---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------- | ---------------------------------------------------------------------------------------
|For the quarterly period ended September 30, 2002
|OR                                               
|o                                                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File No. 000-30207

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SEEBEYOND TECHNOLOGY CORPORATION(Exact name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization) |  | 95-4249153(I.R.S. Employer
Identification Number)
|---------------------------------------------------------------------- |  | -------------------------------------------------

404 E. Huntington Drive
Monrovia, California 91016
(626) 471-6000(Address, including Zip Code, of Registrant's Principal Executive Offices
and Registrant's Telephone Number, including Area Code)

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

The
number of shares outstanding of the registrant's Common Stock, $0.0001 par value, as of November 11, 2002 was 83,607,388.

---

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SeeBeyond Technology Corporation and Subsidiaries
INDEX

|                                             |  |                                                                                                                                    |  | Page No.
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | --------
|Part IFinancial Information                 |  |                                                                                                                                   
|Item 1.                                      |  | Financial Statements:                                                                                                              |  |         
|                                             |  | Condensed Consolidated Balance Sheets as of September 30, 2002 (unaudited) and December 31, 2001                                   |  | 3       
|                                             |  | Condensed Consolidated Statements of Operations (unaudited) for the three months and nine months ended September 30, 2002 and 2001 |  | 4       
|                                             |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2002 and 2001                  |  | 5       
|                                             |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                   |  | 6       
|Item 2.                                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                              |  | 12      
|Item 3.                                      |  | Quantitative and Qualitative Disclosure About Market Risk                                                                          |  | 29      
|Item 4.                                      |  | Controls and Procedures                                                                                                            |  | 29      
|Part IIOther Information                    |  |                                                                                                                                   
|Item 1.                                      |  | Legal Proceedings                                                                                                                  |  | 30      
|Item 2.                                      |  | Changes in Securities and Use of Proceeds                                                                                          |  | 30      
|Item 4.                                      |  | Submission of Matters to a Vote of Security Holders                                                                                |  | 30      
|Item 6.                                      |  | Exhibits and Reports on Form 8-K                                                                                                   |  | 31      
|Signature                                    |  | 33                                                                                                                                
|Certification of the Chief Executive Officer |  | 34                                                                                                                                
|Certification of the Chief Financial Officer |  | 35                                                                                                                                

2

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

SeeBeyond Technology Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

|In thousands, except share and per share data |                                                                                                                                                                                      | September 30,
2002                         |        | December 31,
2001 |        
|--------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | ----------------- | -------
|
|Assets:                                       |                                                                                                                                                                                      |                                            |        |                   |        
|Current assets:                               |                                                                                                                                                                                      |                                            |        |                   |        
|                                              | Cash and cash equivalents                                                                                                                                                            |                                            | $      | 99,646            |        
|                                              | Accounts receivable, net of allowances of $1,995 and $1,837 at September 30, 2002 and December 31, 2001, respectively                                                                |                                            |        | 34,219            |        
|                                              | Prepaid expenses and other current assets                                                                                                                                            |                                            |        | 5,710             |        
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total current assets                       |        |                   | 139,575
|Property and equipment, net                   |                                                                                                                                                                                      |                                            | 16,014 |                   |        
|Related party receivable                      |                                                                                                                                                                                      |                                            |       |                   |        
|Goodwill                                      |                                                                                                                                                                                      |                                            | 1,378  |                   |        
|Other assets                                  |                                                                                                                                                                                      |                                            | 1,291  |                   |        
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total assets                               |        | $                 | 158,258
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|Liabilities and stockholders' equity:         |                                                                                                                                                                                      |                                            |        |                   |        
|Current liabilities:                          |                                                                                                                                                                                      |                                            |        |                   |        
|                                              | Accounts payable                                                                                                                                                                     |                                            | $      | 9,345             |        
|                                              | Accrued compensation and related expenses                                                                                                                                            |                                            |        | 12,396            |        
|                                              | Accrued expenses                                                                                                                                                                     |                                            |        | 5,635             |        
|                                              | Deferred revenues                                                                                                                                                                    |                                            |        | 26,289            |        
|                                              | Lease line payable  current portion                                                                                                                                                 |                                            |        | 542               |        
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total current liabilities                  |        |                   | 54,207 
|Lease line payable                            |                                                                                                                                                                                      |                                            | 869    |                   |        
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total liabilities                          |        |                   | 55,076 
|Stockholders' equity:                         |                                                                                                                                                                                      |                                            |        |                   |        
|                                              | Preferred stock, $.0001 par value  10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2002 and December 31, 2001                                    |                                            |        |                  |        
|                                              | Common stock, $.0001 par value  200,000,000 shares authorized; 83,498,624 and 74,750,485 shares issued and outstanding as of September 30, 2002 and December 31, 2001, respectively |                                            |        | 8                 |        
|                                              | Additional paid-in capital                                                                                                                                                           |                                            |        | 218,777           |        
|                                              | Deferred stock compensation                                                                                                                                                          |                                            |        | (420              | )      
|                                              | Accumulated other comprehensive loss                                                                                                                                                 |                                            |        | (360              | )      
|                                              | Accumulated deficit                                                                                                                                                                  |                                            |        | (114,823          | )      
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total stockholders' equity                 |        |                   | 103,182
|                                              |                                                                                                                                                                                      |                                            |        |                   |        
|                                              |                                                                                                                                                                                      | Total liabilities and stockholders' equity |        | $                 | 158,258
|                                              |                                                                                                                                                                                      |                                            |        |                   |        

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

3

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SeeBeyond Technology Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

|                                                                          |                                                                                                                                                                                       | Three Months Ended
September 30, |              | Nine Months Ended
September 30, |       
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------ | ------------------------------- | ------
|
|
|Revenues:                                                                 |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          | License (net of amortization of warrants of $0 and $0 and $0 and $1,116 for the three months and nine months ended September 30, 2002 and 2001, respectively.)                        |                                  | $            | 13,427                          |       
|                                                                          | Services                                                                                                                                                                              |                                  |              | 11,825                          |       
|                                                                          | Maintenance                                                                                                                                                                           |                                  |              | 10,450                          |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          |                                                                                                                                                                                       | Total revenues                   |              |                                 | 35,702
|Cost of revenues:                                                         |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          | License                                                                                                                                                                               |                                  |              | 707                             |       
|                                                                          | Services (exclusive of stock-based compensation of $27 and $64 and $103 and $231 for the three months and nine months ended September 30, 2002 and 2001, respectively.)               |                                  |              | 10,111                          |       
|                                                                          | Maintenance                                                                                                                                                                           |                                  |              | 1,943                           |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          |                                                                                                                                                                                       | Total cost of revenues           |              |                                 | 12,761
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          |                                                                                                                                                                                       |                                  | Gross profit |                                 |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Operating expenses:                                                       |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          | Research and development (exclusive of stock-based compensation $31 and $72 and $117 and $259 for the three months and nine months ended September 30, 2002 and 2001, respectively.)  |                                  |              | 8,980                           |       
|                                                                          | Sales and marketing (exclusive of stock-based compensation of $98 and $242 and $379 and $873 for the three months and nine months ended September 30, 2002 and 2001, respectively.)   |                                  |              | 17,689                          |       
|                                                                          | General and administrative (exclusive of stock-based compensation $13 and $31 and $50 and $110 for the three months and nine months ended September 30, 2002 and 2001, respectively.) |                                  |              | 4,624                           |       
|                                                                          | Restructuring charges                                                                                                                                                                 |                                  |              |                                |       
|                                                                          | Amortization of goodwill                                                                                                                                                              |                                  |              |                                |       
|                                                                          | Amortization of sales and marketing warrants                                                                                                                                          |                                  |              | (56                             | )     
|                                                                          | Amortization of stock-based compensation                                                                                                                                              |                                  |              | 169                             |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          |                                                                                                                                                                                       | Total operating expenses         |              |                                 | 31,406
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Loss from operations                                                      |                                                                                                                                                                                       |                                  | (8,465       | )                               |       
|Other income (expense):                                                   |                                                                                                                                                                                       |                                  |              |                                 |       
|                                                                          | Interest, net                                                                                                                                                                         |                                  |              | 336                             |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Loss before income tax provision                                          |                                                                                                                                                                                       |                                  | (8,129       | )                               |       
|Provision for income tax                                                  |                                                                                                                                                                                       |                                  | 27           |                                 |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Net loss                                                                  |                                                                                                                                                                                       | $                                | (8,156       | )                               | $     
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Basic and diluted net loss per share                                      |                                                                                                                                                                                       | $                                | (0.10        | )                               | $     
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       
|Number of shares used in calculating basic and diluted net loss per share |                                                                                                                                                                                       |                                  | 83,494       |                                 |       
|                                                                          |                                                                                                                                                                                       |                                  |              |                                 |       

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

4

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SeeBeyond Technology Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                             |                                                                                   | Nine Months Ended
September 30,              |                                      
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------
|
|
|Cash flows from operating activities:                        |                                                                                   |                                              |                                      
|                                                             | Net loss                                                                          |                                              | $                                    
|                                                             | Adjustments to reconcile net loss to net cash used in operating activities:       |                                              |                                      
|                                                             |                                                                                   | Loss on disposal of fixed assets             |                                      
|                                                             |                                                                                   | Depreciation and amortization                |                                      
|                                                             |                                                                                   | Provision for doubtful accounts receivable   |                                      
|                                                             |                                                                                   | Amortization of goodwill                     |                                      
|                                                             |                                                                                   | Amortization of sales and marketing warrants |                                      
|                                                             |                                                                                   | Amortization of other warrants               |                                      
|                                                             |                                                                                   | Amortization of stock-based compensation     |                                      
|                                                             | Changes in assets and liabilities:                                                |                                              |                                      
|                                                             |                                                                                   | Accounts receivable                          |                                      
|                                                             |                                                                                   | Prepaid expenses and other current assets    |                                      
|                                                             |                                                                                   | Accounts payable                             |                                      
|                                                             |                                                                                   | Accrued compensation and related expenses    |                                      
|                                                             |                                                                                   | Deferred revenues                            |                                      
|                                                             |                                                                                   |                                              |                                      
|                                                             |                                                                                   |                                              | Net cash used in operating activities
|Cash flows from investing activities:                        |                                                                                   |                                              |                                      
|                                                             | Purchases of property and equipment                                               |                                              |                                      
|                                                             | Payments to acquire companies, net of cash acquired                               |                                              |                                      
|                                                             | Related party receivable                                                          |                                              |                                      
|                                                             | Other                                                                             |                                              |                                      
|                                                             |                                                                                   |                                              |                                      
|                                                             |                                                                                   | Net cash used in investing activities        |                                      
|Cash flows from financing activities:                        |                                                                                   |                                              |                                      
|                                                             | Net (repayments) borrowings on bank lines of credit                               |                                              |                                      
|                                                             | Proceeds from issuance of common stock pursuant to secondary public offering, net |                                              |                                      
|                                                             | Proceeds from issuance of common stock pursuant to employee stock option plan     |                                              |                                      
|                                                             | Proceeds from issuance of common stock pursuant to employee stock purchase plan   |                                              |                                      
|                                                             |                                                                                   |                                              |                                      
|                                                             |                                                                                   | Net cash provided by financing activities    |                                      
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                              | 823                                  
|                                                             |                                                                                   |                                              |                                      
|Net increase (decrease) in cash and cash equivalents         |                                                                                   |                                              | 52,607                               
|Cash and cash equivalents at beginning of the period         |                                                                                   |                                              | 47,039                               
|                                                             |                                                                                   |                                              |                                      
|Cash and cash equivalents at end of the period               |                                                                                   | $                                            | 99,646                               
|                                                             |                                                                                   |                                              |                                      

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

5

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SeeBeyond Technology Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1.Basis of Presentation

The
accompanying unaudited condensed consolidated financial statements have been prepared by SeeBeyond Technology Corporation (the "Company" or "SeeBeyond") in accordance with the rules
and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company, and its results of operations and cash flows.
These condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes as of and for the year ended December 31,
2001 included in the Company's Form 10-K filed with the Securities and Exchange Commission on February 8, 2002.

The
results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2002 or any other interim period, and the Company makes no representations related thereto.

The
consolidated financial statements include the account of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation.

Certain
prior year amounts have been reclassified to conform to the current year presentation.

Note 2.Revenue Recognition

The
Company recognizes revenue when an agreement has been signed by both parties or other persuasive evidence of an arrangement exists, the software has been shipped or electronically
delivered, the fees are fixed or determinable, collection of the resulting receivable is probable and no other significant obligations remain. For multiple element arrangements where vendor-specific
objective evidence of fair value exists for all undelivered elements, we account for the delivered elements in accordance with the "residual method" prescribed by Statement of Position
98-9. Vendor-specific objective evidence of fair value is based on the price a customer is required to pay when the element is sold separately. The Company enters into arrangements with
end users, which may include the sale of licenses of software, maintenance and services under the arrangement or various combinations of each element, including the sale of such elements separately.

For
multi-element arrangements, each element of the arrangement is analyzed and the Company allocates a portion of the total fee under the arrangement to the undelivered elements,
primarily services and maintenance, using vendor-specific objective evidence of fair value of the element and the remaining portion of the fee is allocated to the delivered elements (i.e. generally
the software license), regardless of any separate prices stated within the contract for each element, under the residual method prescribed by SOP 98-9. Vendor-specific objective evidence
of fair value is based on the price the customer is required to pay when the element is sold separately (i.e. hourly rates charged for consulting services when sold separately from a software license
and the renewal rate for maintenance arrangements). Each license agreement offers additional maintenance renewal periods at a stated price. If vendor-specific objective evidence of fair value does not
exist for the undelivered elements, all revenue is deferred and recognized ratably over the service period if the undelivered element is services, or over the period the maintenance is provided if the
undelivered element is maintenance, or until sufficient objective evidence exists or all elements have been delivered.

6

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License Revenues:Amounts allocated to license revenues under the residual method are recognized at the time of delivery of
the software when vendor specific objective evidence of fair value exists for the undelivered elements, if any, and all the other revenue recognition criteria discussed above have been met.

Services Revenues:Revenues from services are comprised of consulting and implementation services and, to a limited extent,
training. Services are generally sold on a time-and-materials or fixed fee basis and include a range of services including installation of off-the-shelf
software, data conversion and building non-complex interfaces to allow the software to operate in customized environments. Services are generally separable from the other elements under
the arrangement since the performance of the services are not essential to the functionality (i.e. do not involve significant production, modification or customization of the software or building
complex interfaces) of any other element of the transaction and are described in the contract such that the total price of the arrangement would be expected to vary as the result of the inclusion or
exclusion of the services. Revenues for services are recognized as
the services are performed. Training services are sold either on a per student basis or per class and are recognized as classes are attended.

Maintenance Revenues:Maintenance revenues consist primarily of fees for providing unspecified software upgrades on a
when-and-if-available basis and technical support over a specified term, which is typically twelve months. Maintenance revenues are typically paid in advance and
are recognized on a straight-line basis over the specified term.

Revenues
on sales made by alliance partners are generally recognized upon shipment of the software to the end user, if all other revenue recognition criteria noted above are met. Under
limited arrangements with certain distributors, when all the revenue recognition criteria have been met upon delivery of the product to the distributor, revenues are recognized at that time. The
Company does not offer a right of return on its products.

Note 3.Recently Issued Accounting Pronouncements

In
November 2001, the Financial Accounting Standards Board ("FASB") issued an announcement on the topic of "Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred," which was subsequently incorporated in Emerging Issues Task Force ("EITF") No. 01-14. EITF No. 01-14
requires companies to characterize reimbursements received for out-of-pocket expenses as revenues in the statement of operations. Historically, the Company has netted
reimbursements received for out-of-pocket expenses against the related expenses in the accompanying condensed consolidated statements of operations. Reimbursable
out-of-pocket expenses reclassified as service revenues were approximately $806,000 and $1,011,000 for the three months ended September 30, 2002 and 2001, respectively,
and approximately $2,003,000 and $3,724,000 for the nine months ended September 30, 2002 and 2001, respectively.

In
July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets" which were adopted by the Company on January 1, 2002. SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations and changes the criteria to recognize intangible assets apart from goodwill. Under SFAS No. 142 goodwill and indefinite lived intangible assets are no longer amortized
but reviewed annually, or more frequently if impairment indicators arise, for impairment. The impact of adoption of the new standards has not had a material impact on the results of operations or
financial position of the Company.

In
October 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 144 addresses the accounting and reporting for the impairment or disposal of
long-lived assets, including discontinued operations. The Company adopted

7

---

SFAS No. 144 on January 1, 2002 and the adoption did not have a material impact on the Company's results of operations and financial position.

Note 4.Operations by Reportable Segments and Geographic Area

SeeBeyond
has developed a comprehensive solution for business integration, enabling the seamless flow of information across systems applications and enterprises in real-time,
on a global basis. The Company operates in one industry segment, which is the development and marketing of a comprehensive solution for business integration where all key integration technologies,
including application-to-application, business-to-business and business process management, are seamlessly integrated.

Revenues
and long-lived assets by geographic area were as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,2002

2001

2002

2001Revenues:North America

$
22,066

$
29,083

$
72,098

$
98,671Europe


10,372


10,326


28,869


35,747Pacific Rim


3,264


3,697


9,287


11,181Total revenues

$
35,702

$
43,106

$
110,254

$
145,599




September 30,
2002

December 31,
2001Long-lived assets:North America

$
15,853

$
11,520Europe


1,905


2,382Pacific Rim


925


266Total long-lived assets

$
18,683

$
14,168


No
single customer accounted for more than 10% of the Company's net revenues during the three months or nine months ended September 30, 2002 and 2001.

Note 5.Computation of Net Loss Per Share

Basic
net loss per share is computed on the basis of the weighted average number of common shares outstanding. Diluted net loss per share is computed on the basis of the weighted average
number of common shares outstanding plus the effect of outstanding stock warrants and outstanding stock options using the "treasury stock" method.

8

---

The
following table sets forth the components of basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

Three Months Ended
September 30,

Nine Months Ended
September 30,2002

2001

2002

2001Net loss

$
(8,156
)
$
(7,787
)
$
(12,327
)
$
(19,014
)Weighted average outstanding shares of common stock used to compute basic net loss per share


83,494


71,650


81,861


70,937Dilutive effect of:Stock warrants











Employee stock options











Common stock and common stock equivalents


83,494


71,650


81,861


70,937Basic and diluted net loss per share:

$
(0.10
)
$
(0.11
)
$
(0.15
)
$
(0.27
)


Options
to purchase 20,782,726 and 16,321,863 shares of common stock were outstanding as of September 30, 2002 and 2001, respectively, but were not included in the calculations of
diluted net loss per share because their effect would be antidilutive. Common stock warrants to purchase 650,000
shares were not included in the calculations of diluted net loss per share because their effect would be antidilutive.

Note 6.Commitments, Contingencies and Debt

Bank Line of Credit and Lease Line Payable

In November 2000, the Company established a $15.0 million line of credit facility (the "Line") with a lending institution that bears interest at an
annual rate of either prime plus 0.5% or the London InterBank Offered Rate ("LIBOR") rate plus 2.50% (payable monthly) and was to expire May 31, 2002. In October 2001, the Company
amended the Line to extend the expiration date through May 31, 2003. As of September 30, 2002, $7.9 million was available under the Line and there were no borrowings outstanding.
The Company may use up to $5.0 million of the Line to issue letters of credit. As of September 30, 2002, $1.4 million was available for the issuance of letters of credit. The Line
is secured by intellectual property rights, accounts receivable and certain other assets and is subject to certain borrowing base restrictions. The Line was amended effective June 30, 2002 to
adjust the financial covenant requirements. In connection with the amendment a requirement to maintain a certain minimum cash balance at the lending institution was implemented as a condition to
borrow against the Line.

In
addition to the Line, the Company has a $2.0 million equipment line (the "Lease Line") with the same lending institution providing the Line. The Lease Line bears interest at an
annual rate of either prime plus 0.75%, or the LIBOR rate plus 2.75% (payable monthly) and expires on November 30, 2004. The rate at September 30, 2002 was 5.5%. The Company was allowed
to draw against the Lease Line through November 30, 2001. Interest is payable monthly and principal is payable in 36 monthly installments commencing in December 2001. As of
September 30, 2002, there was $1.4 million outstanding under the Lease Line and is secured by certain assets of the Company.

Legal Proceedings

Beginning on July 3, 2002, several purported class action shareholder complaints were filed in the United States District Court for the Central District of
California against the Company and several of our officers and directors. The actions are purportedly brought on behalf of purchasers of common

9

---

stock of SeeBeyond Technology Corporation between December 10, 2001 and April 22, 2002 and between April 23, 2001 and April 22, 2002. The actions generally allege that
during the class periods, defendants made false statements about SeeBeyond's operating results and business, while concealing
material information. The plaintiffs seek unspecified monetary damages. The Company believes these lawsuits are without merit and intends to defend against them vigorously.

The
Company is party to claims and suits brought against it in the ordinary course of business. In the opinion of management, such claims should not have any material adverse effect upon
the results of operation, cash flows or the financial position of the Company.

On
September 5, 2002, a derivative lawsuit was filed by a purported Company shareholder in the Superior Court of California for the County of Los Angeles (the "Wardlow
Complaint"). The Wardlow Complaint names certain of the Company's present and former officers and directors as defendants. The Company has also been named as a nominal defendant in the Wardlow
Complaint. The principal allegation of the Wardlow Complaint is that the defendants breached their fiduciary duties to the Company through the dissemination of allegedly misleading and inaccurate
information and other allegations.

Note 7.Comprehensive Loss

The Company accounts for comprehensive loss using SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive income, as defined, refers to revenues, expenses, gains and losses that are not included in net income (loss) but rather
are recorded directly in stockholders' equity.

Total
comprehensive loss was as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,2002

2001

2002

2001Net loss

$
(8,156
)
$
(7,787
)
$
(12,327
)
$
(19,014
)Foreign translation adjustment


(245
)

(419
)

823


(989
)Comprehensive loss

$
(8,401
)
$
(8,206
)
$
(11,504
)
$
(20,003
)


Note 8.Stockholders' Equity

Secondary Public Offering

In February 2002, the Company completed a public offering of 6,572,623 shares of common stock at $9.57 per share and realized proceeds, net of underwriting
discounts, commissions and issuance costs, of approximately $59.0 million.

Common Stock Warrants

In January 2002, a strategic alliance partner of the Company exercised its warrant and converted its right to purchase 1,200,000 shares of common stock at
$5.33 per share into 666,337 shares of common stock of the Company.

In
March 2002, a warrant agreement between another strategic alliance partner and the Company was cancelled and all rights under the warrant agreement, including all fully vested
shares were forfeited.

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Note 9.Related Party Transactions

On August 15, 2001 the Company provided one of its executive officers with a loan of $500,000 pursuant to a promissory note with an annual interest rate of
8.5% that was repayable to the Company on February 15, 2002. The promissory note was subsequently amended in February 2002 to reflect a June 16, 2002 repayment date. As of
September 30, 2002, a partial payment in the amount of $79,000 has been applied against the loan balance outstanding. The loan balance amounting to approximately $481,000 including interest is
included in prepaid expenses and other current assets as of September 30, 2002.

On
January 2, 2002, the Company provided one of its executive officers, who is also a significant stockholder, with a loan of $2.0 million pursuant to a promissory note
with an annual interest rate of 8.5%. This loan was repaid in full on February 28, 2002.

At
December 31, 2001, the Company had a receivable of $366,000 representing an amount due from one of its executive officers, who is also a significant stockholder, related to
certain life insurance premiums paid on behalf of the officer / stockholder. The amount due to the Company was paid in full in March 2002.

During
the three months and nine months ended September 30, 2002, the Company recorded approximately $0 and $209,000, respectively, in consulting and referral fees payable to EDS.
An affiliate of EDS was a member of the Company's Board of Directors through September 9, 2002. EDS is also a stockholder of the Company. In May 2000, EDS purchased 1,200,000 shares in a
private placement concurrent with the Company's initial public offering at $12.00 per share, the same price paid by investors in the public offering. The Company also issued a warrant to EDS in
January 2000 to purchase 1,200,000 shares of its common stock at $6.67 per share. The warrant, which was fully vested and exercisable as to 1,200,000 shares, expired on July 31, 2002
without being exercised.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with the consolidated financial statements and related notes of SeeBeyond Technology Corporation appearing
elsewhere in this Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties, including statements regarding anticipated costs and
expenses, mix of revenues and plans for introducing new products and services. Our actual results could differ materially from the results contemplated by these forward-looking statements as a result
of a number of factors, including those discussed below, under "Risk Factors" and elsewhere in this Form 10-Q.

Overview

We were founded in 1989 and sold our first products and services in 1991 under the name "Software Technologies Corporation." From 1991 to 1998 our sales and
marketing efforts were primarily focused on customers in the healthcare industry. In 1998, we began to significantly increase our sales and marketing expenses to target customers in other vertical
markets, such as financial services/insurance, manufacturing, retail/e-Commerce/services, telecommunications, energy services and government. In November 1999 we launched the fourth
generation of our product e*Gate 4.0, which introduced a fully distributed fault tolerant architecture. We are currently shipping an enhanced version of our eBusiness Integration Suite
("eBI Suite"), version 4.5.2 to our customers and expect to ship the next generation of our product suite, version 5.0 in 2003. We incurred significant losses in 1999, 2000 and
2001 and as of September 30, 2002, we had an accumulated deficit of approximately $115 million.

We
derive revenues primarily from three sources: licenses, services and maintenance. We market our products and services on a global basis through our direct sales force, and augment our
marketing efforts through relationships with systems integrators, and in other instances, through value-added resellers and technology vendors. Our products are typically licensed directly to
customers for a perpetual term, with pricing based on the number of systems or applications the customer is integrating or connecting with our products. We record license revenues when a license
agreement has been signed by both parties, the fee is fixed or determinable, collection of the fee is probable, delivery of our products has occurred and no other significant obligations remain.
Payments for licenses, services and maintenance received in advance of revenue recognition are recorded as deferred revenue.

We
currently have operations in sixteen countries outside of the United States. Revenues derived from international sales were 35% of total revenues for the nine months ended
September 30, 2002 compared to 32% of total revenues for the nine months ended September 30, 2001. We believe that international revenues will continue to be significant in future
periods. To date, we have not experienced significant seasonality of revenues. However, we expect that our future results will fluctuate in response to the fiscal or quarterly budget cycles of our
customers.

Revenues
from services include consulting and implementation services, training and reimbursable out-of-pocket expenses. A majority of our customers use
third-party systems integrators to implement our products. Customers also typically purchase additional consulting services from us to support their implementation activities. These consulting
services are generally sold on a time and materials or fixed fee basis, and services revenues are recognized as the services are performed. We also offer training services, which are sold on a per
student basis and for which revenues are recognized as the classes are attended.

Customers
who license our products normally purchase maintenance contracts. These contracts provide unspecified software upgrades and technical support over a fixed term, which is
typically 12 months. Maintenance contracts are usually paid in advance, and revenues from these contracts are recognized ratably over the term of the contract.

12

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Our
cost of revenues includes cost of license revenues, cost of services revenues and cost of maintenance revenues. Each category, except cost of license revenues, includes related
expenses for salaries, employee benefits, incentive compensation, bonuses, travel, telephone, communications, rent and allocated facilities and professional fees.

Cost
of license revenues includes the cost of third-party licensed software embedded or bundled with our products. Cost of services revenues consists of compensation and related overhead
costs for personnel engaged in implementation consulting and services, training and out-of-pocket expenses. Cost of maintenance revenues includes compensation and related
overhead costs for personnel engaged in maintenance and support activities. For the three months ended September 30, 2002, our gross margin was 94.7% on our license revenues, 14.5% on our
services revenues and 81.4% on our maintenance revenues. We expect in the future to continue to earn substantially higher gross margins on our license and maintenance revenues as compared to our
services revenues. As a result, our overall gross margin depends significantly on our revenue mix.

Our
sales and marketing expenses include additional expenditures specific to the marketing group, such as public relations and advertising, trade shows, and marketing collateral
materials and expenditures specific to the sales group, such as commissions.

To
date, all software product development costs have been expensed as incurred. Also included in our total costs and expenses are restructuring charges, amortizations of goodwill, sales
and marketing warrants and stock compensation.

In
March 2001, we entered into a four-year co-marketing agreement with a strategic marketing partner and issued a warrant to purchase 625,000 shares of
common stock at an exercise price of $11.34 per share. As a result of the December 2001 private placement of 2,574,298 shares of our common stock, the exercise price of this warrant was
adjusted to $5.83 per share. The warrant expires in March 2006 and 175,000 shares under the warrant were exercisable immediately. The remaining 450,000 shares subject to the warrant are
performance based and shall vest and become exercisable over the thirty-six month period following the issuance of the warrant provided the warrant holder has achieved various milestones
related to providing certain sales an marketing support. As of September 30, 2002, a total of 450,000 shares subject to the warrant were vested. The unvested portion of the warrant was valued
as of the date of issuance and is being amortized as a charge to marketing expense over the term of the co-marketing agreement. The value of the unvested portion of the warrant will be
adjusted in each reporting period based on changes in the fair value of the warrants until such date as the warrants are fully vested. There is no obligation for this strategic partner to make future
product purchases from us.

In
connection with stock option grants to our employees, we have recorded deferred stock compensation totaling $8.5 million through September 30, 2002, of which
approximately $407,000 remains to be amortized. This amount represents the difference between the exercise price and the deemed fair value of our common stock on the date the options were granted
multiplied by the number of option shares granted. This amount is included as a component of stockholders' equity and is being amortized by charges to operations over the vesting period of the
options, consistent with the method described in Financial Accounting Standards Board Interpretation No. 28. We recognized amortization of deferred compensation expense of approximately
$169,000 and $409,000 for the three months ended September 30, 2002 and 2001, respectively. The amortization of the remaining deferred stock compensation will result in additional charges to
operations through 2004. The amortization of stock compensation is classified as a separate component of operating expenses in our consolidated statements of operations.

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Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these
estimates under different assumptions or conditions.

Our
significant accounting policies are described in Note 1 to the annual consolidated financial statements as of and for the year ended December 31, 2001, included in our
Form 10-K filed with the Securities and Exchange Commission on February 8, 2002. We believe our most critical accounting policies include the following:



Revenue recognition.We recognize revenue when an agreement has been signed by both parties or other persuasive evidence of
an arrangement exists, the software has been shipped or electronically delivered, the fees are fixed or determinable, collection of the resulting receivable is probable, and no other significant
obligations remain. For multiple element arrangements where vendor specific objective evidence of fair value exists for all undelivered elements, we account for the delivered elements in accordance
with the "residual method" prescribed by Statement of Position 98-9. Vendor-specific objective evidence of fair value is based on the price a customer is required to pay when
the element is sold separately.

We
assess whether the fee is fixed and determinable and collection is probable at the time of the transaction. In assessing whether the fee is fixed and determinable we analyze the
payment terms of the transaction and other factors, including the nature and class of customer, our historical experience of collecting under our payment terms without granting a concession, the
possibility of the product becoming technologically obsolete before the payments become due and the likelihood of the customer asking for a refund. If we determine the fee is not fixed or determinable
we defer the revenue until the payments under the arrangement become due. We assess whether collection is probable based on a number of factors, including the customer's past transaction history and
credit worthiness. If we determine that collection of a fee is not probable, we defer the fee and recognize revenue at the time collection become probable, which is generally upon the receipt of cash.

Maintenance
revenues consist primarily of fees for providing unspecified software upgrades on a when-and-if-available basis and technical support over
a specified term, which is typically twelve months. Maintenance revenues are typically paid in advance and are recognized on a straight-line basis over the specified term.

Revenues
on sales made by alliance partners are generally recognized upon shipment of the software to the end user, if all other revenue recognition criteria noted above are met. Under
limited arrangements with certain distributors when all the revenue recognition criteria have been met upon delivery of the product to the distributor, revenues are recognized at that time. The
Company does not offer a right of return on its products.

The
fair value of services such as consulting or training is based upon separate sales of these services. Consulting and training services are generally sold on a
time-and-materials or fixed fee basis and are generally recognized as the services are performed. Consulting services primarily consist of

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implementation services related to the installation of the Company's products and generally do not involve significant production, modification or customization to or development of the software.

Significant
management judgments and estimates must be made in connection with determination of the revenue to be recognized in any accounting period. If we made different judgments or
estimates for any period, material differences in the amount and timing of revenue could result.

Allowance for doubtful accounts.We maintain allowances for doubtful accounts based on our analyses of the likelihood that
our customers will not pay us all the money they owe. In circumstances where there is knowledge of a specific customer's inability to meet its financial obligations, a specific reserve is recorded
against amounts due to reduce the net recognized receivable to the amount that is reasonably believed to be collected. For all our customers we perform analyses, which includes a review of their
credit profiles, the terms and conditions of the contracts with our customers, and the current economic trends and payment history. We reassess these allowances each accounting period. If actual
payment experience with our customers is different than our estimates, adjustments to these allowances may be necessary resulting in additional charges to our income statement.

Accounting for income taxes.We record a valuation allowance to reduce our deferred tax assets by the amount of tax benefits
we estimate, based on available evidence is not expected to be realized. Tax benefits will not be realized if we do not generate sufficient taxable income in the future to apply the deferred tax
balance against. As of September 30, 2002, a valuation allowance equal to the value of the deferred tax assets was maintained. In the event we were to determine that we would be able to realize
our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such a determination was made.

Significant
management judgment is required in determining our provision for income tax assets and liabilities and our future taxable income for purposes of assessing our ability to
realize any future benefit from our deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods, our operating results and
financial position could be materially affected.

Foreign Currency Translation.The functional currency for our foreign operations is the local currency. The financial
statements of foreign subsidiaries have been translated into United States dollars. Asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date.
Revenue and expense accounts have been translated using the average exchange rate for the period. The gains and losses associated with the translation of the financial statements resulting from the
changes in exchange rates from period to period have been reported in the other comprehensive income or loss account in stockholders' equity. To the extent assets and liabilities of the foreign
operations are realized or the foreign operations are expected to pay back the intercompany debt in the foreseeable future, amounts previously reported in other comprehensive income or loss account
would be included in net income or loss in the period in which the transaction occurs. Transaction gains or losses, other than intercompany debt deemed to be of a long-term nature, are
included in net income or loss in the period in which they occur.

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Results of Operations

The following table sets forth our results of operations for the three months and nine months ended September 30, 2002 and 2001 respectively, expressed as
a percentage of total revenues:

|                                 |                                              | Three Months Ended
September 30, |              | Nine Months Ended
September 30, |   
|-------------------------------- | -------------------------------------------- | -------------------------------- | ------------ | ------------------------------- | --
|
|Revenues:                        |                                              |                                  |              |                                 |   
|                                 | License                                      |                                  | 38           | %                               | 50
|                                 | Services                                     |                                  | 33           |                                 | 31
|                                 | Maintenance                                  |                                  | 29           |                                 | 19
|                                 |                                              |                                  |              |                                 |   
|                                 |                                              | Total revenues                   |              | 100                             |   
|                                 |                                              |                                  |              |                                 |   
|Cost of revenues:                |                                              |                                  |              |                                 |   
|                                 | License                                      |                                  | 2            |                                 | 1 
|                                 | Services                                     |                                  | 30           |                                 | 24
|                                 | Maintenance                                  |                                  | 4            |                                 | 3 
|                                 |                                              |                                  |              |                                 |   
|                                 |                                              | Total cost of revenues           |              | 36                              |   
|                                 |                                              |                                  |              |                                 |   
|                                 |                                              |                                  | Gross profit |                                 | 64
|                                 |                                              |                                  |              |                                 |   
|Operating expenses:              |                                              |                                  |              |                                 |   
|                                 | Research and development                     |                                  | 25           |                                 | 17
|                                 | Sales and marketing                          |                                  | 51           |                                 | 51
|                                 | General and administrative                   |                                  | 12           |                                 | 12
|                                 | Restructuring charge                         |                                  |             |                                 | 8 
|                                 | Amortization of goodwill                     |                                  |             |                                 |  
|                                 | Amortization of sales and marketing warrants |                                  |             |                                 | 2 
|                                 | Amortization of stock-based compensation     |                                  |             |                                 | 1 
|                                 |                                              |                                  |              |                                 |   
|                                 |                                              | Total operating expenses         |              | 88                              |   
|                                 |                                              |                                  |              |                                 |   
|Loss from operations             |                                              | (24                              | )            | (19                             | ) 
|Other income (expense), net      |                                              | 1                                |              |                                |   
|                                 |                                              |                                  |              |                                 |   
|Loss before income tax provision |                                              | (23                              | )            | (19                             | ) 
|Provision for income tax         |                                              |                                 |              |                                |   
|                                 |                                              |                                  |              |                                 |   
|Net loss                         |                                              | (23                              | )%           | (19                             | )%
|                                 |                                              |                                  |              |                                 |   

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Results of operations for the three months ended September 30, 2002 and 2001:

Revenues

Total revenues.Total revenues for the three months ended September 30, 2002 decreased 17% from the same period last
year, from $43.1 million to $35.7 million. Total revenues for the three months ended September 30, 2002 decreased primarily due to the decrease in license revenues as a result of
delayed purchasing decision-making by our customers due to cost-cutting pressures, reduced capital spending budgets and general economic weakness.

License revenues.License revenues for the three months ended September 30, 2002, decreased 38% from the same period
last year, from $21.5 million to $13.4 million. License revenues for the three months ended September 30, 2002, as a percentage of total revenues were 38%, as compared to 50% for
the same period in the previous year. The decreases in license revenues were due primarily to delayed purchasing decision making by our customers due to cost-cutting pressures, reduced
capital spending budgets and general economic weakness.

Services revenues.Services revenues for the three months ended September 30, 2002, decreased 13% from the same period
in the previous year, from $13.5 million to $11.8 million. Services revenues for the three months ended September 30, 2002, as a percentage of total revenues were 33% as compared
to 31% for the same period in the previous year. The decrease in the absolute dollar amount of services revenues was due primarily to the decline in consulting revenues that resulted from the
corresponding decrease in license revenues for the three months ended September 30, 2002 and the three months ended June 30, 2002, as compared to the three months ended
September 30, 2001 and the three months ended June 30, 2001.

Maintenance revenues.Maintenance revenues for the three months ended September 30, 2002, increased 30% from the same
period in the previous year, from $8.1 million to $10.5 million. Maintenance revenues for the three months ended September 30, 2002, as a percentage of total revenues were 29%, as
compared to 19% for the same period in the previous year. The increase in the absolute dollar amount of maintenance revenues was due primarily to the renewals of prior period maintenance contacts
associated with the increase in our cumulative license revenues.

Cost of revenues

Cost of license revenues.Cost of license revenues for the three months ended September 30, 2002, was approximately
$707,000, compared to $370,000 in the same period in the previous year. Cost of license revenues consists primarily of the cost of third-party licensed software embedded or bundled with
our products. The increase was due to an increase in revenues during the three months ended September 30, 2002 from the sale of our products with third-party embedded or bundled
software.

Cost of services revenues.Cost of services revenues for the three months ended September 30, 2002, decreased 4% from
the same period in the previous year, from $10.5 million to $10.1 million. Cost of services revenues for the three months ended September 30, 2002, as a percentage of total
revenues were 30%, as compared to 24% for the same period in the previous year. The decrease in the absolute dollar amount was due primarily to the decrease in professional services staff and the
related costs associated with decreased services revenues. We expect that cost of services revenues will increase slightly in absolute dollars for the foreseeable future.

Cost of maintenance revenues.Cost of maintenance revenues for the three months ended September 30, 2002, increased
36% from the same period in the previous year, from approximately $1.4 million to $1.9 million. Cost of maintenance revenues as a percentage of total revenues was 4% for the three months
ended September 30, 2002, as compared to 3% for the same period in the previous year. The increases in cost of maintenance revenue were due primarily to an increase in

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maintenance related headcount. We expect that costs of maintenance revenues will increase slightly in absolute dollars for the foreseeable future.

Operating expenses

Research and development expenses.Research and development expenses for the three months ended September 30, 2002,
increased 20% from the same period in the previous year, from $7.5 million to $9.0 million. Research and development expenses as a percentage of total revenues were 25% for the quarter
ended September 30, 2002 as compared to 17% for the same period in the prior year. The increases in research and development expenses were due primarily to the increase in the number of
software developers and quality assurance personnel to support our product development, documentation and testing activities related to the development and release of the latest versions of our
products. We anticipate that research and development expenses will continue to increase in absolute dollars for the remainder of 2002 as we continue to invest in additional headcount and the
development of new products.

Sales and marketing expenses.Sales and marketing expenses for the three months ended September 30, 2002, decreased
17% from the same period in the previous year, from $21.4 million to $17.7 million. Sales and marketing expenses as a percentage of total revenues remained at 51% for the quarter ended
September 30, 2002, the same level as in the same period in the prior year. This decrease in the absolute dollar amount in sales and marketing expenses was due primarily to a decrease in
marketing personnel and promotional and public relations activities. We anticipate that our sales and marketing expense will increase in absolute dollars for the remainder of 2002.

General and administrative expenses.General and administrative expenses for the three months ended September 30,
2002, decreased 8% from the same period in the previous year, from $5.0 million to $4.6 million. General and administrative expenses as a percentage of total revenues remained at 12% for
the quarter ended September 30, 2002, the same level as in the same period in the prior year. The decrease in the absolute dollar amount in general and administrative expenses was due primarily
to the completion of the reduction in workforce during the three months ended September 30, 2001. We anticipate general and administrative expenses to decrease slightly in absolute dollars for
the foreseeable future.

Amortization of goodwill.Amortization of goodwill for the three months ended September 30, 2002, was $0, compared to
$95,000 for the same period in the prior year. The decrease in amortization of goodwill was a result of the adoption of SFAS No. 142 whereby goodwill is no longer amortized but reviewed
periodically for impairment.

Amortization of sales and marketing warrants.Amortization of warrants for the three months ended September 30, 2002,
was $(56,000), compared to $980,000 for the same period in the prior year. The decrease in amortization of warrants was a result of warrants issued to strategic alliance partners being fully amortized
or cancelled as well as a decrease in the value of the unvested portion of a warrant issued to a strategic marketing partner. The amortization of warrant expense for the three months ended
September 30, 2002 and the remaining warrant expense to be recognized going forward relate to this warrant issued under a four-year co-marketing agreement with a
strategic partner. The value of the unvested portion of the warrant will be adjusted in each reporting period based on changes in the fair value of the warrant until such date as the warrant is fully
vested and therefore the amount of amortization for such warrant is subject to fluctuation based on the value of our stock.

Amortization of stock-based compensation.Amortization of stock-based compensation for the three months ended
September 30, 2002, was approximately $169,000, compared to $409,000 for the same period in the previous year.

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Other income (expense), net

Other income (expense), net consists primarily of interest income (expense). Other income, net for the three months ended September 30, 2002, was
approximately $336,000 compared to other income of $223,000 for the same period last year. The increase in other income was primarily due to an increase in interest income due to larger cash balances
as a result of our secondary public stock offering in February 2002.

Results of operations for the nine months ended September 30, 2002 and September 30, 2001:

Revenues

Total revenues.Total revenues for the nine months ended September 30, 2002 decreased 24% from the same period last
year, from $145.6 million to $110.3 million. Total revenues for the nine months ended September 30, 2002 decreased primarily due to the decrease in license revenues as a result of
delayed purchasing decision-making by our customers due to cost cutting pressures, reduced capital spending budgets and general economic weakness.

License revenues.License revenues for the nine months ended September 30, 2002, decreased 43% from the same period
last year, from $85.2 million to $48.8 million. License revenues for the nine months ended September 30, 2002, as a percentage of total revenues were 44%, as compared to 58% for
the same period in the previous year. The decreases in license revenues were due primarily to the global economic slowdown and a decline in information technology spending in general.

Services revenues.Services revenues for the nine months ended September 30, 2002, decreased 18% from the same period
in the previous year, from $39.7 million to $32.5 million. Services revenues for the nine months ended September 30, 2002, as a percentage of total revenues increased to 30%, as
compared to 27% for the same period in the previous year. The decrease in the absolute dollar amount of services revenues was due primarily to the decline in consulting revenues that resulted from the
corresponding decrease in license revenues for the nine months ended September 30, 2002, as compared to the nine months ended September 30, 2001. The increase in services revenues as a
percentage of total revenues was due primarily to the decrease in total revenues for the nine months ended September 30, 2002, as compared to the nine months ended September 30, 2001.

Maintenance revenues.Maintenance revenues for the nine months ended September 30, 2002, increased 40% from the same
period in the previous year, from $20.7 million to $29.0 million. Maintenance revenues for the nine months ended September 30, 2002, as a percentage of total revenues were 26%, as
compared to 15% for the same period in the previous year. The increase in the absolute dollar amount of maintenance revenues was due primarily the renewals of prior period maintenance contacts
associated with the increase in our cumulative license revenues. The increase in maintenance revenue as a percentage of total revenues was due primarily to the decrease in total revenues for the nine
months ended September 30, 2002, as compared to the nine months ended September 30, 2001.

Cost of revenues

Cost of license revenues.Cost of license revenues for the nine months ended September 30, 2002, was approximately
$1.9 million compared to $1.5 million in the same period in the previous year. This increase was due to an increase in revenues during the nine months ended September 30, 2002
from the sale of our products with third-party embedded or bundled software.

Cost of services revenues.Cost of services revenues for the nine months ended September 30, 2002, decreased 20% from
the same period in the previous year, from $33.8 million to $27.1 million. Cost of services revenues as a percentage of total revenues remained at 24% for the quarter ended

19

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September 30, 2002, the same level as in the same period in the prior year. This decrease in the absolute dollar amount was due primarily to the decrease in professional services staff and the
related costs associated with decreased services revenues. We expect that cost of services revenues will increase slightly in absolute dollars for the foreseeable future.

Cost of maintenance revenues.Cost of maintenance revenues for the nine months ended September 30, 2002, increased 65%
from the same period in the previous year, from approximately $3.4 million to $5.6 million. Cost of maintenance revenues as a percentage of total revenues was 5% for the nine months
ended September 30, 2002, as compared to 2% for the same period in the previous year. The increases in the cost of maintenance revenues were due primarily to an increase in maintenance related
headcount.

Research and development expenses.Research and development expenses for the nine months ended September 30, 2002,
increased 14% from the same period in the previous year, from $21.6 million to $24.7 million. The increase in the absolute dollar amount in research and development expenses was due
primarily to the increase in the number of software developers and quality assurance personnel to support our product development, documentation and testing activities related to the development and
release of the latest versions of our products. Research and development expenses as a percentage of total revenues were 22% for the nine months ended September 30, 2002, as compared to 15% for
the same period in the previous year. This increase was due primarily to the decrease in total revenues for the nine months ended September 30, 2002, as compared to the same period in the
previous year.

Sales and marketing expenses.Sales and marketing expenses for the nine months ended September 30, 2002, decreased 37%
from the same period in the previous year, from $78.8 million to $49.3 million. Sales and marketing expenses as a percentage of total revenues for the nine months ended
September 30, 2002, was 45%, as compared to 53% for the same period in the previous year. These decreases in sales and marketing expenses were due primarily to a decrease in marketing staff and
promotional and public relations activities as well as a decrease in total revenues for the nine months ended September 30, 2002, as compared to the same period in the previous year.

General and administrative expenses.General and administrative expenses for the nine months ended September 30, 2002,
decreased 18% from the same period in the previous year, from $16.7 million to $13.7 million. General and administrative expenses as a percentage of total revenues for the nine months
ended September 30, 2002, remained at 12%, the same level as in the same period in the previous year. The decrease in the absolute dollar amount in general and administrative expenses was due
primarily to the completion of the reduction in workforce during the three months ended September 30, 2001.

Amortization of goodwill.Amortization of goodwill for the nine months ended September 30, 2002, was $0, compared to
$223,000 for the same period in the prior year. The decrease in amortization of goodwill was a result of the adoption of SFAS No. 142 whereby goodwill is no longer amortized but reviewed
periodically for impairment.

Amortization of sales and marketing warrants.Amortization of warrants for the nine months ended September 30, 2002,
was $344,000, compared to $3.9 million for the same period in the prior year. The decrease in amortization of warrants was a result of warrants issued to strategic alliance partners being fully
amortized or cancelled as well as a decrease in the value of the unvested portion of a warrant issued to a strategic marketing partner.

Amortization of stock-based compensation.Amortization of stock-based compensation for the nine months ended
September 30, 2002, was approximately $649,000 compared to $1.5 million for the same period in the previous year.

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Other income (expense), net

Other income (expense), net consists primarily of interest income (expense). Other income (expense), net for the nine months ended September 30, 2002, was
approximately $868,000 compared to $339,000 for the same period last year. The increase in other income was primarily due to an increase in interest income due to larger cash balances as a result of
the Company's second public offering in February 2002.

Liquidity and capital resources

As of September 30, 2002, we had cash and cash equivalents of $99.6 million, an increase of $52.6 million from $47.0 million held as
of December 31, 2001.

Net
cash used in operating activities was $1.9 million during the nine months ended September 30, 2002, as compared with $6.9 million in the same period in the
previous year. This period over period decrease in cash used in operating activities reflects a decrease in net loss, a decrease in accounts receivable and increase in accounts payable, offset by
increases in prepaid expenses and other current assets and decreases in accrued expenses.

During
the nine months ended September 30, 2002, our accounts receivable decreased $6.9 million from $41.1 million at December 31, 2001 to
$34.2 million at September 30, 2002. This decline was primarily due to a decrease in revenue during the three months ended September 30, 2002 as compared to the three months ended
December 31, 2001. The timing of receivable collections and revenue recorded within a given quarter will affect our accounts receivable going forward.

Net
cash used in investing activities was $8.8 million during the nine months ended September 30, 2002, as compared with $7.1 million in the same period in the
previous year. The increase primarily was due to increases in capital expenditures and other assets and a decrease in related party receivable. We expect capital expenditures in the next three months
to increase compared to the last three months.

Net
cash provided by financing activities was $62.5 million during the nine months ended September 30, 2002, as compared with $12.4 million in the same period in the
previous year. This increase was due primarily to the completion of the secondary public stock offering in February 2002.

In
October 2001, we extended our $15.0 million senior line of credit facility to May 31, 2003. The line of credit bears interest at a rate of prime plus 0.5%,
payable monthly. As of September 30, 2002, $7.9 million was available under the credit facility and there were no borrowings outstanding.

We
believe that our current cash and cash equivalents balance will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
However, we may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. In addition, we may also utilize cash resources to
fund acquisitions or investments in complementary businesses, technologies or product lines.

Risks Related to SeeBeyond

You should carefully consider the risks described below in evaluating the other statements made herein. The risks described below are not the only ones facing our
company. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business operations.

Our
business, financial condition or results of operations could be adversely affected by any of these risks. The trading price of our common stock could decline due to any of these
risks.

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A continued downturn in the general economy or a continuation of the industry trend toward reducing or delaying additional information technology
spending due to cost-cutting pressures and tightening capital spending budgets could reduce demand for our products and services.

We
rely significantly upon customers making large information technology purchasing decisions as a source of revenue. From 2001 through the first nine months of 2002, we have experienced
a general slow-down in the level of capital spending by some of our customers due to the general economic downturn, which has adversely affected our revenues. This slow-down in
capital spending, if sustained in future periods, could result in reduced sales or the postponement of sales to our customers, particularly in higher margin license sales. There can be no assurance
that the level of spending on information technology in general, or on business integration software by our customers and potential customers in particular, will increase or remain at current levels
in future periods. Lower spending on information technology could result in reduced license sales to our customers, reduced overall revenues, diminished margin levels, and could impair our operating
results in future periods.

We have a large accumulated deficit, we may incur future losses and we may not achieve or maintain profitability.

We
have incurred substantial losses since 1998 as we increased funding of the development of our products and technologies and expanded our sales and marketing organization. As of
September 30, 2002, we had an accumulated deficit of $114.8 million. We may continue to incur losses in future periods and we may not achieve or maintain profitability on a quarterly or
annual basis.

Our operating results fluctuate significantly, and an unanticipated decline in revenues or gross margin may disappoint securities analysts or investors
and result in a decline in our stock price.

Our
quarterly operating results have fluctuated significantly in the past and may vary significantly in the future. We believe that period-to-period comparisons
of our historical results of operations are not a good predictor of our future performance.

Our
revenues and operating results depend upon the volume and timing of customer orders and payments and the date of product delivery. Historically, a substantial portion of our revenues
in a given quarter has been recorded in the final month of that quarter, with a concentration of these revenues in the last two weeks of the final month. We expect this trend to continue and,
therefore, any failure or delay in the closing of orders would have a material adverse effect on our quarterly operating results. Since our operating expenses are based on anticipated revenues and
because a high percentage of these expenses are relatively fixed, a delay in the recognition of revenues from one or more license transactions could cause significant variations in operating results
from quarter to quarter and cause a decline in our stock price. We realize substantially higher gross margins on our license revenues compared to our services and maintenance revenues. Thus, our
margins for any particular quarter will be highly dependent on our revenue mix in that quarter. In our international markets, we have experienced some seasonality of revenues, with lower revenues in
the summer months. Although this seasonality has not had a material impact on our operating results in the past, we cannot assure you that our operating results will not fluctuate in the future as a
result of these and other international trends.

We
record as deferred revenue payments from customers that do not meet our revenue recognition policy requirements. Since only a small portion of our revenues each quarter is recognized
from deferred revenue, our quarterly results depend primarily upon entering into new contracts to generate revenues for that quarter. New contracts may not result in revenues in the quarter in which
the contract was signed, and we may not be able to predict accurately when revenues from these contracts will be recognized. If our operating results are below the expectations of securities analysts
or investors for these or other reasons, our stock price would likely decline, perhaps substantially.

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We experience long and variable sales cycles, which could have a negative impact on our results of operations for any given
quarter.

Our
products are often used by our customers throughout their organizations to address critical business problems. Customers generally consider a wide range of issues before committing
to purchase our products, including product benefits, the ability to operate with existing and future computer systems, the ability to accommodate increased transaction volumes and product
reliability. Many customers are addressing these issues for the first time when they consider whether to buy our products and services. As a result, we or other parties, including systems integrators,
must educate potential
customers on the use and benefits of our products and services. In addition, the purchase of our products generally involves a significant commitment of capital and other resources by a customer. This
commitment often requires significant technical review, assessment of competitive products and approval at a number of management levels within a customer's organization. Our sales cycle may vary
based on the industry in which the potential customer operates and is difficult to predict for any particular license transaction. The length and variability of our sales cycle makes it difficult to
predict whether particular sales will be concluded in any given quarter. If one or more of our license transactions are not consummated in a given quarter, our revenue levels and results of operations
for that quarter may be negatively impacted.

Our operating results are highly dependent on license revenues from one software suite, and our business could be materially harmed by factors that
adversely affect the pricing and demand for this software suite.

Substantially
all of our license revenues have been, and are expected to continue to be, derived from the license of our Business Integration Suite. Accordingly, our future operating
results will depend on the demand for our Business Integration Suite by future customers, including new and enhanced releases that are subsequently introduced. Our latest version of e*Gate Integrator
version 4.5, was launched in June 2001. If our competitors release new products that are superior to our Business Integration Suite in performance or price, or if we fail to enhance our
Business Integration Suite and introduce new products in a timely manner, demand for our products may decline, and we may have to reduce the pricing of our products. A decline in demand or pricing for
our Business Integration Suite as a result of these or other factors would significantly reduce our revenues.

In
the past, we have experienced delays in the commencement of commercial releases of our Business Integration Suite. To date, these delays have not had a material impact on our
revenues. In the future, we may fail to introduce or deliver new products on a timely basis. If new releases or products are delayed or do not achieve market acceptance, we could experience customer
dissatisfaction or a delay or loss of revenues. For example, the introduction of new enterprise and business applications requires us to introduce new e*Way adapters to support the integration of
these applications. Our failure to introduce these or other modules in a timely manner could cause our revenues and market share to decline. In addition, customers may delay purchases of our products
in anticipation of future releases. If customers defer material orders in anticipation of new releases or new product introductions, our revenues may decline.

Moreover,
as we release enhanced versions of our products, we may not be successful in upgrading our customers who purchased previous versions of our Business Integration Suite to the
current version. We also may not be successful in selling add-on modules for our products to existing customers. Any failure to continue to upgrade existing customers' products or sell new
modules, if and when they are introduced, could negatively impact customer satisfaction and our revenues.

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Our revenues will likely decline if we do not develop and maintain successful relationships with our systems integration partners and other partners,
who also have relationships with our competitors.

We
have entered into agreements with a number of systems integrators for them to install and deploy our products and perform custom integration of systems and applications. These systems
integrators also engage in joint marketing and sales efforts with us. If these relationships fail, we will have to devote substantially more resources to the sales and marketing and implementation and
support of our products than we would otherwise, and our efforts may not be as effective as those of the systems integrators. In many cases, these parties have extensive relationships with our
existing and potential customers and influence the decisions of these customers. We rely upon these firms to recommend our products during the evaluation stage of the purchasing process, as well as
for implementation and customer support services.

These
systems integrators are not contractually required to implement our products, and competition for these resources may preclude us from obtaining sufficient resources to provide the
necessary implementation services to support our needs. If the number of installations of our products exceeds our access to the resources provided by these systems integrators, we will be required to
provide these services internally, which would increase our expenses and significantly limit our ability to meet our customers' implementation needs. A number of our competitors have stronger
relationships with some of these systems integrators and, as a result, these systems integrators might be more likely to recommend competitors' products and services instead of ours. In addition, a
number of our competitors have relationships with a greater number of these systems integrators or have stronger systems integrator relationships based on specific vertical markets and, therefore,
have access to a broader base of customers.

Our
failure to establish or maintain systems integrator relationships would significantly harm our ability to license and successfully implement our software products. In addition, we
rely on the industry expertise and customer contacts of these firms in order to market our products more effectively. Therefore, any failure of these relationships would also harm our ability to
increase revenues in key commercial markets. We are currently investing, and plan to continue to invest, significant resources to develop these relationships. Our operating results could be adversely
affected if these efforts do not generate license and service revenues necessary to offset this investment.

Our markets are highly competitive and, if we do not compete effectively, we may suffer price reductions, reduced gross margins and loss of market
share.

The
market for our products is intensely competitive, evolving and subject to rapid technological change. We expect the intensity of competition to increase in the future. As a result of
increased competition, we may have to reduce the price of our products and services, and we may experience reduced gross margins and loss of market share, any one of which could significantly reduce
our future revenues and operating results. Our current competitors include vendors offering e-Business application integration, or eAI, and traditional electronic data interchange, or EDI,
software products, as well as "in house" information technology departments of potential customers that have developed or may
develop systems that provide some or all of the functionality of our Business Integration Suite. We may also encounter competition from major enterprise software developers in the future.

Many
of our existing and potential competitors have more resources, broader customer relationships and better-established brands than we do. In addition, many of these competitors have
extensive knowledge of our industry. Some of our competitors have established or may establish cooperative relationships among themselves or with third parties to offer a single solution and increase
the ability of their products to address customer needs.

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Our substantial and expanding international operations are subject to uncertainties, which could adversely affect our operating
results.

Revenues
from the sale of products and services outside the United States accounted for 38% of our total revenues for the three months ended September 30, 2002 and 33% of our
total revenues for the same period in 2001. Revenues from the sale of products and services in the United Kingdom as a percent of our total revenues were 16% for the three months ended
September 30, 2002 and 15% for the same period in 2001. We believe that revenues from sales outside the United States will continue to account for a material portion of our total revenues for
the foreseeable future. We are exposed to several risks inherent in conducting business internationally, such as:



Any
of these factors could adversely affect our international operations and, consequently, our operating results.

We could suffer losses and negative publicity if new versions or releases of our products contain errors or defects.

Our
products and their interactions with customers' software applications and IT systems are complex and, accordingly, there may be undetected errors or failures when our products are
introduced or as new versions are released. In the past we have discovered software errors in our new releases and new products after their introduction, which have resulted in additional product
development expenses. To date, these additional expenses have not been material. These errors have resulted in product release delays, delayed revenues and customer dissatisfaction. In the future we
may discover errors, including performance limitations, in new releases or new products after the commencement of commercial shipments. Since many customers are using our products for mission-critical
business operations, any of these occurrences could seriously harm our business and generate negative publicity, which could have a negative impact on future sales. Although we maintain product
liability and errors and omissions insurance, we cannot assure you that these policies will be sufficient to compensate for losses caused by any of these occurrences.

If our products do not operate with the many hardware and software platforms used by our customers and keep pace with technological change, our business
may fail.

We
currently serve a customer base with a wide variety of constantly changing hardware, software applications and networking platforms. If our products fail to gain broad market
acceptance due to an inability to support a variety of these platforms, our operating results may suffer. Our business depends on a number of factors, including the following:



25

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Our
industry is characterized by very rapid technological change, frequent new product introductions and enhancements, changes in customer demands and evolving industry standards. We
have also found that the technological life cycles of our products are difficult to estimate. We believe that we must continue to enhance our current products and concurrently develop and introduce
new products that anticipate emerging technology standards and keep pace with competitive and technological developments. Failure to do so will harm our ability to compete. As a result, we are
required to continue to make substantial product development investments.

The market for business integration software may not grow as quickly as we anticipate, which would cause our revenues to fall below
expectations.

The
market for business integration software is rapidly evolving. We earn substantially all of our license revenues from sales of our Business Integration Suite. We expect to earn
substantially all of our revenues in the foreseeable future from sales of our Business Integration Suite and related products and services. Our future financial performance will depend on continued
growth in the number of organizations demanding software and services for application integration and business integration solutions and seeking outside vendors to develop, manage and maintain this
software for their critical applications. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in switching to
third-party products, which may substantially inhibit the growth of the market for business integration software. If this market fails to grow, or grows more slowly than we expect, our revenues will
be adversely affected.

Pending or future litigation could have a material adverse impact on our results of operation and financial condition.

From
time to time, we have been subject to litigation. Several putative securities class action lawsuits are currently pending against us, our directors and officers. The plaintiffs in
these suits allege that we and the other defendants made false statements about SeeBeyond's operating results and business, while concealing material information. We believe that these lawsuits are
without merit and we intend to defend against them vigorously. The complaint does not specify the amount of damages that the plaintiffs seek, and as a result, we are unable to estimate the possible
range of damages that might be incurred as a result of the lawsuit. The uncertainty associated with these unresolved lawsuits could harm our business, financial condition and reputation. Negative
developments with respect to the lawsuits could cause our stock price to decline. In addition to the related cost and use of cash, pending or future litigation could cause the diversion of
management's attention and resources. Although we
have begun to accrue amounts relating to legal costs and expenses, we have not accrued any amounts relating to potential damages associated with the putative class action lawsuits. However, because of
uncertainties relating to litigation, our decision as to whether to accrue and the amount of our estimates could be wrong. In addition, although we are unable to determine the amount, if any, that we
may be required to pay in connection with the resolution of the lawsuits by settlement or otherwise, such a payment could seriously harm our results of operation, financial condition and liquidity.

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If we fail to adequately protect our proprietary rights, we may lose these rights and our business may be seriously harmed.

We
depend upon our ability to develop and protect our proprietary technology and intellectual property rights to distinguish our product from our competitors' products. The unauthorized
use by others of our proprietary rights could materially harm our business. We rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We currently have no issued patents. Despite our efforts to protect our proprietary rights, existing laws afford only limited protection.
Attempts may be made to copy or reverse engineer aspects of our products or to obtain and use information that we regard as proprietary. Accordingly, we cannot be certain that we will be able to
protect our proprietary rights against unauthorized third party copying or use. Furthermore, policing the unauthorized use of our products is difficult, and expensive litigation may be necessary in
the future to enforce our intellectual property rights.

Our products could infringe the intellectual property rights of others, causing costly litigation and the loss of significant
rights.

Third
parties may claim that we have infringed their current or future intellectual property rights. We expect that software developers in our market will increasingly be subject to
infringement claims as the number of products in different software industry segments overlap. Any claims, with or without merit, could be time-consuming, result in costly litigation,
prevent product shipment or cause delays, or require us to enter into royalty or licensing agreements, any of which could harm our business. Patent litigation in particular has complex technical
issues and inherent uncertainties. In the event an infringement claim against us is successful and we cannot obtain a license on acceptable terms, license a substitute technology or redesign our
products to avoid infringement, our business would be harmed. Furthermore, former employers of our current and future employees may assert that our employees have improperly disclosed to us or are
using their confidential or proprietary information.

Failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our
ability to compete and result in lower revenues.

We
currently expect that our current cash resources will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. After that, we
may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, or at all. If we raise additional equity financing, our stockholders may
experience significant dilution of their ownership interests and the per share value of our common stock could decline. If we engage in debt financing, we may be required to accept terms that restrict
our ability to incur additional indebtedness and that force us to maintain specified liquidity or other ratios, any of which could harm our business. If we need additional capital and cannot raise it
on acceptable terms, we may not be able to, among other things:



Our
failure to do any of these things could result in lower revenues and could seriously harm our business.

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If we fail to attract and retain qualified personnel, our ability to compete will be harmed.

We
depend on the continued service of our key technical, sales and senior management personnel, including our Chief Executive Officer, President and Founder, James T. Demetriades. Most
of these persons are not bound by an employment agreement, and we do not maintain key person life insurance on any of these persons, other than Mr. Demetriades. The loss of any of our senior
management or other key product development or sales and marketing personnel could adversely affect our future operating results. In addition, we must attract, retain and motivate highly skilled
employees, including sales personnel and software engineers. We face significant competition for individuals with the skills required to develop, market and support our products and services. We may
not be able to recruit and retain sufficient numbers of these highly skilled employees. If we fail to do so, our ability to compete will be significantly harmed.

Our growth continues to place a significant strain on our management systems and resources. If we fail to manage our growth, our ability to market and
sell our products and develop new products may be harmed.

We
must plan and manage our growth effectively in order to offer our products and services and achieve revenue growth and profitability in a rapidly evolving market. We continue to
increase the scope of our operations domestically and internationally and have in recent years added a number of employees. Our growth has and will continue to place a significant strain on our
management systems and resources, and we may not be able to effectively manage our growth in the future.

Furthermore,
if our relationships with systems integrators succeed and we are able to penetrate additional commercial markets, we may need additional sales and marketing and professional
services resources to support these customers. The growth of our customer base will require us to invest significant resources in the training and development of our employees and our systems
integration partners. If these organizations fail to keep pace with the number and demands of the customers that license our products, our ability to market and sell our products and services and our
ability to develop new products and services will be harmed. To manage our business, we must continue to:



In
addition, if we acquire or invest in other companies, we may experience further strain on our resources and face risks inherent in integrating two corporate cultures, product lines,
operations and businesses.

We have implemented anti-takeover provisions that could discourage or prevent a takeover, even if an acquisition would be beneficial to our
stockholders.

Some
provisions of Delaware law and our certificate of incorporation and bylaws could have the effect of delaying or preventing a third party from acquiring us, even if a change in
control would be beneficial to our stockholders. For example, our certificate of incorporation provides for a classified board of directors whose members serve staggered three-year terms
and does not provide for cumulative voting in the election of directors. Our board of directors has the authority, without further action by our stockholders, to fix the rights and preferences of and
issue shares of preferred stock. In

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addition, our stockholders are unable to act by written consent. These and other provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our
stockholders.

Concentration of ownership among our existing executive officers and directors may prevent new investors from influencing significant corporate
decisions.

Our
Chief Executive Officer, President and Founder, James T. Demetriades beneficially owns approximately 30% of our outstanding common stock. Our executive officers and directors
beneficially own, in the aggregate, approximately 40% of our outstanding common stock. As a result, these stockholders will be able to exercise a significant level of control over all matters
requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could have the effect of delaying or preventing a change of control of
SeeBeyond and will make some transactions difficult or impossible without the support of these stockholders.

Item 3:    Quantitative and Qualitative Disclosure About Market Risk

We are exposed to a variety of risks, including changes in interest rates affecting the return on our investments and foreign currency fluctuations. We have
established policies and procedures to manage our exposure to fluctuations in interest rates and foreign currency exchange rates.

Interest rate risk.We maintain our funds in money market and certificate of deposit accounts at financial institutions. Our
exposure to market risk due to fluctuations in interest rates relates primarily to our interest earnings on our cash deposits. These securities are subject to interest rate risk in as much as their
fair value may fall if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from the levels prevailing as of December 31, 2001, the fair
value of the portfolio would not decline by a material amount. We do not use derivative financial instruments to mitigate risks. However, we do have an investment policy that would allow us to invest
in short-term and long-term investments such as money market instruments and corporate debt securities. Our policy attempts to reduce such risks by typically limiting the
maturity date of such securities, placing our investments with high credit quality issuers and limiting the amount of credit exposure with any one issuer.

Foreign currency exchange rate risk.Our exposure to market risk due to fluctuations in foreign currency exchange rates
relates primarily to the intercompany balances with our subsidiaries located in Australia, Belgium, France, Germany, Italy, Japan, Korea, The Netherlands, New Zealand, The Republic of South Africa,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Transaction gains or losses have not been significant in the past and we do not participate in any hedging activity on foreign currencies.
We would not experience a material foreign exchange loss based on a hypothetical 10% adverse change in the price of any of the local currencies of these countries. Consequently, we do not expect that
a reduction in the value of such accounts denominated in foreign currencies resulting from a sudden or significant fluctuation in foreign exchange rates would have a direct material impact on our
financial position, results of operations or cash flows.

Item 4.    Controls and Procedures

Based on their evaluation as of a date within 90 days of the filing date of this Report on Form 10-Q, the Company's chief executive
officer and chief financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls subsequent to the date the chief executive officer and chief financial officer completed their evaluation.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

The Company is party to routine claims and suits brought against it in the ordinary course of business including disputes arising over the ownership of
intellectual property rights and collection matters. In the opinion of management, the outcome of such routine claims will not have a material adverse effect on the Company's business, financial
condition or results of operation.

Information
with respect to this item is incorporated by reference to Note 6 of the Notes to the Consolidated Financial Statements included in this Report on
Form 10-Q.

Item 2.    Changes in Securities and Use of Proceeds







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



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Item 6.    Exhibits and reports on Form 8-K



|Exhibit No. |     | Description                                                                                                                                                                                             
|----------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         | (1) | Restated Certificate of Incorporation of the Registrant                                                                                                                                                 
|3.2         | (1) | Bylaws of the Registrant                                                                                                                                                                                
|4.1         | *   | Specimen common stock certificates                                                                                                                                                                      
|10.1        | (1) | Form of Indemnification Agreement between the Registrant and each of its directors and officers                                                                                                         
|10.2        | *+  | 1998 Stock Plan                                                                                                                                                                                         
|10.3        | *+  | 2000 Employee Stock Purchase Plan and form of agreements there under                                                                                                                                    
|10.5        | *   | Registration Rights Agreement dated May 8, 1998, as amended                                                                                                                                             
|10.6        | *   | Lease Agreement dated June 6, 1997 between the Registrant and Boone/Fetter/Occidental I for premises in Monrovia, California                                                                            
|10.7        | *   | Lease Agreement dated June 10, 1999 between the Registrant and Franklin Select Realty Trust for premises in Redwood Shores, California                                                                  
|10.8        | *   | Lease Agreement dated December 30, 1991 between the Registrant and the Demetriades Family Trust (dated December 20, 1983) for premises in Arcadia, California                                           
|10.9        | **  | Lease Agreement between The Employees Retirement System of The State of Hawaii and the Registrant dated July 21, 2000 for premises in Monrovia, California                                              
|10.10       | **  | Lease Agreement between Grant Regent, LLC and the Registrant dated August 2, 2000 for premises in New York, New York                                                                                    
|10.11       | ##  | Lease Agreement dated October 9, 2000 between S & F Huntington Millennium LLC and the Registrant for premises in Monrovia, California                                                                   
|10.12       | +## | Employment Agreement between the Registrant and Rangaswamy Srihari                                                                                                                                      
|10.13       | ##  | Loan and Security Agreement, dated December 4, 2000, between the Registrant and Comerica BankCalifornia                                                                                                
|10.14       | ++  | Warrant Purchase Agreement and Warrant dated March 16, 2001 issued to General Motors Corporation                                                                                                        
|10.15       | (1) | Amendment to the Loan and Security Agreement dated as of June 25, 2001, between the Registrant and Comerica Bank-California                                                                             
|10.16       | (1) | Second Amendment to the Loan and Security Agreement dated October 31, 2001, between the Registrant and Comerica Bank-California                                                                         
|10.17       | (1) | Lease Agreement dated as of February 24, 2001 between MWB Business Eschange Limited and the Registrant for premises in Berkshire, United Kingdom                                                        
|10.18       | (1) | Lease Agreement as of July 1, 2001 between Trust Company of Australia Limited and the Registrant for premises in Melbourne, Australia                                                                   
|10.19       | (2) | Lease Agreement between Monrovia Technology Campus LLC and the Registrant dated November 28, 2000 for premises in Monrovia, California                                                                  
|10.20       | (2) | Sublease Agreement between the Registrant (Tenant) and The Employees Retirement System of The State Of Hawaii (Landlord) and Loopnet (Subtenant) dated May 15, 2002 for premises in Monrovia, California

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|10.21 | (2) | Third Amendment to the Loan and Security Agreement dated as of June 30, 2002 between the Registrant and Comerica BankCalifornia
|----- | --- | --------------------------------------------------------------------------------------------------------------------------------
|99.1  |     | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.                        

---



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Signature

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on November 14, 2002.

| |  | SeeBeyond Technology Corporation                                                                                              
| |  | ------------------------------------------------------------------------------------------------------------------------------
| |  | /s/BARRY J. PLAGABarry J. Plaga Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,
James T. Demetriades, certify that:





Date:    November 14,
2002

| |  |        |  |                        
| |  | ------ |  | -----------------------
| |  | By:    |  | /s/JAMES T. DEMETRIADES
| |  | Name:  |  | James T. Demetriades   
| |  | Title: |  | Chief Executive Officer

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CERTIFICATION OF CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,
Barry J. Plaga, certify that:





Date:    November 14,
2002

| |  |        |  |                        
| |  | ------ |  | -----------------------
| |  | By:    |  | /s/BARRY J. PLAGA      
| |  | Name:  |  | Barry J. Plaga         
| |  | Title: |  | Chief Financial Officer

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