     |  |              | 572,117     |   |      |   | 572,117     |  
|Leasehold improvements                                                  |  |              | 2,215,958   |   |      |   | 1,119,130   |  
|                                                                        |  |              |             |   |      |  
|                                                                        |  |              | 28,806,276  |   |      |   | 20,300,470  |  
|Less accumulated depreciation and amortization                          |  |              | (14,633,798 | ) |      |   | (12,048,873 | )
|Less accumulated depreciation and amortization under capital
    leases |  |              | (1,072,649  | ) |      |   | (907,427    | )
|                                                                        |  |              |             |   |      |  
|                                                                        |  | $            | 13,099,829  |   |      | $ | 7,344,170   |  
|                                                                        |  |              |             |   |      |  

7.  CONVERTIBLE NOTES










53



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##### 



7.  CONVERTIBLE NOTES (CONTINUED)






8.  COMMITMENTS


Office Space




|     |  |      |           | 
|---- |  | ---- | --------- | 
|     |  | Rent |          
|     |  |      |          
|2002 |  | $    | 1,179,000 | 
|2003 |  |      | 1,312,000 | 
|2004 |  |      | 1,636,000 | 



Equipment






|                                            |                              |              |           |            |              |   |        |        | 
|------------------------------------------- | ---------------------------- | ------------ | --------- | ---------- | ------------ | - | ------ | ------ | 
|                                            |                              | Operating    |           |            | Capital      |  
|                                            |                              |              |           |            |              |  
|                                            |                              | December 31, |           |            | December 31, |  
|                                            |                              | 2004         |           |            | 2004         |  
|                                            |                              |              |           |            |              |  
|2005                                        |                              | $            | 2,200,753 |            |              | $ | 11,015 |       
|2006                                        |                              |              | 2,420,520 |            |              |   |       |       
|2007                                        |                              |              | 1,946,223 |            |              |   |       |       
|2008                                        |                              |              | 1,722,751 |            |              |   |       |       
|2009                                        |                              |              | 1,770,073 |            |              |   |       |       
|Thereafter                                  |                              |              | 9,093,003 |            |              |   |       |       
|                                            |                              |              |           |            |              |  
|                                            | Total minimum lease payments |              | $         | 19,153,323 |              |   |        | 11,015 | 
|                                            |                              |              |           |            |              |  
|Less amount representing interest           |                              |              |           |            |              |   | (442   | )     
|                                            |                              |              |           |            |              |  
|Present value of minimum lease payments     |                              |              |           |            |              |   | 10,573 |       
|Less current portion                        |                              |              |           |            |              |   | 10,573 |       
|                                            |                              |              |           |            |              |  
|Long-term portion of minimum lease payments |                              |              |           |            |              | $ |       |       
|                                            |                              |              |           |            |              |  

54



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##### 



9.  INCOME TAXES








|                                                |                                              |                                |             |            |            |   |             |            |            |  
|----------------------------------------------- | -------------------------------------------- | ------------------------------ | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                                |                                              | December 31,                   |            
|                                                |                                              |                                |            
|                                                |                                              | 2004                           |             |            | 2003       |  
|                                                |                                              |                                |             |            |            |  
|Deferred tax assets:                            |                                              |                                |             |            |            |   |             |           
|                                                | Net operating loss carryforwards/AMT credits |                                | $           | 35,842,000 |            |   | $           | 35,184,000 |           
|                                                | Deferred wages                               |                                |             | 107,000    |            |   |             | 166,000    |           
|                                                | Other deferred tax assets                    |                                |             | 255,000    |            |   |             | 169,000    |           
|                                                |                                              |                                |             |            |            |  
|                                                |                                              | Total deferred tax assets      |             |            | 36,204,000 |   |             |            | 35,519,000 |  
|Deferred liabilities:                           |                                              |                                |             |            |            |   |             |           
|                                                | Acquired intangible assets  Incurrent       |                                |             | (568,000   | )          |   |             |           |           
|                                                | Depreciation                                 |                                |             | (268,000   | )          |   |             | (534,000   | )         
|                                                |                                              |                                |             |            |            |  
|                                                |                                              | Total deferred tax liabilities |             |            | (836,000   | ) |             |            | (534,000   | )
|Valuation allowance for net deferred tax assets |                                              |                                | (35,368,000 | )          |            |   | (34,985,000 | )         
|                                                |                                              |                                |             |            |            |  
|Net deferred tax assets                         |                                              | $                              |            |            |            | $ |            |           
|                                                |                                              |                                |             |            |            |  



|                                                |                                            |                         |           |            |      |   |         |            |   |   |          |         |  
|----------------------------------------------- | ------------------------------------------ | ----------------------- | --------- | ---------- | ---- | - | ------- | ---------- | - | - | -------- | ------- | -
|                                                |                                            | Year Ended December 31, |          
|                                                |                                            |                         |          
|                                                |                                            | 2004                    |           |            | 2003 |   |         | 2002       |  
|                                                |                                            |                         |           |            |      |   |         |            |  
|Tax expense (benefit) at statutory Federal rate |                                            | $                       | 1,743,000 |            |      | $ | 945,000 |            |   | $ | (138,000 | )      
|Effect of:                                      |                                            |                         |           |            |      |   |         |            |   |   |          |        
|                                                | State income tax (benefit), net            |                         |           | 197,000    |      |   |         | 35,000     |   |   |          | (20,000 | )
|                                                | Other                                      |                         |           | 112,000    |      |   |         | 20,000     |   |   |          | 26,000  |  
|                                                | Alternative minimum tax                    |                         |           | 105,000    |      |   |         | 16,000     |   |   |          |        |  
|                                                | (Decrease) increase in valuation allowance |                         |           | (2,011,000 | )    |   |         | (1,000,000 | ) |   |          | 132,000 |  
|                                                |                                            |                         |           |            |      |   |         |            |  
|Income tax expense                              |                                            | $                       | 146,000   |            |      | $ | 16,000  |            |   | $ |         |        
|                                                |                                            |                         |           |            |      |   |         |            |  

55



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##### 



10.  PREFERRED STOCK






11.  STOCKHOLDERS EQUITY


Stock Options










56



---



##### 



11.  STOCKHOLDERS EQUITY (CONTINUED)




|                                                               |  |                         |           |           |       |   |      |        |           |  |           |   |  |           |      |  |       |  |           |   |  |   |      | 
|-------------------------------------------------------------- |  | ----------------------- | --------- | --------- | ----- | - | ---- | ------ | --------- |  | --------- | - |  | --------- | ---- |  | ----- |  | --------- | - |  | - | ---- | 
|                                                               |  | Year Ended December 31, |          
|                                                               |  |                         |          
|                                                               |  | 2004                    |           |           | 2003  |   |      | 2002   |          
|                                                               |  |                         |           |           |       |   |      |        |          
|                                                               |  |                         |           | Weighted- |       |   |      |        | Weighted- |  |           |   |  | Weighted- |     
|                                                               |  |                         |           | Average   |       |   |      |        | Average   |  |           |   |  | Average   |     
|                                                               |  |                         |           | Exercise  |       |   |      |        | Exercise  |  |           |   |  | Exercise  |     
|                                                               |  | Shares                  |           |           | Price |   |      | Shares |           |  | Price     |   |  | Shares    |      |  | Price | 
|                                                               |  |                         |           |           |       |   |      |        |           |  |           |   |  |           |      |  |       | 
|Outstanding at beginning of period                             |  |                         | 5,357,072 |           |       | $ | 5.38 |        |           |  | 5,917,076 |   |  | $         | 5.13 |  |       |  | 4,414,017 |   |  | $ | 6.53 | 
|Options granted  exercise price equal to market price         |  |                         | 456,497   |           |       |   | 6.89 |        |           |  | 438,677   |   |  |           | 4.87 |  |       |  | 2,365,346 |   |  |   | 2.71 | 
|Options granted  exercise price greater than market
    price |  |                         | 36,300    |           |       |   | 8.59 |        |           |  |          |   |  |           |     |  |       |  | 36,000    |   |  |   | 5.50 | 
|Options exercised                                              |  |                         | (424,434  | )         |       |   | 2.53 |        |           |  | (746,911  | ) |  |           | 2.86 |  |       |  | (189,000  | ) |  |   | 1.54 | 
|Options canceled or expired                                    |  |                         | (297,335  | )         |       |   | 7.23 |        |           |  | (251,770  | ) |  |           | 6.17 |  |       |  | (709,287  | ) |  |   | 6.75 | 
|                                                               |  |                         |           |           |       |   |      |        |           |  |           |   |  |           |      |  |       | 
|Outstanding at end of period                                   |  |                         | 5,128,100 |           |       | $ | 5.67 |        |           |  | 5,357,072 |   |  | $         | 5.38 |  |       |  | 5,917,076 |   |  | $ | 5.13 | 
|                                                               |  |                         |           |           |       |   |      |        |           |  |           |   |  |           |      |  |       | 
|Options exercisable at end of period                           |  |                         | 3,240,461 |           |       | $ | 6.63 |        |           |  | 3,375,885 |   |  | $         | 6.12 |  |       |  | 3,672,699 |   |  | $ | 5.58 | 



|                 |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |           |  |  |   |       | 
|---------------- |  | ------------------- | --------- | --------- | ------------------- |  | --------- | -------- |  | - | ----------- | --------- |  | -------- | --------- |  |  | - | ----- | 
|                 |  | Options Outstanding |           |           | Options Exercisable | 
|                 |  |                     |           |           |                     | 
|                 |  |                     |           | Weighted- |                     |  |           |          | 
|                 |  |                     |           | Average   |                     |  | Weighted- |          |  |   |             | Weighted- | 
|                 |  |                     |           | Remaining |                     |  | Average   |          |  |   |             | Average   | 
|                 |  | Number              |           |           | Contractual Life    |  |           | Exercise |  |   | Number      |           |  | Exercise |          
|                 |  | Outstanding         |           |           | (In Years)          |  |           | Price    |  |   | Exercisable |           |  | Price    |          
|                 |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          
|$0.06 to $2.30   |  |                     | 950,335   |           |                     |  | 5.58      |          |  | $ | 2.00        |           |  |          | 792,515   |  |  | $ | 1.99  | 
|$2.31 to $2.86   |  |                     | 874,409   |           |                     |  | 6.86      |          |  |   | 2.80        |           |  |          | 223,929   |  |  |   | 2.73  | 
|$2.88 to $3.81   |  |                     | 973,283   |           |                     |  | 5.86      |          |  |   | 3.19        |           |  |          | 510,183   |  |  |   | 3.25  | 
|$3.88 to $8.40   |  |                     | 1,495,836 |           |                     |  | 4.60      |          |  |   | 7.12        |           |  |          | 897,597   |  |  |   | 7.54  | 
|$8.42 to $20.19  |  |                     | 833,399   |           |                     |  | 2.58      |          |  |   | 13.12       |           |  |          | 815,399   |  |  |   | 13.12 | 
|$21.50 to $21.50 |  |                     | 838       |           |                     |  | 2.20      |          |  |   | 21.50       |           |  |          | 838       |  |  |   | 21.50 | 
|                 |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          
|                 |  |                     | 5,128,100 |           |                     |  | 5.08      |          |  | $ | 5.67        |           |  |          | 3,240,461 |  |  | $ | 6.63  | 
|                 |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          

57



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##### 



11.  STOCKHOLDERS EQUITY (CONTINUED)


Warrants




|                             |                                      |          |           |          |  
|---------------------------- | ------------------------------------ | -------- | --------- | -------- | -
|                             |                                      | Warrants |          
|                             |                                      |          |          
|Balance at December 31, 2001 |                                      |          | 1,442,182 |         
|                             | Exercise of warrants during 2002     |          |           |         |  
|                             | Cancellation of warrants during 2002 |          |           | (630,736 | )
|                             |                                      |          |          
|Balance at December 31, 2002 |                                      |          | 811,446   |         
|                             | Exercise of warrants during 2003     |          |           |         |  
|                             | Cancellation of warrants during 2003 |          |           | (611,446 | )
|                             |                                      |          |          
|Balance at December 31, 2003 |                                      |          | 200,000   |         
|                             | Exercise of warrants during 2004     |          |           |         |  
|                             | Cancellation of warrants during 2004 |          |           |         |  
|                             |                                      |          |          
|Balance at December 31, 2004 |                                      |          | 200,000   |         
|                             |                                      |          |          



12.     NET INCOME (LOSS) PER
SHARE




|                                                       |                       |                         |           |            |            |   |           |            |  |   |          |            |  
|------------------------------------------------------ | --------------------- | ----------------------- | --------- | ---------- | ---------- | - | --------- | ---------- |  | - | -------- | ---------- | -
|                                                       |                       | Year Ended December 31, |          
|                                                       |                       |                         |          
|                                                       |                       | 2004                    |           |            | 2003       |   |           | 2002       | 
|                                                       |                       |                         |           |            |            |   |           |            | 
|                                                       |                       | (restated)              |           |            | (restated) |   |           |           
|Net income (loss)                                      |                       | $                       | 3,947,052 |            |            | $ | 2,102,087 |            |  | $ | (405,583 | )         
|Shares used in calculation of income (loss) per share: |                       |                         |           |            |            |   |           |            |  |   |          |           
|                                                       | Basic                 |                         |           | 18,057,270 |            |   |           | 15,140,538 |  |   |          | 13,520,642 |  
|                                                       | In the money warrants |                         |           | 62,525     |            |   |           | 38,073     |  |   |          |           |  
|                                                       | In the money options  |                         |           | 2,008,298  |            |   |           | 1,506,991  |  |   |          |           |  
|                                                       |                       |                         |           |            |            |   |           |            | 
|                                                       | Diluted               |                         |           | 20,128,093 |            |   |           | 16,685,602 |  |   |          | 13,520,642 |  
|                                                       |                       |                         |           |            |            |   |           |            | 
|Net income (loss) per share:                           |                       |                         |           |            |            |   |           |            |  |   |          |           
|                                                       | Basic                 |                         | $         | 0.22       |            |   | $         | 0.14       |  |   | $        | (0.03      | )
|                                                       | Diluted               |                         | $         | 0.20       |            |   | $         | 0.13       |  |   | $        | (0.03      | )



13.     EMPLOYEE BENEFIT PLANS


Employee Savings and Retirement Plan




58



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##### 



13.     EMPLOYEE BENEFIT PLANS
(CONTINUED)


Employee Stock Purchase Plan




14.     RELATED PARTY
TRANSACTIONS


Accounting for Stock
Compensation Arrangement with Employer Loan Features.


15.     SUBSEQUENT EVENT




16.     SUMMARIZED QUARTERLY DATA
(UNAUDITED)




|                      |         |               |           |      |            |   |            |               |  |   |              |      |  |   |            |      | 
|--------------------- | ------- | ------------- | --------- | ---- | ---------- | - | ---------- | ------------- |  | - | ------------ | ---- |  | - | ---------- | ---- | 
|                      |         | Quarter Ended |          
|                      |         |               |          
|                      |         | March 31,     |           |      | June 30,   |   |            | September 30, |  |   | December 31, |     
|                      |         | 2004          |           |      | 2004       |   |            | 2004          |  |   | 2004         |     
|                      |         |               |           |      |            |   |            |               |  |   |              |     
|                      |         | (restated)    |           |      | (restated) |   |            | (restated)    |  |   | (restated)   |     
|Total revenues        |         | $             | 9,767,367 |      |            | $ | 10,068,458 |               |  | $ | 11,046,654   |      |  | $ | 11,402,973 |     
|Gross profit          |         |               | 5,289,090 |      |            |   | 5,906,473  |               |  |   | 6,829,165    |      |  |   | 7,025,945  |     
|Net income            |         | $             | 224,333   |      |            | $ | 983,208    |               |  | $ | 1,810,657    |      |  | $ | 928,854    |     
|Net income per share: |         |               |           |      |            |   |            |               |  |   |              |      |  |   |            |     
|                      | Basic   |               | $         | 0.01 |            |   | $          | 0.05          |  |   | $            | 0.10 |  |   | $          | 0.05 | 
|                      | Diluted |               | $         | 0.01 |            |   | $          | 0.05          |  |   | $            | 0.09 |  |   | $          | 0.05 | 

59



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##### 



16.     SUMMARIZED QUARTERLY DATA
(UNAUDITED) (CONTINUED)


|                             |         |               |            |      |          |            |           |               |            |   |              |      |  |   |           |       |  
|---------------------------- | ------- | ------------- | ---------- | ---- | -------- | ---------- | --------- | ------------- | ---------- | - | ------------ | ---- |  | - | --------- | ----- | -
|                             |         | Quarter Ended |           
|                             |         |               |           
|                             |         | March 31,     |            |      | June 30, |            |           | September 30, |            |   | December 31, |     
|                             |         | 2003          |            |      | 2003     |            |           | 2003          |            |   | 2003         |     
|                             |         |               |            |      |          |            |           |               |            |   |              |     
|                             |         |               |            |      |          | (restated) |           |               | (restated) |  
|Total revenues               |         | $             | 11,009,998 |      |          | $          | 8,417,410 |               |            | $ | 9,259,122    |      |  | $ | 9,721,085 |      
|Gross profit                 |         |               | 7,159,509  |      |          |            | 4,656,985 |               |            |   | 5,097,659    |      |  |   | 5,329,216 |      
|Net income (loss)            |         | $             | 2,123,172  |      |          | $          | (148,215  | )             |            | $ | 213,863      |      |  | $ | (86,733   | )    
|Net income (loss) per share: |         |               |            |      |          |            |           |               |            |   |              |      |  |   |           |      
|                             | Basic   |               | $          | 0.15 |          |            | $         | (0.01         | )          |   | $            | 0.02 |  |   | $         | (0.01 | )
|                             | Diluted |               | $          | 0.15 |          |            | $         | (0.01         | )          |   | $            | 0.01 |  |   | $         | (0.01 | )





|                      |         |               |           |      |               |   |               |      |  |              |            |      |  |   |            |      | 
|--------------------- | ------- | ------------- | --------- | ---- | ------------- | - | ------------- | ---- |  | ------------ | ---------- | ---- |  | - | ---------- | ---- | 
|                      |         | Quarter Ended |          
|                      |         |               |          
|                      |         | March 31,     |           |      |               |   | September 30, |      |  | December 31, |           
|                      |         | 2004          |           |      | June 30, 2004 |   |               | 2004 |  |              | 2004       |     
|                      |         |               |           |      |               |   |               |      |  |              |            |     
|Total revenues        |         | $             | 9,767,367 |      |               | $ | 10,068,458    |      |  | $            | 11,046,654 |      |  | $ | 11,402,973 |     
|Gross profit          |         |               | 5,483,868 |      |               |   | 6,124,283     |      |  |              | 7,168,218  |      |  |   | 7,307,545  |     
|Net income            |         | $             | 419,111   |      |               | $ | 1,201,018     |      |  | $            | 2,149,710  |      |  | $ | 1,210,454  |     
|Net income per share: |         |               |           |      |               |   |               |      |  |              |            |      |  |   |            |     
|                      | Basic   |               | $         | 0.02 |               |   | $             | 0.07 |  |              | $          | 0.12 |  |   | $          | 0.07 | 
|                      | Diluted |               | $         | 0.02 |               |   | $             | 0.06 |  |              | $          | 0.11 |  |   | $          | 0.06 | 

|                      |         |               |           |      |              |   |           |      | 
|--------------------- | ------- | ------------- | --------- | ---- | ------------ | - | --------- | ---- | 
|                      |         | Quarter Ended |          
|                      |         |               |          
|                      |         | September 30, |           |      | December 31, |  
|                      |         | 2003          |           |      | 2003         |  
|                      |         |               |           |      |              |  
|Total revenues        |         | $             | 9,259,122 |      |              | $ | 9,721,085 |     
|Gross profit          |         |               | 5,247,600 |      |              |   | 5,840,957 |     
|Net income            |         | $             | 363,804   |      |              | $ | 425,008   |     
|Net income per share: |         |               |           |      |              |   |           |     
|                      | Basic   |               | $         | 0.02 |              |   | $         | 0.02 | 
|                      | Diluted |               | $         | 0.02 |              |   | $         | 0.02 | 

60



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##### 








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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Restatement








Evaluation of Disclosure Controls and Procedures


Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities


Remediation of Material Weakness in Internal
Control




Changes in Internal Control Over Financial
Reporting




61



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##### 






PART III







|         |                                                
|-------- | -----------------------------------------------
|Item 10. | Directors and Executive Officers of the Company








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



62



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##### 






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |     |                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | (1) | Consolidated Financial Statements. All financial statements are
    filed in Part II, Item 8 of this report on
    Form 10-K.















| |                                                         
| | --------------------------------------------------------
| | (2) Schedule II  Valuation and Qualifying
    Accounts.



| |                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All other schedules set forth in the applicable accounting
    regulations of the Securities and Exchange Commission either are
    not required under the related instructions or are not
    applicable and, therefore, have been omitted.



| |                      
| | ---------------------
| | (3) List of Exhibits.

| |      |  |  |                                                                                                                                                                                                                                                                                                  
| | ---- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1  |  |  | Agreement and Plan of Merger Among Online Resources Corporation,
    Incurrent Acquisition LLC and Incurrent Solutions, Inc.
    (Incorporated by reference from our Form 8-K filed on
    October 21, 2004)                                                                                     
| | 3.1  |  |  | Form of Amended and Restated Certificate of Incorporation of the
    Company (Incorporated by reference from our registration
    statement on Form S-1; Registration No. 333-74777)                                                                                                             
| | 3.2  |  |  | Form of Amended and Restated Bylaws of the Company (Incorporated
    by reference from our registration statement on Form S-1;
    Registration No. 333-74777)                                                                                                                                   
| | 3.3  |  |  | Certificate of Designation of Shares of Series B Junior
    Participating Preferred Stock (Filed as Exhibit 3.3 to our
    Form 10-K for the year ended December 31, 2002 filed
    on March 31, 2003 and incorporated herein by reference)                                                      
| | 4.1  |  |  | Specimen of Common Stock Certificate of the Company
    (Incorporated by reference from our registration statement on
    Form S-1; Registration No. 333-74777)                                                                                                                                  
| | 4.2  |  |  | Form of warrants issued to placement agent (Filed as
    Exhibit 4.3 to our Form 10-Q for the quarter ended
    September 30, 2000 filed on November 14, 2000 and
    incorporated herein by reference)                                                                                          
| | 4.3  |  |  | Registration Rights Agreement dated September 28, 2000
    among the Registrant and Jefferies & Company, Inc. as the
    placement agent (Filed as Exhibit 4.2 to our Form 10-Q
    for the quarter ended September 30, 2000 filed on
    November 14, 2000 and incorporated herein by reference)
| | 4.4  |  |  | Rights Agreement dated as of January 11, 2002, between the
    registrant and American Stock Transfer & Trust Company
    (Filed as Exhibit 4.1 to our Form 8-K filed on
    January 15, 2002 and incorporated herein by reference)                                                              
| | 10.1 |  |  | Lease Agreement for premises at 7600 Colshire Drive, McLean,
    Virginia (Incorporated by reference from our registration
    statement on Form S-1; Registration No. 333-74777)                                                                                                                
| | 10.2 |  |  | Online Resources & Communications Corporation 1989 Stock
    Option Plan (Incorporated by reference from our registration
    statement on Form S-1; Registration No. 333-74777)                                                                                                                 
| | 10.3 |  |  | 1999 Stock Option Plan (Incorporated by reference from our
    registration statement on Form S-1; Registration
    No. 333-74777)                                                                                                                                                               
| | 10.4 |  |  | Employee Stock Purchase Plan (Incorporated by reference from our
    registration statement on Form S-8; Registration
    No. 333-40674)                                                                                                                                                         

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##### 



| |      |  |  |                                                                                                                                                                                                                                      
| | ---- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.5 |  |  | Lease Agreement for premises at 4795 Meadow Wood Lane,
    Chantilly, Virginia (Filed as an exhibit to our Form 10-Q
    for the quarter ended September 30, 2004 filed on
    November 5, 2004 and incorporated herein by reference)
| | 23   |  |  | Consent of Independent Registered Public Accounting Firm (See
    Exhibit attached to this Report)                                                                                                                                   
| | 31.1 |  |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act, as amended                                                                                                                   
| | 31.2 |  |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act, as amended                                                                                                                   
| | 32   |  |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                        

64



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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


ON FINANCIAL STATEMENT SCHEDULE








| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





65



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##### 



Schedule II  Valuation and Qualifying
Accounts


|                                 |                              |            |   |        |           |  |   |            |            |  |               |        |     |  |   |         | 
|-------------------------------- | ---------------------------- | ---------- | - | ------ | --------- |  | - | ---------- | ---------- |  | ------------- | ------ | --- |  | - | ------- | 
|                                 |                              | Balance at |   |        |           |  |   |            |           
|                                 |                              | Beginning  |   |        |           |  |   |            | Balance at | 
|Classification                   |                              | of Period  |   |        | Additions |  |   | Deductions |            |  | End of Period |       
|                                 |                              |            |   |        |           |  |   |            |            |  |               |       
|Allowance for doubtful accounts: |                              |            |   |        |           |  |   |            |            |  |               |        |     |  |   |        
|                                 | Year ended December 31, 2002 |            | $ | 35,000 |           |  | $ | 88,000     |            |  | $             | 46,095 | (1) |  | $ | 76,905  | 
|                                 | Year ended December 31, 2003 |            | $ | 76,905 |           |  | $ |           |            |  | $             | 10,000 | (2) |  | $ | 66,905  | 
|                                 | Year ended December 31, 2004 |            | $ | 66,905 |           |  | $ | 99,685     | (3)        |  | $             | 14,275 | (1) |  | $ | 152,315 | 








|    |                                                                
|--- | ---------------------------------------------------------------
|(1) | Uncollectible accounts written off.                            
|   
|(2) | Reversal of previously reserved amounts that were collected.   
|   
|(3) | $85,410 related to the acquisition of Incurrent Solutions, Inc.

66



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##### 






SIGNATURES






| |                             
| | ----------------------------
| | ONLINE RESOURCES CORPORATION



| |     |                          
| | --- | -------------------------
| | By: | /s/ Matthew P.
    Lawlor

| |                        
| | -----------------------
| | Matthew P. Lawlor      
| | Chairman and           
| | Chief Executive Officer

67