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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31,
2003

Commission file number 0-29291



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Corillian Corporation

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Oregon                                                             |  | 91-1795219                                 
|(State or other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification Number)
|                                                                  
|3400 NW John Olsen Place Hillsboro,
    Oregon                     |  | 97124                                      
|(Address of principal executive
    offices)                       |  | (Zip Code)                                 

(503) 629-3300

(Telephone number)


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

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

Common Stock, no par value


(Title of class)


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

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

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes o          No þ

The aggregate market value of voting stock held
by non-affiliates of the Registrant was approximately
$41,838,785 as of June 30, 2003, based upon the closing
price on the NASDAQ National Market reported for such date.
Shares of Common Stock held by each executive officer and
director and by each person who beneficially owns more than 5%
of the outstanding Common Stock and was deemed to be an
affiliate have been excluded. This determination of executive
officer or affiliate status is not necessarily a conclusive
determination for other purposes.

37,377,007 shares of Common Stock were
issued and outstanding as of March 15, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this
Report, to the extent not set forth herein, is incorporated
herein by reference from the Registrants definitive proxy
statement relating to the annual meeting of shareholders to be
held on May 10, 2004, which definitive proxy statement
shall be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year to which
this Report relates.



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FORM 10-K

TABLE OF CONTENTS

|             |  |                                                                                                        |  |  |    | 
|------------ |  | ------------------------------------------------------------------------------------------------------ |  |  | -- | 
|PART I      
|Item 1.      |  | Business                                                                                               |  |  | 2  | 
|Item 2.      |  | Properties                                                                                             |  |  | 19 | 
|Item 3.      |  | Legal Proceedings                                                                                      |  |  | 20 | 
|Item 4.      |  | Submission of Matters to a
    Vote of Security Holders                                                |  |  | 20 | 
|            
|PART II     
|Item 5.      |  | Market for the
    Registrants Common Stock and Related Shareholder
    Matters                       |  |  | 20 | 
|Item 6.      |  | Selected Financial Data                                                                                |  |  | 20 | 
|Item 7.      |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations              |  |  | 21 | 
|Item 7A.     |  | Quantitative and Qualitative
    Disclosure About Market Risk                                          |  |  | 32 | 
|Item 8.      |  | Financial Statements and
    Supplementary Data                                                        |  |  | 33 | 
|Item 9.      |  | Changes in and Disagreements
    With Accountants on Accounting and Financial Disclosure               |  |  | 33 | 
|Item 9A.     |  | Controls and Procedures                                                                                |  |  | 33 | 
|            
|PART III    
|Item 10.     |  | Directors and Executive
    Officers of the Registrant                                                 |  |  | 34 | 
|Item 11.     |  | Executive Compensation                                                                                 |  |  | 34 | 
|Item 12.     |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Shareholder
    Matters |  |  | 34 | 
|Item 13.     |  | Certain Relationships and
    Related Transactions                                                     |  |  | 35 | 
|Item 14.     |  | Principal Accountant Fees
    and Services                                                             |  |  | 35 | 
|            
|PART IV     
|Item 15.     |  | Financial Statements,
    Financial Statement Schedules, Exhibits and Reports on
    Form 8-K          |  |  | 36 | 
|EXHIBIT 21.1
|EXHIBIT 23.1
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2



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PART I






|        |         
|------- | --------
|Item 1. | Business

This Annual Report on Form 10-K and the
documents incorporated herein by reference contain
forward-looking statements based on expectations, estimates and
projections as of the date of this filing. Actual results may
differ materially from those expressed in forward-looking
statements. See Item 7 of Part II 
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Forward-Looking
Statements.

Overview

Corillian is a leading provider of solutions that
enable banks, brokers, financial portals and other financial
service providers to rapidly deploy Internet-based financial
services. Corillians solutions allow consumers to conduct
financial transactions, view personal and market financial
information, pay bills and access other financial services on
the Internet. Corillian Voyager is a software platform combined
with a set of applications for Internet banking, electronic bill
presentment and payment, targeted marketing, data aggregation,
alerts and online customer relationship management.
Corillians solutions integrate into existing database
applications and systems and enable its customers to monitor
transactions across all systems in real time. Corillians
solutions are also designed to support multiple lines of
business, including small business banking and credit card
management, and to scale to support millions of users. Current
Corillian customers include J.P. Morgan Chase, Bank One,
The Huntington National Bank, Charter One Bank and SunTrust Bank.

Corillian was incorporated in Oregon in 1997.

Industry Background

The Internet has become an integral part of the
daily lives of millions of consumers because of the
functionality and convenience it offers. In addition to more
traditional uses such as email, the Internet is being used
increasingly to conduct financial transactions and deliver
financial services. Internet users are increasingly demanding
Internet-based financial services, such as access to financial
information over the Internet, real-time access to stock quotes
and investment portfolio information, and Internet bill payment
services. The benefits that consumers derive from Internet-based
financial services include:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | twenty-four hour, real-time access to information
    and financial services from any Internet device;
|
| |  | convenient and inexpensive bill presentment and
    payment tools;                                    
|
| |  | improved personal finance management; and                                                             
|
| |  | the presentation of comprehensive, consolidated
    financial data.                                   

The growth in Internet usage and the popularity
of personal finance content have changed the competitive
landscape of the financial service industry by requiring
financial institutions to compete on the features they offer in
the Internet channel as well as other delivery channels while
focusing on lowering the expenses of their technology
infrastructure. Within this environment, Corillian believes many
financial institutions are recognizing they will require more
cost-effective Internet-based financial solutions with greater
functionality to help them differentiate their service and
product offerings and expand their market share. In addition,
financial institutions will need these solutions to easily
integrate with disparate systems and applications and provide
technological efficiencies.

Significant challenges are involved in deploying
Internet finance solutions. Most notably, multiple diverse
computing environments, including existing systems, packaged
applications, Internet application servers and other
emerging technologies, must be integrated and must be able to
communicate with each other to provide customers with real-time
data and to allow them to conduct financial transactions. In
addition, external systems, such as those of credit card
companies and bill payment providers, must be integrated with
internal systems in a secure and reliable manner. These
technical challenges are magnified by the speed with which these
services must be brought to market. Most financial institutions
do not have the technical skills or

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resources to rapidly design and deploy these
services. In addition, although some financial institutions have
the technical skills and resources to develop and deploy
Internet finance solutions, they are subject to significant
time-to-market competitive pressures. For most of these
financial service providers, internally developing and deploying
Internet finance solutions can be expensive and take in excess
of one year. As a result, many of these financial service
providers are realizing that if they want to deploy an
Internet-based financial product or service and integrate
disparate applications more quickly and efficiently, they need a
comprehensive, outsourced packaged software and service solution.


The Corillian Solution

Corillian is a leading provider of solutions that
enable financial service providers to deploy Internet-based
financial services and to integrate disparate applications
across their multiple delivery channels and lines of business.
Corillians solutions include comprehensive suites of
software that are combined with its professional services to
form a complete outsourced solution for offering Internet-based
financial services.

Corillian Voyager consists of a software platform
and a menu of applications built upon that platform, all of
which Corillian can provide on a hosted basis or which can run
on its customers premises. Corillian Voyager integrates
with Corillians customers existing databases and
systems and enables them to monitor transactions across all
systems in real time. Corillian has developed software
applications for Internet banking, electronic bill presentment
and payment, alerts, targeted marketing, data aggregation and
online customer relationship management. Corillian can provide
its customers with wireless delivery capabilities for all of
these applications.

Corillian believes its products and services
provide the following benefits to its customers:

Accelerated Time to
Market.Using the Corillian Voyager
platform, financial institutions can deploy Internet-based
financial services to their customers within as little as 60 to
90 days, depending on the complexity of the project and the
degree of customization involved with the project. In addition,
Corillian provides comprehensive systems integration and
implementation services and customer support to complement the
flexible architecture of Corillians solutions.

Highly Scalable and Extensible
Platform.Corillians software
platform has been designed to be highly scalable to meet the
evolving needs of its customers. Independent laboratory test
results indicate that Corillian Voyager can support Internet
banking programs for more than ten million users. In addition,
Corillian Voyager has been designed using universal standards,
including eXtensible Markup Language for communication and Open
Financial Exchange for financial transactions. This architecture
enables Corillians customers to deploy new Internet-based
financial services by adding applications to Corillians
platform at any time and by integrating future applications with
any Internet connected point-of-presence.

Flexibility and
Control.Corillian offers its
customers the ability to take total control of the development
and management of Corillian Voyager or to rely on Corillian for
these services. Customers can use their own internal personnel
for implementation, a combination of Corillian personnel and
internal personnel or just Corillian personnel. In addition,
customers have the option of hosting the Corillian Voyager
platform on their own premises or having the solutions hosted in
our managed facility. Corillians customers may request
that Corillian host their solution because they lack sufficient
resources or the appropriate systems to host the solution on
their premises. In addition, Corillians customers can
reduce their information technology costs by outsourcing
application hosting services with Corillian. Corillian offers
customers the opportunity to transfer operation of their
solution to their own premises at any time. This flexibility
provides Corillians customers with the option to gain
operational control of a deployment over time as their needs and
desires change.

Advanced Technology and Continued
Innovation.Corillian believes its
solutions provides a comprehensive solution with a broad range
of applications across multiple lines of business that can be
delivered on the desktop or by wireless access. Corillian offers
certified Internet financial applications using the Open
Financial Exchange data standard, and Corillian has helped to
define industry standards such as Microsofts Distributed
interNet Applications Architecture for Financial Services.

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Reduced Cost of Internet
Operations.Corillians products
lower the costs associated with its customers Internet
banking operations primarily by reducing the cost of internal
development and hardware requirements. Corillians software
solutions provide all of the functionality for Internet-based
financial services in a single comprehensive package. This
eliminates the cost of purchasing, integrating and installing
separate solution components from multiple vendors.

Strategy

Corillians objective is to extend its
leadership in Internet finance solutions. To that end, Corillian
seeks to establish Corillian Voyager as the platform of choice
for Internet finance. To achieve this objective, Corillian
intends to pursue the following strategies:

Increase Market
Share.To date, Corillian has focused
its sales and marketing efforts to target the largest financial
service providers. Corillian intends to continue targeting
large, industry-leading financial service providers by
increasing its sales and marketing efforts. Corillian has
successfully developed other markets, including small to
mid-size financial institutions, and Corillian intends to
continue its efforts towards expanding its penetration of these
markets.

Expand Breadth of Product and Service
Offerings.Corillians current
financial applications include features for Internet banking,
electronic bill presentment and payment, interfacing with
personal finance managers through the Open Financial Exchange
data standard, consumer banking, small business banking, credit
and management, alerts and data aggregation. Corillian intends
to expand its product offerings to include new applications,
such as wealth management and cash management.

Leverage and Expand Strategic
Relationships.Corillian intends to
leverage its relationships with leading systems integrators and
value-added resellers to extend its reach and provide our
customers with more comprehensive, customized solutions.
Corillian intends to continue to expand and build additional
relationships with value-added resellers. In addition, Corillian
believes that forging relationships with key technology vendors
is critical to delivering a comprehensive solution to financial
service providers. Corillians strategic partners include
Microsoft and NCR Corporation. Corillian intends to develop
additional relationships to expand the scope of its
functionality, and for co-marketing and distribution purposes.

Collaborate with Technology
Leaders.Corillians products and
services adhere to existing industry standards and have been
designed to meet the openness and scalability required of
Internet solutions. Corillian will continue to collaborate with
companies to develop new technologies and to encourage the
adoption and implementation of universal standards that can
foster and simplify the exchange of financial information
through the Internet. Corillian intends to continue investing in
research and development to meet the needs of its customers as
they evolve their Internet offerings.

Products and Services

Corillians solutions enable financial
institutions, Internet portals and other Internet financial
service providers to offer their customers a variety of
financial services over the Internet, including Internet
banking, electronic bill presentment and payment, web content
management and data aggregation. Corillian also offers a variety
of services to support its customers throughout the process of
implementing and maintaining Corillians solutions.



| |                        
| | -----------------------
| | Corillian
    VoyagerTM

Corillian Voyager is a highly secure and reliable
software platform upon which Corillian has built a menu of
applications to support multiple lines of business within
banking. Corillian Voyager has been designed to be highly
scalable to meet the evolving needs of Corillians
customers. Independent laboratory test results indicate that
Corillian Voyager can support Internet banking programs for more
than ten million users. In addition, Corillian Voyager has been
designed using universal standards, including eXtensible Markup
Language for communication and Open Financial Exchange for
financial transactions. This architecture enables
Corillians customers to deploy new Internet-based
financial services by adding applications to

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Corillians platform at any time and by
integrating future applications to any Internet connected
point-of-presence.




| |                          
| | -------------------------
| | Applications for eFinance

Consumer Banking.Corillian Consumer Banking enables financial institutions to
offer their retail customers secure, real-time access to
transactional banking services through the Internet. These
services can be delivered to the desktop or accessed by wireless
devices. Internet users can receive their consolidated account
information and transaction history and conduct financial
transactions, such as transfers and loan payments, over the
Internet 24 hours a day, seven days a week. The financial
institutions can choose standard browser-based user interfaces
or more customized Internet templates and online screens.

Small Business
Banking.Corillian Small Business
Banking enables financial institutions to offer their small
business customers secure, real-time access to account details
and money movement functions through an Internet browser or
accounting packages like QuickBooks. Businesses can control
access to business banking features, accounts and transaction
levels to provide financial and audit controls for their staff,
and can reconcile accounts instantly.

Credit Card
Management.Corillian Credit Card
Management enables financial institutions to offer their credit
card customers secure, real-time access to transactional credit
card services through the Internet. These services can be
delivered to the desktop or accessed by wireless devices. Credit
card users can receive consolidated account information and
transaction history, view statements, pay bills and conduct
other financial transactions over the Internet 24 hours a
day, seven days a week. The financial institutions can choose
standard browser-based user interfaces or more customized
Internet templates and online screens.

Corillian Payments.Corillian Payments enables financial service providers to offer
their customers electronic bill payment services and to deliver
bills to customers through a standard Internet page, through
supported personal finance management software, such as Quicken
or Microsoft Money, or as a digital image of a scanned paper
bill. A financial service provider can choose to deliver its own
bills, the bills of direct billing businesses, or the bills of
third-party bill presentment providers, such as CheckFree,
Princeton eCom or Metavante. By consolidating all bill
presentment and payment options, Corillian Payments enables
Internet users to pay bills in the same program where they do
most of their financial transactions. This application also
enables financial institutions to extend their product and
service features for their customers and to present bills on
behalf of their business customers.

Open Financial Exchange
Publishing.Corillian OFX Publishing
enables financial institutions to offer their customers the
ability to integrate their financial information with personal
financial management software, such as Quicken, QuickBooks and
Microsoft Money, or Internet portals such as Yahoo! Finance and
MSN MoneyCentral. Each Corillian solution was designed using the
Open Financial Exchange data standard. This data specification
streamlines the process that financial service companies must
employ to connect with financial data centers and to interface
with personal financial management software.

Customer Care.Corillian Relationship Manager, Report Manager and Targeted
Marketing provide financial institutions with the tools to
gather, organize and capitalize on information collected within
Corillian Voyager and to monitor and administer other
applications deployed on Corillian Voyager. Using these
products, financial institutions can generate comprehensive
reports regarding the financial transactions of their customers,
view Internet usage, track new customer additions and manage
targeted advertising campaigns. Advertisements can be customized
using customer profile information gathered from the financial
institutions data system and from data derived from
customer usage of the Voyager system. For example, a financial
institution can segment customers who have a balance of $10,000
or greater in a savings account, pay three credit cards online,
and have a high profitability index, and establish a targeted
marketing campaign for selling certificates of deposit to these
customers. Corillian Targeted Marketing can react immediately to
customer profile changes and terminate messages to customers who
have already purchased the marketed product.

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Corillian OneSource
Register.Corillian OneSource Register
(OSR) enables a financial institution to provide its
customers with a customer-driven online check registry and to
control and enhance its data aggregation offering. Data
aggregation allows a financial institution to acquire and
aggregate financial information from different banks, brokerages
and other financial service providers and deliver this content
to its customers through its website. Using Corillian OSR, a
financial service provider can control elements of the data
aggregation process itself, supplement the content provided by
data aggregation service providers, such as Yodlee, with content
acquired through the OFX data standard and enhance the
presentation of aggregated content for its customers through
online check registries. As a result, a financial
institutions customer can see all of his or her financial
information from different accounts in one place in a
comprehensive and feature-rich manner and only needs to remember
one login identification name and password to access all of this
financial information.

Certified Solutions.Corillian seeks to provide its customers with a comprehensive
solution for their Internet finance initiatives.
Corillians products adhere to existing industry standards
and have been designed using open standards so that they can
integrate with the products developed by third parties.
Corillian Voyager-Certified Solutions are software packages
developed by Corillians technology partners for
integration into the Corillian Voyager platform. Corillian
Voyager-Certified Solutions include applications such as the
Data Aggregation application and are offered through
partnerships with companies such as CashEdge and Yodlee. These
solutions are put through the rigors of Corillians
certification testing, so Corillians customers are able to
seamlessly integrate best-of-breed solutions into their Internet
platforms.

Professional
Services

Corillian offers a menu of professional services
designed to fulfill its customers needs throughout the
process of product design, implementation and operation.
Corillians services include:

Implementation
Services.Corillians
implementation services begin during the pre-sales process.
Corillians implementation experts perform an analysis of a
potential customers product requirements and determine how
these products can best be integrated with the customers
existing host infrastructure. Corillian then develops a site
survey and a project plan recommendation. Once Corillian is
chosen to install its applications, Corillians
professional service team works with the customer to ensure that
every solution is integrated with the customers existing
financial transaction system for delivery over the Internet. If
necessary, Corillian writes custom interfaces to handle
transaction requests, validate those requests and convert them
to a standard format for Internet-based presentation or to the
Open Financial Exchange format for delivery to personalized
financial management software. Corillian also customizes its
Internet templates to provide its customers with a user
interface that complements its brand recognition, design
elements, color schemes and corporate logos. The implementation
process is generally completed in 60 to 270 days, depending
on the complexity of the project. The fees for Corillians
implementation services vary from project to project, depending
on the size of the customer and the products and services
selected by the customer.

Hosting Services.Corillian offers hosting services to its customers that prefer
to have Corillian handle all of their Internet-based financial
systems. Under this service option, the customers
Corillian Voyager servers reside at Corillians managed
facility, and Corillians staff monitors and maintains the
servers. Corillians services include weekly log auditing,
installation and configuration of servers, and staff to help its
customers manage system performance and daily operations.
Corillian charges a monthly hosting fee that varies based on the
needs of the customer, the scope of its online services and the
solutions deployed.

Consulting Services.By consulting with Corillians staff, Corillians
customers can select and design an electronic commerce strategy.
In addition to consulting with Corillians customers on the
range of products and services available to them, Corillian
helps its customers with product and Internet site design. For
customers that lack in-house network security professionals,
Corillian helps develop the appropriate network and security
protection features to ensure a secure system.

Support Services.Corillian offers several levels of technical and maintenance
support for its customers. These levels are designed to meet
Corillians customers needs and those of their
customers. Corillians support fees vary based on which
level of support the customer selects. In addition to technical
support,

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Corillian provides annual maintenance support for
each customer. These maintenance services entitle the customer
to updates and modifications of Corillians solutions.


Training Services.Corillian makes available to its customers a variety of training
services and supporting materials to help them use
Corillians applications. All courses are led by
Corillians staff and can be conducted at the
customers location or Corillians headquarters.

Customers

Corillian targets large financial institutions,
financial portals and other financial service providers that are
seeking scalable, reliable and advanced solutions that enable
them to offer Internet-based financial services. Corillian has
provided its solutions primarily to two major industry
groups  large financial institutions (primarily
banks) and large credit unions. In 2003, two customers each
represented more than 10% of Corillians consolidated
revenues, and in total, represented approximately 28% of
Corillians consolidated revenues.

Systems and Technology

Corillian
Voyager

Corillian Voyager is a scalable platform that
uses a three-tiered architecture, connecting end-users to the
existing host systems of financial institutions. Corillian
Voyager routes and validates requests, formats transaction
responses and stores and forwards bill payment instructions.

The three layers of the Corillian Voyager
architecture each have a specific functional focus. The Web
Server layer is responsible for presentation interaction with
the customer, handling hyper-text mark-up language to the
browser or the Open Financial Exchange data standard to the
connected financial software or wireless device. The Transaction
Processor layer controls the business logic for the users
request, directs the request to the appropriate host target, and
assembles the results. The Host Server layer interprets and
formats the transaction for the existing host system, then
analyzes and returns the data fields from the response. Optional
applications provide incremental services, such as batch
processing of bill payment transactions or collection of
electronic bills.

Corillian
Technology

Corillians systems are designed to provide
real-time data acquisition, processing and presentation for
applications used to offer Internet-based financial services.
Specific components and features of the technology Corillian
uses to provide these benefits include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Scalable Framework.Each of the layers of Corillian Voyager is a software component
    that can be replicated within the Corillian Voyager
    configuration for redundancy and scalability. By adding an
    incremental component, work is distributed among servers across
    a network.                                                                                                                                                                                                                                                                                                                                
|
| |  | Flexible Interfaces.Corillians solutions are designed to integrate with
    virtually any existing host system, providing a means for
    financial service providers to easily bring existing
    applications to the Internet. Corillians host server
    technology allows multiple simultaneous access to different
    existing and third-party systems. In addition, browser
    interfaces are customizable in form and function, allowing the
    financial service provider to display unique branding,
    advertising, and extended functionality.                                                             
|
| |  | Advanced
    Architecture.The open architecture of
    Corillian Voyager enables flexible integration and rapid
    deployment of Corillian line of business applications, as well
    as Corillian-certified applications from Corillian partners.
    Powered by Microsoft® Windows Server 2003 and
    Microsoft.NET, Corillian Voyager is built to incorporate
    emerging Internet finance technology. This architectural
    standard allows Corillians applications to interoperate
    with other application servers, such as teller and call center
    platforms and automated teller machine delivery systems.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Open Financial Exchange Data
    Standard.Corillians solutions
    employ the Open Financial Exchange data standard, which was
    developed by Microsoft, CheckFree and Intuit to provide a
    unified specification for the electronic exchange of financial
    data among financial institutions, businesses and consumers over
    the Internet. This data specification standardizes the
    connection to financial data centers and to personal financial
    management software. By using the Open Financial Exchange data
    standard, all financial information retrieved from a financial
    institution can be quickly downloaded to consumer software
    programs, such as Microsoft Money and Quicken.

Strategic Alliances and Partnerships

Corillian has marketing, technology, and resale
alliances with a number of companies in the technology and
financial services industries and will continue to pursue new
alliances with additional companies within these industries.
These alliances are intended to help Corillian address new
vertical markets and market segments and to enable Corillian to
provide its customers with access to additional resources and
technology to enhance and customize Corillians solutions.
Some of Corillians more significant strategic partners
include:



| |         
| | --------
| | CashEdge

Founded in 1999, CashEdge® provides
infrastructure that global financial institutions rely on to
extend their online channels and enhance customer profitability.
CashEdge delivers secure Online Money Movement and Advanced
Account Aggregation platforms that power specialized retail
banking and advisor applications. They have flexible deployment
models that provide for a customized, rapid implementation of
both hosted and onsite solutions. Corillian resells CashEdge
solutions as part of an integrated account aggregation and
online money movement solution to financial institutions.

CheckFree

CheckFree designs, develops and markets services
that enable consumers to make electronic payments and
collections, automate paper-based recurring financial
transactions and conduct secure transactions on the Internet.
CheckFree is Corillians primary partner for remittance
processing and was a developer with Intuit and Microsoft of the
Open Financial Exchange data standard. Corillian has developed a
number of Voyager interfaces to CheckFree systems and resells a
bill payment service provided by CheckFree called CheckFree Web.

Microsoft

Microsoft is the publisher of the Windows 2000
Server network, the Microsoft Money personal financial
management program and Microsofts new Money Explorer and
MSN Money Professional products and services, and the provider
of the MoneyCentral financial portal. In 2001, Corillian and
Microsoft signed a multi-year alliance agreement to deliver a
joint enterprise eFinance solution to financial institutions
worldwide. The agreement spans technology development,
marketing, sales and support of solutions based on the Corillian
Voyager platform, Microsoft Windows 2000 and 2003 Server network
operating systems, and .NET, Microsofts platform for XML
web services.

NCR

In February 2001, Corillian entered into an
agreement with NCR that provides for NCRs use of the
Corillian Voyager platform as its core consumer banking
component for mid- to large-sized financial institutions. NCR is
a leader in providing Relationship Technology solutions to
customers worldwide in the retail, financial, communications,
manufacturing, travel and transportation, and insurance markets.
NCR customizes the Corillian Voyager software to allow financial
institutions greater flexibility in delivering Internet
financial services to their customers. NCRs Internet
banking service is run in a managed server model from its secure
and high availability data centers in Columbia, Maryland and
Dallas, Texas.

In November 2003, Corillian and NCR extended
their distribution agreement to provide NCR the right to license
the Corillian Voyager platform as a part of a shared-server
Internet banking solution to service

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small-sized financial institutions. Under the
terms of the agreement, NCR will market the Voyager-enabled
solution to its existing shared-server customer base, as well as
new prospects in the United States. The shared-server solution
will be hosted by NCR from its secure and high availability data
center in Columbia, Maryland.


In February 2004, Corillian and NCR amended their
distribution agreement to provide NCR the right to market its
Voyager-enabled solutions to financial institutions in markets
around the world.



| |               
| | --------------
| | Princeton eCom

Since 1984, Princeton eCom has continuously
delivered Integrated Payment Solutions, driving growth in the
electronic bill payment industry. It offers an end-to-end,
hosted solution in Electronic Bill Presentment and Payment
(EBPP) and bill pay for online banking and financial services.
Currently, over 1,400 financial institutions and 130
billers use Princeton eComs hosted solution for bill
presentment and electronic payment. Corillian securely
integrates with the Princeton eCom bill payment and bill
presentment-processing engine, providing Corillian financial
services customers a complete Electronic Bill Payment and
Presentment solution.

Yodlee

In July 2000, Corillian entered into an agreement
with Yodlee to develop and market a product that integrates the
Corillian Voyager platform with Yodlees data aggregation
service. Under the terms of the agreement, Corillian and Yodlee
will jointly market and sell a new, integrated banking and
aggregation solution to global financial institutions. The
bundled offering utilizes our expertise with the OFX data
standard and Yodlees industry-leading data aggregation
platform. The service can either be deployed on a hosted basis
by Yodlee or through the Corillian Voyager platform.

Sales and Marketing

Corillian sells its software and services
primarily through its direct sales organization. As of
December 31, 2003, Corillians direct sales force
consisted of six personnel operating domestically and one
salesperson operating internationally out of a total of 22
personnel in sales. Corillians direct sales efforts have
historically been focused on domestic financial service
providers, such as banks and credit unions. Corillian
complements its direct sales efforts through joint sales and
marketing arrangements with Internet-based technology vendors,
such as NCR.

Corillians sales process features a
multi-tiered approach that requires the involvement of its field
sales personnel, its technical professionals and members of
Corillians senior management. Corillians sales
process simultaneously targets senior business executives,
personnel responsible for Internet-based initiatives and systems
engineers. Corillian employs this multi-leveled approach to
accelerate the purchasing cycle.

Corillians products are complex, and sales
and implementations can be delayed due to its customers
procedures for approving large capital expenditures and
deploying new technologies within their networks. As a result,
Corillians sales cycle can vary significantly and
typically ranges from three to nine months.

Research and Development

As of December 31, 2003, Corillians
research and development staff consisted of 46 personnel,
including 33 engineers. Their development efforts are
focused on:



| |   |                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhancements to Existing Products and
    Services.Corillian continues to
    update and modify its solutions to enhance quality, performance
    and scalability, to extend functionality to address
    Corillians customers changing needs, and to take
    advantage of improved technology within Corillians
    industry.
|
| |  | Developing New Products and
    Services.Corillian is working to
    expand its product and service offerings. Corillian intends to
    expand its product offerings to include new consumer banking
    functions, as well as applications for wealth management and
    corporate cash management.                              

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| |   |                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Participating in Technology Testing and
    Collaboration.Corillian has
    participated in the development of industry data standards and
    will continue to collaborate with companies to develop new
    technologies and to encourage the adoption and implementation of
    open standards that can foster and simplify the exchange of
    financial information through the Internet.

Competition

The market for providing solutions to the
Internet financial services industry is highly competitive, and
Corillian expects that competition will intensify in the future.
Corillian competes with a variety of companies in various
segments of the Internet-based financial services industry, and
Corillians competitors vary in size and in the scope and
breadth of the products and services they offer. In the area of
Internet consumer banking, Corillian primarily competes with
other companies that provide outsourced Internet finance
solutions to large financial institutions, including S1 and
Financial Fusion. Within this market segment, Corillian also
competes with companies that offer software platforms designed
for internal development of Internet-based financial services
software, such as IBMs WebSphere, and the internal
information technology personnel of financial institutions that
want to develop their own solutions. In addition, vendors such
as Digital Insight, FundsXpress, and Online Resources and
Communications, who primarily target community financial
institutions, occasionally compete with Corillian for large
financial institutions and compete with Corillian regularly for
smaller financial institutions. Several of the vendors offering
data processing services to financial institutions, including
EDS, Fiserv, Jack Henry and M&I Data Services, offer their
own Internet banking solutions. Local competition for Internet
consumer banking services is provided by many smaller Internet
service outsourcing companies located throughout the United
States. Corillians primary competition for providing the
business banking services that financial institutions offer
their commercial customers are vendors of cash management
systems for large corporations such as ADP, Digital Insight and
Politzer & Haney.

Corillian believes that its ability to compete
successfully depends upon a number of factors, including:



| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | Corillians market presence with financial
    service providers;                                       
|
| |  | the reliability, scalability, security, speed and
    performance of Corillians solutions and services;
|
| |  | the comprehensiveness, ease of use and service
    level of Corillians products and services;          
|
| |  | Corillians ability to continue to interface
    with financial service providers and their technology; 
|
| |  | Corillians pricing policies and the pricing
    policies of its competitors and suppliers;             
|
| |  | the timing of introductions of new products and
    services by Corillian and its competitors; and      
|
| |  | Corillians ability to meet its
    customers expectations.                                            

Corillian expects competition to increase
significantly as new companies enter its market and existing
competitors expand their product lines and services. In
addition, many companies that provide outsourced Internet
finance solutions are consolidating, creating larger competitors
with greater resources and more products than Corillian.

Intellectual Property

Although Corillian believes its success is more
dependent upon its technical expertise than its proprietary
rights, Corillians future success and ability to compete
is dependent in part upon its proprietary technology. Corillian
has received trademark registrations for the name Corillian and
its logo. None of Corillians technology is patented, but
we have established an internal patent team of engineers and
in-house counsel to monitor and evaluate as part of the new
product development cycle Corillians technologies and
business methods for patentability. Corillian has several patent
applications pending in the United States Patent and Trademark
Office.

Corillian relies on a combination of contractual
rights and copyright, trademark and trade secret laws to
establish and protect its proprietary technology. Corillian
requires all of its employees to sign an assignment of patents
and inventions agreement and generally enter into
confidentiality agreements with Corillians

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employees, consultants, resellers, customers and
potential customers. Corillian also limits access to and
distribution of its source code, and further limits the
disclosure and use of other proprietary information. Corillian
does not assure you that the steps taken in this regard will be
adequate to prevent misappropriation of its technology or that
its competitors will not independently develop technologies that
are substantially equivalent or superior to Corillians
technology. Corillian also does not assure you that Corillian
will not infringe upon the intellectual property rights of third
parties.


Despite Corillians efforts to protect its
proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain or use Corillians products or technology.
In addition, the laws of some foreign countries do not protect
Corillians proprietary rights to the same extent as do the
laws of the United States. The costs of defending
Corillians proprietary rights or claims that Corillian
infringes on third-party proprietary rights may be high.

Government Regulation

Numerous federal agencies have recently adopted
rules and regulations protecting consumer privacy and
establishing guidelines for financial institutions to follow in
selecting technology vendors for solutions such as
Corillians solutions. Corillian believes its business does
not currently subject Corillian to any of these rules or
regulations that would adversely affect its business. However,
these rules and regulations are new and may be interpreted to
apply to Corillians business in a manner that could make
its business more onerous or costly.

As the Internet continues to evolve, Corillian
expects federal, state and foreign governments to adopt more
laws and regulations covering issues such as user privacy,
taxation of goods and services provided over the Internet,
pricing, content and quality of products and services. If
enacted, these laws and regulations could limit the market for
Internet-based financial services.

If enacted or deemed applicable to Corillian,
some laws, rules or regulations applicable to financial service
activities could render Corillians business or operations
more costly and less viable. The financial services industry is
subject to extensive and complex federal and state regulation,
and financial institutions operate under high levels of
governmental supervision. Corillians customers must ensure
its services and related products work within the extensive and
evolving regulatory requirements applicable to them. Corillian
may become subject to direct regulation as the market for its
business evolves. Federal, state or foreign authorities could
adopt laws, rules or regulations affecting Corillians
business operations, such as requiring Corillian to comply with
data, record keeping and other processing requirements. Any of
these laws, rules or regulations, or new laws, rules and
regulations affecting Corillian or Corillians customers,
could lead to increased operating costs and could also reduce
the convenience and functionality of Corillians services,
possibly resulting in reduced market acceptance.

A number of proposals at the federal, state and
local level and by the governments of significant foreign
countries would, if enacted, expand the scope of regulation of
Internet-based financial services and could impose taxes on the
sale of goods and services and other Internet activities. Any
development that substantially impairs the growth of the
Internet or its acceptance as a medium for transaction
processing could have a material adverse effect on
Corillians business, financial condition and operating
results.

Backlog

As of December 31, 2003, Corillian had a
backlog of unfilled orders of $37.2 million, as compared to
a backlog of $38.1 million as of December 31, 2002.
Corillian expects that a majority of its backlog as of
December 31, 2003 will be filled during fiscal 2004.
Backlog represents contractual customer commitments, including
fees for licenses, professional services, maintenance, hosting
and subscriptions. Backlog is not necessarily indicative of
revenues to be recognized in any given future period. There are
many factors that would impact Corillians filling of
backlog, such as Corillians progress in completing
projects for its customers, Corillians customers
meeting anticipated schedules for customer-dependent
deliverables and Corillians customers satisfying
their contractual obligations. Corillian provides no assurances
that any portion of its backlog will be filled during any fiscal
year or at all or that its backlog will be recognized as
revenues in any given period.

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Employees

As of December 31, 2003, Corillian had a
total of 227 full-time employees, including 122 in
operations, 7 in marketing, 22 in sales, 46 in research and
development and 30 in general and administration. None of
Corillians work force is unionized. Corillian has not
experienced any work stoppages and considers its relations with
its employees to be good.

Risk Factors

You should carefully consider the following
factors regarding information included in this Annual Report.
The risks and uncertainties described below are not the only
ones Corillian faces. Additional risks and uncertainties not
presently known to Corillian or that Corillian currently deems
immaterial also may impair its business operations. If any of
the following risks actually occur, Corillians business,
financial condition and operating results could be materially
adversely affected.



| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | While Corillian Generated Net Income in the
    Last Three Fiscal Quarters of 2003, Corillian Has a History of
    Losses and May Incur Losses in Future Periods if it is Not Able
    to, Among Other Things, Increase Its Sales to New and Existing
    Customers

With the exception of the last three fiscal
quarters of 2003, Corillian has incurred substantial net losses
in every quarter since it began operations. Corillian generated
net income of approximately $5.1 million during the year
ended December 31, 2003; however, as of December 31,
2003, Corillian had an accumulated deficit of approximately
$107.9 million. If Corillian does not sign contracts with
new customers or provide additional software and services to
existing customers, it will incur significant operating losses
in future quarters. Corillian may decide that it is necessary to
further reduce its personnel or other expenses to maintain its
operations, and such reductions may reduce Corillians
ability to sell its products and services.



| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillians Quarterly Results
    Fluctuate Significantly and May Fall Short of Anticipated
    Levels, Which May Cause the Price of Its Common Stock to
    Decline

Corillians quarterly operating results have
varied in the past, and it expects they will continue to vary
from quarter to quarter in the future. In future quarters,
Corillians operating results may be below the expectations
of public market analysts and investors, which could cause the
price of its common stock to decline. Corillian may also
announce that expected financial or operating results for a
particular period will be less than it anticipated, which could
cause the price of Corillians common stock to decline. In
addition, Corillian has difficulty predicting the volume and
timing of orders and recognizes a substantial portion of its
revenues on a percentage-of-completion basis. Any delays in
closing orders or implementation of products or services can
cause Corillians operating results to fall substantially
short of anticipated levels for any quarter. As a result of
these and other factors, Corillian believes period-to-period
comparisons of its historical results of operations are not
necessarily meaningful and are not a good predictor of its
future performance.



| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Corillian, or Its Implementation
    Partners, Do Not Effectively Implement Corillians
    Solutions, Corillian May Not Achieve Anticipated Revenues or
    Gross Margins

Corillians solutions are complex and must
integrate with complex data processing systems. Implementing
Corillians solutions is a lengthy process, generally
taking between 60 and 270 days to complete. In addition,
Corillian generally recognizes revenues on a
percentage-of-completion basis, so its revenues are often
dependent on its ability to complete implementations within the
time periods that Corillian establishes for its projects.
Corillian relies on a combination of internal and outsourced
teams for its implementations. If these teams encounter
significant delays in implementing Corillians solutions
for a customer or fail to implement its solutions effectively or
at all, Corillian may not be able to recognize any revenues from
the contract or be required to recognize negative revenues from
the contract if its revised project estimates indicate that
Corillian recognized excess revenues in prior periods. In
addition, Corillian may incur monetary damages or penalties if
it is not successful in completing projects on schedule.

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From time to time, Corillian agrees to penalty
provisions in its contracts that require Corillian to make
payments to its customers if Corillian fails to meet specified
milestones or that permit its customers to terminate their
contracts with Corillian if Corillian fails to meet specified
milestones. If Corillian fails to perform in accordance with
established project schedules, Corillian may be forced to make
substantial payments as penalties or refunds and may lose its
contractual relationship with the applicable customers.



| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillians Products Lengthy
    Sales Cycles May Cause Revenues and Operating Results to Be
    Unpredictable and to Vary Significantly from Period to
    Period

The sale and implementation of Corillians
products and services are often subject to delays because of its
customers internal budgets and procedures for approving
large capital expenditures and deploying new technologies within
their networks. As a result, the time between the date of
initial contact with a potential customer and the execution of a
contract with the customer typically ranges from three to nine
months. In addition, Corillians prospective
customers decision-making processes require Corillian to
provide a significant amount of information to them regarding
the use and benefits of its products. Corillian may expend
substantial funds and management resources during a sales cycle
and fail to make the sale.



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillian May Not Achieve Anticipated
    Revenues If Corillian Does Not Successfully Introduce New
    Products or Develop Upgrades or Enhancements to Its Existing
    Products

To date, Corillian has derived substantially all
of its revenues from licenses and professional and support
services related to the Corillian Voyager product and its
related applications. Corillian expects to add new products by
acquisition, partnering or internal development and to develop
enhancements to its existing products. New or enhanced products
may not be released on schedule and may not achieve market
acceptance. New products or upgrades to existing products may
contain defects when released, which could damage
Corillians relationship with its customers or partners and
further limit market acceptance of its products and services. If
Corillian is unable to ship or implement new or enhanced
products and services when planned, or fail to achieve timely
market acceptance of its new or enhanced products and services,
Corillian may lose sales and fail to achieve anticipated
revenues.



| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A Small Number of Customers Account for a
    Substantial Portion of Corillians Revenues in Each Period;
    Corillians Results of Operations and Financial Condition
    Could Suffer if it Loses Customers or Fails to Add Additional
    Customers to Its Customer Base

Corillian derives a significant portion of its
revenues from a limited number of customers in each period.
Accordingly, if Corillian fails to close a sale with a major
potential customer, if a contract is delayed or deferred, or if
an existing contract expires or is cancelled and Corillian fails
to replace the contract with new business, its revenues would be
adversely affected. During the years ended December 31,
2001 and 2002, one customer individually accounted for 16% and
11%, respectively, of consolidated revenues. During the year
ended December 31, 2003, two customers individually
accounted for more than 10% of consolidated revenues, and, in
total, these two customers accounted for approximately 28% of
consolidated revenues. Corillian expects that a limited number
of customers will continue to account for a substantial portion
of its revenues in each quarter in the foreseeable future. If a
customer terminates a Voyager contract with Corillian early,
Corillian would lose ongoing revenue streams from annual
maintenance fees, hosting fees, professional service fees and
potential additional license and service fees for additional
increments of end users and for other Voyager applications.



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillian Partners May Be Unable to Fulfill
    Their Service Obligations and Cause Corillian to Incur Penalties
    or Other Expenses with Its Customers

Corillian resells products and services from
other companies, such as CheckFree, CashEdge, CenterPost and
InfoImage. If these vendors are unable to fulfill their
contractual obligations as a result of insolvency, a disaster or
similar event or are unable to provide the services in a
commercially reasonable manner, Corillian may be required to
incur additional expenses to provide the services to its
customers or to pay penalties to its customers for the
suspension or termination of the services.

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| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillian May Need to Raise Additional
    Financing to Fund Its Operations and May Not be Able to Raise
    Funds on Beneficial Terms or at All

Because it has a history of losses and has
limited cash resources, Corillian may have to raise financing in
the future to fund its operations. If Corillian is required to
raise financing, it may be required to sell equity or debt
securities at severely discounted prices and with terms that are
superior to the rights of its common shareholders, or Corillian
may not be able to raise financing at all. If Corillian sells
equity or debt securities, the price of its common stock could
decrease significantly, and the interests of its common
shareholders could be diluted substantially.



| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillians Facility and Operations
    May Be Disabled by a Disaster or Similar Event, Which Could
    Damage Its Reputation and Require Corillian to Incur Financial
    Loss

All of Corillians communications and
network equipment related to its operations are currently
located in Hillsboro, Oregon. Corillian does not currently have
an alternate data center or facility that can provide system
redundancy or emergency backup capabilities. Corillian cannot
assure that its data center and facility will operate after a
disaster. In addition, Corillian may experience problems during
the period following a disaster in reestablishing its systems
and infrastructure. Although Corillian has a disaster recovery
plan in place, Corillian does not currently have the technology
or facilities to instantly recover full Internet services if its
facility is not functioning. A disaster, such as a fire, an
earthquake, a terrorist attack or a flood, at its facility could
result in failures or interruptions in providing
Corillians products and services to its customers. In
addition, Corillians systems are vulnerable to operational
failures, losses in power, telecommunications failure and
similar events. Corillian has contracted to provide a certain
level of service to its customers and, consequently, a failure
or interruption of Corillians systems in the future could
cause it to refund fees to some of its customers to compensate
for decreased levels of service.



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | The Market Price for Our Common Stock, Like
    Other Technology Stocks, May Be Volatile

The value of your investment in Corillian could
decline due to the impact of any of the following factors upon
the market price of its common stock:



| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | variations in Corillians actual and
    anticipated operating results;                                          
|
| |  | changes in Corillians earnings estimates by
    analysts;                                                       
|
| |  | Corillians failure to meet analysts
    performance expectations or its announced performance
    expectations;
|
| |  | Corillians failure to remain listed on the
    NASDAQ national market; and                                      
|
| |  | lack of liquidity.                                                                                               

The stock markets have recently experienced stock
price and volume volatility that has affected companies
stock prices. The stock markets may continue to experience
volatility that may adversely affect the market price of
Corillians common stock. Stock prices for many companies
in the technology sector have experienced wide fluctuations that
have often been unrelated to their operating performance.
Fluctuations such as these may affect the market price of
Corillians common stock.

As of March 15, 2004, the 52-week high and
low trading prices of Corillians common stock, as reported
on the NASDAQ National Market, were $8.15 and $0.62,
respectively.



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition in the Market for
    Internet-Based Financial Services is Intense and Could Reduce
    Corillians Sales and Prevent Corillian from Achieving
    Profitability

The market for Internet-based financial services
is intensely competitive and rapidly changing. Corillian expects
competition to persist and intensify, which could result in
price reductions, reduced gross margins and loss of market share
for its products and services. Corillian competes with a number
of companies in various segments of the Internet-based financial
services industry, and its competitors vary in size and in the
scope and

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breadth of the products and services they offer.
Corillians primary competitors for software platforms
designed to enable financial institutions to offer
Internet-based financial services, both domestically and
internationally, include S1, Digital Insight, Financial Fusion,
Online Resources and Communications and Metavante. Corillian
also competes with companies that offer software platforms
designed for internal development of Internet-based financial
services software, such as IBMs WebSphere. Within this
segment of Corillians industry, many companies are
consolidating, creating larger competitors with greater
resources and a broader range of products.


Some of Corillians applications also
compete with companies that offer solutions with similar
functionality to Corillians solutions, such as Broadvision
and Vignette for targeted marketing solutions and Yodlee for
aggregated financial data solutions and bill presentment.
Corillian also competes with businesses delivering financial
services through Internet portals, banks marketing their own
Internet-based financial services, and non-bank financial
service providers, such as brokerages and insurance companies,
seeking to expand the breadth of their Internet product and
services offerings. In addition, Corillians customers may
develop competing products. For example, a bank or brokerage may
choose to develop its own software platform for Internet-based
financial services. Several of the vendors offering data
processing services to financial institutions, including EDS,
Fiserv, Jack Henry and Metavante, also offer Internet banking
solutions that compete with Corillians solutions.

Many of Corillians competitors and
potential competitors have a number of significant advantages
over Corillian, including:



| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a longer operating history;                                                                                                                                                                                     
|
| |  | more extensive name recognition and marketing
    power;                                                                                                                                                        
|
| |  | preferred vendor status with Corillians
    existing and potential customers; and                                                                                                                              
|
| |  | significantly greater financial, technical,
    marketing and other resources, giving them the ability to
    respond more quickly to new or changing opportunities,
    technologies and customer requirements.

Corillians competitors may also bundle
their products in a manner that may discourage users from
purchasing Corillians products. Existing and potential
competitors may establish cooperative relationships with each
other or with third parties, or adopt aggressive pricing
policies to gain market share.



| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | Consolidation in the Financial Services
    Industry Could Reduce the Number of Corillians Customers
    and Potential Customers

As a result of the mergers and acquisitions
occurring in the banking industry today, some of
Corillians existing customers could terminate their
contracts with Corillian and potential customers could break off
negotiations with Corillian. An existing or potential customer
may be acquired by or merged with another financial institution
that uses competing Internet-based financial products and
services or does not desire to continue the relationship with
Corillian for some other reason, which could result in the new
entity terminating the relationship with Corillian.

In addition, an existing or potential customer
may be acquired by or merged with one of Corillians
existing customers that licenses Corillians products under
a contract with more favorable terms and that can be applied to
the acquired customers business operations. This may
result in a reduction in Corillians anticipated revenues
from the acquired customer. Recently, two of Corillians
largest customers, J.P. Morgan Chase and Bank One, announced
their plans to merge.

One of Corillians largest customers,
Wachovia Corporation, was acquired by First Union and ceased
using Corillians software in July 2003.

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| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Corillian May Incur Substantial Losses from
    Non-Operating Activities, Such as Its Minority Investments in
    Other Companies, or Lose the Entire Amount Corillian Has
    Invested in Other Companies

In the second fiscal quarter of 2000, Corillian
made a $3.0 million minority investment in e-Banc, LLC, a
Delaware limited liability company. On February 12, 2004,
e-Banc changed its name to Synoran LLC. Corillian
contributed an additional $1.0 million in cash to Synoran
during the first quarter of 2003. Corillian does not anticipate
making any further cash contributions to Synoran. Under
applicable accounting rules, Corillians proportionate
share of any losses incurred by Synoran will be reflected on its
statement of operations as a loss from non-operating activities.
These losses may be substantial. During the years ended
December 31, 2001, 2002 and 2003, Corillian incurred
approximately $592,000, $916,000 and $1.1 million,
respectively, in losses from non-operating activities as a
result of its investment in Synoran. Corillian may lose a
portion or all of its investment in Synoran.

Corillian may in the future make similar
investments in other companies. These investments could result
in additional losses for Corillian.



| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | If Corillian Loses Key Personnel, Corillian
    Could Experience Reduced Sales, Delayed Product Development and
    Diversion of Management Resources

Corillians success depends largely on the
continued contributions of its key management, technical, sales
and marketing and professional services personnel, many of whom
would be difficult to replace. If one or more of its key
employees were to resign, the loss of personnel could result in
loss of sales, delays in new product development and diversion
of management resources. Corillian does not have employment
agreements with its senior managers or other key personnel.



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Corillian Does Not Develop International
    Operations as Expected or Fails to Address International Market
    Risks, Corillian May Not Achieve Anticipated Sales
    Growth

To increase its revenues, Corillian pursued
direct international sales opportunities and opened an
international office. However, international demand for its
products and services did not grow significantly during 2001 or
2002, so Corillian significantly reduced its direct investments
internationally and is seeking to expand international sales
through resellers and selective direct sales efforts.
International expansion of its business may be more difficult or
take longer than Corillian anticipates, and it may not be able
to successfully market, sell, deliver and support its products
internationally. Corillian will need to form additional
relationships with partners worldwide. These activities require
significant investments of time and capital from Corillian. If
Corillian is unable to develop international sales on a timely
basis or at all, it may not achieve anticipated sales growth,
gross margins or operating results. If Corillian is successful
in developing international sales, it will be subject to a
number of risks associated with international operations,
including:



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | longer accounts receivable collection cycles;                                                                                
|
| |  | expenses associated with localizing products for
    foreign markets;                                                        
|
| |  | difficulties in managing operations and partners
    across disparate geographic areas;                                      
|
| |  | difficulties in hiring qualified local personnel,
    finding qualified partners and complying with disparate labor
    laws;
|
| |  | foreign currency exchange rate fluctuations;                                                                                 
|
| |  | difficulties associated with enforcing agreements
    and collecting receivables through foreign legal
    systems; and      
|
| |  | unexpected changes in regulatory requirements
    that impose multiple conflicting tax laws and regulations.                 

If Corillian fails to address these risks, its
results of operations and financial condition may be adversely
affected.

16



---



##### Table of Contents





| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Acquisitions May Be Costly and Difficult to
    Integrate, Divert Management Resources or Dilute Shareholder
    Value

Corillian has considered and made strategic
acquisitions in the past and in the future may acquire or make
investments in complementary companies, products or
technologies. Corillian may not be able to successfully
integrate these companies, products or technologies. In
connection with these acquisitions or investments, Corillian
could:



| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | issue stock that would dilute its current
    shareholders percentage ownership;              
|
| |  | incur debt and assume liabilities; and                                                         
|
| |  | incur amortization expenses related to intangible
    assets or incur large impairment charges.

Future acquisitions also could pose numerous
additional risks to Corillians operations, including:



| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | problems combining the purchased operations,
    technologies or products;            
|
| |  | problems integrating the business models of
    acquisition targets with Corillians; 
|
| |  | unanticipated costs;                                                                  
|
| |  | diversion of managements attention from
    Corillians core business;               
|
| |  | adverse effects on existing business
    relationships with suppliers and customers;  
|
| |  | entering markets in which Corillian has no or
    limited prior experience; and       
|
| |  | potential loss of key employees, particularly
    those of the purchased organization.



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Corillian Becomes Subject to
    Intellectual Property Infringement Claims, These Claims Could Be
    Costly and Time Consuming to Defend, Divert Management Attention
    or Cause Product Delays

Corillian has in the past been, and may in the
future be, sued for allegedly infringing or misappropriating a
third-partys intellectual property rights. Any
intellectual property infringement claims against Corillian,
with or without merit, could be costly and time-consuming to
defend, divert Corillians managements attention, or
cause product delays. Corillian expects that software product
developers and providers of Internet-based financial services
will increasingly be subject to infringement claims as the
number of products and competitors in its industry grows and the
functionality of products overlaps. If Corillians products
were found to infringe a third partys proprietary rights,
Corillian could be required to enter into royalty or licensing
agreements in order to be able to sell its products. Royalty and
licensing agreements, if required, may not be available on terms
acceptable to Corillian or at all.

There has been substantial litigation in the
software and Internet industries regarding intellectual property
rights. It is possible that, in the future, third parties may
claim that Corillians current or potential future products
infringe their intellectual property.



| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Network or Internet Security Problems Could
    Damage Corillians Reputation and Business

Corillian has in the past and might in the future
experience security incidents involving actual or attempted
access to its customers systems by unknown third parties.
As a result of these types of incidents, Corillian may incur
contractual or other legal liabilities. Security risks may also
deter financial service providers from purchasing
Corillians products and deter consumers of financial
services from using Corillians products or services.
Corillian relies on standard Internet security systems, all of
which are licensed from third parties, to provide the security
and authentication necessary to effect secure transmission of
data over the Internet. Corillians networks may be
vulnerable to unauthorized access, computer viruses and other
disruptive problems. In addition, advances in computer
capabilities, new discoveries in the field of cryptography or
other events or developments may render Corillians
Internet security measures inadequate.

17



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##### Table of Contents



Someone who is able to circumvent security
measures could misappropriate proprietary information or cause
interruptions in Corillians Internet operations. Corillian
may need to expend significant capital or other resources
protecting against the threat of security breaches or
alleviating problems caused by breaches. Eliminating computer
viruses and alleviating other security problems may result in
interruptions, delays or cessation of service to users accessing
Internet sites that deliver Corillians services, any of
which could harm Corillians business.



| |                                                                
| | ---------------------------------------------------------------
| | New Technologies Could Render
    Corillians Products Obsolete

If Corillian is unable to develop products that
respond to changing technology, Corillians business could
be harmed. The market for Internet-based financial services is
characterized by rapid technological change, evolving industry
standards, changes in consumer demands and frequent new product
and service introductions.

Advances in Internet technology or in
applications software directed at financial services could lead
to new competitive products that have better performance or
lower prices than Corillians products and could render its
products obsolete and unmarketable. Corillians Voyager
solutions were designed to run on servers using the
Windows NT, Windows 2000 and Windows 2003 operating
systems. If a new software language or operating system becomes
standard or is widely adopted in Corillians industry,
Corillian may need to rewrite portions of its products in
another computer language or for another operating system to
remain competitive.



| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Defects in Corillians Solutions and
    System Errors in Its Customers Data Processing Systems
    After Installing Corillians Solutions Could Result in Loss
    of Revenues, Delay in Market Acceptance and Injury to
    Corillians Reputation

Complex software products like Corillians
may contain undetected errors or defects that may be detected at
any point in the life of the product. Corillian has in the past
discovered software errors in its products. After
implementation, errors may be found from time to time in
Corillians new products or services, its enhanced products
or services, or products or services Corillian resells for
strategic partners, such as Yodlees data aggregation
service. These errors could cause Corillian to lose revenues or
cause a delay in market acceptance of its solutions or could
result in liability for damages, injury to Corillians
reputation or increased warranty costs.



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Corillians Products and Services Must
    Interact With Other Vendors Products, Which May Not
    Function Properly

Corillians products are often used in
transaction processing systems that include other vendors
products, and, as a result, Corillians products must
integrate successfully with these existing systems. System
errors, whether caused by Corillians products or those of
another vendor, could adversely affect the market acceptance of
its products, and any necessary modifications could cause
Corillian to incur significant expenses.



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | If Corillian Becomes Subject to Product
    Liability Litigation, it Could be Costly and Time Consuming to
    Defend

Since Corillians products are used to
deliver services that are integral to its customers
businesses, errors, defects or other performance problems could
result in financial or other damages to Corillians
customers. Product liability litigation arising from these
errors, defects or problems, even if it were unsuccessful, would
be time consuming and costly to defend. Existing or future laws
or unfavorable judicial decisions could negate any limitation of
liability provisions that are included in Corillians
license agreements.



| |                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Corillian is Unable to Protect Its
    Intellectual Property, Corillian May Lose a Valuable Competitive
    Advantage or be Forced to Incur Costly Litigation to Protect Its
    Rights

Corillians future success and ability to
compete depends in part upon its proprietary technology, but its
protective measures may prove inadequate. Corillian relies on a
combination of copyright, trademark, patent and trade secret
laws and contractual provisions to establish and protect its
proprietary rights. None of

18



---



##### Table of Contents



Corillians technology is patented.
Corillian has obtained federal trademark registration for some
of its marks and its logo. Corillian has applied for, but has
not yet obtained, patents on technology it has developed. If
Corillian does not receive approval for these patents, it may be
unable to use this technology without restriction or prevent
others from using this technology.


Despite Corillians efforts to protect its
intellectual property, a third party could copy or otherwise
obtain Corillians software or other proprietary
information without authorization, or could develop software
competitive to Corillians. Corillians competitors
may independently develop similar technology, duplicate its
products or design around Corillians intellectual property
rights. In addition, the laws of some foreign countries do not
protect Corillians proprietary rights to as great an
extent as do the laws of the United States, and Corillian
expects the use of its products will become more difficult to
monitor if Corillian increases its international presence.

Corillian may have to litigate to enforce its
intellectual property rights, to protect its trade secrets or
know-how or to determine their scope, validity or
enforceability. Enforcing or defending Corillians
intellectual property rights is expensive, could cause the
diversion of Corillians resources and may not prove
successful. If Corillian is unable to protect its intellectual
property, it may lose a valuable competitive advantage.



| |                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Increasing Government Regulation of the
    Internet and the Financial Services Industry Could Limit the
    Market for Corillians Products and Services, Impose on
    Corillian Liability for Transmission of Protected Data and
    Increase Its Expenses

Numerous federal agencies have recently adopted
rules and regulations protecting consumer privacy and
establishing guidelines for financial institutions to follow in
selecting technology vendors for solutions such as
Corillians solutions. Corillian believes its business does
not currently subject it to any of these rules or regulations
that would adversely affect Corillians business. However,
these rules and regulations are new and may be interpreted to
apply to Corillians business in a manner that could make
its business more onerous or costly.

As the Internet continues to evolve, Corillian
expects federal, state and foreign governments to adopt more
laws and regulations covering issues such as user privacy,
taxation of goods and services provided over the Internet,
pricing, content and quality of products and services. If
enacted, these laws and regulations could limit the market for
Internet-based financial services.

If enacted or deemed applicable to Corillian,
some laws, rules or regulations applicable to financial service
activities could render Corillians business or operations
more costly and less viable. The financial services industry is
subject to extensive and complex federal and state regulation,
and financial institutions operate under high levels of
governmental supervision. Corillians customers must ensure
its services and related products work within the extensive and
evolving regulatory requirements applicable to them. Corillian
may become subject to direct regulation as the market for our
business evolves. Federal, state or foreign authorities could
adopt laws, rules or regulations affecting Corillians
business operations, such as requiring Corillian to comply with
data, record keeping and other processing requirements. Any of
these laws, rules or regulations, or new laws, rules and
regulations affecting Corillians customers
businesses, could lead to increased operating costs and could
also reduce the convenience and functionality of
Corillians services, possibly resulting in reduced market
acceptance.

A number of proposals at the federal, state and
local level and by the governments of significant foreign
countries would, if enacted, expand the scope of regulation of
Internet-based financial services and could impose taxes on the
sale of goods and services and other Internet activities. Any
development that substantially impairs the growth of the
Internet or its acceptance as a medium for transaction
processing could have a material adverse effect on
Corillians business, financial condition and operating
results.






|        |           
|------- | ----------
|Item 2. | Properties

Corillians corporate headquarters are
located in Hillsboro, Oregon. Corillian leases approximately
122,000 square feet at its World Campus, and the lease for
this space expires in October 2007. Corillian also

19



---



##### Table of Contents



leases approximately 22,000 square feet in
another office building in Beaverton, Oregon, of which
approximately 13,000 square feet are currently sub-leased,
and the lease for this space expires in February 2005. From time
to time, Corillian leases office space in foreign countries on a
daily or weekly basis. Corillian does not own or lease any other
properties or facilities. In May 2003, Corillian vacated a
portion of its corporate headquarters in Hillsboro, Oregon.
Corillian is currently evaluating its options with respect to
identifying a sub-lessee for all or part of this office space.
Depending on the outcome of this process, Corillian may be
required to record a loss under the provisions of Statement
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities.







|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Corillian is engaged in legal proceedings
incidental to the normal course of business. Although the
ultimate outcome of these matters cannot be determined,
management believes that the final disposition of these
proceedings will not have a material adverse effect on the
consolidated financial position, results of operations or
liquidity of Corillian.






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

Not applicable.




PART II






|        |                                                                             
|------- | ----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Stock and Related Shareholder Matters

Corillians Common Stock is traded on the
NASDAQ National Market under the symbol CORI. Public
trading of the Common Stock commenced on April 12, 2000.
Prior to that, there was no public market for the Common Stock.
The following table sets forth, for the periods indicated, the
high and low sale price per share of the Common Stock as
reported by the NASDAQ National Market:

|                             |  |      |      |     |  |   |      | 
|---------------------------- |  | ---- | ---- | --- |  | - | ---- | 
|                             |  | High |      | Low
|                             |  |      |      |    
|Year ended December 31, 2002 |  |      |      |     |  |   |      | 
|First Quarter                |  | $    | 4.80 |     |  | $ | 2.25 | 
|Second Quarter               |  | $    | 3.43 |     |  | $ | 1.59 | 
|Third Quarter                |  | $    | 2.22 |     |  | $ | 0.85 | 
|Fourth Quarter               |  | $    | 1.75 |     |  | $ | 0.71 | 
|                            
|Year ended December 31, 2003 |  |      |      |     |  |   |      | 
|First Quarter                |  | $    | 1.00 |     |  | $ | 0.61 | 
|Second Quarter               |  | $    | 2.10 |     |  | $ | 0.64 | 
|Third Quarter                |  | $    | 4.20 |     |  | $ | 1.70 | 
|Fourth Quarter               |  | $    | 7.45 |     |  | $ | 3.52 | 

As of March 15, 2004, Corillians
common stock was held by an estimated 137 shareholders.
Brokers and other institutions hold many of such shares on
behalf of shareholders.

Corillian has never declared or paid any cash
dividends on its Common Stock. Corillian currently intends to
retain its earnings, if any, for use in its business and does
not anticipate paying any cash dividends in the foreseeable
future.






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

The following selected financial data and other
operating information are derived from Corillians audited
consolidated financial statements. The tables shown below
represent portions of Corillians consolidated financial
statements and are not complete. This selected financial data
should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Corillians

20



---



##### Table of Contents



audited consolidated financial statements and
related notes included elsewhere in this report. Historical
results are not necessarily indicative of the results of
operations in future periods.


|                                               |         |                                          |         |       |   |      |         |        |   |      |         |        |   |   |         |        |   |   |        |        | 
|---------------------------------------------- | ------- | ---------------------------------------- | ------- | ----- | - | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | - | - | ------ | ------ | 
|                                               |         |                                         
|                                               |         | Year Ended December 31,                 
|                                               |         |                                         
|                                               |         | 1999                                     |         | 2000  |   | 2001 |         | 2002   |   | 2003
|                                               |         |                                          |         |       |   |      |         |        |   |     
|                                               |         |                                         
|                                               |         | (in thousands, except per share amounts)
|Consolidated Statement of Operations
    Data: |         |                                          |         |       |   |      |         |        |   |      |         |        |   |   |         |        |   |   |        |       
|Revenues                                       |         | $                                        | 7,736   |       |   | $    | 30,853  |        |   | $    | 53,848  |        |   | $ | 39,141  |        |   | $ | 46,132 |       
|Gross profit                                   |         |                                          | 1,085   |       |   |      | 8,354   |        |   |      | 23,491  |        |   |   | 18,719  |        |   |   | 25,631 |       
|Income (loss) from operations                  |         |                                          | (10,393 | )     |   |      | (35,169 | )      |   |      | (48,998 | )(1)   |   |   | (15,910 | )(2)   |   |   | 6,396  |       
|Net income (loss)                              |         |                                          | (9,994  | )     |   |      | (33,255 | )      |   |      | (49,301 | )      |   |   | (17,257 | )      |   |   | 5,126  |       
|Net income (loss) per share:                   |         |                                          |         |       |   |      |         |        |   |      |         |        |   |   |         |        |   |   |        |       
|                                               | Basic   |                                          | $       | (1.37 | ) |      | $       | (1.33  | ) |      | $       | (1.42  | ) |   | $       | (0.49  | ) |   | $      | 0.14   | 
|                                               | Diluted |                                          | $       | (1.37 | ) |      | $       | (1.33  | ) |      | $       | (1.42  | ) |   | $       | (0.49  | ) |   | $      | 0.14   | 
|Weighted average shares:                       |         |                                          |         |       |   |      |         |        |   |      |         |        |   |   |         |        |   |   |        |       
|                                               | Basic   |                                          |         | 7,399 |   |      |         | 25,106 |   |      |         | 34,645 |   |   |         | 35,477 |   |   |        | 36,431 | 
|                                               | Diluted |                                          |         | 7,399 |   |      |         | 25,106 |   |      |         | 34,645 |   |   |         | 35,477 |   |   |        | 37,813 | 



---



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Corillian recorded restructuring and impairment
    charges of $18,097 during the year ended December 31, 2001.
    See Note 9 to the consolidated financial statements for
    further discussion.                                         
|   
|(2) | Corillian recorded restructuring and litigation
    settlement charges of $682 and $2,580, respectively, during the
    year ended December 31, 2002. See Notes 7 and 9 to the
    consolidated financial statements for further discussion.

|                                           |  |                |         |      |  |      |         |      |  |      |        |  |  |   |        |  |  |   |        | 
|------------------------------------------ |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                           |  |               
|                                           |  | December 31,  
|                                           |  |               
|                                           |  | 1999           |         | 2000 |  | 2001 |         | 2002 |  | 2003
|                                           |  |                |         |      |  |      |         |      |  |     
|                                           |  |               
|                                           |  | (in thousands)
|Consolidated Balance Sheet Data:           |  |                |         |      |  |      |         |      |  |      |        |  |  |   |        |  |  |   |        | 
|Cash and cash equivalents                  |  | $              | 8,502   |      |  | $    | 49,150  |      |  | $    | 15,798 |  |  | $ | 16,721 |  |  | $ | 26,243 | 
|Restricted cash                            |  |                |        |      |  |      |        |      |  |      |       |  |  |   | 1,003  |  |  |   |       | 
|Investments                                |  |                | 10,357  |      |  |      |        |      |  |      | 1,905  |  |  |   | 910    |  |  |   | 601    | 
|Working capital                            |  |                | 16,976  |      |  |      | 41,299  |      |  |      | 17,759 |  |  |   | 5,924  |  |  |   | 14,417 | 
|Total assets                               |  |                | 25,902  |      |  |      | 101,158 |      |  |      | 50,243 |  |  |   | 37,479 |  |  |   | 42,818 | 
|Debt and capital leases, long-term portion |  |                | 177     |      |  |      | 5,265   |      |  |      | 3,730  |  |  |   | 1,600  |  |  |   | 1,075  | 
|Redeemable convertible preferred stock     |  |                | 31,501  |      |  |      |        |      |  |      |       |  |  |   |       |  |  |   |       | 
|Total shareholders equity (deficit)       |  |                | (11,706 | )    |  |      | 72,593  |      |  |      | 28,104 |  |  |   | 13,121 |  |  |   | 19,554 | 






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

Forward-Looking Statements

This Annual Report on Form 10-K includes
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other
than statements of historical fact, including statements
regarding industry prospects and future results of operations or
financial position, made in this Annual Report on Form 10-K
are forward-looking. These statements relate to future events or
Corillians future financial performance. In some cases,
you can identify forward-looking statements by terminology
including intend, could,
may, will, should,
expect, plan, anticipate,
believe, estimate, predict,
potential, future, or
continue, the negative of these terms or other
comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various
factors, including the risks described in greater detail in
Item 1, Part 1, Business  Risk
Factors, Corillians registration statements and
reports

21



---



##### Table of Contents



filed with the Securities and Exchange
Commission, and contained in Corillians press releases
from time to time.


Corillian does not guarantee future results,
levels of activity, performance or achievements. Corillian is
under no duty to update any of the forward-looking statements
after the date of this document to conform them to actual
results or to changes in its expectations.

Overview

Corillian is a leading provider of solutions that
enable banks, brokers, financial portals and other financial
service providers to rapidly deploy Internet-based financial
services. Corillians solutions allow consumers to conduct
financial transactions, view personal and market financial
information, pay bills and access other financial services on
the Internet. Corillian Voyager is a software platform combined
with a set of applications for Internet banking, electronic bill
presentment and payment, targeted marketing, data aggregation,
alerts and online customer relationship management.
Corillians solutions integrate into existing database
applications and systems and enable its customers to monitor
transactions across all systems in real time. Corillians
solutions are also designed to support multiple lines of
business, including small business banking and credit card
management, and to scale to support millions of users. Current
Corillian customers include J.P. Morgan Chase, Bank One,
The Huntington National Bank, Charter One Bank and SunTrust Bank.

Substantially all of Corillians revenues
are derived from licensing Corillians software and
performing professional services for its customers, both through
direct sales channels and indirect sales partners. These
professional services include implementation, custom software
engineering, consulting, maintenance, training and hosting. In
most cases, Corillian recognizes revenues for licenses,
implementation, training and custom engineering services using
the percentage-of-completion method. Revenues relating to
maintenance services are recognized ratably over the term of the
associated maintenance contract. Revenues derived from hosting
and consulting services are recognized as the services are
performed. Corillian generally licenses Corillian Voyager on an
end user basis, with its initial license fee based on a fixed
number of end users. As a customer increases its installed base
of end users beyond the initial fixed number of end users,
Corillians software license requires the customer to pay
Corillian an additional license fee to cover additional
increments of end users.

The market for new sales of Internet banking
solutions continued to be challenging in 2003 due to various
factors, including conservative information technology spending,
a maturing of the market for Internet banking solutions and
budget priorities of financial institutions. Corillian only
signed one new customer during 2003, Charter One Bank. The
majority of Corillians license revenues in 2003 came from
sales to existing customers. Despite these trends, Corillian
significantly improved its operating performance by increasing
sales to existing customers and reducing operating expenses. To
address the sales challenges experienced during 2003, Corillian
restructured its sales force and marketing organization during
the second half of 2003. Moving forward, Corillian will focus on
developing additional applications to complement its market
position within retail Internet banking and selling products and
services to new and existing customers.

Revenues for 2003 were $46.1 million, as
compared to revenues of $39.1 million and
$53.8 million in 2002 and 2001, respectively. The increase
in revenues was primarily due to an increase in consolidated
software license and professional service revenues of
approximately $4.6 million during 2003, as compared to
2002, including an increase of $1.8 million in sales from
additional licenses to existing customers. The increase in
revenues was also due to an increase in consolidated maintenance
revenues of approximately $1.9 million in 2003, as compared
to 2002, as Corillians installed customer based increased
from 2002 to 2003. The lower revenues in 2002 and 2003, as
compared to 2001, were primarily attributable to fewer new
customer contracts signed in 2002 and 2003, which resulted in
both lower software license and professional service revenues.

During 2003, two customers individually accounted
for more than 10% of consolidated revenues, and, in total, these
two customers accounted for approximately 28% of consolidated
revenues. During 2002 and 2001, one customer accounted for
approximately 11% and 16%, respectively, of consolidated
revenues.

22



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##### Table of Contents



Gross profit as a percentage of revenues improved
to 55.6% in 2003, as compared to 47.8% and 43.6% in 2002 and
2001, respectively. The increase in gross profit as a percentage
of revenues during 2003, as compared to 2002, was mainly due to
the increase in sales of additional licenses to existing
customers and the $1.0 million of gross profit recognized
during 2003 from projects on which Corillian had used the
zero profit methodology for revenue recognition.
This increase was partially offset by use of Corillians
research and development personnel during 2003 to provide
services for Corillians customers, which resulted in
reclassification of approximately $1.1 million in research
and development expenses related to these personnel to cost of
revenues. The increase in gross profit as a percentage of
revenues during 2002, as compared to 2001, was mainly due to a
higher percentage of license revenues as compared to total
revenues, as well as improved utilization of personnel
performing professional services and an increased number of
customers receiving post-contractual customer support.

Corillian reported net income of
$5.1 million for 2003, as compared to net losses of
$17.3 million and $49.3 million in 2002 and 2001,
respectively. The increase in Corillians net income in
2003, as compared to 2002, resulted from the increase in
revenues and improved gross margins discussed above and
corporate cost containment initiatives implemented throughout
2002 and 2003.

Corillians overall financial position
strengthened significantly during 2003. Corillian generated
$11.3 million in net cash from operations during 2003 and
had $26.8 million in cash, cash equivalents and short-term
investments as of December 31, 2003, as compared to
$18.6 million in cash, restricted cash, cash equivalents
and short-term investments as of December 31, 2002. Working
capital improved from $5.9 million as of December 31,
2002 to $14.4 million as of December 31, 2003.

Since incorporation, Corillian has incurred
substantial costs to develop and market its technology and to
provide professional services. As a result, Corillian has
accumulated a deficit of approximately $107.9 million as of
December 31, 2003. Corillians limited operating
history makes it difficult to forecast future operating results.
As a result of the rapid evolution of Corillians business
and limited operating history, Corillian believes
period-to-period comparisons of its results of operations,
including its revenues and cost of revenues and operating
expenses as a percentage of revenues, are not necessarily
indicative of its future performance.

Critical Accounting Policies and
Estimates

Managements discussion and analysis of
financial condition and results of operations is based upon
Corillians audited consolidated financial statements,
which have been prepared in accordance with accounting
principles generally accepted in the United States of America.
The preparation of consolidated financial statements requires
Corillian to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On
an on-going basis, Corillian evaluates its estimates, including
those related to revenue recognition, bad debts, investments,
income taxes, restructuring, and contingencies and litigation.
Corillian bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.

Certain of Corillians accounting policies
require higher degrees of judgment than others in their
application. These include revenue recognition and accruals for
contracts in loss positions. Corillians policy and related
procedures for software revenue recognition are summarized below.

Revenue Recognition.Corillian recognizes revenues from software licensing agreements
in accordance with the provisions of Statement of Position
(SOP) No. 97-2, Software Revenue Recognition,as amended by SOP No. 98-9, Modification, in
general, of SOP No. 97-2, Software Revenue Recognition,
with Respect to Certain Transactions.

Revenues on software arrangements involving
multiple elements, which generally include software licenses,
implementation and custom software engineering services,
post-contractual customer support, training services and hosting
services, are allocated to the elements using the residual
method specified in SOP

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No. 98-9. Corillian has determined that
post-contractual customer support and hosting services can be
separated from software licenses, implementation, training and
custom software engineering services because
(a) post-contractual customer support and hosting services
are not essential to the functionality of any other element in
the arrangement, and (b) sufficient vendor-specific
objective evidence exists to permit the allocation of revenue to
these service elements. The hosting element can be accounted for
separately from the license element, as the customer can take
possession of the software without significant penalty, in
accordance with Emerging Issues Task Force (EITF) 00-3,Application of AICPA Statement of Position 97-2 to
Arrangements that Include the Right to Use Software Stored on
Another Entitys Hardware.Vendor-specific objective
evidence has been established on post-contractual customer
support and hosting services using the price the customer is
required to pay when they are sold separately (the renewal
rate). Under the residual method, the full fair value of
post-contractual customer support and hosting services are
deferred and subsequently recognized as the services are
performed. The difference between the total software arrangement
fee and the amount deferred for post-contractual customer
support and hosting services is allocated to software license,
implementation, training and custom software engineering
services and recognized using contract accounting.


Corillians software licenses are, in
general, functionally dependent on implementation and certain
custom software engineering services; therefore, software
licenses and implementation services, together with custom
software engineering services that are essential to the
functionality of the software, are combined and recognized using
the percentage-of-completion method of contract accounting in
accordance with SOP No. 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts.The percentage-of-completion is measured by the percentage
of contract hours incurred to date compared to the estimated
total contract hours for each contract. Corillian has the
ability to make reasonable, dependable estimates relating to the
extent of progress towards completion, contract revenues and
contract costs. Any estimation process, including that used in
preparing contract accounting models, involves inherent risk.
Profit estimates are subject to revision as the contract
progresses towards completion. Revisions in profit estimates are
charged to income in the period that the facts giving rise to
the revision become known. Corillian reduces the inherent risk
relating to revenue and cost estimates in
percentage-of-completion models through various approval and
monitoring processes and policies. Risks relating to service
delivery, usage, productivity and other factors are considered
in the estimation process. Cumulative revenues recognized may be
less or greater than cumulative billings at any point in time
during a contracts term. The resulting difference is
recorded as deferred revenue or revenue in excess of billings,
respectively. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are
determined.

Pursuant to SOP No. 81-1, on projects where
ultimate recoverability is questionable due to inherent hazards,
Corillian limits revenue recognition in the period to the amount
of project costs incurred in the same period, and postpones
recognition of profits until results can be estimated more
precisely. Under this zero profit methodology, equal
amounts of revenues and costs, measured on the basis of
performance during the period, are presented in Corillians
consolidated statements of operations.

In arrangements where Corillian does not have an
obligation to install its products, Corillian recognizes
non-refundable license fees over the estimated implementation
period for the customer or resellers project. If Corillian
determines that the customer or reseller can successfully
install Corillians products in a production environment,
Corillian will recognize non-refundable license fees for future
arrangements in the period in which collectibility of the
license fees is probable, assuming all other
SOP No. 97-2 revenue recognition criteria are met.

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Results of Operations

The following table sets forth the periods
indicated, the percentage of revenues represented by certain
lines in Corillians audited consolidated statements of
operations.

|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |      | 
|------------------------------------- | -------------------------------------------------------- | ----------------------- | ----- | ---- |  | ---- | ----- | ---- |  |  | ----- | ---- | 
|                                      |                                                          |                        
|                                      |                                                          | Year Ended December 31,
|                                      |                                                          |                        
|                                      |                                                          | 2001                    |       | 2002 |  | 2003
|                                      |                                                          |                         |       |      |  |     
|Revenues                              |                                                          |                         | 100.0 | %    |  |      | 100.0 | %    |  |  | 100.0 | %   
|Cost of revenues                      |                                                          |                         | 56.4  |      |  |      | 52.2  |      |  |  | 44.4  |     
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Gross profit                          |                                                          |                         | 43.6  |      |  |      | 47.8  |      |  |  | 55.6  |     
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Operating expenses:                   |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|                                      | Sales and marketing                                      |                         |       | 37.3 |  |      |       | 29.9 |  |  |       | 13.9 | 
|                                      | Research and development                                 |                         |       | 21.8 |  |      |       | 19.8 |  |  |       | 12.9 | 
|                                      | General and administrative                               |                         |       | 25.9 |  |      |       | 28.2 |  |  |       | 14.8 | 
|                                      | Amortization of goodwill and other intangible
    assets |                         |       | 11.4 |  |      |       |     |  |  |       |     | 
|                                      | Amortization of deferred stock-based compensation        |                         |       | 4.7  |  |      |       | 2.3  |  |  |       | 0.1  | 
|Litigation settlement charges         |                                                          |                         |      |      |  |      | 6.6   |      |  |  |      |     
|Restructuring and impairment charges  |                                                          |                         | 33.6  |      |  |      | 1.7   |      |  |  |      |     
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Total operating expenses              |                                                          |                         | 134.7 |      |  |      | 88.5  |      |  |  | 41.7  |     
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Income (loss) from operations         |                                                          |                         | (91.1 | )    |  |      | (40.7 | )    |  |  | 13.9  |     
|Other income (expense), net           |                                                          |                         | (0.6  | )    |  |      | (3.4  | )    |  |  | (2.5  | )   
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Net income (loss) before income taxes |                                                          |                         | (91.7 | )%   |  |      | (44.1 | )%   |  |  | 11.4  | %   
|Income taxes                          |                                                          |                         |      |      |  |      |      |      |  |  | 0.3   |     
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     
|Net income (loss)                     |                                                          |                         | (91.7 | )%   |  |      | (44.1 | )%   |  |  | 11.1  | %   
|                                      |                                                          |                         |       |      |  |      |       |      |  |  |       |     



| |                                                               
| | --------------------------------------------------------------
| | Comparison of Years Ended December 31,
    2001, 2002 and 2003

Revenues

Revenues decreased from $53.8 million for
2001 to $39.1 million for 2002. The decrease was primarily
due to the decrease in revenues generated from Corillians
international operations and Corillian Services, Inc., a
business unit of Corillian that provided consulting services
related to non-Corillian products for financial institutions.
Corillians international operations generated
approximately $826,000 in revenues during the year ended
December 31, 2002, a decrease of approximately
$8.4 million as compared to 2001. This reduction in
international revenues was the result of licensing software and
performing professional services for fewer international
customers.

Corillian Services, Inc. generated
$2.2 million in revenues during 2002, a decrease of
approximately $6.0 million as compared to 2001. This
reduction was the result of Corillian Services, Inc.
performing services on fewer projects for third-party customers.
As part of Corillians restructuring actions during the
fourth quarter of 2001, Corillian Services, Inc. closed its
Los Angeles headquarters and reduced its headcount by
41 professional services personnel.

The decrease in revenues in 2002, as compared to
2001, was also caused by a reduction in revenues of $475,000
recorded by Corillian during the three-month period ended
June 30, 2002, related to the modification of contractual
obligations for one of Corillians customers as a result of
a contract dispute.

Revenues increased from $39.1 million for
2002 to $46.1 million for 2003. This increase in revenues
was primarily due to an increase in consolidated software
license and professional service revenues of approximately
$4.6 million during 2003, as compared with 2002. This
increase was partially due to an increase of $1.8 million
in sales of additional licenses to existing customers during
2003, as compared with 2002. The

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majority of the revenues from these additional
license sales is recognized in the period in which the licenses
are sold. The increase in revenues during 2003 was also due to
an increase in consolidated maintenance revenues of
approximately $1.9 million, as compared with 2002, as
Corillians installed customer base increased from 2002 to
2003.


Due to certain triggering events included in a
customers contract, beginning with the three-month period
ended September 30, 2002, Corillian applied the zero
profit methodology discussed above to three existing
projects for one customer. Both revenue and expense recognized
from these projects accounted for under the zero
profit methodology during 2002 and 2003, was approximately
$271,000 and $714,000 respectively. As all three of this
customers projects were completed and accepted during
2003, Corillian recognized an additional $1.0 million of
revenues related to these projects, which had been previously
deferred until completion of the projects, during 2003. Since
all cost of revenues associated with these projects had been
previously recognized using the zero profit
methodology, recognition of this deferred revenue resulted in
the corresponding recognition of $1.0 million in gross
profit during 2003. No further revenues were deferred on these
projects as of December 31, 2003.

Corillians international operations
contributed approximately $659,000 to Corillians
consolidated revenues in 2003, as compared with $826,000 to
Corillians consolidated revenues in 2002. Corillian
Services, Inc. contributed $475,000 to Corillians
consolidated revenues for 2003, as compared with approximately
$2.2 million to Corillians consolidated revenues for
2002. Because of the restructuring actions implemented during
the fourth quarter of 2001 and second quarter of 2002 and the
subsequent reduction in employees throughout Corillians
international operations, Corillian does not expect its
international operations to generate significant revenues during
fiscal 2004. Corillian is pursuing ways in which to increase
revenues derived from its international operations through
resellers. Until Corillians resellers are successful at
distributing and implementing Corillians products
internationally, Corillian does not anticipate that revenues
from international operations will comprise a significant
percentage of its consolidated revenues. Corillian anticipates
that revenues from Corillian Services, Inc. in 2004 will be
lower as compared with the revenues from Corillian
Services, Inc. during 2003.

As of December 31, 2003, Corillian had a
backlog of unfilled orders of $37.2 million, as compared to
a backlog of $38.1 million as of December 31, 2002.
Backlog decreased during 2003, as revenues recognized were
greater than sales during this period. Although Corillian signed
several contracts with existing customers during 2003, Corillian
signed contracts with only one new customer during this period.

Backlog represents contractual customer
commitments, including fees for licenses, professional services,
maintenance, hosting and subscriptions. Backlog is not
necessarily indicative of revenues to be recognized in any given
future period. There are many factors that would impact
Corillians filling of backlog, such as Corillians
progress in completing projects for its customers,
Corillians customers meeting anticipated schedules
for customer-dependent deliverables and Corillians
customers satisfying their contractual obligations.
Corillian provides no assurances that any portion of its backlog
will be filled during any fiscal year or at all or that its
backlog will be recognized as revenues in any given period.

Cost
of Revenues

Cost of revenues consists primarily of salaries
and related expenses for professional service personnel and
outsourced professional service providers who are responsible
for the implementation and customization of Corillians
software and for maintenance and support personnel who are
responsible for post-contractual customer support.

Cost of revenues decreased from
$30.4 million for 2001 to $20.4 million for 2002.
Gross profit increased as a percentage of revenues from 43.6% in
2001 to 47.8% in 2002. The increase in gross profit as a
percentage of revenues during 2002 was mainly due to improved
utilization of personnel performing professional services and an
increased number of customers receiving post-contractual
customer support. Corillian also decreased the number of its
professional services personnel from 152 as of December 31,
2001, to 131 as of December 31, 2002. Cost of revenues
associated with Corillian Services, Inc. decreased by
approximately $10.1 million in 2002, from
$11.9 million for 2001 to $1.8 million for 2002. This
decrease in Corillian

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Services, Inc.s cost of revenues was
primarily due to the closure of its Los Angeles headquarters and
the reduction in its headcount by 41 professional services
personnel during the fourth quarter of 2001.


Cost of revenues remained essentially flat from
approximately $20.4 million in 2002, to $20.5 million
in 2003. Gross profit increased as a percentage of revenues from
47.8% in 2002, to 55.6% in 2003. The increase in gross profit as
a percentage of revenues during 2003, as compared to 2002, was
mainly due to the increase of $1.8 million in sales of
additional licenses to existing customers and the
$1.0 million of gross profit recognized during 2003 from
projects on which Corillian had used the zero profit
methodology for revenue recognition. This increase was partially
offset by use of Corillians research and development
personnel during 2003 to provide services for Corillians
customers, which resulted in reclassification of approximately
$1.1 million in research and development expenses related
to these personnel to cost of revenues. The increase in gross
profit as a percentage of revenues is also partially
attributable to improved margins on hosting services and
post-contractual customer support.

Operating Expenses

Sales and Marketing
Expenses.Sales and marketing expenses
consist of salaries, commissions, and related expenses for
personnel involved in marketing, sales and support functions, as
well as costs associated with trade shows and other promotional
activities.

Sales and marketing expenses decreased from
$20.1 million for 2001 to $11.7 million for 2002. The
decrease was mainly a result of Corillians restructuring
actions to improve operational efficiency implemented during the
fourth quarter of 2001 and second quarter of 2002. Corillian
decreased the number of its sales and marketing personnel from
67 as of December 31, 2001, to 31 as of December 31,
2002. Primarily as a result of these restructuring actions and
other corporate cost containment initiatives, domestic sales and
marketing expenses decreased by $3.8 million for 2002, as
compared to 2001. The decrease was also attributable to a
decrease of approximately $3.4 million in direct
international sales and marketing expenses and a decrease of
approximately $1.2 million in Corillian Services, Inc.
sales and marketing expenses for 2002, as compared to 2001.

Sales and marketing expenses decreased from
$11.7 million for 2002 to $6.4 million for 2003. This
decrease was mainly a result of Corillians restructuring
actions to improve operational efficiency during the second
quarter of 2002. Primarily as a result of these restructuring
actions and other corporate cost containment initiatives, direct
international sales and marketing expenses decreased by
approximately $3.0 million and domestic sales and marketing
expenses decreased by approximately $2.0 million in 2003,
as compared to 2002.

Research and Development
Expenses.Research and development
expenses consist primarily of salaries and related expenses for
engineering personnel and costs of materials and equipment
associated with the design, development and testing of
Corillians products.

Research and development expenses decreased from
$11.7 million for 2001 to $7.7 million for 2002. This
decrease was mainly due to Corillians restructuring
actions during the fourth quarter of 2001 and second quarter of
2002 and other corporate cost containment initiatives, as
Corillian decreased the number of its research and development
personnel from 62 as of December 31, 2001, to 49 as of
December 31, 2002, and significantly reduced third-party
research and development expenses during 2002, as compared to
2001. The decrease from 2001 to 2002 would have been even larger
if not for the impact of approximately $1.7 million of
funded research and development recorded as a reduction of
research and development expense during the three-month period
ended September 30, 2001.

Research and development expenses decreased from
$7.7 million for 2002 to $6.0 million in 2003. This
decrease was mainly due to certain Corillian research and
development personnel providing services for Corillians
customers during 2003, which resulted in the reclassification of
approximately $1.1 million in research and development
expenses related to these personnel to cost of revenues in 2003.
This decrease was also due to Corillians restructuring
actions during the second quarter of 2002 and other corporate
cost containment initiatives. The decrease would have been
larger if not for the impact of approximately $290,000

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of funded research and development recorded as a
reduction of research and development expense during the
three-month period ended March 31, 2002.


Research and development expenses, to a certain
extent, could fluctuate in future periods due to the additional
funding of Corillians research and development activities
by customers accounted for under the provisions of the Financial
Accounting Standards Boards (FASB) Statement of
Financial Accounting Standards No. 68, Research and
Development Arrangements (Statement No. 68), as well as
internal funding for the development of new products and
enhancements to existing products and the use of
Corillians research and development personnel to provide
services for Corillians customers.

General and Administrative
Expenses.General and administrative
expenses consist of salaries and related expenses for executive,
finance, human resources, legal, information systems management
and administration personnel, as well as professional fees, bad
debt expense and other general corporate expenses.

General and administrative expenses decreased
from $14.0 million for 2001 to $11.0 million for 2002.
The decrease was mainly due to Corillians restructuring
actions during the fourth quarter of 2001 and second quarter of
2002 and other corporate cost containment initiatives, as
Corillian decreased the number of its general and administrative
personnel from 46 as of December 31, 2001, to 35 as of
December 31, 2002. During 2002, direct domestic and
Corillian Services, Inc. general and administrative
expenses decreased by approximately $529,000 and
$2.4 million, respectively, mainly due to the restructuring
actions implemented during the fourth quarter of 2001 and second
quarter of 2002. Domestically, the effect of these restructuring
actions was partially offset by a $562,000 charge recorded in
general and administrative expense during the three-month period
ended June 30, 2002. This charge related to the settlement
of a contract dispute in August 2002. Internationally, during
2002, Corillian recognized charges of approximately
$1.0 million to write-off customer receivables and to
establish an allowance for doubtful accounts. This charge was
almost entirely offset by the decrease in international general
administrative expenses caused by the restructuring actions
implemented during the fourth quarter of 2001 and second quarter
of 2002.

General and administrative expenses decreased
from $11.0 million for 2002 to $6.8 million for 2003.
The decrease was caused by a decrease of approximately
$2.1 million in international general and administrative
expense, which was mainly due to charges totaling approximately
$1.0 million recognized during 2002 to establish an
allowance for doubtful accounts for certain receivables. The
remainder of the decrease in international general and
administrative expense was primarily attributable to the winding
down of Corillians international operations towards the
end of 2002 and beginning of 2003.

The remaining decrease in general and
administrative expense during 2003, as compared to 2002, was
partially due to a $562,000 charge discussed above, which was
recorded in general and administrative expense during the
three-month period ended June 30, 2002. During the
three-month period ended June 30, 2003, Corillian entered
into a settlement agreement with its insurance company regarding
this contract dispute. Under this agreement, Corillians
insurance company agreed to pay Corillian $250,000 in cash,
which was received in July 2003. Corillian recorded this
settlement as a reduction in general and administrative expense
for the three-month period ended June 30, 2003. The
remaining decrease was also due to reduced legal expenses, as
Corillians dispute with KeyBank was settled in October
2002, as well as general cost savings realized throughout the
period as a result of corporate cost containment initiatives.

On November 14, 2003, Steve Sipowicz stepped
down as Corillians Chief Financial Officer and Secretary.
Mr. Sipowicz is serving as Corillians financial
advisor for a six-month period following his departure.
Mr. Sipowicz will receive $100,000 as severance and
$2,000 per month during the period he serves as financial
advisor. Corillian recorded a charge of $100,000 related to
Mr. Sipowiczs severance agreement as general and
administrative expense during the three-month period ended
September 30, 2003.

Amortization of Goodwill and Other Intangible
Assets.Amortization of goodwill and
other intangible assets was $6.1 million, $0 and $0 in
2001, 2002 and 2003, respectively, reflecting amortization of
customer relationships, workforce and goodwill acquired as part
of Corillians acquisition of Hatcher Associates Inc. in
November 2000. During the fourth quarter of 2001, Corillian
recorded an impairment charge of $16.8 million,

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which was the entire remaining balance of
goodwill and other intangible assets resulting from Hatcher
acquisition. This impairment charge was a component of
restructuring charges recorded in 2001.


Amortization of Deferred Stock-based
Compensation.Deferred stock-based
compensation represents the difference between the exercise
price of stock options granted to employees and the fair value
of Corillians common stock at the time of the grants. In
addition, this amount includes the fair value of stock options
granted to non-employees. This amount was being amortized over
the respective vesting periods of these options on an
accelerated basis. For 2001, 2002 and 2003, amortization of
deferred stock-based compensation was $2.5 million,
$885,000 and $35,000, respectively. All deferred stock-based
compensation was amortized as of March 31, 2003.

Litigation Settlement
Charges.In October 2002, Corillian
and KeyBank settled a dispute surrounding KeyBanks
allegations that one of Corillians employees used
KeyBanks trade secrets in performing work for Corillian.
As part of this settlement, both parties dismissed their
respective claims. Also, as part of this settlement, Corillian
agreed to pay KeyBank approximately $1.8 million in cash
and issue to KeyBank 500,000 shares of common stock, valued
at approximately $750,000. $1.4 million of the cash was
paid to KeyBank during the fourth quarter of 2002 and $250,000
of the cash was paid on November 16, 2003. Corillian will
pay the remaining $175,000 in cash, which was included in other
current liabilities as of December 31, 2003, to KeyBank on
November 16, 2004. Corillian issued the shares of common
stock during the fourth quarter of 2002. Corillian recorded a
charge of approximately $2.6 million during the three-month
period ended September 30, 2002 related to this settlement.

Restructuring and Impairment
Charges.During the fourth quarter of
2001, Corillian initiated restructuring actions to improve
operational efficiency and reduce operating expenses. Charges
related to these restructuring actions were accrued in the
period in which executive management committed to execute such
actions. The restructuring actions taken in 2001 included the
reorganization of operational and management responsibilities
and closure of Corillian Services, Inc.s (formerly
Hatcher Associates Inc.) Los Angeles headquarters. These actions
resulted in a net reduction of worldwide headcount of 125, of
which 41 were employees of Corillian Services, Inc.
Restructuring charges recorded in connection with these actions
totaled $1.3 million and consisted of severance-related
costs of $1.2 million, $90,000 in losses recognized on the
sale of equipment, and lease cancellation costs of $27,000. This
restructuring effort was substantially completed as of
December 31, 2001. Of the cash restructuring charges of
$1.0 million, approximately $889,000 was paid in 2001 and
the remainder was paid during the first half of 2002.

In the fourth quarter of 2001, Corillian
determined that the goodwill and other intangible assets
recorded in connection with the acquisition of Corillian
Services, Inc. were impaired and Corillian recorded an
impairment of the entire goodwill and other intangible assets
balance of approximately $16.8 million. In accordance with
Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of,management reviewed the goodwill and other intangible asset
balances for impairment as Corillian Services, Inc.s
operating results and forecasted future results indicated the
carrying amount of these assets were not recoverable. The
impairment analysis was based on projected undiscounted cash
flows, which were no longer adequate to support the carrying
value of goodwill and other intangible assets associated with
the business.

During the second quarter of 2002, Corillian
initiated restructuring actions to improve operational
efficiency and reduce operating expenses. Charges related to
these restructuring actions were accrued in the period in which
executive management committed to execute such actions. These
actions resulted in a net reduction of worldwide headcount of
49. Restructuring charges recorded in connection with these
actions totaled approximately $682,000, which consisted solely
of severance-related payments, health care costs and
severance-related tax payments. Of these cash restructuring
charges, approximately $398,000 was paid during the three-month
period ended June 30, 2002, and the remainder of
approximately $284,000 was paid during the three-month period
ended September 30, 2002.

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Other Income (Expense), Net

Other income (expense), net, consists primarily
of interest earned on cash and cash equivalents and short-term
investments, gains and losses recognized upon sale of
Corillians assets, interest expense, Corillians
share of losses in equity investments, and other miscellaneous
items. Other expense, net, increased from $303,000 in 2001 to
$1.3 million in 2002. This increase was mainly the result
of a reduction in interest income earned of approximately
$1.0 million during 2002, as compared to 2001. This
decrease in interest income was due to lower interest rates and
decreased cash, cash equivalents and short-term investment
balances.

Other expense, net, decreased from
$1.3 million in 2002 to $1.1 million in 2003. This
decrease was mainly due to a decrease in interest expense of
approximately $298,000 during 2003, as compared to 2002, as well
as an increase in interest income of approximately $40,000
during 2003, as compared to 2002. This decrease was partially
offset by a $217,000 increase in Corillians proportionate
share of Synorans net loss during 2003, as compared to
2002.

Income Taxes

No provision for federal, state or foreign income
taxes was recorded for 2001 or 2002 because Corillian had
incurred net operating losses in each of those years. Corillian
was profitable during 2003. Although net operating loss
carryforwards were used to offset taxable income for regular tax
purposes, Corillian was subject to alternative minimum tax
because only 90 percent of taxable income may be offset by
net operating loss carryforwards for alternative minimum tax
purposes. As a result, Corillian recorded an income tax charge
of approximately $124,000 during 2003 primarily related to
alternative minimum taxes.

As of December 31, 2003, Corillian had
federal and state net operating loss carryforwards of
approximately $59.2 million and foreign net operating loss
carryforwards of approximately $13.5 million to offset
against future taxable income and research and experimentation
credits of $2.9 million. These carryforwards expire in 2004
through 2023. Corillian had net deferred tax assets, including
Corillians net operating loss carryforwards and tax
credits, of $30.6 million as of December 31, 2003. A
full valuation allowance has been recorded against the net
deferred tax asset balance due to uncertainties regarding the
realizability of the asset balance.

Liquidity and Capital Resources

As of December 31, 2003, Corillian had
$26.8 million in cash, cash equivalents and short-term
investments consisting mainly of cash and taxable municipal
bonds with original maturities from 0 to 180 days, as
compared to $18.6 million as of December 31, 2002. In
November 2000, Corillian obtained a $5.0 million equipment
line of credit with a financial institution. In June 2003,
Corillian refinanced this line of credit to obtain lower
interest rates on its remaining debt with this financial
institution. Approximately $2.6 million was outstanding
under this line of credit as of December 31, 2003. As of
this date, an additional $1.0 million was available for
borrowing under this amended line of credit. Under this line of
credit, Corillian must comply with affirmative covenants that
require it to maintain a specified tangible net worth value,
debt coverage ratio and adjusted quick ratio. Corillian believes
it was in compliance with these covenants as of
December 31, 2003. If Corillian fails to comply with these
covenants and cannot cure its noncompliance within the periods
of time identified in the agreement, Corillian may be required
to immediately repay all of its outstanding indebtedness under
this line of credit.

Net cash provided by (used in) operating
activities was ($26.3 million), $2.7 million and
$11.3 million for 2001, 2002 and 2003, respectively. The
increase in net cash provided by operations from 2001 to 2002
resulted primarily from a decrease in net loss, net of non-cash
expenses including depreciation, amortization of deferred
stock-based compensation, and bad debt expense, as well as
decreases in accounts receivable and revenue in excess of
billing and an increase in deferred revenue.

The increase in net cash provided by operations
from 2002 to 2003 resulted primarily from an increase in net
income, as well as the decrease in restricted cash and other
current assets related to the completion and acceptance of a
customers project, which resulted in the release of
$1.7 million from an escrow account to

30



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Corillian and $1.0 million in cash becoming
unrestricted during 2003. During the third quarter of 2002,
Corillian deposited the $1.7 million into an escrow account
pending successful completion of a customer project. Of this
amount, $1.2 million was funded by a receivable from this
customer. During the third quarter of 2003, Corillian completed
the final milestone of this project and all amounts held on
deposit in the escrow account were released to Corillian.
Corillian also agreed to deposit and maintain the
$1.0 million in cash in a corporate bank account with this
customer, which was deposited in October 2002. These funds were
initially classified as restricted cash because Corillian was
required to maintain the funds on deposit and could not use the
funds without violating the agreement. During the second quarter
of 2003, Corillian and the customer amended the terms of the
contract to remove the requirement that Corillian maintain the
funds on deposit with the customer. As a result, these funds
became classified as unrestricted during the second quarter of
2003.


This increase in net cash provided by operations
was partially offset by an increase in accounts receivable in
2003, as compared to 2002, which was mainly due to a large
additional seat license billing made in December 2003 that was
not paid as of December 31, 2003.

Net cash provided by (used in) investing
activities was ($8.2 million), $215,000 and
($1.8 million) for 2001, 2002 and 2003, respectively. Net
cash used in investing activities during 2001 consisted of
$6.3 million of property and equipment purchases, as
Corillian continued its build-out of its corporate headquarters
and international facilities, as well as $1.9 million of
investment purchases. During 2002, net cash provided by
investing activities consisted of $995,000 in proceeds from the
maturities of investments, which were partially offset by
$780,000 of property and equipment purchases. During 2003, net
cash used in investing activities consisted of $1.1 million
of property and equipment purchases and a $1.0 million cash
investment in Synoran, offset by $309,000 in proceeds received
from the maturities of investments.

Net cash provided by (used in) financing
activities was $1.1 million, ($2.1 million) and
$32,000 for 2001, 2002 and 2003, respectively. Net cash provided
by financing activities in 2001 consisted primarily of
$2.0 million in proceeds from the issuance of common stock,
offset, in part, by net principal payments on line of credit
borrowings and capital lease obligations of $535,000 and
$384,000, respectively. Net cash used in financing activities in
2002 consisted primarily of net principal payments on line of
credit borrowings and capital lease obligations of
$2.2 million and $467,000, respectively. This usage was
partially offset by $576,000 in proceeds received from the
issuance of common stock. During 2003, net cash provided by
financing activities consisted of $1.3 million in proceeds
received from the issuance of common stock, which was almost
entirely offset by $860,000 and $381,000 in net repayments on
long-term borrowings and capital lease obligations, respectively.

Working capital increased from $5.9 million
as of December 31, 2002, to $14.4 million as of
December 31, 2003. This increase was primarily attributable
to a net increase in cash, cash equivalents, restricted cash and
short-term investments of approximately $8.2 million, as
well as an increase in accounts receivable of approximately
$2.1 million. These increases were partially offset by an
increase in deferred revenue of approximately $1.6 million.

In May 2000, Corillian entered into a lease for
its new corporate headquarters, which is located in Hillsboro,
Oregon and consists of approximately 122,000 square feet.
The lease has a term of seven years, but Corillian has the right
to renew the lease for a term of five years on two separate
occasions. Under the terms of this lease, Corillians
monthly rent ranges from approximately $214,000 in the first
year to approximately $244,000 in the seventh year. Corillian
also leases approximately 22,000 square feet in another
office building in Beaverton, Oregon, of which approximately
13,000 square feet are currently sub-leased, and the lease
for this space expires in February 2005. Under the terms of this
lease, Corillians monthly rent is approximately $29,000.
Corillian receives approximately $6,000 per month from the
sub-leasing of a portion of this office building.

Corillian had no material financial obligations
as of December 31, 2003, other than obligations under its
line of credit facilities and operating and capital leases, as
well as its obligation to pay KeyBank approximately $175,000 in
cash on November 16, 2004. Future capital requirements will
depend on many factors, including the timing of research and
development efforts and the expansion of Corillians
operations, both domestically

31



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and internationally. Corillian believes its
current cash and cash equivalents will be sufficient to meet its
working capital requirements for at least the next
12 months. Thereafter, Corillian may find it necessary to
obtain additional equity or debt financing. If additional
financing is required, Corillian may not be able to raise it on
acceptable terms or at all. Additional financing could result in
dilution to its current shareholders percentage ownership.
If Corillian is unable to obtain additional financing, Corillian
may be required to reduce the scope of its planned research and
development and sales and marketing efforts, as well as the
further development of its infrastructure.


Corillian is contractually obligated to make the
following payments as of December 31, 2003:

|                              |  |                |        |           |  |           |       |           |  |           |       |  |  |   |       |  |  |   |   | 
|----------------------------- |  | -------------- | ------ | --------- |  | --------- | ----- | --------- |  | --------- | ----- |  |  | - | ----- |  |  | - | - | 
|                              |  |                |        | Less than |  |           |       |           |  | More than
|                              |  | Total          |        | 1 year    |  | 1-3 years |       | 3-5 years |  | 5 years  
|                              |  |                |        |           |  |           |       |           |  |          
|                              |  |               
|                              |  | (in thousands)
|Litigation settlement         |  | $              | 175    |           |  | $         | 175   |           |  | $         |      |  |  | $ |      |  |  | $ |  | 
|Lines of credit               |  |                | 2,763  |           |  |           | 1,617 |           |  |           | 731   |  |  |   | 415   |  |  |   |  | 
|Capital lease obligations     |  |                | 35     |           |  |           | 21    |           |  |           | 14    |  |  |   |      |  |  |   |  | 
|Operating lease obligations   |  |                | 11,038 |           |  |           | 3,108 |           |  |           | 5,732 |  |  |   | 2,198 |  |  |   |  | 
|                              |  |                |        |           |  |           |       |           |  |           |       |  |  |   |       |  |  |   |   | 
|Total contractual obligations |  | $              | 14,011 |           |  | $         | 4,921 |           |  | $         | 6,477 |  |  | $ | 2,613 |  |  | $ |  | 
|                              |  |                |        |           |  |           |       |           |  |           |       |  |  |   |       |  |  |   |   | 






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

Foreign Exchange Rate Sensitivity

Corillian develops products in the United States
and markets its products and services in the United States, and
to a lesser extent in Europe, Asia and Australia. As a result,
its financial results could be affected by factors such as
changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Because nearly all of its revenue
is currently denominated in United States dollars, a
strengthening of the United States dollar could make
Corillians products less competitive in foreign markets.

Corillian does not use derivative financial
instruments for speculative purposes. Corillian does not engage
in exchange rate hedging or hold or issue foreign exchange
contracts for trading purposes. Corillian does have
foreign-based operations where transactions are denominated in
foreign currencies and are subject to market risk with respect
to fluctuations in the relative value of currencies. Currently,
Corillian has limited operations in Europe, Asia and Australia
and conducts transactions in various local currencies in these
locales. To date, the impact of fluctuations in the relative
fair value of other currencies has not been material.

Interest Rate Sensitivity

As of December 31, 2003, Corillian had
$26.8 million in cash, cash equivalents and short-term
investments consisting mainly of cash and taxable municipal
bonds with original maturities from 0 to 180 days, as
compared to $18.6 million as of December 31, 2002.
Corillians short-term investments may be subject to
interest rate risk and will decrease in value if market interest
rates increase. A decline in interest rates over a sustained
period would reduce Corillians interest income.

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|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

(a) The following documents are filed as
part of this report:



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | 1.     Annual
    Financial Statements                                                                                                 
|
| | The following consolidated financial statements
    of the Company are filed as part of this Annual Report on
    Form 10-K as follows:

INDEX TO FINANCIAL STATEMENTS

|                                                                                                         |  |      |     | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                         |  | Page
|                                                                                                         |  |     
|Independent Auditors Report                                                                             |  |      | F-1 | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2003                                         |  |      | F-2 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2001, 2002 and 2003           |  |      | F-3 | 
|Consolidated Statements of Shareholders
    Equity for the years ended December 31, 2001, 2002 and 2003 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2001, 2002 and 2003           |  |      | F-5 | 
|Notes to Consolidated Financial Statements                                                               |  |      | F-6 | 



| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.     Financial
    Statement Schedules                                                                                                                                                                    
|
| | Financial statement schedules have been omitted
    because the information required to be set forth therein is not
    applicable or is included in the notes to the Consolidated
    Financial Statements.
|
| | 3.     Selected
    Quarterly Results of Operations                                                                                                                                                         
|
| | The Selected Quarterly Results of Operations
    required by this Item 8 are included in Note 11 to the
    Consolidated Financial Statements.                                                              






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

Not applicable.






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

Based on an evaluation under the supervision and
with the participation of Corillians management, including
Corillians chief executive officer and chief financial
officer, as of December 31, 2003, Corillians chief
executive officer and chief financial officer have concluded
that Corillians disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) (Exchange Act) are
effective to ensure that information required to be disclosed by
Corillian 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.

During the three-month period ended
December 31, 2003, there were no changes in
Corillians internal control over financial reporting that
have materially affected, or are reasonably likely to materially
affect, Corillians internal control over financial
reporting. Corillians chief executive officer and chief
financial officer do not expect that Corillians disclosure
controls and procedures will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the system are met. Corillians chief
executive officer and chief financial officer do believe
Corillians internal control systems over financial
reporting provide reasonable assurance that their objectives are
met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake.

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Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of
any system of controls also is based partly on certain
assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.





PART III






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

Information called for by
Part III, Item 10, is included in the
Companys Proxy Statement relating to the Companys
annual meeting of shareholders to be held on May 10, 2004,
and is incorporated herein by reference. Such Proxy Statement
will be filed within 120 days of December 31, 2003,
the Companys fiscal year end.

Corillian has adopted a code of ethics for its
Chief Executive Officer and senior financial officers. Corillian
will provide a copy of this code of ethics to shareholders free
of charge upon request. To request a copy, send a written
request to Corillian Corporation, Attention: Investor Relations,
3400 NW John Olsen Place, Hillsboro, Oregon 97124, and
include the address to which the document should be mailed.






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

Information called for by
Part III, Item 11, is included in the
Companys Proxy Statement relating to the Companys
annual meeting of shareholders to be held on May 10, 2004,
and is incorporated herein by reference. Such Proxy Statement
will be filed within 120 days of December 31, 2003,
the Companys fiscal year end.






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

Information called for by
Part III, Item 12, is included in the
Companys Proxy Statement relating to the Companys
annual meeting of shareholders to be held on May 10, 2004,
and is incorporated herein by reference. Such Proxy Statement
will be filed within 120 days of December 31, 2003,
the Companys fiscal year end.



| |                                         
| | ----------------------------------------
| | Equity Compensation Plan
    Information

In May 2003, Corillians Board of Directors
adopted the 2003 Nonqualified Stock Incentive Compensation Plan
and authorized the issuance of 1,000,000 shares of common
stock under the plan. This plan was adopted as a retention plan
for Corillians employees. The Company may not grant stock
options under this plan to any existing directors or officers. A
significant number of stock options outstanding under
Corillians previously approved stock option plans had
exercise prices that were significantly higher than
Corillians stock price in May 2003, and Corillian did not
anticipate that those stock options would be exercised in the
near future or at all, absent extraordinary stock price
appreciation. The Board carefully evaluated the alternatives
available for providing incentives for and retaining employees
and decided to make additional option grants rather than
conducting a company-wide option cancellation program or
re-pricing. As a result of this decision, the Board decided that
it was necessary to adopt this plan. The Board acted to keep the
long-term interests of Corillians workforce tightly
aligned with the long-term interests of shareholders and to
counter any financial incentive competitors might offer to
Corillian employees. Corillian does not intend to adopt or
materially modify any stock compensation plans in the future
without shareholder approval.

34



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##### Table of Contents



The following table provides information as of
December 31, 2003 about Corillians common stock that
may be issued to employees, consultants or directors under
Corillians currently existing equity compensation plans:

|                                                           |  |                                                                    |           |                     |  |                     |      |  |  |  |         |       
|---------------------------------------------------------- |  | ------------------------------------------------------------------ | --------- | ------------------- |  | ------------------- | ---- |  |  |  | ------- | ------
|                                                           |  |                                                                   
|                                                           |  | Securities Authorized for Issuance Under Equity Compensation Plans
|                                                           |  |                                                                   
|                                                           |  |                                                                    |           | Number of shares   
|                                                           |  | Number of shares                                                   |           |                     |  | remaining available
|                                                           |  | to be issued upon                                                  |           | Weighted-average    |  | for issuance       
|                                                           |  | exercise of                                                        |           | exercise price of   |  | under equity       
|                                                           |  | outstanding options                                                |           | outstanding options |  | compensation plans 
|                                                           |  |                                                                    |           |                     |  |                    
|Equity compensation plans approved by shareholders         |  |                                                                    | 5,694,578 | (1)                 |  | $                   | 3.45 |  |  |  | 888,894 | (2)(3)
|Equity compensation plans not approved by
    shareholders |  |                                                                    | 906,500   |                     |  |                     | 3.96 |  |  |  | 93,500  |       
|                                                           |  |                                                                    |           |                     |  |                     |      |  |  |  |         |       
|                                                           |  |                                                                    | 6,601,078 |                     |  | $                   | 3.51 |  |  |  | 982,394 |       
|                                                           |  |                                                                    |           |                     |  |                     |      |  |  |  |         |       



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes 1,170 shares of Corillians
    common stock that are issuable upon the exercise of outstanding
    options that were assumed in connection with Corillians
    acquisition of Hatcher Associates Inc. (now Corillian
    Services, Inc.), with a weighted average exercise price of
    $7.05.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | Includes 654,415 shares remaining available
    for purchase under Corillians 2000 Stock Incentive
    Compensation Plan. The 2000 Stock Incentive Compensation Plan
    includes an evergreen formula pursuant to which the number of
    shares authorized for grant will be increased annually by the
    lesser of (1) 400,000 shares, and (2) an amount
    equal to one percent of the average outstanding shares of the
    common stock of the Company as of the end of the immediately
    preceding fiscal year on a fully-diluted basis; plus any shares
    subject to outstanding awards under Corillians 1997 Stock
    Option Plan as of the effective date of the 2000 Stock Incentive
    Compensation Plan that cease to be subject to such awards other
    than by reason of exercise or payment of such awards. Excludes
    369,123 additional shares of common stock that became available
    for purchase under the 2000 Stock Incentive Compensation Plan on
    January 1, 2004 pursuant to the evergreen formula. Also
    excludes shares that will become issuable under the 2000 Stock
    Incentive Compensation Plan if and when they cease to be subject
    to outstanding awards (other than by reason of exercise or
    settlement of the awards) under our 1997 Stock Option Plan.
|   
|(3) | Includes 234,479 shares remaining available
    for issuance under Corillians 2000 Employee Stock Purchase
    Plan. The 2000 Employee Stock Purchase Plan includes an
    evergreen formula pursuant to which the number of shares
    authorized for grant will be increased annually by the lesser of
    (1) 333,333 shares, (2) an amount equal to two
    percent of the average number of shares of common stock
    outstanding on a fully diluted basis as of the end of our
    immediately preceding fiscal year, and (3) a lesser amount
    determined by our Board of Directors. Excludes 333,333
    additional shares of common stock that became available for
    issuance under the 2000 Employee Stock Purchase Plan on
    January 1, 2004 pursuant to the evergreen formula.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        






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

Information called for by
Part III, Item 13, is included in the
Companys Proxy Statement relating to the Companys
annual meeting of shareholders to be held on May 10, 2004,
and is incorporated herein by reference. Such Proxy Statement
will be filed within 120 days of December 31, 2003,
the Companys fiscal year end.






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

Information called for by Part III,
Item 14, is included in the Companys Proxy Statement
relating to the Companys annual meeting of shareholders to
be held on May 10, 2004, and is incorporated herein by
reference. Such Proxy Statement will be filed within
120 days of December 31, 2003, the Companys
fiscal year end.

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##### Table of Contents






PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) Documents filed as part of this Report:



| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Financial Statements                                                                                                                                                                                    
|
| | All consolidated financial statements of the
    Company as set forth under Item 8 of this Report.                                                                                                          
|
| | (2) Financial Statement Schedules                                                                                                                                                                           
|
| | Financial statement schedules have been omitted
    because the information required to be set forth therein is not
    applicable or is included in the notes to the Consolidated
    Financial Statements.
|
| | (3) Exhibits                                                                                                                                                                                                
|
| | The exhibits listed on the accompanying index to
    exhibits immediately following the financial statement schedule
    are filed as part of, or incorporated by reference into, this
    Form 10-K.       

|        |        |             |  |                                                                                                                                                                                                                                                   
|------- | ------ | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 3.1    |             |  | Articles of Incorporation (incorporated by
    reference to Exhibit 3.2 of Corillians Form S-1,
    as amended, File No. 333-95513)                                                                                                              
|        | 3.2    |             |  | Bylaws (incorporated by reference to
    Exhibit 3.4 of Corillians Form S-1, as amended,
    File No. 333-95513)                                                                                                                                 
|        | 4.1    |             |  | Form of Common Stock certificate (incorporated by
    reference to Exhibit 4.1 of Corillians Form S-1,
    as amended, File No. 333-95513)                                                                                                       
|        | 10.1*  |             |  | Corillians Amended and Restated 2000 Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 99.2 of Corillians Form S-8 filed on
    November 1, 2001, File No. 333-72652)                                             
|        | 10.2*  |             |  | Corillians 2000 Employee Stock Purchase
    Plan (incorporated by reference to Exhibit 99.1 of
    Corillians Form S-8 filed on November 1, 2001,
    File No. 333-72652)                                                                       
|        | 10.3*  |             |  | Corillians Amended and Restated 1997 Stock
    Option Plan (incorporated by reference to Exhibit 10.3 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2000)                                                       
|        | 10.4   |             |  | Lease between Carramerica Realty Corporation and
    Corillian, dated May 22, 2000 (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended March 31, 2000)                                    
|        | 10.5   |             |  | Loan Agreement between Corillian Corporation and
    Silicon Valley Bank, dated November 9, 2000 (incorporated
    by reference to Exhibit 10.5 of Corillians report on
    Form 10-K for the year ended December 31, 2000)                      
|        | 10.6*  |             |  | Form of Stock Option Agreement with certain
    employees (incorporated by reference to Exhibit 10.9 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2000)                                                         
|        | 10.7   |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated November 30,
    2001 (incorporated by reference to Exhibit 10.9 of
    Corillians report on Form 10-K for the year ended
    December 31, 2001)    
|        | 10.8*  |             |  | Form of Indemnification Agreement between
    Corillian and its directors and executive officers (incorporated
    by reference to Exhibit 10.13 of Corillians report on
    Form 10-Q for the quarter ended March 31, 2001)                     
|        | 10.9*  |             |  | Form of Severance Agreement with Executive
    Officers and Certain Other Key Employees (incorporated by
    reference to Exhibit 10.1 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2002)                                
|        | 10.10  |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated November 13,
    2002 (incorporated by reference to Exhibit 10.5 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2002)
|        | 10.11* |             |  | Corillian Corporation 2003 Nonqualified Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended June 30, 2003)                                          

36



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##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                                         
|------- | ------ | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 10.12* |             |  | Form of Stock Option Agreement under Corillian
    Corporation 2003 Nonqualified Stock Incentive Compensation Plan
    (incorporated by reference to Exhibit 10.2 of
    Corillians report on Form 10-Q for the quarter ended
    June 30, 2003)                       
|        | 10.13* |             |  | Form of Stock Option Agreement with certain
    employees under Corillian Corporation 2003 Nonqualified Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 10.3 of Corillians report on Form 10-Q
    for the quarter ended June 30, 2003)
|        | 10.14  |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated June 16, 2003
    (incorporated by reference to Exhibit 10.4 of
    Corillians report on Form 10-Q for the quarter ended
    June 30, 2003)                               
|        | 10.15* |             |  | Form of Amendment to Stock Option Letter
    Agreements for Certain Employees under the 2000 Stock Incentive
    Compensation Plan (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended September 30, 2003)      
|        | 10.16* |             |  | Form of Severance Agreement for Certain Employees
    (incorporated by reference to Exhibit 10.2 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2003)                                                                                   
|        | 10.17* |             |  | Separation Agreement and General Release between
    Corillian Corporation and Steve Sipowicz, dated
    September 30, 2003 (incorporated by reference to
    Exhibit 10.3 of Corillians report on Form 10-Q
    for the quarter ended September 30, 2003)             
|        | 21.1   |             |  | Subsidiaries of the Company                                                                                                                                                                                                                                             
|        | 23.1   |             |  | Consent of KPMG LLP, Independent Auditors                                                                                                                                                                                                                               
|        | 24.1   |             |  | Power of Attorney (see page 38).                                                                                                                                                                                                                                        
|        | 31.1   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                          
|        | 31.2   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                          
|        | 32.1   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                          
|        | 32.2   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                          



---



|  |                                         
|- | ----------------------------------------
|* | Management contract or compensatory plan

(b) Reports on Form 8-K:

On April 23, 2003, Corillian furnished a
report on Form 8-K, which disclosed Corillians press
release providing its financial results as of and for the
three-month period ended March 31, 2003.

On July 23, 2003, Corillian furnished a
report on Form 8-K, which disclosed Corillians press
release providing its financial results as of and for the
three-month period ended June 30, 2003.

On October 22, 2003, Corillian furnished a
report on Form 8-K, which disclosed Corillians press
release providing its financial results as of and for the
three-month period ended September 30, 2003.

On February 3, 2004, Corillian furnished a
report on Form 8-K, which disclosed Corillians press
release providing its financial results as of and for the three
and twelve-month periods ended December 31, 2003.

37



---



##### Table of Contents



SIGNATURES

Pursuant to the requirements of Sections 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on
March 24, 2004.



| |                      
| | ---------------------
| | CORILLIAN CORPORATION



| |    |                  
| | -- | -----------------
| | By | /s/ PAUL K. WILDE

| |                              
| | -----------------------------
| |                              
| | Chief Financial Officer      
| | (Principal Financial Officer)

POWER OF ATTORNEY

Each person whose individual signature appears
below hereby authorizes and appoints Paul K. Wilde and Alex P.
Hart, and each of them, with full power of substitution and
resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his
or her name, place and stead and to execute in the name and on
behalf of each person, individually and in each capacity stated
below, and to file, any and all amendments to this Report, and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing, ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his or
her substitute or substitutes may lawfully do or cause to be
done by virtue thereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below on
March 24, 2004 by the following persons on behalf of the
Registrant and in the capacities indicated.

|                                         |  |                                                                  
|---------------------------------------- |  | -----------------------------------------------------------------
|Signature                                |  | Capacities                                                       
|                                         |  |                                                                  
|                                        
|/s/ ALEX P. HARTAlex P. Hart             |  | Chief Executive Officer and DirectorPrincipal Executive Officer  
|                                        
|/s/ PAUL K. WILDEPaul K. Wilde           |  | Chief Financial OfficerPrincipal Financial and Accounting Officer
|                                        
|/s/ ROBERT G. BARRETTRobert G. Barrett   |  | Director                                                         
|                                        
|/s/ ERIC DUNNEric Dunn                   |  | Director                                                         
|                                        
|/s/ RAVI MOHANRavi Mohan                 |  | Director                                                         
|                                        
|/s/ JAY N. WHIPPLE IIIJay N. Whipple III |  | Director                                                         

38



---



##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                                         
|------- | ------ | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 3.1    |             |  | Articles of Incorporation (incorporated by
    reference to Exhibit 3.2 of Corillians Form S-1,
    as amended, File No. 333-95513)                                                                                                                                    
|        | 3.2    |             |  | Bylaws (incorporated by reference to
    Exhibit 3.4 of Corillians Form S-1, as amended,
    File No. 333-95513)                                                                                                                                                       
|        | 4.1    |             |  | Form of Common Stock certificate (incorporated by
    reference to Exhibit 4.1 of Corillians Form S-1,
    as amended, File No. 333-95513)                                                                                                                             
|        | 10.1*  |             |  | Corillians Amended and Restated 2000 Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 99.2 of Corillians Form S-8 filed on
    November 1, 2001, File No. 333-72652)                                                                   
|        | 10.2*  |             |  | Corillians 2000 Employee Stock Purchase
    Plan (incorporated by reference to Exhibit 99.1 of
    Corillians Form S-8 filed on November 1, 2001,
    File No. 333-72652)                                                                                             
|        | 10.3*  |             |  | Corillians Amended and Restated 1997 Stock
    Option Plan (incorporated by reference to Exhibit 10.3 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2000)                                                                             
|        | 10.4   |             |  | Lease between Carramerica Realty Corporation and
    Corillian, dated May 22, 2000 (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended March 31, 2000)                                                          
|        | 10.5   |             |  | Loan Agreement between Corillian Corporation and
    Silicon Valley Bank, dated November 9, 2000 (incorporated
    by reference to Exhibit 10.5 of Corillians report on
    Form 10-K for the year ended December 31, 2000)                                            
|        | 10.6*  |             |  | Form of Stock Option Agreement with certain
    employees (incorporated by reference to Exhibit 10.9 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2000)                                                                               
|        | 10.7   |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated November 30,
    2001 (incorporated by reference to Exhibit 10.9 of
    Corillians report on Form 10-K for the year ended
    December 31, 2001)                          
|        | 10.8*  |             |  | Form of Indemnification Agreement between
    Corillian and its directors and executive officers (incorporated
    by reference to Exhibit 10.13 of Corillians report on
    Form 10-Q for the quarter ended March 31, 2001)                                           
|        | 10.9*  |             |  | Form of Severance Agreement with Executive
    Officers and Certain Other Key Employees (incorporated by
    reference to Exhibit 10.1 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2002)                                                      
|        | 10.10  |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated November 13,
    2002 (incorporated by reference to Exhibit 10.5 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2002)                      
|        | 10.11* |             |  | Corillian Corporation 2003 Nonqualified Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended June 30, 2003)                                                                
|        | 10.12* |             |  | Form of Stock Option Agreement under Corillian
    Corporation 2003 Nonqualified Stock Incentive Compensation Plan
    (incorporated by reference to Exhibit 10.2 of
    Corillians report on Form 10-Q for the quarter ended
    June 30, 2003)                       
|        | 10.13* |             |  | Form of Stock Option Agreement with certain
    employees under Corillian Corporation 2003 Nonqualified Stock
    Incentive Compensation Plan (incorporated by reference to
    Exhibit 10.3 of Corillians report on Form 10-Q
    for the quarter ended June 30, 2003)
|        | 10.14  |             |  | Loan Modification Agreement between Corillian
    Corporation and Silicon Valley Bank, dated June 16, 2003
    (incorporated by reference to Exhibit 10.4 of
    Corillians report on Form 10-Q for the quarter ended
    June 30, 2003)                               
|        | 10.15* |             |  | Form of Amendment to Stock Option Letter
    Agreements for Certain Employees under the 2000 Stock Incentive
    Compensation Plan (incorporated by reference to
    Exhibit 10.1 of Corillians report on Form 10-Q
    for the quarter ended September 30, 2003)      
|        | 10.16* |             |  | Form of Severance Agreement for Certain Employees
    (incorporated by reference to Exhibit 10.2 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2003)                                                                                   
|        | 10.17* |             |  | Separation Agreement and General Release between
    Corillian Corporation and Steve Sipowicz, dated
    September 30, 2003 (incorporated by reference to
    Exhibit 10.3 of Corillians report on Form 10-Q
    for the quarter ended September 30, 2003)             
|        | 21.1   |             |  | Subsidiaries of the Company                                                                                                                                                                                                                                             



---



##### Table of Contents



|        |      |             |  |                                                                                                                               
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 23.1 |             |  | Consent of KPMG LLP, Independent Auditors                                                                                     
|        | 24.1 |             |  | Power of Attorney (see page 38).                                                                                              
|        | 31.1 |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002
|        | 31.2 |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002
|        | 32.1 |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002
|        | 32.2 |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002



---

* Management contract or compensatory plan




---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

The Board of Directors

Corillian Corporation:


We have audited the accompanying consolidated
balance sheets of Corillian Corporation and subsidiaries as of
December 31, 2002 and 2003, and the related consolidated
statements of operations, shareholders equity, and cash
flows for each of the years in the three-year period ended
December 31, 2003. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Corillian Corporation and
subsidiaries as of December 31, 2002 and 2003, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2003 in
conformity with accounting principles generally accepted in the
United States of America.

/s/ KPMG LLP

Portland, Oregon

January 30, 2004


F-1



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##### Table of Contents



CORILLIAN CORPORATION



CONSOLIDATED BALANCE SHEETS


(In thousands)


|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |          |        | 
|----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | -------- | ------ |  | ----- | -------- | ------ | 
|                                                |                                                                                                                                                            |                                           
|                                                |                                                                                                                                                            | December 31,                              
|                                                |                                                                                                                                                            |                                           
|                                                |                                                                                                                                                            | 2002                                       |       | 2003    
|                                                |                                                                                                                                                            |                                            |       |         
|Assets                                         
|Current assets:                                 |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                | Cash and cash equivalents                                                                                                                                  |                                            | $     | 16,721   |        |  | $     | 26,243   |       
|                                                | Restricted cash                                                                                                                                            |                                            |       | 1,003    |        |  |       |         |       
|                                                | Investments                                                                                                                                                |                                            |       | 910      |        |  |       | 601      |       
|                                                | Accounts receivable, net                                                                                                                                   |                                            |       | 3,987    |        |  |       | 6,103    |       
|                                                | Other receivables                                                                                                                                          |                                            |       | 1,805    |        |  |       | 226      |       
|                                                | Revenue in excess of billings                                                                                                                              |                                            |       | 1,542    |        |  |       | 1,258    |       
|                                                | Prepaid expenses and deposits                                                                                                                              |                                            |       | 1,471    |        |  |       | 1,319    |       
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total current assets                       |       |          | 27,439 |  |       |          | 35,750 | 
|Property and equipment, net                     |                                                                                                                                                            |                                            | 8,376 |          |        |  | 5,765 |         
|Investment in joint venture                     |                                                                                                                                                            |                                            | 1,074 |          |        |  | 941   |         
|Other assets                                    |                                                                                                                                                            |                                            | 590   |          |        |  | 362   |         
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total assets                               |       | $        | 37,479 |  |       | $        | 42,818 | 
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|Liabilities and Shareholders
    Equity       
|Current liabilities:                            |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                | Accounts payable                                                                                                                                           |                                            | $     | 1,801    |        |  | $     | 1,224    |       
|                                                | Accrued liabilities                                                                                                                                        |                                            |       | 2,067    |        |  |       | 2,052    |       
|                                                | Deferred revenue                                                                                                                                           |                                            |       | 13,981   |        |  |       | 15,560   |       
|                                                | Current portion of capital lease obligations                                                                                                               |                                            |       | 380      |        |  |       | 19       |       
|                                                | Current portion of long-term debt                                                                                                                          |                                            |       | 1,865    |        |  |       | 1,510    |       
|                                                | Other current liabilities                                                                                                                                  |                                            |       | 1,421    |        |  |       | 968      |       
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total current liabilities                  |       |          | 21,515 |  |       |          | 21,333 | 
|Capital lease obligations, less current portion |                                                                                                                                                            |                                            | 32    |          |        |  | 12    |         
|Long-term debt, less current portion            |                                                                                                                                                            |                                            | 1,568 |          |        |  | 1,063 |         
|Other long-term liabilities                     |                                                                                                                                                            |                                            | 1,243 |          |        |  | 856   |         
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total liabilities                          |       |          | 24,358 |  |       |          | 23,264 | 
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|Commitments and contingencies                   |                                                                                                                                                            |                                            |       |          |        |  |       |         
|Shareholders equity:                           |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                | Common stock, no par value; 150,000 shares
    authorized; 36,147 and 36,891 shares issued and outstanding
    at December 31, 2002 and 2003, respectively |                                            |       | 126,141  |        |  |       | 127,414  |       
|                                                | Deferred stock-based compensation                                                                                                                          |                                            |       | (35      | )      |  |       |         |       
|                                                | Accumulated other comprehensive income                                                                                                                     |                                            |       | 49       |        |  |       | 48       |       
|                                                | Accumulated deficit                                                                                                                                        |                                            |       | (113,034 | )      |  |       | (107,908 | )     
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total shareholders equity                 |       |          | 13,121 |  |       |          | 19,554 | 
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         
|                                                |                                                                                                                                                            | Total liabilities and shareholders equity |       | $        | 37,479 |  |       | $        | 42,818 | 
|                                                |                                                                                                                                                            |                                            |       |          |        |  |       |         

See accompanying notes to consolidated financial
statements.

F-2



---



##### Table of Contents



CORILLIAN CORPORATION



CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per share
data)


|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |        |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------ | ------ | ------- | ---- | ------ | ------ | ------- | - | ------ | ------ | ------ | -
|                                                                                                                                                 |                                                                                                                                                            |                                      
|                                                                                                                                                 |                                                                                                                                                            | Year Ended December 31,              
|                                                                                                                                                 |                                                                                                                                                            |                                      
|                                                                                                                                                 |                                                                                                                                                            | 2001                                  |        | 2002   |         | 2003
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |     
|Revenues                                                                                                                                         |                                                                                                                                                            | $                                     | 53,848 |        |         | $    | 39,141 |        |         | $ | 46,132 |       
|Cost of revenues, excluding $342, $148 and $7 in
    2001, 2002 and 2003, respectively, of amortization of deferred
    stock-based compensation |                                                                                                                                                            |                                       | 30,357 |        |         |      | 20,422 |        |         |   | 20,501 |       
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Gross profit                          |        |        | 23,491  |      |        |        | 18,719  |   |        |        | 25,631 |  
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|Operating expenses:                                                                                                                              |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 | Sales and marketing, excluding $1,319, $401 and
    $14 in 2001, 2002 and 2003, respectively, of amortization of
    deferred stock-based compensation     |                                       |        | 20,096 |         |      |        | 11,720 |         |   |        | 6,422  |       
|                                                                                                                                                 | Research and development, excluding $210, $83 and
    $5 in 2001, 2002 and 2003, respectively, of amortization of
    deferred stock-based compensation    |                                       |        | 11,721 |         |      |        | 7,733  |         |   |        | 5,968  |       
|                                                                                                                                                 | General and administrative, excluding $635, $253
    and $9 in 2001, 2002 and 2003, respectively, of amortization of
    deferred stock-based compensation |                                       |        | 13,950 |         |      |        | 11,029 |         |   |        | 6,810  |       
|                                                                                                                                                 | Amortization of goodwill and other intangible
    assets                                                                                                   |                                       |        | 6,119  |         |      |        |       |         |   |        |       |       
|                                                                                                                                                 | Amortization of deferred stock-based compensation                                                                                                          |                                       |        | 2,506  |         |      |        | 885    |         |   |        | 35     |       
|                                                                                                                                                 | Litigation settlement charges                                                                                                                              |                                       |        |       |         |      |        | 2,580  |         |   |        |       |       
|                                                                                                                                                 | Restructuring and impairment charges                                                                                                                       |                                       |        | 18,097 |         |      |        | 682    |         |   |        |       |       
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Total operating expenses              |        |        | 72,489  |      |        |        | 34,629  |   |        |        | 19,235 |  
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Income (loss) from operations         |        |        | (48,998 | )    |        |        | (15,910 | ) |        |        | 6,396  |  
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|Other income (expense), net:                                                                                                                     |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 | Interest income                                                                                                                                            |                                       |        | 1,229  |         |      |        | 184    |         |   |        | 224    |       
|                                                                                                                                                 | Interest expense                                                                                                                                           |                                       |        | (818   | )       |      |        | (542   | )       |   |        | (244   | )     
|                                                                                                                                                 | Other expense, net                                                                                                                                         |                                       |        | (714   | )       |      |        | (989   | )       |   |        | (1,126 | )     
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Total other income (expense), net     |        |        | (303    | )    |        |        | (1,347  | ) |        |        | (1,146 | )
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Net income (loss) before income taxes |        |        | (49,301 | )    |        |        | (17,257 | ) |        |        | 5,250  |  
|Income taxes                                                                                                                                     |                                                                                                                                                            |                                       |       |        |         |      |       |        |         |   | 124    |       
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                 |                                                                                                                                                            | Net income (loss)                     |        | $      | (49,301 | )    |        | $      | (17,257 | ) |        | $      | 5,126  |  
|                                                                                                                                                 |                                                                                                                                                            |                                       |        |        |         |      |        |        |         |   |        |       
|Basic net income (loss) per share                                                                                                                |                                                                                                                                                            | $                                     | (1.42  | )      |         | $    | (0.49  | )      |         | $ | 0.14   |       
|Diluted net income (loss) per share                                                                                                              |                                                                                                                                                            | $                                     | (1.42  | )      |         | $    | (0.49  | )      |         | $ | 0.14   |       
|Shares used in computing basic net income (loss)
    per share                                                                                   |                                                                                                                                                            |                                       | 34,645 |        |         |      | 35,477 |        |         |   | 36,431 |       
|Shares used in computing diluted net income
    (loss) per share                                                                                 |                                                                                                                                                            |                                       | 34,645 |        |         |      | 35,477 |        |         |   | 37,813 |       

See accompanying notes to consolidated financial
statements.

F-3



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##### Table of Contents



CORILLIAN CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

(In thousands)


|                                                                 |  |              |        |             |  |               |         |             |  |               |        |        |  |   |     |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------- |  | ------------ | ------ | ----------- |  | ------------- | ------- | ----------- |  | ------------- | ------ | ------ |  | - | --- | - |  | - | -------- | - |  | - | ------- | -
|                                                                 |  |              |        |             |  |               |         | Accumulated |  |               |        |       
|                                                                 |  |              |        |             |  | Other         |         |             |  |              
|                                                                 |  | Common Stock |        | Deferred    |  | Comprehensive |         |             |  | Total        
|                                                                 |  |              |        | Stock-based |  | Income        |         | Accumulated |  | Shareholders
|                                                                 |  | Shares       |        | Amount      |  | Compensation  |         | (Loss)      |  | Deficit       |        | Equity
|                                                                 |  |              |        |             |  |               |         |             |  |               |        |       
|Balance, December 31, 2000                                       |  |              | 34,137 |             |  | $             | 123,203 |             |  | $             | (4,164 | )      |  | $ | 30  |   |  | $ | (46,476  | ) |  | $ | 72,593  |  
|Issuance of common shares in business combinations               |  |              | 25     |             |  |               | 306     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 306     |  
|Exercise of common stock options                                 |  |              | 609    |             |  |               | 683     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 683     |  
|Issuance of common shares under employee stock
    purchase plan |  |              | 267    |             |  |               | 1,366   |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 1,366   |  
|Deferred stock-based compensation                                |  |              |       |             |  |               | (489    | )           |  |               | 489    |        |  |   |    |   |  |   |         |   |  |   |        |  
|Amortization of deferred stock-based compensation                |  |              |       |             |  |               |        |             |  |               | 2,506  |        |  |   |    |   |  |   |         |   |  |   | 2,506   |  
|Foreign currency translation                                     |  |              |       |             |  |               |        |             |  |               |       |        |  |   | (49 | ) |  |   |         |   |  |   | (49     | )
|Net loss                                                         |  |              |       |             |  |               |        |             |  |               |       |        |  |   |    |   |  |   | (49,301  | ) |  |   | (49,301 | )
|                                                                 |  |              |        |             |  |               |         |             |  |               |        |        |  |   |     |   |  |   |          |   |  |   |         |  
|Balance, December 31, 2001                                       |  |              | 35,038 |             |  | $             | 125,069 |             |  | $             | (1,169 | )      |  | $ | (19 | ) |  | $ | (95,777  | ) |  | $ | 28,104  |  
|Issuance of common shares in settlement of
    litigation        |  |              | 500    |             |  |               | 745     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 745     |  
|Issuance of common shares in exchange for services               |  |              | 30     |             |  |               | 45      |             |  |               | (45    | )      |  |   |    |   |  |   |         |   |  |   |        |  
|Exercise of common stock options                                 |  |              | 360    |             |  |               | 226     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 226     |  
|Issuance of common shares under employee stock
    purchase plan |  |              | 219    |             |  |               | 350     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 350     |  
|Deferred stock-based compensation                                |  |              |       |             |  |               | (294    | )           |  |               | 294    |        |  |   |    |   |  |   |         |   |  |   |        |  
|Amortization of deferred stock-based compensation                |  |              |       |             |  |               |        |             |  |               | 885    |        |  |   |    |   |  |   |         |   |  |   | 885     |  
|Foreign currency translation                                     |  |              |       |             |  |               |        |             |  |               |       |        |  |   | 68  |   |  |   |         |   |  |   | 68      |  
|Net loss                                                         |  |              |       |             |  |               |        |             |  |               |       |        |  |   |    |   |  |   | (17,257  | ) |  |   | (17,257 | )
|                                                                 |  |              |        |             |  |               |         |             |  |               |        |        |  |   |     |   |  |   |          |   |  |   |         |  
|Balance, December 31, 2002                                       |  |              | 36,147 |             |  | $             | 126,141 |             |  | $             | (35    | )      |  | $ | 49  |   |  | $ | (113,034 | ) |  | $ | 13,121  |  
|Exercise of common stock options                                 |  |              | 490    |             |  |               | 1,115   |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 1,115   |  
|Issuance of common shares under employee stock
    purchase plan |  |              | 254    |             |  |               | 158     |             |  |               |       |        |  |   |    |   |  |   |         |   |  |   | 158     |  
|Amortization of deferred stock-based compensation                |  |              |       |             |  |               |        |             |  |               | 35     |        |  |   |    |   |  |   |         |   |  |   | 35      |  
|Foreign currency translation                                     |  |              |       |             |  |               |        |             |  |               |       |        |  |   | (1  | ) |  |   |         |   |  |   | (1      | )
|Net income                                                       |  |              |       |             |  |               |        |             |  |               |       |        |  |   |    |   |  |   | 5,126    |   |  |   | 5,126   |  
|                                                                 |  |              |        |             |  |               |         |             |  |               |        |        |  |   |     |   |  |   |          |   |  |   |         |  
|Balance, December 31, 2003                                       |  |              | 36,891 |             |  | $             | 127,414 |             |  | $             |       |        |  | $ | 48  |   |  | $ | (107,908 | ) |  | $ | 19,554  |  
|                                                                 |  |              |        |             |  |               |         |             |  |               |        |        |  |   |     |   |  |   |          |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

F-4



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##### Table of Contents



CORILLIAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |        |     |       |        |  
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ----------------------- | --------------------------------------------------------------------- | --------------------------------------------------------------------- | --- | ------ | ------- | ------- | --- | ----- | ------ | ------ | --- | ----- | ------ | -
|                                                                             |                                                                                                        |                        
|                                                                             |                                                                                                        | Year Ended December 31,
|                                                                             |                                                                                                        |                        
|                                                                             |                                                                                                        | 2001                    |                                                                       | 2002                                                                  |     | 2003  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |       
|Cash flows from operating activities:                                        |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             | Net income (loss)                                                                                      |                         | $                                                                     | (49,301                                                               | )   |        | $       | (17,257 | )   |       | $      | 5,126  |    
|                                                                             | Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities: |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |        |    
|                                                                             |                                                                                                        |                         | Depreciation and amortization                                         |                                                                       |     | 4,666  |         |         |     | 5,431 |        |        |     | 3,715 |       
|                                                                             |                                                                                                        |                         | Amortization of deferred stock-based compensation                     |                                                                       |     | 2,506  |         |         |     | 885   |        |        |     | 35    |       
|                                                                             |                                                                                                        |                         | Amortization of goodwill and other intangible
    assets              |                                                                       |     | 6,119  |         |         |     |      |        |        |     |      |       
|                                                                             |                                                                                                        |                         | Impairment of long-lived assets                                       |                                                                       |     | 16,764 |         |         |     |      |        |        |     |      |       
|                                                                             |                                                                                                        |                         | Issuance of common stock in settlement of
    litigation              |                                                                       |     |       |         |         |     | 745   |        |        |     |      |       
|                                                                             |                                                                                                        |                         | Equity in losses of joint venture                                     |                                                                       |     | 592    |         |         |     | 916   |        |        |     | 1,133 |       
|                                                                             |                                                                                                        |                         | Provision for (recovery of) bad debts                                 |                                                                       |     |       |         |         |     | 1,317 |        |        |     | (173  | )     
|                                                                             |                                                                                                        |                         | Loss on sale of assets                                                |                                                                       |     | 90     |         |         |     | 114   |        |        |     | 8     |       
|                                                                             |                                                                                                        |                         | Changes in operating assets and liabilities, net
    of acquisitions: |                                                                       |     |        |         |         |     |       |        |        |     |       |       
|                                                                             |                                                                                                        |                         |                                                                       | Restricted cash                                                       |     |        |        |         |     |       | (1,003 | )      |     |       | 1,003  |  
|                                                                             |                                                                                                        |                         |                                                                       | Accounts receivable                                                   |     |        | (806    | )       |     |       | 4,122  |        |     |       | (1,931 | )
|                                                                             |                                                                                                        |                         |                                                                       | Other receivables                                                     |     |        | 386     |         |     |       | (1,488 | )      |     |       | 1,562  |  
|                                                                             |                                                                                                        |                         |                                                                       | Revenue in excess of billings                                         |     |        | (1,949  | )       |     |       | 4,868  |        |     |       | 284    |  
|                                                                             |                                                                                                        |                         |                                                                       | Prepaid expenses, deposits and other assets                           |     |        | (161    | )       |     |       | (644   | )      |     |       | 380    |  
|                                                                             |                                                                                                        |                         |                                                                       | Accounts payable and accrued liabilities                              |     |        | (8,833  | )       |     |       | (1,272 | )      |     |       | (596   | )
|                                                                             |                                                                                                        |                         |                                                                       | Deferred revenue                                                      |     |        | 2,885   |         |     |       | 5,100  |        |     |       | 1,579  |  
|                                                                             |                                                                                                        |                         |                                                                       | Other liabilities                                                     |     |        | 746     |         |     |       | 868    |        |     |       | (840   | )
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             |                                                                                                        |                         |                                                                       | Net cash provided by (used in) operating
    activities               |     |        | (26,296 | )       |     |       | 2,702  |        |     |       | 11,285 |  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|Cash flows from investing activities:                                        |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             | Purchase of property and equipment, net                                                                |                         |                                                                       | (6,259                                                                | )   |        |         | (780    | )   |       |        | (1,112 | )  
|                                                                             | Purchase of investments                                                                                |                         |                                                                       | (1,905                                                                | )   |        |         |        |     |       |        |       |    
|                                                                             | Proceeds from the maturities of investments                                                            |                         |                                                                       |                                                                      |     |        |         | 995     |     |       |        | 309    |    
|                                                                             | Investment in joint venture                                                                            |                         |                                                                       |                                                                      |     |        |         |        |     |       |        | (1,000 | )  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             |                                                                                                        |                         |                                                                       | Net cash provided by (used in) investing
    activities               |     |        | (8,164  | )       |     |       | 215    |        |     |       | (1,803 | )
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|Cash flows from financing activities:                                        |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             | Proceeds from the issuance of common stock                                                             |                         |                                                                       | 2,049                                                                 |     |        |         | 576     |     |       |        | 1,273  |    
|                                                                             | Proceeds from line of credit borrowings                                                                |                         |                                                                       | 1,188                                                                 |     |        |         |        |     |       |        | 1,000  |    
|                                                                             | Payments on line of credit borrowings                                                                  |                         |                                                                       | (1,723                                                                | )   |        |         | (2,163  | )   |       |        | (1,860 | )  
|                                                                             | Principal payments on capital lease obligations                                                        |                         |                                                                       | (384                                                                  | )   |        |         | (467    | )   |       |        | (381   | )  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             |                                                                                                        |                         |                                                                       | Net cash provided by (used in) financing
    activities               |     |        | 1,130   |         |     |       | (2,054 | )      |     |       | 32     |  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             |                                                                                                        |                         |                                                                       | Effect of exchange rate fluctuations on cash and
    cash equivalents |     |        | (22     | )       |     |       | 60     |        |     |       | 8      |  
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             |                                                                                                        |                         |                                                                       | Increase (decrease) in cash and cash equivalents                      |     |        | (33,352 | )       |     |       | 923    |        |     |       | 9,522  |  
|Cash and cash equivalents at beginning of year                               |                                                                                                        |                         | 49,150                                                                |                                                                       |     |        | 15,798  |         |     |       | 16,721 |       
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|Cash and cash equivalents at end of year                                     |                                                                                                        | $                       | 15,798                                                                |                                                                       |     | $      | 16,721  |         |     | $     | 26,243 |       
|                                                                             |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|Supplemental disclosures of cash flow information:                           |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             | Cash paid during the period for:                                                                       |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |        |    
|                                                                             |                                                                                                        | Interest                |                                                                       | $                                                                     | 818 |        |         | $       | 542 |       |        | $      | 244 |      
|                                                                             |                                                                                                        | Taxes                   |                                                                       |                                                                       | 228 |        |         |         | 187 |       |        |        | 131 |      
|Supplemental disclosures of non-cash investing
    and financing activities: |                                                                                                        |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |       
|                                                                             | Property and equipment acquired through capital
    leases                                             |                         |                                                                       |                                                                      |     |        |         | 146     |     |       |        |       |    
|                                                                             | Recorded through business combinations:                                                                |                         |                                                                       |                                                                       |     |        |         |         |     |       |        |        |    
|                                                                             |                                                                                                        | Common shares           |                                                                       |                                                                       | 306 |        |         |         |    |       |        |        |    |      

See accompanying notes to consolidated financial
statements.

F-5



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##### Table of Contents



CORILLIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|    |                       
|--- | ----------------------
|(1) | Description of Company

Corillian Corporation was incorporated in Oregon
in 1997. Corillian is a provider of solutions that enable banks,
brokers, financial portals and other financial service providers
to rapidly deploy Internet-based financial services.
Corillians solutions allow consumers to conduct financial
transactions, view personal and market financial information,
pay bills and access other financial services on the Internet.
Corillian Voyager is a software platform combined with a set of
applications for Internet banking, electronic bill presentment
and payment, targeted marketing, data aggregation and online
customer relationship management. Corillian also offers a
variety of services to support its customers throughout the
process of implementing and maintaining its solutions.



|    |                                               
|--- | ----------------------------------------------
|(2) | Summary of Significant Accounting
    Policies



|    |                 
|--- | ----------------
|(a) | Use of Estimates

The preparation of consolidated financial
statements in accordance with accounting principles generally
accepted in the United States of America requires Corillian to
make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Corillian bases
its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Estimates
related to software revenue recognition and accrual for
contracts in a loss position require higher degrees of judgment
than others in their application. Actual results may differ from
these estimates under different assumptions or conditions.



|    |                            
|--- | ---------------------------
|(b) | Principles of Consolidation

The consolidated financial statements include the
financial statements of Corillian Corporation and its
wholly-owned subsidiaries, Corillian Services, Inc.,
Corillian International, Ltd. and Corillian South Asia
Sdn Bhd. All intercompany balances and transactions have
been eliminated in consolidation. As of December 31, 2003,
Corillian dissolved Corillian Services, Inc. and
incorporated its remaining business and personnel into Corillian
Corporation.



|    |                    
|--- | -------------------
|(c) | Revenue Recognition

Corillian recognizes revenues from software
licensing agreements in accordance with the provisions of
Statement of Position (SOP) No. 97-2, Software
Revenue Recognition, as amended by SOP No. 98-9,
Modification of SOP No. 97-2, Software Revenue
Recognition, with Respect to Certain Transactions.

Revenues on software arrangements involving
multiple elements, which generally include software licenses,
implementation and custom software engineering services,
post-contractual customer support, training services and hosting
services, are allocated to the elements using the residual
method specified in SOP No. 98-9. Corillian has determined
that post-contractual customer support and hosting services can
be separated from software licenses, implementation, training
and custom software engineering services because
(a) post-contractual customer support and hosting services
are not essential to the functionality of any other element in
the arrangement, and (b) sufficient vendor-specific
objective evidence exists to permit the allocation of revenue to
these service elements. The hosting element can be accounted for
separately from the license element, as the customer can take
possession of the software without significant penalty, in
accordance with Emerging Issues Task Force (EITF) 00-3,
Application of AICPA Statement of Position 97-2 to
Arrangements that Include the Right to Use Software Stored on
Another Entitys Hardware. Vendor-specific objective
evidence has been established on post-contractual customer
support and hosting services using the price the customer is
required to pay when they are sold separately (the renewal
rate). Under the residual

F-6



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

method, the full fair value of post-contractual
customer support and hosting services are deferred and
subsequently recognized as the services are performed. The
difference between the total software arrangement fee and the
amount deferred for post-contractual customer support and
hosting services is allocated to software license,
implementation, training and custom software engineering
services and recognized using contract accounting.

Corillians software licenses are, in
general, functionally dependent on implementation, training and
certain custom software engineering services; therefore,
software licenses and implementation and training services,
together with custom software engineering services that are
essential to the functionality of the software, are combined and
recognized using the percentage-of-completion method of contract
accounting in accordance with SOP No. 81-1, Accounting
for Performance of Construction-Type and Certain Production-Type
Contracts. The percentage-of-completion is measured by the
percentage of contract hours incurred to date compared to the
estimated total contract hours for each contract. Corillian has
the ability to make reasonable, dependable estimates relating to
the extent of progress towards completion, contract revenues and
contract costs. Any estimation process, including that used in
preparing contract accounting models, involves inherent risk.
Profit estimates are subject to revision as the contract
progresses towards completion. Revisions in profit estimates are
charged to income in the period that the facts giving rise to
the revision become known. Corillian reduces the inherent risk
relating to revenue and cost estimates in
percentage-of-completion models through various approval and
monitoring processes and policies. Risks relating to service
delivery, usage, productivity and other factors are considered
in the estimation process. Cumulative revenues recognized may be
less or greater than cumulative billings at any point in time
during a contracts term. The resulting difference is
recognized as deferred revenue or revenue in excess of billings,
respectively. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are
determined.

Custom engineering services are arrangements in
which Corillian customizes existing software based on a
customers specifications. Revenues from custom engineering
services in which Corillian has an obligation to successfully
complete specified activities are deferred until acceptance by
the customer, whereas agreements in which Corillian is providing
services on a best-efforts basis are recognized as services are
performed.

Arrangements where customers fund expedited
development of software products are accounted for as funded
research and development. In arrangements where Corillian
retains and reserves title and all ownership rights to the
software products, Corillian recognizes these funds as a
reduction of research and development expense. During the years
ended December 31, 2001, 2002 and 2003, Corillian
recognized approximately $1.7 million, $290,000 and $0,
respectively, of funded research and development as a reduction
of research and development expense.

Revenues for post-contractual customer support
are recognized ratably over the term of the support services
period, generally a period of one year. Services provided to
customers under customer support and maintenance agreements
generally include technical support and unspecified product
upgrades deliverable on a when and if available basis. Revenues
from hosting services for transactions processed by Corillian
are recognized ratably as services are performed.

Pursuant to SOP No. 81-1, on projects where
ultimate recoverability is questionable due to inherent hazards,
Corillian limits revenue recognition in the period to the amount
of project costs incurred in the same period, and postpones
recognition of profits until results can be estimated more
precisely. Under this zero profit methodology, equal
amounts of revenues and costs, measured on the basis of
performance during the period, are presented in Corillians
consolidated statements of operations.

Due to certain triggering events included in a
customers contract, beginning with the three-month period
ended September 30, 2002, Corillian applied the zero
profit methodology discussed above to three existing
projects for one customer. Both revenue and expense recognized
from these projects accounted for under the zero
profit methodology during the years ended
December 31, 2002 and 2003, was approximately $271,000

F-7



---



##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and $714,000 respectively. As all three of this
customers projects were completed and accepted during
2003, Corillian recognized an additional $1.0 million of
revenue related to these projects, which had been previously
deferred until completion of the projects, during the year ended
December 31, 2003. Since all cost of revenues associated
with these projects had been previously recognized using the
zero profit methodology, recognition of this
deferred revenue resulted in the corresponding recognition of
$1.0 million in gross profit during the year ended
December 31, 2003. No further revenues were deferred on
these projects as of December 31, 2003.

In arrangements where Corillian does not have an
obligation to install its products, Corillian recognizes
non-refundable license fees over the estimated implementation
period for the customer or resellers project. If Corillian
determines that the customer or reseller can successfully
install Corillians products in a production environment,
Corillian will recognize non-refundable license fees for future
arrangements in the period in which collectibility of the
license fees is probable, assuming all other
SOP No. 97-2 revenue recognition criteria are met.



|    |                 
|--- | ----------------
|(d) | Cash Equivalents

Cash equivalents consist of mainly of taxable
municipal bonds with original maturities of 90 days or
less, which are carried at market value, which approximates
cost. Cash equivalents totaled $12.1 million and
$23.5 million as of December 31, 2002 and 2003,
respectively.



|    |                
|--- | ---------------
|(e) | Restricted Cash

During the third quarter of 2002, Corillian
agreed to deposit $1.0 million in cash in a corporate bank
account with a customer. This balance was classified as
restricted cash as of December 31, 2002, because Corillian
was required to maintain the funds on deposit and could not use
the funds without violating the agreement. During the second
quarter of 2003, Corillian and the customer amended the terms of
the contract to remove the requirement that Corillian maintain
the funds on deposit with the customer. As a result, these funds
became classified as unrestricted during the second quarter of
2003.



|    |            
|--- | -----------
|(f) | Investments

Investments consist mainly of commercial paper
and taxable municipal bonds, which have original maturities
between 90 and 180 days. These investments are classified
as held-to-maturity and are recorded at market value, which
approximates cost.

A decline in the market value of any security
below cost that is deemed to be other-than-temporary results in
a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is
established. To determine whether an impairment is
other-than-temporary, Corillian considers whether it has the
ability and intent to hold the investment until a market price
recovery and considers whether evidence indicating the cost of
the investment is recoverable outweighs evidence to the
contrary. There have been no other-than-temporary impairments
identified or recorded by Corillian.

Premiums and discounts are amortized or accreted
over the life of the related security as an adjustment to yield
using a method that approximates the effective-interest method.
Dividend and interest income is recognized when earned.



|    |                  
|--- | -----------------
|(g) | Intangible Assets

In accordance with the provisions of the
Financial Accounting Standard Boards (FASB) Statement of
Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, (Statement
No. 144) management reviews Corillians long-lived
assets and definite-lived intangible assets for impairment when
events or changes in circumstances indicated the carrying amount
of the assets are not recoverable. Recoverability of long-lived
assets is determined by comparing the forecasted undiscounted net

F-8



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

cash flows of the asset or asset group to the
carrying amount of the asset or asset group. If the operation is
determined to be unable to recover the carrying amount of its
assets, the assets or asset groups are written down to their
estimated fair value. Fair value is determined based on
discounted cash flows or appraised values, depending upon the
nature of the assets.

Statement No. 142, Goodwill and Other
Intangible Assets, requires disclosure of what reported
income before extraordinary items and net income would have been
in all periods presented exclusive of amortization expense
(including any related tax effects) recognized in those periods
related to goodwill and other intangible assets that are no
longer being amortized. Corillian adopted Statement No. 142
on January 1, 2002.

Intangible assets consisted of goodwill,
workforce, and customer relationships. The intangible assets
were acquired as a result of Corillians acquisition of
Hatcher Associates Inc. in November 2000. Goodwill and customer
relationships were to be amortized over three years and
workforce was to be amortized over two years. Amortization
expense was $6.1 million, $0 and $0 for the years ended
December 31, 2001, 2002 and 2003, respectively. During
2001, Corillian recorded an impairment charge of approximately
$16.8 million related to goodwill and other intangible
assets resulting from Hatcher acquisition (see Note 9 for
further discussion).

The following table illustrates what
Corillians net loss and basic and diluted net loss per
share would have been during the year ended December 31,
2001, exclusive of amortization expense related to the goodwill
and other non-amortizable intangible assets.

|                                              |                                                                          |              |         |       | 
|--------------------------------------------- | ------------------------------------------------------------------------ | ------------ | ------- | ----- | 
|                                              |                                                                          | Year Ended  
|                                              |                                                                          | December 31,
|                                              |                                                                          | 2001        
|                                              |                                                                          |             
|Reported net loss                             |                                                                          | $            | (49,301 | )    
|Add back:                                     |                                                                          |              |         |      
|                                              | Amortization of goodwill and other
    non-amortizable intangible assets |              |         | 6,119 | 
|                                              |                                                                          |              |         |      
|Adjusted net loss                             |                                                                          | $            | (43,182 | )    
|                                              |                                                                          |              |         |      
|Reported basic and diluted net loss per share |                                                                          | $            | (1.42   | )    
|Add back:                                     |                                                                          |              |         |      
|                                              | Amortization of goodwill and other
    non-amortizable intangible assets |              |         | 0.17  | 
|                                              |                                                                          |              |         |      
|Adjusted basic and diluted net loss per share |                                                                          | $            | (1.25   | )    
|                                              |                                                                          |              |         |      

(h) Investment
in Joint Venture

Investments in businesses that Corillian owns
less than a 50% interest and can exert significant influence
over are accounted for using the equity method of investment
accounting. EITF D-46, Accounting for Limited
Partnership Investments, requires that investments in
limited partnerships be accounted for using the equity method
when the percentage of ownership is greater than 5%. Under the
equity method, Corillian records an investment in the stock at
cost, and adjusts the carrying amount of the investment to
recognize its share of the earnings or losses of the business
after the date of investment based on its ownership percentage
of the business as a whole.

On June 9, 2000, Corillian entered into an
operating agreement with Huntington Bancshares Incorporated,
Compaq Computer Corporation and SAIC Venture Capital
Corporation, a division of Science Applications International
Corporation to form e-Banc, LLC, a Delaware limited liability
company. On February 12, 2004, e-Banc changed its name to
Synoran LLC. The business of Synoran is to develop,
produce and market solutions that enable financial institutions
to collect and coordinate their data from all

F-9



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

delivery channels including tellers, ATMs,
web banking sites, among others, on a real time basis, using
existing financial institution legacy systems as well as new
channel applications.

Pursuant to the agreement, Corillian contributed
$3.0 million in cash and issued Synoran a purchase credit
of $5.0 million towards the future purchase of
Corillians software licenses. The purchase credit is only
applicable to license fees and cannot be applied towards
professional services, custom engineering services, hosting
fees, or maintenance fees. Corillians ownership percentage
of Synoran as of December 31, 2003, was 12.3%. Corillian
has one representative on Synorans board of managers.
Corillian invested an additional $1.0 million in cash in
Synoran during 2003. During the years ended December 31,
2001, 2002 and 2003, Corillian recorded $592,000, $916,000 and
$1.1 million, respectively, of losses related to its
investment in Synoran.

(i) Accounts
Receivable

Trade accounts receivable are recorded at
invoiced amount and do not bear interest. Corillian performs
ongoing credit evaluations of its customers financial
condition. Credit is extended to customers as deemed necessary
and generally does not require collateral. Management believes
that the risk of loss is significantly reduced due to the
quality and financial position of its customers. Management
provides an allowance for doubtful accounts based on current
customer information and historical statistics. The allowance
for doubtful accounts is Corillians best estimate of the
amount of probable credit losses in its existing accounts
receivable. Account balances are charged off against the
allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. Corillian does
not have any off-balance-sheet credit exposure related to its
customers. At December 31, 2002 and 2003, Corillians
allowance for doubtful accounts receivable was $399,000 and
$101,000, respectively.

The following table summarizes the activity in
the allowance for doubtful accounts (in thousands):

|                            |  |      |   |      |  |      |       |   |  |   |      |  
|--------------------------- |  | ---- | - | ---- |  | ---- | ----- | - |  | - | ---- | -
|                            |  | 2001 |   | 2002 |  | 2003
|                            |  |      |   |      |  |     
|Beginning allowance balance |  | $    |  |      |  | $    |      |   |  | $ | 399  |  
|Provision (recovery)        |  |      |  |      |  |      | 1,317 |   |  |   | (173 | )
|Charge-offs                 |  |      |  |      |  |      | (918  | ) |  |   | (125 | )
|                            |  |      |   |      |  |      |       |   |  |   |      |  
|Ending allowance balance    |  | $    |  |      |  | $    | 399   |   |  | $ | 101  |  
|                            |  |      |   |      |  |      |       |   |  |   |      |  

(j) Property
and Equipment

Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated
useful life of the assets, generally three to five years.
Equipment recorded under capital lease agreements are
depreciated over the shorter of the estimated useful life of the
equipment or the lease term. Leasehold improvements are
depreciated over the shorter of the remaining term of the
related leases or the estimated economic useful lives of the
improvements. Repairs and maintenance are expensed as incurred.

(k) Research
and Development

Research and development costs are expensed as
incurred.

(l) Capitalized
Software

Corillian accounts for software development costs
in accordance with Statement No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. Software development costs are capitalized
beginning when a products technological feasibility has
been established by completion of a working model of the product
and ending when a product is available for general release to
customers.

F-10



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Completion of a working model of Corillians
products and general release has substantially coincided. As a
result, Corillian has not capitalized any software development
costs during the three-year period ended December 31, 2003
and charged all such costs to research and development expense
as incurred.

Internal use software development costs are
accounted for in accordance with SOP No. 98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. Costs incurred in the preliminary
project stage are expensed as incurred and costs incurred in the
application development stage are capitalized and amortized on a
straight-line basis over the estimated life of the asset.
Capitalized internal use software development costs have not
been significant to date.

(m) Concentration
of Business and Credit Risk

Results of operations are substantially derived
from United States operations and substantially all significant
assets reside in the United States. Banks and other financial
institutions accounted for a majority of Corillians
revenues during the three-year period ended December 31,
2003. A majority of Corillians revenues are generated from
the financial services industry. Accordingly, Corillians
near-term and long-term prospects depend on its ability to
attract the technology expenditures of these companies. The
market for Internet-based financial services is intensely
competitive and rapidly changing. Additionally, the sale and
implementation of Corillians products and services are
often subject to delays because of Corillians
customers internal budgets and procedures for approving
large capital expenditures and deploying new technologies within
their networks. Corillians financial condition, results of
operations and liquidity could be materially affected if adverse
conditions in the industry developed, such as a reduction in
technology expenditures or a delay in the sales or
implementation timeline. An inability of Corillian to generate
demand for its product, whether as a result of competition,
technological change, economic, or other factors, could have a
material adverse result on Corillians financial condition,
results of operations or liquidity.

Corillian is exposed to concentration of credit
risk principally from accounts receivable and revenue in excess
of billing. As of December 31, 2002, three customers
accounted for more than 10% of consolidated accounts receivable.
These customers, in total, accounted for approximately 52% of
Corillians consolidated accounts receivable balance as of
December 31, 2002. As of December 31, 2003, three
customers individually accounted for more than 10% of
consolidated accounts receivable. These customers, in total,
accounted for approximately 54% of Corillians consolidated
accounts receivable balance as of December 31, 2003.

Three customers individually accounted for more
than 10% of Corillians consolidated revenue in excess of
billing balance as of December 31, 2002. These customers,
in total, accounted for approximately 71% of Corillians
consolidated revenue in excess of billing balance as of
December 31, 2002. Three customers individually accounted
for more than 10% of Corillians consolidated revenue in
excess of billing balance as of December 31, 2003. These
customers, in total, accounted for approximately 64% of
Corillians consolidated revenue in excess of billing
balance as of December 31, 2003.

Corillian is also subject to concentrations of
credit risk from its cash, cash equivalents and investments.
Corillian limits its exposure to credit risk associated with
cash, cash equivalents and investments by placing its cash, cash
equivalents and investments with major financial institutions
and by investing in investment-grade securities.



|    |                             
|--- | ----------------------------
|(n) | Risk of Technological Change

A substantial portion of Corillians
revenues are generated from the development and rapid release to
market of computer software products and enhancements during the
year. In the extremely competitive industry environment in which
Corillian operates, such product generation, development and
marketing processes are uncertain and complex, requiring
accurate prediction of market trends and demand as well as
successful management of various risks inherent in such
products. Additionally, Corillians production strategy

F-11



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

relies on certain employees ability to
deliver implemented products in time to meet critical
development and distribution schedules. In light of these
dependencies, it is reasonably possible that failure to
successfully manage a significant product introduction or
failure of certain employees to deliver implemented products as
needed could have severe impact on Corillians growth,
results of operations and liquidity.



|    |                         
|--- | ------------------------
|(o) | Stock-Based Compensation

At December 31, 2003, Corillian had various
stock-based compensation plans, including stock option plans and
an employee stock purchase plan, which are described more fully
in Notes 5 and 6. Corillian applies the
intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,and related
interpretations including FASB Interpretation
(FIN) No. 44, Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion
No. 25, to account for its fixed-plan stock options.
Under this method, compensation expense is generally recorded on
the date of grant if the current market price of the underlying
stock exceeded the exercise price. Statement No. 123,
Accounting for Stock-Based Compensationand Statement
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment
of FASB Statement No. 123,established accounting and
disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. As
permitted by existing accounting standards, Corillian has
elected to continue to apply the intrinsic-value-based method of
accounting described above, and has adopted only the disclosure
requirements of Statement No. 123, as amended.

Corillian incurred deferred stock-based
compensation of $0, $45,000 and $0 for the years ended
December 31, 2001, 2002 and 2003, respectively. Expense
associated with stock-based compensation is amortized on an
accelerated basis over the vesting period of the individual
stock option awards consistent with the method prescribed in FIN
No. 28.

The following table illustrates the effect on net
income (loss) if the fair-value-based method had been applied to
all outstanding and unvested awards in each period.

|                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                                                                                    |  |                                      
|                                                                                                                    |  | Year Ended December 31,              
|                                                                                                                    |  |                                      
|                                                                                                                    |  | 2001                                  |         | 2002 |  | 2003
|                                                                                                                    |  |                                       |         |      |  |     
|                                                                                                                    |  |                                      
|                                                                                                                    |  | (in thousands, except per share data)
|Net income (loss), as reported                                                                                      |  | $                                     | (49,301 | )    |  | $    | (17,257 | ) |  | $ | 5,126  |  
|Add: Stock-based compensation expense determined
    using the intrinsic value method                               |  |                                       | 2,506   |      |  |      | 885     |   |  |   | 35     |  
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards |  |                                       | (9,605  | )    |  |      | (6,328  | ) |  |   | (3,314 | )
|                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|Pro forma net income (loss)                                                                                         |  | $                                     | (56,400 | )    |  | $    | (22,700 | ) |  | $ | 1,847  |  
|                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|Net income (loss) per share:                                                                                        |  |                                       |         |      |  |      |         |   |  |   |        |  
|Basic  as reported                                                                                                 |  | $                                     | (1.42   | )    |  | $    | (0.49   | ) |  | $ | 0.14   |  
|Basic  pro forma                                                                                                   |  | $                                     | (1.63   | )    |  | $    | (0.64   | ) |  | $ | 0.05   |  
|Diluted  as reported                                                                                               |  | $                                     | (1.42   | )    |  | $    | (0.49   | ) |  | $ | 0.14   |  
|Diluted  pro forma                                                                                                 |  | $                                     | (1.63   | )    |  | $    | (0.64   | ) |  | $ | 0.05   |  

Information related to the assumptions used in
the above calculations is further described in Notes 5
and 6.

Corillian accounts for stock issued to
non-employees in accordance with the provisions of Statement
No. 123 and EITF 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.

F-12



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                            
|--- | ---------------------------
|(p) | Net Income (Loss) Per Share

Corillian computes net income (loss) per share in
accordance with Statement No. 128, Earnings Per Share,and SEC Staff Accounting Bulletin No. 98 (SAB
No. 98). Under the provisions of Statement No. 128 and
SAB No. 98, basic net income (loss) per share is computed
by dividing the net income (loss) for the period by the
weighted-average number of shares of common stock outstanding
during the period. Diluted net income (loss) per share is
computed by dividing net income (loss) for the period by the
weighted-average number of shares of common stock and potential
dilutive common shares outstanding during the period.

The following is a reconciliation of basic and
diluted weighted-average shares:

|                                                |                                                |                         |        |        |  |      |        |        |  |  |        |        | 
|----------------------------------------------- | ---------------------------------------------- | ----------------------- | ------ | ------ |  | ---- | ------ | ------ |  |  | ------ | ------ | 
|                                                |                                                |                        
|                                                |                                                | Year Ended December 31,
|                                                |                                                |                        
|                                                |                                                | 2001                    |        | 2002   |  | 2003
|                                                |                                                |                         |        |        |  |     
|                                                |                                                |                        
|                                                |                                                | (in thousands)         
|Shares for basic net income (loss) per share:   |                                                |                         |        |        |  |      |        |        |  |  |        |       
|                                                | Weighted-average common shares                 |                         |        | 34,645 |  |      |        | 35,477 |  |  |        | 36,431 | 
|Effect of dilutive securities:                  |                                                |                         |        |        |  |      |        |        |  |  |        |       
|                                                | Stock options and employee stock purchase plan |                         |        |       |  |      |        |       |  |  |        | 1,382  | 
|                                                |                                                |                         |        |        |  |      |        |        |  |  |        |       
|Shares for diluted net income (loss) per share: |                                                |                         | 34,645 |        |  |      | 35,477 |        |  |  | 37,813 |       
|                                                |                                                |                         |        |        |  |      |        |        |  |  |        |       

Options with exercise prices less than the
average fair market value of the underlying common stock
totaling 1,700,776 and 533,611 for the years ended
December 31, 2001 and 2002, respectively, were excluded
from the net loss per share calculations due to Corillians
net loss in these periods.

The following shares issuable under stock options
and a warrant would not result in additional dilutive shares
under the treasury stock method as the exercise price of the
stock options and warrant exceeded the average fair market value
of the underlying common stock for the periods presented below:

|                                    |  |                         |       |      |  |      |       |  |  |  |       | 
|----------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                    |  |                        
|                                    |  | Year Ended December 31,
|                                    |  |                        
|                                    |  | 2001                    |       | 2002 |  | 2003
|                                    |  |                         |       |      |  |     
|                                    |  |                        
|                                    |  | (in thousands)         
|Shares issuable under stock options |  |                         | 2,727 |      |  |      | 4,623 |  |  |  | 3,128 | 
|Shares issuable under a warrant     |  |                         | 250   |      |  |      | 250   |  |  |  |      | 
|                                    |  |                         |       |      |  |      |       |  |  |  |       | 
|                                    |  |                         | 2,977 |      |  |      | 4,873 |  |  |  | 3,128 | 
|                                    |  |                         |       |      |  |      |       |  |  |  |       | 



|    |                            
|--- | ---------------------------
|(q) | Comprehensive Income (Loss)

Corillian has adopted the provisions of Statement
No. 130, Reporting on Comprehensive Income.
Comprehensive income (loss) is defined as changes in
shareholders equity exclusive of transactions with owners.
To date, only foreign currency translation adjustments are
required to be reported in comprehensive income (loss) for
Corillian and have not been material to Corillians
financial position or results of operations.



|    |             
|--- | ------------
|(r) | Income Taxes

Corillian accounts for income taxes under the
asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences of events that
have been included in the financial statements and tax returns.
Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are
expected to be recovered or settled. Valuation allowances are
established to reduce deferred tax assets to the amount expected
to be realized.

F-13



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                        
|--- | ---------------------------------------
|(s) | Fair Value of Financial
    Instruments

The carrying amounts reported in the balance
sheet for cash and cash equivalents, restricted cash,
investments, accounts and notes receivable, revenue in excess of
billings, and accounts payable approximate fair values due to
the short-term nature of those instruments. The carrying amount
of long-term debt approximates fair value as the stated interest
rates approximate current market rates. Fair value estimates are
made at a specific point in time, based on relevant market
information about the financial instruments when available.
These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision.



|    |            
|--- | -----------
|(t) | Advertising

Advertising costs are expensed as incurred.
Advertising expense was $333,000, $88,000 and $25,000 for the
years ended December 31, 2001, 2002 and 2003, respectively.



|    |                                     
|--- | ------------------------------------
|(u) | Recent Accounting
    Pronouncements

In December 2003, the FASB issued FIN No. 46
(revised December 2003) (FIN No. 46R), Consolidation of
Variable Interest Entities, which addresses how a business
enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting
rights and accordingly should consolidate the entity. FIN
No. 46R replaces FIN No. 46, Consolidation of
Variable Interest Entities, which was issued in January
2003. Corillian will be required to apply FIN No. 46R to
variable interests in variable interest entities
(VIEs) created after December 31, 2003. For
variable interests in VIEs created before January 1, 2004,
FIN No. 46R will be applied beginning on January 1,
2005. For any VIEs that must be consolidated under FIN
No. 46R that were created before January 1, 2004, the
assets, liabilities, and non-controlling interests of the VIE
initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and
any previously recognized interest being recognized as the
cumulative effect of an accounting change. If determining the
carrying amounts is not practicable, fair value at the date FIN
No. 46R first applies may be used to measure the assets,
liabilities, and non-controlling interest of the VIE. Corillian
does not currently have any variable interests in VIEs, and does
not expect the application of the Interpretation to have a
significant impact on Corillians financial condition,
results of operations or liquidity.



|    |                  
|--- | -----------------
|(v) | Reclassifications

Certain reclassifications have been made to the
consolidated financial statements for 2001 and 2002 in order to
conform to the 2003 presentation.

F-14



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                         
|--- | ------------------------
|(3) | Balance Sheet Components



|    |                            
|--- | ---------------------------
|(a) | Property and Equipment, Net

Property and equipment, net, consisted of the
following at December 31:

|                                               |  |                |         |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                               |  | 2002           |         | 2003
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (in thousands)
|Computer equipment and software                |  | $              | 12,507  |      |  | $ | 13,568  |  
|Furniture, fixtures and other equipment        |  |                | 3,335   |      |  |   | 3,332   |  
|Leasehold improvements                         |  |                | 4,224   |      |  |   | 4,257   |  
|                                               |  |                |         |      |  |   |         |  
|                                               |  |                | 20,066  |      |  |   | 21,157  |  
|Less accumulated depreciation and amortization |  |                | (11,690 | )    |  |   | (15,392 | )
|                                               |  |                |         |      |  |   |         |  
|                                               |  | $              | 8,376   |      |  | $ | 5,765   |  
|                                               |  |                |         |      |  |   |         |  

Depreciation and amortization expense was
$4.7 million, $5.4 million and $3.7 million for
the years ended December 31, 2001, 2002 and 2003,
respectively.



|    |                    
|--- | -------------------
|(b) | Accrued Liabilities

Accrued liabilities consisted of the following at
December 31:

|                             |  |                |       |      |  |   |       | 
|---------------------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                             |  | 2002           |       | 2003
|                             |  |                |       |     
|                             |  |               
|                             |  | (in thousands)
|Payroll and related expenses |  | $              | 1,546 |      |  | $ | 1,267 | 
|Other accrued liabilities    |  |                | 521   |      |  |   | 785   | 
|                             |  |                |       |      |  |   |       | 
|                             |  | $              | 2,067 |      |  | $ | 2,052 | 
|                             |  |                |       |      |  |   |       | 



|    |             
|--- | ------------
|(4) | Income Taxes

Domestic and foreign pre-tax income (loss) is as
follows for the year ended December 31:

|         |       |                |         |         |   |      |         |         |   |   |       |       | 
|-------- | ----- | -------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ----- | ----- | 
|         |       | 2001           |         | 2002    |   | 2003
|         |       |                |         |         |   |     
|         |       |               
|         |       | (in thousands)
|Domestic |       | $              | (40,280 | )       |   | $    | (12,052 | )       |   | $ | 5,034 |      
|Foreign  |       |                | (9,021  | )       |   |      | (5,205  | )       |   |   | 216   |      
|         |       |                |         |         |   |      |         |         |   |   |       |      
|         | Total |                | $       | (49,301 | ) |      | $       | (17,257 | ) |   | $     | 5,250 | 
|         |       |                |         |         |   |      |         |         |   |   |       |      

For 2003, Corillian provided current federal and
state tax expense of $108,000 and $16,000, respectively. No
provision for federal, state or foreign income taxes was
recorded for 2001 or 2002, as Corillian incurred net operating
losses in each of those years.

F-15



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The reconciliation of the statutory federal
income tax rate to Corillians effective income tax rate is
as follows:

|                                      |                                               |      |     |      |  |      |     |    |  |  |    |     |  
|------------------------------------- | --------------------------------------------- | ---- | --- | ---- |  | ---- | --- | -- |  |  | -- | --- | -
|                                      |                                               | 2001 |     | 2002 |  | 2003
|                                      |                                               |      |     |      |  |     
|Federal statutory rate                |                                               |      | (34 | )%   |  |      | (34 | )% |  |  | 34 | %  
|Increases (decreases) resulting from: |                                               |      |     |      |  |      |     |    |  |  |    |    
|                                      | Losses for which no benefit has been provided |      |     | 15   |  |      |     | 34 |  |  |    |    |  
|                                      | Utilization of net operating losses           |      |     |     |  |      |     |   |  |  |    | (31 | )
|                                      | Goodwill                                      |      |     | 19   |  |      |     |   |  |  |    |    |  
|                                      | Other                                         |      |     |     |  |      |     |   |  |  |    | (1  | )
|                                      |                                               |      |     |      |  |      |     |    |  |  |    |    
|                                      |                                               |      |    | %    |  |      |    | %  |  |  | 2  | %  
|                                      |                                               |      |     |      |  |      |     |    |  |  |    |    

The tax effects of temporary differences and net
operating loss carryforwards which give rise to the significant
portions of deferred tax assets and liabilities are as follow as
at December 31:

|                          |                                                   |                                      |         |        |        |  |         |        |        | 
|------------------------- | ------------------------------------------------- | ------------------------------------ | ------- | ------ | ------ |  | ------- | ------ | ------ | 
|                          |                                                   | 2002                                 |         | 2003  
|                          |                                                   |                                      |         |       
|                          |                                                   |                                     
|                          |                                                   | (in thousands)                      
|Deferred tax assets:      |                                                   |                                      |         |        |        |  |         |       
|                          | Research and experimentation credit carryforwards |                                      | $       | 2,230  |        |  | $       | 2,552  |       
|                          | Accrued expenses and allowances                   |                                      |         | 369    |        |  |         | 510    |       
|                          | Deferred compensation                             |                                      |         | 802    |        |  |         | 599    |       
|                          | Domestic net operating loss carryforwards         |                                      |         | 24,435 |        |  |         | 22,714 |       
|                          | Foreign net operating loss carryforwards          |                                      |         | 2,795  |        |  |         | 2,721  |       
|                          | Equity investments                                |                                      |         | 247    |        |  |         | 247    |       
|                          | Goodwill                                          |                                      |         | 350    |        |  |         | 321    |       
|                          | Depreciable assets                                |                                      |         | 607    |        |  |         | 923    |       
|                          | Alternative minimum tax credit carryforward       |                                      |         |       |        |  |         | 83     |       
|                          | Other                                             |                                      |         | 24     |        |  |         | 36     |       
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Total gross deferred tax assets      |         |        | 31,859 |  |         |        | 30,706 | 
|Less valuation allowance  |                                                   |                                      | (31,697 | )      |        |  | (30,590 | )     
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   |                                      | 162     |        |        |  | 116     |       
|                          |                                                   |                                      |         |        |        |  |         |       
|Deferred tax liabilities: |                                                   |                                      |         |        |        |  |         |       
|                          | Prepaid expenses                                  |                                      |         | 162    |        |  |         | 116    |       
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Total gross deferred tax liabilities |         |        | 162    |  |         |        | 116    | 
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Net deferred tax assets              |         | $      |       |  |         | $      |       | 
|                          |                                                   |                                      |         |        |        |  |         |       

Corillian has established a valuation allowance
for certain deferred tax assets, including those for net
operating loss and tax credit carryforwards. Such a valuation
allowance is recorded when it is more likely than not that the
deferred tax assets will not be realized. The portion of the
valuation allowance for deferred tax assets for which
subsequently recognized tax benefits will be applied directly to
contributed capital is approximately $890,000.

The net change in the total valuation allowance
was a decrease of $1.1 million for the year ended
December 31, 2003.

F-16



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

At December 31, 2003, Corillian had federal
and state net operating loss carryforwards of approximately
$59.2 million and foreign net operating loss carryforwards
of $13.5 million to offset against future income.
Additionally, Corillian had alternative minimum tax credits of
approximately $83,000 and research and experimentation credits
of $2.9 million. These carryforwards expire between 2004
through 2023.



|    |                     
|--- | --------------------
|(5) | Shareholders Equity

(a) Warrant

Concurrent with Corillians initial public
offering on April 12, 2000, Corillian issued a warrant to
purchase 250,000 shares of common stock. This warrant had
an exercise price of $8.00 per share, which was equal to
the per share price of Corillians initial public offering
of common stock, and a term of three years. This warrant was
fully vested at the time of purchase and immediately
exercisable. The purchase price of this warrant was
approximately $1.4 million, which was determined using the
Black-Scholes option pricing model and paid upon closing of
Corillians initial public offering. This warrant expired
unexercised in April 2003.

(b) 2000
Employee Stock Purchase Plan

In March 2000, the Board of Directors approved
the 2000 Employee Stock Purchase Plan (the ESPP) that became
effective upon completion of Corillians initial public
offering on April 12, 2000. As of December 31, 2003,
234,479 shares were available for issuance under the ESPP.

Offering periods commence on February 1 and
August 1 each year and have a 24-month duration. Each
offering period consists of four consecutive purchase periods of
six months duration, except that the last date of the
first purchase period was July 31, 2000.

Participants purchase common stock on the last
day of each purchase period. The purchase price is the lesser of
85% of the fair market value of the common stock on the first
day of an offering period or 85% of the fair market value of the
common stock on the purchase date, except that the purchase
price for the first offering period was equal to the lesser of
100% of the initial public offering price and 85% of the fair
market value of the common stock on the purchase date.

If the fair market value of Corillians
common stock on any purchase date of an offering period is less
than the fair market value of Corillians common stock on
the first day of the offering period, then every participant
shall automatically (a) be withdrawn from the offering
period at the close of the purchase date after the acquisition
of the shares of Corillians common stock for the purchase
period and (b) be enrolled in the offering period
commencing on the first business date subsequent to the purchase
period.

The per share weighted-average fair value, as
determined by applying the valuation methodology prescribed in
FASB Technical Bulletin 97-1, Accounting under
Statement 123 for Certain Employee Stock Purchase Plans
with a Look-Back Option, to the ESPP in 2001, 2002 and 2003,
was $2.54, $0.72 and $0.32, respectively, using the following
assumptions:

|                        |  |                         |  |             |  |            
|----------------------- |  | ----------------------- |  | ----------- |  | -----------
|                        |  |                        
|                        |  | Year Ended December 31,
|                        |  |                        
|                        |  | 2001                    |  | 2002        |  | 2003       
|                        |  |                         |  |             |  |            
|Risk free interest rate |  | 4.09%                   |  | 3.10%       |  | 1.05-1.86% 
|Expected volatility     |  | 100%                    |  | 100%        |  | 22-44%     
|Expected life in years  |  | 6-24 months             |  | 6-24 months |  | 6-24 months
|Dividend yield          |  |                        |  |            |  |           

F-17



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                           
|--- | ------------------------------------------
|(6) | 1997, 2000 and 2003 Stock Option
    Plans

In 1997, Corillians Board of Directors
approved and adopted a Stock Option Plan (the 1997 Plan).
Options granted pursuant to the 1997 Plan may be either
incentive stock options or non-qualified stock options, at the
discretion of the Board of Directors. In March 2000, the Board
of Directors approved an amendment that capped the 1997 Plan at
3,453,193 shares, which was the number of shares subject to
options at that time. Shares under the 1997 Plan generally vest
in yearly installments over a period of three or four years
following the date of grant. Options under the 1997 Plan
generally expire five years from the date of grant, and
generally expire three months after termination of employment
with Corillian.

In March 2000, the Board of Directors approved
the 2000 Stock Incentive Compensation Plan (the 2000 Plan).
Options granted pursuant to the 2000 Plan may be either
incentive stock options or non-qualified stock options, at the
discretion of the Board of Directors. Shares under the 2000 Plan
generally vest over a period of four years following the date of
grant. Options under the 2000 Plan generally expire ten years
from the date of grant, and generally expire three months after
termination of employment with Corillian. As of
December 31, 2003, 654,415 shares remained available
for purchase under the 2000 Plan.

In May 2003, Corillians Board of Directors
adopted the 2003 Nonqualified Stock Incentive Compensation Plan
(the 2003 Plan) and authorized the issuance of
1,000,000 shares of common stock under the 2003 Plan. The
2003 Plan was not approved by Corillians shareholders.
Shares under the 2003 Plan generally vest over a period of
four years following the date of grant. Options under the
2003 Plan generally expire ten years from the date of grant, and
generally expire three months after termination of employment
with Corillian. As of December 31, 2003, 93,500 shares
remained available for purchase under the 2003 Plan.

Stock option activity under the 1997, 2000 and
2003 Stock Option Plans was as follows:

|                          |  |           |            |          |  |   |       |  
|------------------------- |  | --------- | ---------- | -------- |  | - | ----- | -
|                          |  |           |            | Weighted
|                          |  |           |            | Average 
|                          |  | Number    |            | Exercise
|                          |  | of Shares |            | Price   
|                          |  |           |            |         
|Balance December 31, 2000 |  |           | 5,826,207  |          |  | $ | 6.54  |  
|Granted                   |  |           | 1,798,088  |          |  |   | 5.43  |  
|Exercised                 |  |           | (608,573   | )        |  |   | (1.12 | )
|Cancelled                 |  |           | (963,802   | )        |  |   | (5.33 | )
|                          |  |           |            |          |  |   |       |  
|Balance December 31, 2001 |  |           | 6,051,920  |          |  |   | 6.93  |  
|Granted                   |  |           | 1,290,550  |          |  |   | 2.69  |  
|Exercised                 |  |           | (359,857   | )        |  |   | (0.63 | )
|Cancelled                 |  |           | (3,097,417 | )        |  |   | (8.72 | )
|                          |  |           |            |          |  |   |       |  
|Balance December 31, 2002 |  |           | 3,885,196  |          |  |   | 4.69  |  
|Granted                   |  |           | 4,279,750  |          |  |   | 2.24  |  
|Exercised                 |  |           | (490,058   | )        |  |   | (2.28 | )
|Cancelled                 |  |           | (1,072,640 | )        |  |   | (3.30 | )
|                          |  |           |            |          |  |   |       |  
|Balance December 31, 2003 |  |           | 6,602,248  |          |  | $ | 3.51  |  
|                          |  |           |            |          |  |   |       |  

F-18



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information
regarding stock options outstanding and exercisable as of
December 31, 2003:

|            |  |                     |           |                     |  |           |      |             |  |           |      |  |  |  |           |  |  |   |      | 
|----------- |  | ------------------- | --------- | ------------------- |  | --------- | ---- | ----------- |  | --------- | ---- |  |  |  | --------- |  |  | - | ---- | 
|            |  |                     |           |                     |  |          
|            |  | Options Outstanding |           |                    
|            |  |                     |           | Options Exercisable
|            |  |                     |           | Weighted-           |  |           |      |            
|            |  |                     |           | Average             |  | Weighted- |      |             |  | Weighted-
|            |  |                     |           | Remaining           |  | Average   |      | Exercisable |  | Average  
|Exercise    |  | Number of           |           | Contractual         |  | Exercise  |      | Number of   |  | Exercise 
|Price       |  | Shares              |           | Life                |  | Price     |      | Shares      |  | Price    
|            |  |                     |           |                     |  |           |      |             |  |          
|$0.56-0.86  |  |                     | 1,783,041 |                     |  |           | 9.04 |             |  | $         | 0.85 |  |  |  | 55,036    |  |  | $ | 0.59 | 
|0.88-1.50   |  |                     | 642,383   |                     |  |           | 6.29 |             |  |           | 1.38 |  |  |  | 245,186   |  |  |   | 1.48 | 
|1.54-2.85   |  |                     | 782,781   |                     |  |           | 7.58 |             |  |           | 2.60 |  |  |  | 319,084   |  |  |   | 2.51 | 
|2.90-3.00   |  |                     | 1,466,250 |                     |  |           | 9.57 |             |  |           | 3.00 |  |  |  | 2,469     |  |  |   | 2.97 | 
|3.02-19.50  |  |                     | 1,927,793 |                     |  |           | 7.46 |             |  |           | 7.45 |  |  |  | 1,082,051 |  |  |   | 8.22 | 
|            |  |                     |           |                     |  |           |      |             |  |           |      |  |  |  |           |  |  |   |      | 
|$0.56-19.50 |  |                     | 6,602,248 |                     |  |           | 8.25 |             |  | $         | 3.51 |  |  |  | 1,703,826 |  |  | $ | 5.93 | 
|            |  |                     |           |                     |  |           |      |             |  |           |      |  |  |  |           |  |  |   |      | 

During the fourth quarter of 2002, Corillian
cancelled 890,000 options of a member of its Board of Directors.
The options had exercise prices ranging from $2.85 to
$19.25 per share. In exchange for the cancelled options,
Corillian issued 30,000 shares of restricted stock, which
vested over one year. Corillian recorded $45,000 of deferred
stock-based compensation associated with this grant of
restricted stock, which was amortized to expense over the
vesting period.

The per share weighted average grant date fair
value, as reflected in Note 1, as determined by applying
the Black-Scholes option pricing model to stock options granted
under the 1997, 2000 and 2003 Stock Option Plans, was $3.81,
$1.90 and $0.81 during the years ended December 31, 2001,
2002 and 2003, respectively, using the following
weighted-average assumptions:

|                        |  |                         |      |      |  |      |      |   |  |  |      |  
|----------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                        |  |                        
|                        |  | Year Ended December 31,
|                        |  |                        
|                        |  | 2001                    |      | 2002 |  | 2003
|                        |  |                         |      |      |  |     
|Risk free interest rate |  |                         | 4.09 | %    |  |      | 3.10 | % |  |  | 1.48 | %
|Expected volatility     |  |                         | 100  | %    |  |      | 100  | % |  |  | 39   | %
|Expected life in years  |  |                         | 3.93 |      |  |      | 3.99 |   |  |  | 4.00 |  
|Dividend yield          |  |                         |     |      |  |      |     |   |  |  |     |  

(7) Commitments and
Contingencies

(a) Litigation

In October 2002, Corillian and KeyBank settled a
dispute surrounding KeyBanks allegations that one of
Corillians employees used KeyBanks trade secrets in
performing work for Corillian. As part of this settlement, both
parties dismissed their respective claims. Also, as part of this
settlement, Corillian agreed to pay KeyBank approximately
$1.8 million in cash and issue to KeyBank
500,000 shares of common stock, valued at approximately
$745,000. Corillian paid $1.4 million and $250,000 of the
cash to KeyBank during the fourth quarter of 2002 and on
November 16, 2003, respectively. Corillian will pay the
remaining $175,000, which was included in other current
liabilities as of December 31, 2003, to KeyBank on
November 16, 2004. Corillian issued the shares of common
stock during the fourth quarter of 2002. Corillian recorded a
charge of approximately $2.6 million during the three-month
period ended September 30, 2002 related to this settlement.

F-19



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(b) 401(k)
Plan

Corillian maintains a profit-sharing retirement
plan for eligible employees under the provisions of Internal
Revenue Code Section 401(k). Participants may defer up to
15% of their annual compensation on a pre-tax basis, subject to
maximum limits on contributions set forth by the Internal
Revenue Service. Corillians contributions are equal to 50%
of a participants contribution, up to a maximum of 6% of
each participants annual compensation. Under this plan,
Corillian made contributions of approximately $429,000, $358,000
and $460,000 during the years ended December 31, 2001, 2002
and 2003, respectively.

(c) Lease
Obligations

Corillian is obligated under capital lease
agreements for computer and other equipment that expire over the
next three years. Gross amounts of property and equipment and
related accumulated depreciation recorded under capital leases
are as follows as of December 31:

|                              |  |                |       |      |  |   |        |  
|----------------------------- |  | -------------- | ----- | ---- |  | - | ------ | -
|                              |  | 2002           |       | 2003
|                              |  |                |       |     
|                              |  |               
|                              |  | (in thousands)
|Computer and other equipment  |  | $              | 1,416 |      |  | $ | 1,416  |  
|Less accumulated depreciation |  |                | (841  | )    |  |   | (1,213 | )
|                              |  |                |       |      |  |   |        |  
|                              |  | $              | 575   |      |  | $ | 203    |  
|                              |  |                |       |      |  |   |        |  

Corillian also has non-cancelable operating
leases, which expire over the next four years. Rental expense
under operating leases was $3.7 million, $3.7 million
and $3.1 million for the years ended December 31,
2001, 2002 and 2003, respectively.

In May 2003, Corillian vacated a portion of its
corporate headquarters in Hillsboro, Oregon. Corillian is
currently evaluating its options with respect to identifying a
sub-lessee for all or part of this office space. Depending on
the outcome of this process, Corillian may be required to record
a loss under the provisions of Statement No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities.

Future minimum lease payments on operating and
capital leases are as follows:

|                                   |      |                                             |     |           |    |  |   |       |        | 
|---------------------------------- | ---- | ------------------------------------------- | --- | --------- | -- |  | - | ----- | ------ | 
|                                   |      | Capital                                     |     | Operating
|                                   |      | Leases                                      |     | Leases   
|                                   |      |                                             |     |          
|                                   |      |                                            
|                                   |      | (in thousands)                             
|Year ending December 31:           |      |                                             |     |           |    |  |   |      
|                                   | 2004 |                                             | $   | 21        |    |  | $ | 3,108 |       
|                                   | 2005 |                                             |     | 11        |    |  |   | 2,851 |       
|                                   | 2006 |                                             |     | 3         |    |  |   | 2,881 |       
|                                   | 2007 |                                             |     |          |    |  |   | 2,198 |       
|                                   |      |                                             |     |           |    |  |   |      
|                                   |      | Total minimum lease payments                |     |           | 35 |  |   | $     | 11,038 | 
|                                   |      |                                             |     |           |    |  |   |      
|Less amounts representing interest |      |                                             | (4  | )         |    |  |   |      
|                                   |      |                                             |     |           |    |  |   |      
|                                   |      | Present value of minimum lease payments     |     |           | 31 |  |   |       |        | 
|Less current portion               |      |                                             | (19 | )         |    |  |   |      
|                                   |      |                                             |     |           |    |  |   |      
|                                   |      | Long-term portion of minimum lease payments |     | $         | 12 |  |   |       |        | 
|                                   |      |                                             |     |           |    |  |   |      

(d) Line
of credit

In January 2000, Corillian obtained a
$3.0 million equipment line of credit with a financial
institution. Corillian fully paid the remaining obligation under
this line of credit during 2003.

F-20



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In November 2000, Corillian obtained a
$5.0 million equipment line of credit with a financial
institution. In June 2003, Corillian refinanced this line of
credit to obtain lower interest rates on its remaining debt with
this financial institution. As of December 31, 2003, an
additional $1.0 million was available for borrowing under
this amended line of credit. Under this line of credit,
Corillian must comply with affirmative covenants that require it
to maintain a specified tangible net worth value, debt coverage
ratio and adjusted quick ratio. Corillian believes it was in
compliance with these covenants as of December 31, 2003. If
Corillian fails to comply with these covenants and cannot cure
its noncompliance within the periods of time identified in the
agreement, Corillian may be required to immediately repay all of
its outstanding indebtedness under this line of credit. Certain
assets of Corillian secure borrowings under this arrangement.

Long-term debt was as follows as of
December 31:

|                                                                                                                           |  |                |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                                                                                                           |  | 2002           |        | 2003
|                                                                                                                           |  |                |        |     
|                                                                                                                           |  |               
|                                                                                                                           |  | (in thousands)
|Line of credit facility retired during 2003                                                                                |  | $              | 571    |      |  | $ |       |  
|Line of credit facility due January 2005 through
    June 2008 with interest rates of 5.0 to 6.0% at
    December 31, 2003 |  |                | 2,862  |      |  |   | 2,573  |  
|                                                                                                                           |  |                |        |      |  |   |        |  
|                                                                                                                           |  |                | 3,433  |      |  |   | 2,573  |  
|Less current portion                                                                                                       |  |                | (1,865 | )    |  |   | (1,510 | )
|                                                                                                                           |  |                |        |      |  |   |        |  
|                                                                                                                           |  | $              | 1,568  |      |  |   | 1,063  |  
|                                                                                                                           |  |                |        |      |  |   |        |  

Annual maturities of Corillians long-term
debt obligations are as follows as of December 31, 2003 (in
thousands):

|      |  |   |       | 
|----- |  | - | ----- | 
|2004  |  | $ | 1,510 | 
|2005  |  |   | 414   | 
|2006  |  |   | 250   | 
|2007  |  |   | 263   | 
|2008  |  |   | 136   | 
|      |  |   |       | 
|Total |  | $ | 2,573 | 
|      |  |   |       | 

(e) Indemnification

Corillians product license and services
agreements include a limited indemnification provision for
claims from third-parties relating to Corillians
intellectual property. Such indemnification provisions are
accounted for in accordance with Statement No. 5,
Accounting for Contingencies. The indemnification is
limited to the amount paid by the customer. To date, claims
under such indemnification provisions have not been significant.



|    |                    
|--- | -------------------
|(8) | Segment Information

Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information,
establishes standards for reporting information related to
operating segments in annual financial statements and requires
selected information for those segments to be presented in
interim financial reports issued to shareholders. Statement
No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating
segments are defined as components of an enterprise about which
separate, discrete financial information is available for
evaluation by the chief operating decision maker, or
decision-making group, in making decisions about how to allocate
resources and assess performance. Corillians chief
operating decision maker, as defined under Statement
No. 131, is its chief executive officer. Corillian operates
in a single segment.

F-21



---



##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(a) Geographic
Information

Results of operations are substantially derived
from United States operations and substantially all assets
reside in the United States. Corillians results of
operations for the years ended December 31, 2001, 2002 and
2003, include approximately $13.5 million,
$6.0 million and $155,000, respectively, of direct
operating expenses related to Corillians international
operations.

Corillians international operations
generated a total of approximately $9.2 million, $826,000
and $659,000 of its consolidated revenues during the years ended
December 31, 2001, 2002 and 2003, respectively. In 2002,
Corillian closed its office in London, England, and elected to
pursue international sales primarily through resellers and
selective direct sales efforts.



|    |                
|--- | ---------------
|(b) | Major Customers

Revenues from Corillians major customers,
accounting for more than 10% of consolidated revenues in a
particular year, are as follows:

|           |  |                         |       |      |  |      |       |  |  |   |       | 
|---------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|           |  |                        
|           |  | Year Ended December 31,
|           |  |                        
|           |  | 2001                    |       | 2002 |  | 2003
|           |  |                         |       |      |  |     
|           |  |                        
|           |  | (in thousands)         
|Customer A |  | $                       | 8,682 |      |  | $    | 4,341 |  |  | $ | 6,069 | 
|Customer B |  |                         |      |      |  |      |      |  |  |   | 6,743 | 



|    |         
|--- | --------
|(c) | Revenues

Corillians chief decision-maker monitors
the revenue streams of licenses and various services. There are
many shared expenses generated by the various revenue streams.
Because management believes that any allocation of the expenses
to multiple revenue streams would be impractical and arbitrary,
management has not historically made such allocations
internally. The chief decision-maker does, however, monitor
revenue streams at a more detailed level than those depicted in
the accompanying financial statements.

Revenues derived from Corillians licenses
and services are as follows:

|                                  |  |                         |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                  |  |                        
|                                  |  | Year Ended December 31,
|                                  |  |                        
|                                  |  | 2001                    |        | 2002 |  | 2003
|                                  |  |                         |        |      |  |     
|                                  |  |                        
|                                  |  | (in thousands)         
|License and professional services |  | $                       | 49,240 |      |  | $    | 30,623 |  |  | $ | 35,195 | 
|Post-contractual support          |  |                         | 3,366  |      |  |      | 6,904  |  |  |   | 8,771  | 
|Hosting                           |  |                         | 1,242  |      |  |      | 1,614  |  |  |   | 2,166  | 
|                                  |  |                         |        |      |  |      |        |  |  |   |        | 
|                                  |  | $                       | 53,848 |      |  | $    | 39,141 |  |  | $ | 46,132 | 
|                                  |  |                         |        |      |  |      |        |  |  |   |        | 



|    |                                     
|--- | ------------------------------------
|(9) | Restructuring and Impairment Charges

During the fourth quarter of 2001, Corillian
initiated restructuring actions to improve operational
efficiency and reduce operating expenses. Charges related to
these restructuring actions were accrued in the period in which
executive management committed to execute such actions and
termination benefits had been communicated to the affected
employees, in accordance with EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The restructuring actions taken in 2001
included the reorganization of operational and management
responsibilities and closure of Corillian Services, Inc.s
(formerly Hatcher Associates Inc.) Los Angeles
headquarters. These actions resulted in a net reduction of
worldwide headcount of 125, of which 41 were employees of
Hatcher. Restructuring charges recorded in connection with these
actions totaled

F-22



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$1.3 million and consisted of
severance-related costs of $1.2 million, $90,000 in losses
recognized on the sale of equipment, and lease cancellation
costs of $27,000. This restructuring effort was substantially
completed by December 31, 2001. Of the cash restructuring
charges of $1.0 million, approximately $889,000 were paid
in 2001 and the remainder were paid during the first half of
2002.

During the second quarter of 2002, Corillian
initiated additional restructuring actions to further improve
operational efficiency and reduce operating expenses. Charges
related to these restructuring actions were accrued in the
period in which executive management committed to execute such
actions and termination benefits had been communicated to the
affected employees, in accordance with EITF 94-3. These
actions resulted in a net reduction of worldwide headcount by
49. Cash restructuring charges recorded in connection with these
actions totaled approximately $682,000, which consisted solely
of severance-related payments, health care costs and
severance-related tax payments. Of these restructuring charges,
approximately $398,000 were paid during the three-month period
ended June 30, 2002, and the remainder of approximately
$284,000 was paid during the three-month period ended
September 30, 2002.

During 2001, in accordance with Statement
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of,
management reviewed the goodwill and other intangible asset
balances for impairment as Hatchers operating results and
forecasted future results indicated the carrying amount of these
assets may not be recoverable. The impairment analysis was based
on projected undiscounted cash flows, which were no longer
deemed adequate to support the carrying value of goodwill and
other intangible assets associated with the business.
Consequently, in the fourth quarter of 2001, Corillian
determined that the goodwill and other intangible assets were
impaired and Corillian recorded a $16.8 million impairment
of the entire goodwill and other intangible asset balance.



|     |                           
|---- | --------------------------
|(10) | Related Party Transactions

In January 2001, Corillian extended a $300,000
short-term loan to Alex P. Hart to assist him in purchasing a
house in Portland, Oregon while he was in the process of selling
his house in Bellevue, Washington and relocating to Portland to
serve as Corillians President. The loan is interest-free
and is secured by all assets of Mr. Hart. As of
December 31, 2003, Mr. Hart has paid $175,000 of the
principal amount of the note, and $125,000 of the principal
amount remains outstanding.

In connection with Ted Spooners departure
as Chief Executive Officer in October 2002, Corillian entered
into an agreement with Mr. Spooner that required Corillian
to pay Mr. Spooner a severance payment of approximately
$600,000. $300,000 of expense related this severance agreement
was recognized as general and administrative expense during the
three-month period ended March 31, 2003. The remaining
$300,000 of expense related to this severance agreement was
recognized as general and administrative expense during the
three-month period ended December 31, 2002. In April 2003,
Corillian paid the severance payment to Mr. Spooner.
Effective May 7, 2003, Mr. Spooner is neither a
director nor employee of Corillian.

On November 14, 2003, Steve Sipowicz stepped
down as Corillians Chief Financial Officer and Secretary.
Mr. Sipowicz will serve as Corillians financial
advisor for a six-month period following his departure.
Mr. Sipowicz will receive $100,000 as severance and $2,000
per month during the period he serves as financial advisor.
Corillian recorded a charge of $100,000 related to
Mr. Sipowiczs severance agreement as general and
administrative expense during the three-month period ended
September 30, 2003.

F-23



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|     |                                                
|---- | -----------------------------------------------
|(11) | Quarterly Financial Information 
    Unaudited

A summary of quarterly financial information
follows (in thousands, except per share data):

|                                      |  |                    |        |         |  |              |        |             |  |   |        |      |  |   |        |  
|------------------------------------- |  | ------------------ | ------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ | ---- |  | - | ------ | -
|                                      |  |                   
|                                      |  | Quarter Ended 2002
|                                      |  |                   
|                                      |  | March 31           |        | June 30 |  | September 30 |        | December 31
|                                      |  |                    |        |         |  |              |        |            
|Total revenues                        |  | $                  | 10,063 |         |  | $            | 8,981  |             |  | $ | 10,038 |      |  | $ | 10,059 |  
|Gross profit                          |  |                    | 4,740  |         |  |              | 3,887  |             |  |   | 4,984  |      |  |   | 5,108  |  
|Loss from operations                  |  |                    | (3,755 | )       |  |              | (5,736 | )(1)        |  |   | (5,218 | )(2) |  |   | (1,201 | )
|Net loss                              |  |                    | (4,030 | )       |  |              | (6,123 | )           |  |   | (5,639 | )    |  |   | (1,465 | )
|Net loss per share, diluted and basic |  |                    | (0.11  | )       |  |              | (0.17  | )           |  |   | (0.16  | )    |  |   | (0.04  | )

|                                    |  |                    |        |         |  |              |        |             |  |   |        |  |  |   |        | 
|----------------------------------- |  | ------------------ | ------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ |  |  | - | ------ | 
|                                    |  |                   
|                                    |  | Quarter Ended 2003
|                                    |  |                   
|                                    |  | March 31           |        | June 30 |  | September 30 |        | December 31
|                                    |  |                    |        |         |  |              |        |            
|Total revenues                      |  | $                  | 10,848 |         |  | $            | 11,482 |             |  | $ | 11,586 |  |  | $ | 12,216 | 
|Gross profit                        |  |                    | 5,787  |         |  |              | 6,549  |             |  |   | 6,492  |  |  |   | 6,803  | 
|Income (loss) from operations       |  |                    | (7     | )       |  |              | 2,072  |             |  |   | 1,947  |  |  |   | 2,384  | 
|Net income (loss)                   |  |                    | (441   | )       |  |              | 1,794  |             |  |   | 1,649  |  |  |   | 2,124  | 
|Basic net income (loss) per share   |  |                    | (0.01  | )       |  |              | 0.05   |             |  |   | 0.05   |  |  |   | 0.06   | 
|Diluted net income (loss) per share |  |                    | (0.01  | )       |  |              | 0.05   |             |  |   | 0.04   |  |  |   | 0.05   | 



---

The four quarters for net income (loss) per share
may not add for the year because of the different number of
shares outstanding during the year.

|    |                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------
|(1) | Corillian recorded a restructuring charge of
    approximately $682 during the quarter ended June 30, 2002.                   
|   
|(2) | Corillian recorded a litigation settlement charge
    of approximately $2,580 during the quarter ended
    September 30, 2002.

F-24