##### Table of Contents









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,
2002

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
$47,318,400 as of June 28, 2002, based upon the closing
price on the Nasdaq Stock 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 have been excluded in that such persons
may under certain circumstances be deemed to be affiliates. This
determination of executive officer or affiliate status is not
necessarily a conclusive determination for other purposes.

36,289,275 shares of Common Stock were
issued and outstanding as of March 14, 2003.

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 7, 2003, 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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TABLE OF CONTENTS



|                              |                                                                                               |                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------- |  |  |  |  |  | 
|PART I                       
|                              | Item 1. Business                                                                             
|                              | Item 2. Properties                                                                           
|                              | Item 3. Legal Proceedings                                                                    
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                      
|                              | Item 5. Market for the Registrants Common Stock and Related Shareholder Matters             
|                              | Item 6. Selected Financial Data                                                              
|                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                           
|                              | Item 8. Financial Statements and Supplementary Data                                          
|INDEX TO FINANCIAL STATEMENTS
|                              | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
|PART III                     
|                              | Item 10. Directors and Executive Officers of the Registrant                                  
|                              | Item 11. Executive Compensation                                                              
|                              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                              | Item 13. Certain Relationships and Related Transactions                                      
|                              | Item 14. Controls and Procedures                                                             
|PART IV                      
|                              | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES                   
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS          
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS
|EXHIBIT 23.1                 
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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FORM 10-K

TABLE OF CONTENTS

|         |  |                                                                                           |  |  |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  |  | -- | 
|PART I  
|Item 1.  |  | Business                                                                                  |  |  | 2  | 
|Item 2.  |  | Properties                                                                                |  |  | 20 | 
|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              |  |  | 21 | 
|Item 6.  |  | Selected Financial Data                                                                   |  |  | 21 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |  | 22 | 
|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 | 
|        
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |  | 33 | 
|Item 11. |  | Executive Compensation                                                                    |  |  | 34 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |  | 34 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |  | 35 | 
|Item 14. |  | Controls and Procedures                                                                   |  |  | 35 | 
|        
|PART IV 
|Item 15. |  | Financial Statements, Financial Statement
    Schedules, Exhibits and Reports on Form 8-K |  |  | 36 | 

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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

We are a leading provider of solutions that
enable banks, brokers, financial portals and other financial
service providers to rapidly deploy Internet-based financial
services. Our 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, web content
management and online customer relationship management. Our
Corillian Voyager Standard Edition (SE) is a packaged Internet
banking solution tailored to the specific needs of small to
mid-sized financial institutions looking for the same
scalability and reliability of Corillian Voyager in a more
rapidly deployable, economical solution. Our solutions integrate
into existing database applications and systems and enable our
customers to monitor transactions across all systems in real
time. Our solutions are also designed to scale to support
millions of users. Our current Corillian Voyager customers
include Chase Manhattan Bank, Bank One, Wachovia Bank and
SunTrust Bank.

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, we believe 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 for 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 online brokers and
financial portals have the technical skills and resources to
develop and deploy Internet finance solutions, they are subject
to significant time-to-market competitive pressures and seek to
maintain their focus on their core competencies. 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

We are 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.
Our solutions include comprehensive suites of software that are
combined with our 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 we can provide on a hosted basis or which can run on our
customers premises. Corillian Voyager integrates with our
customers existing databases and systems and enables them
to monitor transactions across all systems in real time. We have
developed software applications for Internet banking, electronic
bill presentment and payment, targeted marketing, data
aggregation, web content management and online customer
relationship management. We can provide our customers with
wireless delivery capabilities for all of these applications.

Corillian Voyager SE is a packaged Internet
banking solution tailored to the specific needs of small to
mid-sized financial institutions looking for the same
scalability and reliability of Corillian Voyager in a more
rapidly deployable, economical solution. Corillian Voyager SE
includes all of the applications available with Corillian
Voyager but is installed in a more packaged manner to remove
some of the expense and complexity associated with a fully
customized solution. Corillian Voyager SE can be connected to a
variety of host systems in as little as 60 to 90 days and
involves significantly less customization than the Corillian
Voyager platform. Corillian Voyager SE can be hosted in
Corillians state-of-the-art data center in Oregon or can
run on our customers premises.

We believe our products and services provide the
following benefits to our customers:

Accelerated Time to
Market.Using the Corillian Voyager
platform or Corillian Voyager SE, 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, we provide comprehensive
systems integration and implementation services and customer
support to complement the flexible architecture of our solutions.

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

Flexibility and
Control.We offer our customers the
option of hosting the Corillian Voyager and Corillian Voyager SE
platforms on their own premises or having the solutions hosted
in our managed facility. Our customers may request that we host
their solutions deployment because they lack sufficient
resources or the appropriate systems to host the solutions on
their premises. In addition, our customers can reduce their
information technology costs by outsourcing application hosting
services with us. We offer customers the opportunity to transfer
operation of their solutions to their own premises at any time.
This flexibility provides

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our customers with the option to gain operational
control of a deployment over time as their needs and desires
change.


Advanced Technology and Continued
Innovation.We believe our solutions
provide the only comprehensive solution with a broad range of
retail applications that can be delivered on the desktop or by
wireless access. We offer certified Internet financial
applications using the Open Financial Exchange data standard,
and we have helped to define industry standards such as
Microsofts Distributed interNet Applications Architecture
for Financial Services.

Reduced Cost of Internet
Operations.Our products lower the
costs associated with our customers Internet operations
primarily by reducing the cost of internal development. Our
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

Our objective is to be the leading global
provider of Internet finance solutions to both traditional and
emerging Internet financial service providers. To that end, we
seek to establish Corillian Voyager and Corillian
Voyager SE as the platforms of choice for Internet finance.
To achieve this objective, we intend to pursue the following
strategies:

Increase Market
Share.To date, we have focused our
sales and marketing efforts to target the largest financial
service providers. We intend to continue targeting large,
industry-leading financial service providers by increasing our
sales and marketing efforts. We have successfully developed
other markets, including small to mid-size financial
institutions, insurance companies and brokerages, and we intend
to continue to focus our efforts on expanding our penetration of
these markets.

Expand Breadth of Product and Service
Offerings.Our 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,
small business banking, data aggregation, online customer
relationship management, web content management and access to
wireless devices like the Palm VII. We intend to expand our
product offerings to include new features, such as wealth
management and call center management.

Leverage and Expand Strategic
Relationships.We intend to leverage
our relationships with leading systems integrators and
value-added resellers to extend our reach and provide our
customers with more comprehensive, customized solutions. We
intend to continue to expand and build additional relationships
with value-added resellers. In addition, we believe that forging
relationships with key technology vendors is critical to
delivering a comprehensive solution to financial service
providers. Our strategic partners include Microsoft,
Hewlett-Packard and NCR Corporation. We intend to develop
additional relationships to expand the scope of our
functionality, and for co-marketing and distribution purposes.
In 2002, we closed our office in London, England, and elected to
pursue international sales primarily through strategic partners
and value-added resellers.

Collaborate with Technology
Leaders.Our products and services
adhere to existing industry standards and have been designed to
meet the openness and scalability required of Internet
solutions. We 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. We intend to continue investing in research and
development to meet the needs of our customers as they evolve
their Internet offerings.

Products and Services

Our 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. We also offer a variety of services to support our
customers throughout the process of implementing and maintaining
our solutions.

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| |                                                  
| | -------------------------------------------------
| | Voyager  The Operating System
    for eFinanceTM

Corillian Voyager.Corillian Voyager is a software
platform upon which we have built a menu of applications, all of
which we can provide on a hosted basis or which can run on our
customers premises. Corillian Voyager has been designed to
be highly scalable to meet the evolving needs of our customers.
Independent laboratory test results indicate that Corillian
Voyager can support Internet banking programs for more than five
million users. In addition, Corillian Voyager has been designed
using universal standards, including eXtensible Markup Language
for communication, Open Financial Exchange for financial
transactions, and Microsofts Distributed interNet
Applications Architecture for Financial Services for
interoperability. This architecture enables our customers to
deploy new Internet-based financial services by adding
applications to our platform at any time and by integrating
future applications to any Internet connected point-of-presence.

Corillian Voyager SE.Corillian Voyager SE is a packaged
Internet banking solution tailored to the specific needs of
small to mid-sized financial institutions looking for the same
scalability and reliability of Corillian Voyager in a more
rapidly deployable, economical solution. Corillian Voyager SE
applications include all applications available within the
Corillian Voyager platform but are installed in a more packaged
manner to remove some of the expense and complexity associated
with a fully customized solution. Corillian Voyager SE can be
connected to a variety of host systems in as little as 60 to
90 days and involves less customization than the Corillian
Voyager platform. Corillian Voyager SE can be hosted in
Corillians state-of-the-art data center in Oregon or on
our customers premises.



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

Consumer Banking.Our Consumer Banking application
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.

Corillian Payments.Our Corillian Payments application
enables financial service providers to offer their customers
electronic bill payment services and to deliver bills to their
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 or
Metavante. By consolidating all bill presentment and payment
options, our solution 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.Our OFX Publishing
application 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 of our solutions was
designed using the Open Financial Exchange data standard. This
data specification streamlines the process financial service
companies must employ to connect with financial data centers and
to interface with personal financial management software.

Customer Relationship
Management.Our Relationship Manager,
Report Manager and Targeted Marketing applications provide
financial institutions with the tools to gather, organize and
capitalize on information collected within the Voyager system
and to monitor and administer other applications in the Voyager
system. Using these applications, 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

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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. Our applications can react
immediately to customer profile changes and terminate messages
to customers who have already purchased the marketed product.


Small Business
Banking.Our Small Business Banking
application enables financial institutions to offer their small
business customers secure, real-time access to account history
and the ability to conduct cash management functions through an
Internet browser or accounting packages like QuickBooks.
Businesses can control access to business banking and account
features to provide financial and audit controls for their staff
and can reconcile accounts instantly.

Corillian OneSource Register.Our Corillian OneSource Register (OSR)
application 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.

Corillian Personalization
Manager.Corillian Personalization
Manager provides financial institutions with a complete set of
presentation layer tools that enable rapid and easy
administration of their websites. Corillian Personalization
Manager enables the integration of different feeds of content
from different business sites and applications, either within a
financial institution or from third parties. Financial
institutions can also deliver personalized content to consumers
based on their profile information. This can include different
content for different consumers or consumer segments, as well as
a selection of different presentation themes. In addition,
consumers can personalize their websites by choosing content and
placing it on the page in the order they would like to view it
and by choosing different website presentation themes.

Certified Solutions.We seek to provide our customers with a comprehensive solution
for their Internet finance initiatives. Our 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. Voyager-Certified Solutions are software
packages developed by our technology partners for integration
into the Corillian Voyager platform. 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 our certification testing, so our customers are able to
seamlessly integrate best-of-breed solutions into their Internet
platforms.



| |                      
| | ---------------------
| | Professional Services

We offer a package of professional services
designed to fulfill our customers needs throughout the
process of product design, implementation and operation. Our
services include:

Implementation
Services.Our implementation services
begin during the pre-sales stage. Our 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. We then develop a site survey and a project plan
recommendation. Once we are chosen to install our applications,
our 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, we write 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. We also customize our Internet
templates to provide our customers with a user interface that
complements its brand recognition, design elements, color
schemes and corporate logos. The implementation process is
generally

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completed in 90 to 270 days, depending on
the complexity of the project. The fees for our 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.We
offer hosting services to our customers that prefer to have us
handle all of their Internet-based financial systems. Under this
service option, the Corillian Voyager servers reside at our
managed facility, and our staff monitors and maintains the
servers. Our services include weekly log auditing, installation
and configuration of servers, and staff to help our customers
manage system performance and daily operations. We charge 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 our staff, our customers can select and
design an electronic commerce strategy. In addition to
consulting with our customers on the range of products and
services available to them, we help our customers with product
and Internet site design. For customers that lack in-house
network security professionals, we help develop the appropriate
network and security protection features to ensure a secure
system.

Support Services.We
offer several levels of technical and maintenance support for
our customers. These levels are designed to meet our
customers needs and those of their customers. Our support
fees vary based on which level of support the customer selects.
In addition to technical support, we provide annual maintenance
support for each customer. These maintenance services entitle
the customer to updates and modifications of our solutions.

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

Customers

We target 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. We have provided our
solutions primarily to two major industry groups 
large financial institutions (primarily banks) and large credit
unions. In 2002, one customer represented approximately 11% of
our consolidated revenue.

Systems and Technology



| |                   
| | ------------------
| | The Voyager System

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

The three layers of the Voyager application
server 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.

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| |                     
| | --------------------
| | Corillian Technology

Our 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 we use to provide
these benefits include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Scalable Framework.Each of the layers of the Voyager application server is a
    software component that can be replicated within the Voyager
    configuration for redundancy and scalability. By adding an
    incremental component, work is distributed among servers across
    a network. Internal load balancing is managed by the Voyager
    Transaction Request Broker, a transaction monitor technology.                                                                                                                                                                                                                                                                                                
|
| |  | Flexible Interfaces.Our 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.
    Our 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.Our solutions use
    Microsofts Distributed interNet Applications Architecture
    for Financial Services, a standards-based framework. This
    architectural standard allows our applications to interoperate
    with other application servers, such as teller and call center
    platforms and automated teller machine delivery systems.                                                                                                                                                                                                                                                                                                                                        
|
| |  | Open Financial Exchange Data
    Standard.Our 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

We have 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 us address new vertical
markets and market segments and to enable us to provide our
customers with access to additional resources and technology to
enhance and customize our solutions. Some of our more
significant strategic partners include:



| |          
| | ---------
| | 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 our primary partner for remittance processing and
was a developer with Intuit and Microsoft of the Open Financial
Exchange data standard. We have developed a number of Voyager
interfaces to CheckFree systems and resell a bill payment
service provided by CheckFree called WebPay.



| |          
| | ---------
| | 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 financial portal, MoneyCentral. 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 Server network
operating system, and .NET, Microsofts platform for XML
web services. Corillian also became the preferred reseller for
Microsofts new Money Explorer and MSN Money Professional
products and services.

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| |    
| | ---
| | NCR

In February 2001, we entered into an agreement
with NCR that provides for NCR to use the Corillian Voyager
platform as its core consumer banking component for mid- to
large-sized financial institutions. NCR is a leader in providing
Relationship TechnologyTM solutions to customers
worldwide in the retail, financial, communications,
manufacturing, travel and transportation, and insurance markets.
NCR will customize 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, Md.
and Dallas, Texas.



| |       
| | ------
| | Yodlee

In July 2000, we entered into an agreement with
Yodlee to develop and market a product that integrates our
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 our Corillian Voyager platform.

Sales and Marketing

We sell our software and services primarily
through our direct sales organization. As of December 31,
2002, our direct sales force consisted of 8 personnel
operating domestically and 2 personnel operating
internationally out of a total of 23 personnel in sales.
Our direct sales efforts have historically been focused on
domestic financial service providers, such as banks, insurance
companies and credit unions. We complement our direct sales
efforts through joint sales and marketing arrangements with
Internet-based technology vendors, such as NCR.

Our sales process features a multi-tiered
approach that requires the involvement of our field sales
personnel, our technical professionals and members of our senior
management. Our sales process simultaneously targets senior
business executives, personnel responsible for Internet-based
initiatives and systems engineers. We employ this multi-leveled
approach to accelerate the purchasing cycle. For
Voyager SE, which is targeted at small to mid-sized
financial institutions, we rely on a combination of
telemarketing, Internet-based marketing and direct sales.

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

Research and Development

As of December 31, 2002, our product
development staff consisted of 35 engineers out of a total
of 49 personnel in research and development. Their
development efforts are focused on:



| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhancements to Existing Products and
    Services.We continue to update and
    modify our solutions to enhance quality, performance and
    scalability, to extend functionality to address our
    customers changing needs, and to take advantage of
    improved technology within our industry.                                                                                  
|
| |  | Developing New Products and
    Services.We are working to expand our
    product and service offerings. We intend to expand our product
    offerings to include new retail functions, such as wealth
    management and corporate cash management.                                                                                                                                    
|
| |  | Participating in Technology Testing and
    Collaboration.We have 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.

9



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Competition

The market for providing solutions to the
Internet financial services industry is highly competitive, and
we expect that competition will intensify in the future. We
compete with a variety of companies in various segments of the
Internet-based financial services industry, and our competitors
vary in size and in the scope and breadth of the products and
services they offer. In the area of Internet consumer banking,
we primarily compete with other companies that provide
outsourced Internet finance solutions to large financial
institutions, including S1 and Financial Fusion. Within this
market segment, we also compete 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 us
for large financial institutions and compete with us 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. Our 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,
Magnet and Politzer & Haney.

Our applications also compete with companies that
offer solutions with similar functionality to our solutions,
such as Broadvision and Vignette for targeted marketing
solutions; Just-in-Time for electronic bill presentment and
payment solutions; and Yodlee for aggregated financial data
solutions. We also compete with businesses delivering financial
services through Internet portals, banks marketing their own
Internet-based financial services, and non-bank financial
institutions, such as brokerages and insurance companies,
seeking to expand the breadth of their Internet product and
services offerings.

We also face competition from our customers and
potential customers who develop their own Internet finance
solutions. Rather than purchasing Internet finance solutions and
services from third-party vendors, our customers and potential
customers could develop, implement and maintain their own
services and applications. We give no assurance that these
financial service providers will perceive sufficient value in
our products and services to justify investing in them.

We believe that our ability to compete
successfully depends upon a number of factors, including:



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

We expect competition to increase significantly
as new companies enter our 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 us.

Intellectual Property

Although we believe our success is more dependent
upon our technical expertise than our proprietary rights, our
future success and ability to compete is dependent in part upon
our proprietary technology. We have received registrations for
Corillian and our logo as our trademarks. None of our technology
is patented,

10



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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 our technologies and
business methods for patentability. We have several patent
applications pending in the United States Patent and Trademark
Office but have not been issued any patents.


We rely on a combination of contractual rights
and copyright, trademark and trade secret laws to establish and
protect our proprietary technology. We require all of our
employees to sign an assignment of patents and inventions
agreement and generally enter into confidentiality agreements
with our employees, consultants, resellers, customers and
potential customers. We also limit access to and distribution of
our source code, and further limit the disclosure and use of
other proprietary information. We do not assure you that the
steps taken by us in this regard will be adequate to prevent
misappropriation of our technology or that our competitors will
not independently develop technologies that are substantially
equivalent or superior to our technology. We also do not assure
you that we will not infringe upon the intellectual property
rights of third parties.

Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise
obtain or use our products or technology. In addition, the laws
of some foreign countries do not protect our proprietary rights
to the same extent as do the laws of the United States. The
costs of defending our proprietary rights or claims that we
infringe 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 our
solutions. We believe our business does not currently subject us
to any of these rules or regulations that would adversely affect
our business. However, these rules and regulations are new and
may be interpreted to apply to our business in a manner that
could make our business more onerous or costly.

As the Internet continues to evolve, we expect
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 us, some laws,
rules or regulations applicable to financial service activities
could render our 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. Our customers must ensure our services and related
products work within the extensive and evolving regulatory
requirements applicable to them. We 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 our business operations, such as requiring
us to comply with data, record keeping and other processing
requirements. Any of these laws, rules or regulations, or new
laws, rules and regulations affecting our customers
businesses, could lead to increased operating costs and could
also reduce the convenience and functionality of our 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 our business,
financial condition and operating results.

Backlog

As of December 31, 2002, we had a backlog of
unfilled orders of $38.1 million, as compared to a backlog
of $29.0 million as of December 31, 2001. Backlog
represents contractual customer commitments, including fees for
licenses, professional services, maintenance, hosting and
subscriptions. Backlog is not necessarily indicative of revenue
to be recognized in any given future period. For example, some
of the fees reflected in

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backlog may be accounted for as funded research
and development, depending on the nature of the work to be
performed by us. We expect that a majority of our backlog as of
December 31, 2002 will be filled during fiscal 2003.
However, there are many factors that would impact our filling of
backlog, such as our progress in completing projects for our
customers, our customers meeting anticipated schedules for
customer-dependent deliverables and our customers
satisfying their contractual obligations. We provide no
assurances that any portion of our backlog will be filled during
any fiscal year or at all or that our backlog will be recognized
as revenue in any given period.


Employees

As of December 31, 2002, we had a total of
246 full-time employees, including 131 in operations, 8 in
marketing, 23 in sales, 49 in research and development and 35 in
general and administration. None of our work force is unionized.
We have not experienced any work stoppages and consider our
relations with our 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 we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair
our business operations. If any of the following risks actually
occur, our business, financial condition and operating results
could be materially adversely affected.



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | We May Need to Raise Additional Financing
    to Fund our Operations and May Not Be Able to Raise Funds on
    Beneficial Terms or at All

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



| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We Have a History of Losses, We Expect to
    Continue to Incur Losses and We May Not Achieve or Maintain
    Profitability

We may never generate sufficient revenues for
profitability. We have incurred substantial net losses in every
quarter since we began operations, and we expect that we will
continue to lose money at least through the first half of 2003.
We incurred a net loss of $17.3 million during the year
ended December 31, 2002, and as of December 31, 2002,
we had an accumulated deficit of $113.0 million. If we do
not sign contracts with new customers or provide additional
software and services to existing customers, we will incur
significant operating losses in future quarters. We may decide
that it is necessary to further reduce our personnel or other
expenses to maintain our operations, and such reductions may
reduce our ability to sell our products and services.



| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We Have a Limited Operating History And Are
    Subject to the Risks that Our Solutions Are Not Adopted by
    Financial Service Providers or Used by Consumers and that We
    Change Product and Service Strategies

We were incorporated in April 1997. Accordingly,
we have a limited operating history with which you can evaluate
our business and prospects. Our business is new and will not be
successful unless consumers adopt wide usage of Internet-based
financial services and financial service providers choose our
solutions to deliver those services. In addition, our prospects
must be considered in light of the risks and uncertainties
encountered by early stage companies in new and rapidly evolving
markets such as the Internet-based financial services market. We
may decide to change product and service strategies, so you
cannot rely upon us to continue any product or service strategy
for any length of time.

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

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



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | 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 our common stock:



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | variations in our actual and anticipated
    operating results;                                      
|
| |  | changes in our earnings estimates by analysts;                                                       
|
| |  | our failure to meet analysts performance
    expectations or our announced performance expectations;
|
| |  | our 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 our
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 our common stock.

As of March 5, 2003, the 52-week high and
low trading prices of our common stock, as reported on Nasdaq,
were $3.48 and $0.61, respectively.



| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our 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 our products and
services are often subject to delays because of our
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, our prospective customers
decision-making processes require us to provide a significant
amount of information to them regarding the use and benefits of
our products. We may expend substantial funds and management
resources during a sales cycle and fail to make the sale.



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Facility and Operations May Be Disabled
    by A Disaster Or Similar Event, Which Could Damage Our
    Reputation And Require Us to Incur Financial Loss

All of our communications and network equipment
related to our operations are currently located in Hillsboro,
Oregon. We do not currently have an alternate data center or
facility that can provide system redundancy or emergency backup
capabilities. We cannot assure that our data center and facility
will operate after a disaster. In addition, we may experience
problems during the period following a disaster in
reestablishing our systems and infrastructure. Although we have
a disaster recovery plan in place, we do not currently have the
technology or facilities to instantly recover full Internet
services if our facility is not

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functioning. A disaster, such as a fire, an
earthquake, a terrorist attack or a flood, at our facility could
result in failures or interruptions in providing our products
and services to our customers. In addition, our systems are
vulnerable to operational failures, losses in power,
telecommunications failure and similar events. We have
contracted to provide a certain level of service to our
customers and, consequently, a failure or interruption of our
systems in the future could cause us to refund fees to some of
our customers to compensate for decreased levels of service.




| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We May Not Achieve Anticipated Revenues if
    We Do Not Successfully Introduce New Products or Develop
    Upgrades or Enhancements to Our Existing Products

To date, we have derived substantially all of our
revenues from licenses and professional and support services
related to our Corillian Voyager product and its related
applications. We expect to add new products by acquisition,
partnering or internal development and to develop enhancements
to our 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 our relationship with our
customers or partners and further limit market acceptance of our
products and services. If we are unable to ship or implement new
or enhanced products and services when planned, or fail to
achieve timely market acceptance of our new or enhanced products
and services, we may lose sales and fail to achieve anticipated
revenues.



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If We, or Our Implementation Partners, Do
    Not Effectively Implement Our Solutions at Financial Service
    Providers Facilities, We May Not Achieve Anticipated
    Revenues or Gross Margins

Our solutions are complex and must integrate with
complex data processing systems at our customers
facilities. Implementing our solutions at these facilities is a
lengthy process, generally taking between 90 and 270 days
to complete. In addition, we generally recognize revenue on a
percentage completion basis, so our revenue is often dependent
on our ability to complete implementations within the time
periods that we establish for our projects. We rely on a
combination of internal implementation teams and outsourced
implementation teams for our implementations. If these teams
encounter significant delays in implementing our solutions for a
customer or fail to implement our solutions effectively or at
all at a customers facility, we may not be able to
recognize any revenue from the contract or be required to
recognize negative revenue from the contract if our revised
project estimates indicate that we recognized excess revenues in
prior periods. In addition, we may incur monetary damages or
penalties if we are not successful in completing projects on
schedule.



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If We Do Not Develop International
    Operations as Expected or Fail to Address International Market
    Risks, We May Not Achieve Anticipated Sales Growth

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

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| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | 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 we fail to address these risks, our results of
operations and financial condition may be adversely affected.



| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Market For Internet-Based Financial
    Services Has Only Recently Begun to Develop, and if Consumers Do
    Not Widely Use Internet-Based Financial Services, Our Results of
    Operations and Financial Condition Could be Harmed

We cannot predict the size of the market for
Internet-based financial services, the rate at which that market
will grow, or whether consumers will widely accept
Internet-based financial services such as those enabled by our
products. Any event that results in decreased consumer use of
financial services in general and Internet-based financial
services in particular could harm our results of operations and
financial condition. We expect to continue to depend on
Internet-based financial products and services for substantially
all of our revenues in the foreseeable future. However, the
market for Internet-based financial services has only recently
begun to develop. Critical issues concerning commercial use of
the Internet for financial services  including
security, reliability, privacy, ease and cost of access, and
quality of service  are still evolving. Changes in
economic conditions and unforeseen events, including recession,
inflation or other adverse occurrences, may result in a decline
in the use of financial services in general, and less consumer
demand for Internet-based financial products and services in
particular, each of which could have a material adverse effect
on our results of operations and financial condition.



| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition in the Market For
    Internet-Based Financial Services is Intense and Could Reduce
    Our Sales and Prevent Us From Achieving
    Profitability

The market for Internet-based financial services
is new, intensely competitive, highly fragmented and rapidly
changing. We expect competition to persist and intensify, which
could result in price reductions, reduced gross margins and loss
of market share for our products and services. We compete with a
number of companies in various segments of the Internet-based
financial services industry, and our competitors vary in size
and in the scope and breadth of the products and services they
offer. Our 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. We also compete 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 our industry, many
companies are consolidating, creating larger competitors with
greater resources and a broader range of products.

Some of our applications also compete with
companies that offer solutions with similar functionality to our
solutions, such as Broadvision and Vignette for targeted
marketing solutions, Just-in-Time for electronic bill
presentment and payment solutions, and Yodlee for aggregated
financial data solutions. We also compete 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, our
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 our solutions.

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Many of our competitors and potential competitors
have a number of significant advantages over us, including:



| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a longer operating history;                                                                                                                                                                                     
|
| |  | more extensive name recognition and marketing
    power;                                                                                                                                                        
|
| |  | preferred vendor status with our 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.

Our competitors may also bundle their products in
a manner that may discourage users from purchasing our 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.



| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A Small Number of Customers Account For a
    Substantial Portion of Our Revenues in Each Period; Our Results
    of Operations and Financial Condition Could Suffer if We Lose
    Customers or Fail to Add Additional Customers to Our Customer
    Base

We derive a significant portion of our revenues
from a limited number of customers in each period. Accordingly,
if we fail 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 we fail to replace the contract with
new business, our revenues would be adversely affected. During
the fiscal year ended December 31, 2002, one customer
accounted for approximately 11% of our consolidated revenues. We
expect that a limited number of customers will continue to
account for a substantial portion of our revenues in each
quarter in the foreseeable future. If a customer terminates a
Voyager contract with us early, we 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.



| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | Consolidation in the Financial Services
    Industry Could Reduce the Number of Our Customers and Potential
    Customers

As a result of the mergers and acquisitions
occurring in the banking industry today, some of our existing
customers could terminate their contracts with us and potential
customers could break off negotiations with us. 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 us for some other reason, which could
result in the new entity terminating the relationship with us.

In addition, an existing or potential customer
may be acquired by or merged with one of our existing customers
that licenses our 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 our
anticipated revenue from the acquired customer.

One of our largest customers, Wachovia
Corporation, was acquired by First Union. The combined entity
has not decided to terminate its relationship with us but may in
the future decide to terminate its relationship with us. This
would substantially reduce the likelihood that we would obtain
future revenue from this customer.



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

Our success depends largely on the continued
contributions of our key management, technical, sales and
marketing and professional services personnel, many of whom
would be difficult to replace. If one or more of our 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. We do not have employment agreements
with our senior managers or other key personnel, except
Alex P. Hart.

16



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##### Table of Contents





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

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



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issue stock that would dilute our current
    shareholders percentage ownership;                                                                
|
| |  | incur debt and assume liabilities; and                                                                                                           
|
| |  | incur amortization expenses related to intangible
    assets or incur large and immediate write-offs of goodwill and
    other intangible assets.

Future acquisitions also could pose numerous
additional risks to our operations, including:



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



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

We have 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 us, with or
without merit, could be costly and time-consuming to defend,
divert our managements attention, or cause product delays.
We expect 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 our industry grows and the functionality of products
overlaps. If our products were found to infringe a third
partys proprietary rights, we could be required to enter
into royalty or licensing agreements in order to be able to sell
our products. Royalty and licensing agreements, if required, may
not be available on terms acceptable to us 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 our current or potential future products infringe
their intellectual property.



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Network or Internet Security Problems Could
    Damage Our Reputation and Business

We have in the past and might in the future
experience security incidents involving actual or attempted
access to our customers systems by unknown third parties.
As a result of these types of incidents, we may incur
contractual or other legal liabilities. Security risks may also
deter financial service providers from purchasing our products
and deter consumers of financial services from using our
products or services. We rely 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. Our 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 our Internet security
measures inadequate.

17



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Someone who is able to circumvent security
measures could misappropriate proprietary information or cause
interruptions in our Internet operations. We 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 our services, any of which could harm our business.



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We May Incur Substantial Losses From
    Non-Operating Activities, Such as Our Minority Investments in
    Other Companies, or Lose the Entire Amount We Have Invested in
    Other Companies

In the second fiscal quarter of 2000, we made a
$3.0 million minority investment in e-Banc, LLC, a Delaware
limited liability company. We have contributed an additional
$500,000 in cash to e-Banc during the first quarter of 2003. We
are currently obligated to contribute an additional $500,000 in
cash to e-Banc and expect to make this contribution during the
second quarter of 2003. Under applicable accounting rules, our
proportionate share of any losses incurred by e-Banc will be
reflected on our statement of operations as a loss from
non-operating activities. These losses may be substantial.
During the fiscal years ended December 31, 2000, 2001 and
2002, we incurred approximately $418,000, $592,000 and $916,000,
respectively, in losses from non-operating activities as a
result of our investment in e-Banc. We may lose a portion or all
of our investment in e-Banc.

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



| |                                                        
| | -------------------------------------------------------
| | New Technologies Could Render Our Products
    Obsolete

If we are unable to develop products that respond
to changing technology, our 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 our products and could render our products
obsolete and unmarketable. Our Voyager solutions were designed
to run on servers using the Windows NT, Windows 2000 and Windows
..NET operating systems. If a new software language or operating
system becomes standard or is widely adopted in our industry, we
may need to rewrite portions of our products in another computer
language or for another operating system to remain competitive.



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

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



| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | Restrictions on Export of Encrypted
    Technology Could Cause Us to Incur Delays in International
    Sales

Our software uses encryption technology, the
export of which is regulated by the United States government. If
the United States adopts new legislation restricting export of
software and encryption technology, we may experience delay or
reduction in shipment of our products internationally. Existing
or future export regulations could limit our ability to
distribute our products outside of the United States. We cannot
effectively control the unauthorized distribution of software
across the Internet. A delay or reduction in the shipment of our
products internationally or the unauthorized distribution of or
software across the Internet could cause our results from
operations and financial condition to suffer.

18



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

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



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

Since our products are used to deliver services
that are integral to our customers businesses, errors,
defects or other performance problems could result in financial
or other damages to our 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 our license agreements.



| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If We Are Unable to Protect Our
    Intellectual Property, We May Lose a Valuable Competitive
    Advantage or be Forced to Incur Costly Litigation to Protect Our
    Rights

Our future success and ability to compete depends
in part upon our proprietary technology, but our protective
measures may prove inadequate to protect our proprietary rights.
We rely on a combination of copyright, trademark, patent and
trade secret laws and contractual provisions to establish and
protect our proprietary rights. None of our technology is
patented. We have obtained federal trademark registration for
some of our marks. We have applied for, but have not yet
obtained, patents on technology we have developed. If we do not
receive approval for these patents, we may be unable to use this
technology without restriction or prevent others from using this
technology.

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

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



| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Increasing Government Regulation of the
    Internet and the Financial Services Industry Could Limit the
    Market For Our Products and Services, Impose on Us Liability For
    Transmission of Protected Data and Increase Our
    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 our
solutions. We believe our business does not currently subject us
to any of these rules or regulations that would adversely affect
our business. However, these rules and regulations are new and
may be interpreted to apply to our business in a manner that
could make our business more onerous or costly.

As the Internet continues to evolve, we expect
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 us, some laws,
rules or regulations applicable to financial service activities
could render our 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

19



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levels of governmental supervision. Our customers
must ensure our services and related products work within the
extensive and evolving regulatory requirements applicable to
them. We 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 our business
operations, such as requiring us to comply with data, record
keeping and other processing requirements. Any of these laws,
rules or regulations, or new laws, rules and regulations
affecting our customers businesses, could lead to
increased operating costs and could also reduce the convenience
and functionality of our 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 our business,
financial condition and operating results.






Item 2.     Properties


We lease approximately 122,000 square feet at our
corporate headquarters in Hillsboro, Oregon, and the lease for
this space expires in October 2007. We also lease approximately
22,000 square feet in another office building in Beaverton,
Oregon, of which approximately 1,000 square feet are currently
sub-leased, and the lease for this space expires in February
2005. From time to time, we lease office space in foreign
countries on a daily or weekly basis. We do not own or lease any
other properties or facilities.






Item 3.     Legal
Proceedings


In April 2000, KeyBank National Association
brought a lawsuit in the Court of Common Pleas in Cuyahoga
County, Ohio against one of Corillians employees, alleging
that the employee violated the terms of confidentiality
agreements with KeyBank and misappropriated trade secrets of
KeyBank and used them in performing work for Corillian.
Corillian investigated the allegations and concluded that the
employee did not use trade secrets or confidential information
in performing any substantial services for Corillian. Corillian
continues to employ this employee. In January 2001, KeyBank
named Corillian as a party to the lawsuit, alleging that
Corillian misappropriated KeyBanks trade secrets and
confidential information and used them in performing work for
some of its customers. KeyBank sought unspecified monetary
damages. Corillian filed a counterclaim against KeyBank,
alleging that KeyBank used proprietary information that
Corillian disclosed to KeyBank when Corillian shared its
technology with them in November 1998. Corillian sought
unspecified monetary damages.

In October 2002, Corillian and KeyBank settled
this dispute. 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 Corillians
common stock, valued at approximately $745,000. Corillian paid
$1.4 million of the cash to KeyBank during the fourth
fiscal quarter of 2003. $250,000 and $175,000 will be paid on
November 16, 2003 and 2004, respectively. Corillian issued
the shares of common stock during the fourth fiscal quarter of
2002. Corillian agreed to allow KeyBank to include its shares in
any registration statements Corillian may file with the
Securities and Exchange Commission during the 12 months
following the date of the settlement. Corillian recorded a
charge of approximately $2.6 million during the three-month
period ended September 30, 2002 related to this settlement.






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


Not applicable.

20



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##### Table of Contents






PART II






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

Our 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, 2001 |  |      |       |     |  |   |      | 
|First Quarter                |  | $    | 14.00 |     |  | $ | 4.81 | 
|Second Quarter               |  | $    | 5.97  |     |  | $ | 2.56 | 
|Third Quarter                |  | $    | 4.72  |     |  | $ | 1.10 | 
|Fourth Quarter               |  | $    | 5.70  |     |  | $ | 1.41 | 
|                            
|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 | 

As of March 14, 2003, our common stock was
held by an estimated 170 shareholders. Brokers and other
institutions hold many of such shares on behalf of shareholders.
There are no restrictions on the payment of dividends.

We have never declared or paid any cash dividends
on our common stock. We currently intend to retain our earnings,
if any, for use in our business and do 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 our audited consolidated
financial statements. The tables shown below represent portions
of our 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 our consolidated

21



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##### Table of Contents



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,                 
|                                               |                   |                                         
|                                               |                   | 1998                                     |        | 1999  |   | 2000 |         | 2001  |   | 2002
|                                               |                   |                                          |        |       |   |      |         |       |   |     
|                                               |                   |                                         
|                                               |                   | (in thousands, except per share amounts)
|Consolidated Statement of Operations
    Data: |                   |                                          |        |       |   |      |         |       |   |      |         |        |   |   |         |        |   |   |         |       
|Revenues                                       |                   | $                                        | 3,393  |       |   | $    | 7,736   |       |   | $    | 30,853  |        |   | $ | 53,848  |        |   | $ | 39,141  |       
|Gross profit                                   |                   |                                          | 1,499  |       |   |      | 1,085   |       |   |      | 8,354   |        |   |   | 23,491  |        |   |   | 18,719  |       
|Loss from operations                           |                   |                                          | (1,927 | )     |   |      | (10,393 | )     |   |      | (35,169 | )      |   |   | (48,998 | )(1)   |   |   | (15,910 | )     
|Net loss                                       |                   |                                          | (1,831 | )     |   |      | (9,994  | )     |   |      | (33,255 | )      |   |   | (49,301 | )      |   |   | (17,257 | )     
|Net loss attributable to common shareholders   |                   |                                          | (1,831 | )     |   |      | (10,096 | )     |   |      | (33,355 | )      |   |   | (49,301 | )      |   |   | (17,257 | )     
|Net loss per share:                            |                   |                                          |        |       |   |      |         |       |   |      |         |        |   |   |         |        |   |   |         |       
|                                               | Basic and diluted |                                          | $      | (0.24 | ) |      | $       | (1.37 | ) |      | $       | (1.33  | ) |   | $       | (1.42  | ) |   | $       | (0.49  | )
|Weighted average shares:                       |                   |                                          |        |       |   |      |         |       |   |      |         |        |   |   |         |        |   |   |         |       
|                                               | Basic and diluted |                                          |        | 7,427 |   |      |         | 7,399 |   |      |         | 25,106 |   |   |         | 34,645 |   |   |         | 35,477 |  



---



|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Corillian recorded restructuring and impairment
    charges of $18,097 during the year ended December 31, 2001.
    See Note 12 to the consolidated financial statements for
    further discussion.

|                                           |  |                |        |      |  |      |         |      |  |      |         |  |  |   |        |  |  |   |        | 
|------------------------------------------ |  | -------------- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                           |  |               
|                                           |  | December 31,  
|                                           |  |               
|                                           |  | 1998           |        | 1999 |  | 2000 |         | 2001 |  | 2002
|                                           |  |                |        |      |  |      |         |      |  |     
|                                           |  |               
|                                           |  | (in thousands)
|Consolidated Balance Sheet Data:           |  |                |        |      |  |      |         |      |  |      |         |  |  |   |        |  |  |   |        | 
|Cash and cash equivalents                  |  | $              | 290    |      |  | $    | 8,502   |      |  | $    | 49,150  |  |  | $ | 15,798 |  |  | $ | 16,721 | 
|Restricted cash                            |  |                |       |      |  |      |        |      |  |      |        |  |  |   |       |  |  |   | 1,003  | 
|Investments                                |  |                |       |      |  |      | 10,357  |      |  |      |        |  |  |   | 1,905  |  |  |   | 910    | 
|Working capital (deficit)                  |  |                | (1,392 | )    |  |      | 16,976  |      |  |      | 41,299  |  |  |   | 17,759 |  |  |   | 5,924  | 
|Total assets                               |  |                | 948    |      |  |      | 25,902  |      |  |      | 101,158 |  |  |   | 50,243 |  |  |   | 37,479 | 
|Debt and capital leases, long-term portion |  |                |       |      |  |      | 177     |      |  |      | 5,265   |  |  |   | 3,730  |  |  |   | 1,600  | 
|Redeemable convertible preferred stock     |  |                |       |      |  |      | 31,501  |      |  |      |        |  |  |   |       |  |  |   |       | 
|Total shareholders equity (deficit)       |  |                | (1,165 | )    |  |      | (11,706 | )    |  |      | 72,593  |  |  |   | 28,104 |  |  |   | 13,121 | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 our
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 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.

22



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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,
web content management and online customer relationship
management. Our Corillian Voyager Standard Edition (SE) is a
packaged Internet banking solution tailored to the specific
needs of small to mid-sized financial institutions looking for
the same scalability and reliability of Corillian Voyager in a
more rapidly deployable, economical solution. 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 scale to support millions of users. Corillians
current Corillian Voyager customers include Chase Manhattan
Bank, Bank One, Wachovia Bank and SunTrust Bank.

Substantially all of Corillians revenue is
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 revenue for licenses and implementation and
custom engineering services using the percentage-of-completion
method. Revenue relating to maintenance services is recognized
ratably over the term of the associated maintenance contract.
Revenue derived from training, 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. For
customers that provide Corillian with significant strategic
advantages, Corillian has in the past and may in the future
charge discounted license fees based on an unlimited number of
end users.

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 hosting. From time to time to
accommodate specific customers, Corillian resells equipment and
materials to these customers, and the expenses associated with
the purchase of this equipment and materials are included within
the cost of revenues in the period in which the resale occurs.

Since incorporation, Corillian has incurred
substantial costs to develop and market its technology and to
provide professional services. As a result, Corillian has
incurred net losses in each quarter of operation since inception
and has accumulated a deficit of $113.0 million as of
December 31, 2002. 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 costs of revenues and operating
expenses as a percentage of revenues, are not necessarily
indicative of its future performance.

During the year ended December 31, 2002, one
customer accounted for approximately 11% of consolidated
revenue, as compared to the years ended December 31, 2000
and 2001, when one customer accounted for approximately 24% and
16%, respectively, of consolidated revenue.

Acquisitions

In November 2000, Corillian acquired Hatcher
Associates Inc. (Hatcher), a software integration,
implementation and consulting company focused on applications
for consumer banking. Under the terms of the Stock Purchase
Agreement dated November 24, 2000, between Hatcher and
Corillian, approximately 1.9 million shares of Corillian
Common Stock were issued or reserved for issuance for all
outstanding shares of Hatcher. Corillian also assumed
outstanding options for 212,700 shares of the common stock of
Hatcher, which converted into fully vested options for 41,581
shares of Corillian common stock. The acquisition was accounted
for using the purchase method of accounting and, accordingly,
the net assets and results of operations of Hatcher have been
included in Corillians consolidated financial statements
since the acquisition

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date. Of the total purchase price of
$25.7 million, approximately $3.7 million was
allocated to tangible assets acquired, offset by approximately
$1.4 million of liabilities assumed, and the remainder was
allocated to intangible assets, including customer relationships
of $2.6 million, workforce of $1.8 million and
goodwill of $19.0 million. The estimate of fair value of
the net assets acquired was based on an independent appraisal
and management estimates. Goodwill and customer relationships
were to be amortized over their estimated useful lives of three
years and workforce was to be amortized over its estimated
useful life of two years. During 2001, Corillian recorded an
impairment charge of approximately $16.8 million, which was
the entire remaining balance of goodwill and other intangible
assets resulting from this acquisition.


In April 2000, Corillian issued an aggregate of
138,638 shares of our Common Stock to acquire InterTech Systems,
Inc. (InterTech), a Minnesota corporation, which was a developer
of data aggregation intellectual property and technology.
Following the provisions of Statement of Financial Accounting
Standards No. 86 (Statement No. 86), Accounting for
the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed,during 2000, Corillian recorded approximately
$1.3 million in research and development expenses
consisting of $1.1 million relating to the 138,638 shares
issued to InterTech and $228,000 for consulting and other
services relating to the acquisition in connection with the
InterTech transaction.

Critical Accounting Policies and
Estimates

Managements discussion and analysis of
financial condition and results of operations is based upon our
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, intangible assets,
income taxes, financing operations, 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 our accounting policies require higher
degrees of judgment than others in their application. These
include software revenue recognition and accruals for loss
contracts and contingencies. Our policy and related procedures
for software revenue recognition are summarized below.

Revenue Recognition.Corillian recognizes revenue 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.
Generally, Corillians software licenses are 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.

Revenue 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, is allocated to the elements using the residual method
specified in SOP No. 98-9. Corillian has determined that
post-contractual customer support, training and hosting services
can be separated from software licenses, implementation and
custom software engineering services because
(a) post-contractual customer support, training 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. 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), and on training based on the price customers are
charged when

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these services are sold separately. Under the
residual method, the full fair value of post-contractual
customer support, training, and hosting services is 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, hosting
and training services is allocated to software license,
implementation and custom software engineering services and
recognized using contract accounting.


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 corporate policy,
approval and monitoring processes. 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 costs and profits billed at any
point in time during a contracts term. The resulting
difference is recognized as deferred revenue or revenue in
excess of billing, respectively. Provisions for estimated losses
on uncompleted contracts are made in the period in which such
losses are determined.

For certain projects, ultimate recoverability is
questionable due to inherent hazards. Pursuant to SOP
No. 81-1, 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 revenue and cost, measured on the
basis of performance during the period, are presented in
Corillians consolidated statements of operations.

Corillian recognizes non-refundable license fees
paid by a reseller that has not demonstrated a history of its
ability to successfully install Corillian Voyager in an end
customer environment over the estimated implementation period
for the end customers project. Once a reseller has
successfully demonstrated its ability to implement Corillian
Voyager, Corillian recognizes subsequent non-refundable license
fees from the reseller on future contracts as a separate element
in the period in which the cash was received, 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 our consolidated statements of operations.

|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |      | 
|--------------------------- | -------------------------------------------------------- | ----------------------- | ------ | ---- |  | ---- | ----- | ---- |  |  | ----- | ---- | 
|                            |                                                          |                        
|                            |                                                          | Year Ended December 31,
|                            |                                                          |                        
|                            |                                                          | 2000                    |        | 2001 |  | 2002
|                            |                                                          |                         |        |      |  |     
|Revenues                    |                                                          |                         | 100.0  | %    |  |      | 100.0 | %    |  |  | 100.0 | %   
|Costs of revenues           |                                                          |                         | 72.9   |      |  |      | 56.4  |      |  |  | 52.2  |     
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|Gross profit                |                                                          |                         | 27.1   |      |  |      | 43.6  |      |  |  | 47.8  |     
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|Operating expenses:         |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|                            | Sales and marketing                                      |                         |        | 50.6 |  |      |       | 37.3 |  |  |       | 29.9 | 
|                            | Research and development                                 |                         |        | 44.0 |  |      |       | 21.8 |  |  |       | 19.8 | 
|                            | General and administrative                               |                         |        | 26.3 |  |      |       | 25.9 |  |  |       | 28.2 | 
|                            | Amortization of goodwill and other intangible
    assets |                         |        | 2.2  |  |      |       | 11.4 |  |  |       |     | 
|                            | Amortization of deferred stock-based compensation        |                         |        | 18.0 |  |      |       | 4.7  |  |  |       | 2.3  | 
|                            | Litigation settlement charges                            |                         |        |     |  |      |       |     |  |  |       | 6.6  | 
|                            | Restructuring and impairment charges                     |                         |        |     |  |      |       | 33.6 |  |  |       | 1.7  | 
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|Total operating expenses    |                                                          |                         | 141.1  |      |  |      | 134.7 |      |  |  | 88.5  |     
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|Loss from operations        |                                                          |                         | (114.0 | )    |  |      | (91.1 | )    |  |  | (40.7 | )   
|Other income (expense), net |                                                          |                         | 6.2    |      |  |      | (0.6  | )    |  |  | (3.4  | )   
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     
|Net loss                    |                                                          |                         | (107.8 | )%   |  |      | (91.7 | )%   |  |  | (44.1 | )%  
|                            |                                                          |                         |        |      |  |      |       |      |  |  |       |     



| |                                                               
| | --------------------------------------------------------------
| | Comparison of Years Ended December 31,
    2000, 2001 and 2002

Revenue

Revenues increased from $30.9 million for
2000 to $53.8 million for 2001. The increase in revenues
from 2000 to 2001 was primarily due to software license and
professional services sales to an increased number of new and
existing customers, an increase in average transaction size, an
increase in the number of end users on Corillians
customers platforms and an increase in the number of
Corillians professional services personnel working on
customer projects.

This increase was also due to increased revenues
from Corillians international operations and Corillian
Services, Inc. Corillians international operations
generated approximately $9.2 million of consolidated
revenues for the year ended December 31, 2001.
Corillians international operations generated no revenue
during the year ended December 31, 2000. Corillian
Services, Inc. contributed approximately $8.2 million to
Corillians consolidated revenues for the year ended
December 31, 2001. The operations of Corillian Services,
Inc., which were acquired on November 24, 2000, contributed
approximately $1.2 million to Corillians consolidated
revenue during the year ended December 31, 2000.

Revenues decreased from $53.8 million for
2001 to $39.1 million for 2002. The decrease in revenue
from 2001 to 2002 was primarily due to the decrease in revenue
generated from Corillians international operations and
Corillian Services, Inc. Corillians international
operations generated approximately $826,000 in revenue during
the year ended December 31, 2002, a decrease of
approximately $8.4 million as compared to 2001. This
reduction was the result of licensing software and performing
professional services for fewer international customers. 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 revenue during fiscal 2003.
Corillian is pursuing ways in which to increase revenue derived
from its international operations through resellers. Until
Corillians resellers are successful at distributing and
implementing Corillians products

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internationally, Corillian does not anticipate
that revenue from international operations will comprise a
significant percentage of its consolidated revenue.


Corillian Services, Inc. generated
$2.2 million in revenue during the year ended
December 31, 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.
Corillian anticipates that annual revenue from Corillian
Services, Inc. in 2003 will be lower as compared with the annual
revenues earned by Corillian Services, Inc. during fiscal 2002.





| |                
| | ---------------
| | Cost of Revenue

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 our software and for
maintenance and support personnel who are responsible for
post-contractual customer support.

In connection with the purchase of the Voyager
technology in 1997, Corillian agreed to pay a royalty of seven
percent of our revenue, up to a maximum of $1.75 million.
Corillian recorded $935,000 in royalty expenses for the year
ended December 31, 2000 which completed its requirements
under the royalty agreement.

Cost of revenues increased from
$22.5 million for 2000 to $30.4 million for 2001.
Gross profit increased as a percentage of revenues from 27.1% in
2000 to 43.6% in 2001. This increase in gross profit as a
percentage of revenues was primarily due to a reduction of
third-party integration expenses, as Corillian Services, Inc.
personnel were transitioned to Corillians implementation
projects, an increase in higher margin revenue streams such as
new license sales to existing Voyager customers, the cessation
of Corillians royalty obligation during 2000 and improved
margins on professional services and post-contractual customer
support. Corillian decreased the number of its professional
services personnel from 180 at December 31, 2000, to 152 at
December 31, 2001 as a result of restructuring actions to
improve operational efficiency during the fourth quarter of 2001.

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 the year ended December 31,
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 at December 31, 2001, to 131 at December 31,
2002.

Cost of revenues associated with Corillian
Services, Inc. decreased by approximately $10.1 million
during the year ended December 31, 2002 from
$11.9 million for 2001 to $1.8 million for 2002. This
decrease in Corillian Services, Inc.s cost of revenues is
primarily due to the closure of its Los Angeles headquarters and
the reduction in its headcount of 41 professional services
personnel during the fourth quarter of 2001.

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 increased from
$15.6 million for 2000 to $20.1 million for 2001. The
increase in sales and marketing expense from 2000 to 2001 was
primarily attributable to an increase of $4.8 million and
$1.4 million, respectively, in direct international and
Corillian Services, Inc. sales and marketing expenses in 2001.
During the years ended December 31, 2000 and 2001,
Corillian incurred direct international sales and marketing
expenses of $1.8 million and $6.6 million,
respectively. During the years

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ended December 31, 2000 and 2001, Corillian
incurred direct sales and marketing expenses of $113,000 and
$1.5 million, respectively, attributable to Corillian
Services, Inc. This increase in sales and marketing expense from
international and Corillian Services, Inc. operations was
partially offset by the effect of Corillians reduction in
workforce implemented in the fourth quarter of 2001.


Sales and marketing expenses decreased from
$20.1 million for 2001 to $11.7 million for 2002. The
decrease in sales and marketing expense from 2001 to 2002 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 at
December 31, 2001, to 31 at 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 the year
ended December 31, 2002, as compared with fiscal 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 the
year ended December 31, 2002, as compared with fiscal 2001.

Corillian expects sales and marketing expenses in
fiscal 2003 will be relatively flat as compared with fiscal
2002, although these expenses could fluctuate from period to
period depending on the timing of new marketing programs and the
level of revenues recognized in fiscal 2003.

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
$13.6 million for 2000 to $11.7 million for 2001.
Research and development decreased from 2000 to 2001 primarily
due to $1.7 million of funded research and development,
which was recorded as a reduction of research and development
expense during the third quarter of 2001. Corillian slightly
decreased the number of research and development personnel from
63 at December 31, 2000, to 62 at December 31, 2001.

Research and development expenses decreased from
$11.7 million for 2001 to $7.7 million for 2002.
Research and development expenses decreased from 2001 to 2002
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 at
December 31, 2001, to 49 at December 31, 2002, and
significantly reduced third-party research and development
expenses during the year ended December 31, 2002, as
compared with fiscal 2001.

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 Statement
No. 68, Research and Development Arrangements, as
well as internal funding for the development of new products and
enhancements to existing products.

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 and other
general corporate expenses.

General and administrative expenses increased
from $8.1 million for 2000, to $14.0 million for 2001.
The increase in general and administrative expense from 2000 to
2001 was primarily attributable to an increase of
$1.6 million and $2.3 million, respectively, in direct
international and Corillian Services, Inc general and
administrative expenses in 2001. During the years ended
December 31, 2000 and 2001, Corillian incurred direct
international general and administrative expenses of $473,000
and $2.1 million, respectively. During the years ended
December 31, 2000 and 2001, Corillian incurred direct
general and administrative expenses of $236,000 and
$2.6 million, respectively, attributable to Corillian
Services, Inc.

General and administrative expenses decreased
from $14.0 million for 2001 to $11.0 million for 2002.
The decrease in general and administrative expense from 2001 and
2002 was mainly due to Corillians restructuring actions
during the fourth quarter of 2001 and second quarter of 2002 and
other corporate cost containment

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initiatives, as Corillian decreased the number of
its general and administrative personnel from 46 at
December 31, 2001, to 35 at December 31, 2002. During
the year ended December 31, 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 related to the settlement of a contract
dispute in August 2002 and approximately $300,000 related to the
provision for bad debts. In connection with Ted Spooners
departure as Chief Executive Officer in October 2002, Corillian
entered into an agreement with Mr. Spooner, which requires
Corillian to pay Mr. Spooner a severance payment of
approximately $600,000. $300,000 is due upon termination of the
agreement or Mr. Spooners termination of employment
as Chief Corporate Strategist, and $300,000 of which is due in
four equal quarterly installments beginning 90 days after
such termination. Mr. Spooners agreement terminates
on April 7, 2003. During the three-month period ended
December 31, 2002, Corillian recorded expense of $300,000
in general and administrative expense related to this severance
agreement. Corillian will recognize an additional $300,000 in
expense related to this severance agreement during the
three-month period ended March 31, 2003.


Internationally, during the year ended
December 31, 2002, Corillian recognized charges of
approximately $1.0 million related to the provision for bad
debts. This charge was almost entirely offset by the decrease in
international general and administrative expenses caused by the
restructuring actions implemented during the fourth quarter of
2001 and second quarter of 2002, as international general and
administrative expense remained relatively unchanged during the
year ended December 31, 2002, as compared with fiscal 2001.

Amortization of Intangible
Assets.Amortization of intangible
assets was $676,000, $6.1 million and $0 in 2000, 2001 and
2002, 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, 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
fiscal 2001.

Amortization of Deferred Stock-based
Compensation.Corillian recorded
deferred stock-based compensation of $10.6 million in
connection with stock options granted during 1999 and 2000.
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 is being
amortized over the respective vesting periods of these options
on an accelerated basis. For the years ended December 31,
2000, 2001 and 2002, amortization of deferred stock-based
compensation was $5.6 million, $2.5 million and
$885,000, respectively. Corillian expects amortization of
approximately $35,000 in 2003 related to these stock options.

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
$745,000. $1.4 million of the cash was paid to KeyBank
during the fourth quarter of 2002. Corillian will pay $250,000
and $175,000 to Key Bank on November 16, 2003 and 2004,
respectively. 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

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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. The
restructuring effort was substantially completed by
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 may not be 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.

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 earnings and losses in joint venture investments, and
other miscellaneous items. Other income (expense), net,
decreased from income of $1.9 million in 2000 to expense of
$303,000 in 2001. This decrease was mainly the result of reduced
interest income earned due to lower interest rates and decreased
cash, cash equivalents and short-term investment balances and
Corillians share of losses from its e-Banc investment.
This decrease was also attributable to increased interest
expense incurred on Corillians capital lease and line of
credit obligations throughout 2001. 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 the year
ended December 31, 2002, as compared with fiscal 2001. This
decrease in interest income was due to lower interest rates and
decreased cash, cash equivalents and short-term investment
balances.

Income Taxes

No provision for federal and state income taxes
was recorded for 2000, 2001 or 2002 because Corillian had
incurred net operating losses in each of those years.

As of December 31, 2002, Corillian had
federal and state net operating loss carryforwards of
approximately $63.7 million and foreign net operating loss
carryforwards of approximately $13.9 million to offset
against future income and research and experimentation credits
of $2.5 million. These carryforwards expire in 2003 through
2022. Corillian had gross deferred tax assets, including
Corillians net operating loss carryforwards and tax
credits, of $35.4 million as of December 31, 2002. A
full valuation allowance has been recorded against the net
deferred tax asset balance as a result of uncertainties
regarding the realization of the asset balance.

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Liquidity and Capital Resources

As of December 31, 2002, Corillian had
$18.6 million in cash, cash equivalents, restricted cash
and short-term investments consisting of cash, commercial paper
and taxable municipal bonds with original maturities from 0 to
180 days, as compared to $17.7 million as of
December 31, 2001. In January 2000, Corillian obtained a
$3.0 million equipment line of credit with a financial
institution of which approximately $571,000 was outstanding at
December 31, 2002 and due for re-payment in April 2003. In
November 2000, Corillian obtained a $5.0 million equipment
line of credit with a financial institution of which
approximately $2.9 million was outstanding at
December 31, 2002. No credit was available under this line
of credit as of December 31, 2002. Under this line of
credit, Corillian must comply with affirmative covenants that
require it to maintain a specified tangible net worth value and
adjusted quick ratio. Corillian believes it was in compliance
with these covenants as of December 31, 2002. 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 repay all of its
outstanding indebtedness under this line of credit.

Net cash used in operating activities was
$19.7 million and $26.3 million for the years ended
December 31, 2000 and 2001, respectively. Net cash provided
by operating activities was $2.7 million for the year ended
December 31, 2002. The increase in net cash used in
operations from 2000 to 2001 was primarily attributable to an
increased net loss net of non-cash expenses including
depreciation, amortization of deferred stock-based compensation
and intangible assets and impairment of long-lived assets and a
decrease in accounts payable and accrued liabilities, offset in
part by an increase in accounts receivable, revenue in excess of
billing and deferred revenue. 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.

Net cash used in investing activities was
$1.9 million and $8.2 million for the years ended
December 31, 2000 and 2001, respectively. Net cash provided
by investing activities was approximately $215,000 for the year
ended December 31, 2002. During 2000, net cash used in
investing activities consisted of $8.5 million of property
and equipment purchases, $3.0 million of contributions to
e-Banc and $738,000 of cash used in business acquisitions. This
usage was offset, in part, by net proceeds from the maturities
of investments of $10.4 million. Net cash used in investing
activities during 2001 consisted of $6.3 million of
property and equipment purchases and $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.

Net cash provided by financing activities was
$62.2 million and $1.1 million for the years ended
December 31, 2000 and 2001, respectively. Net cash used in
financing activities was $2.1 million for the year ended
December 31, 2002. Net cash provided by financing
activities in 2000 consisted mainly of $56.2 million of net
proceeds from the issuance of common stock, primarily from
Corillians initial public offering, private placement and
warrant issuance in April 2000, as well as $6.1 million in
net proceeds from Corillians line of credit borrowings.
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.

Working capital decreased from $17.8 million
as of December 31, 2001, to $5.9 million as of
December 31, 2002. This decrease was primarily attributable
to decreases in accounts receivable and revenue in excess of
billing of $5.4 million and $4.9 million,
respectively, coupled with an increase in deferred revenue of
$5.1 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

31



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##### Table of Contents



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 1,000 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 $1,300 per month from the sub-leasing of a portion
of this office building.


Corillian has no material financial obligations
other than obligations under its line of credit facilities and
operating and capital leases, as well as its obligation to
contribute an additional $1.0 million in cash to e-Banc
during the first half of 2003, pay Key Bank approximately
$425,000 in cash with payments of $250,000 and $175,000 on
November 16, 2003 and 2004, respectively, and pay Ted
Spooner $600,000 in accordance with his severance agreement.
Corillian contributed $500,000 of the $1.0 million
obligation to e-Banc during January 2003. During the third
quarter of 2002, Corillian deposited $1.6 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, and Corillian expects the escrow
funds will be returned in fiscal 2003. This escrow receivable
was recorded as a component of other receivables as of
December 31, 2002. Corillian also agreed to deposit
$1.0 million in cash in a corporate bank account with this
customer, which was deposited in October 2002 and is classified
as restricted cash as of December 31, 2002. These funds
will become unrestricted upon the successful completion of this
customers project, which is anticipated to occur in fiscal
2003.

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 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, 2002:

|                              |  |                |        |           |  |           |       |           |  |           |        |  |  |   |       |  |  |   |   | 
|----------------------------- |  | -------------- | ------ | --------- |  | --------- | ----- | --------- |  | --------- | ------ |  |  | - | ----- |  |  | - | - | 
|                              |  |                |        | Less than |  |           |       |           |  | More than
|                              |  | Total          |        | 1 year    |  | 1-3 years |       | 3-5 years |  | 5 years  
|                              |  |                |        |           |  |           |       |           |  |          
|                              |  |               
|                              |  | (in thousands)
|e-Banc contribution           |  | $              | 1,000  |           |  | $         | 1,000 |           |  | $         |       |  |  | $ |      |  |  | $ |  | 
|Ted Spooner severance         |  |                | 600    |           |  |           | 450   |           |  |           | 150    |  |  |   |      |  |  |   |  | 
|Litigation settlement         |  |                | 425    |           |  |           | 250   |           |  |           | 175    |  |  |   |      |  |  |   |  | 
|Lines of credit               |  |                | 3,433  |           |  |           | 1,865 |           |  |           | 1,568  |  |  |   |      |  |  |   |  | 
|Capital lease obligations     |  |                | 454    |           |  |           | 419   |           |  |           | 35     |  |  |   |      |  |  |   |  | 
|Operating lease obligations   |  |                | 14,075 |           |  |           | 3,037 |           |  |           | 8,840  |  |  |   | 2,198 |  |  |   |  | 
|                              |  |                |        |           |  |           |       |           |  |           |        |  |  |   |       |  |  |   |   | 
|Total contractual obligations |  | $              | 19,987 |           |  | $         | 7,021 |           |  | $         | 10,768 |  |  | $ | 2,198 |  |  | $ |  | 
|                              |  |                |        |           |  |           |       |           |  |           |        |  |  |   |       |  |  |   |   | 




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

32



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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 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, 2002, Corillian had
$18.6 million in cash, restricted cash, cash equivalents
and short-term investments consisting of cash, commercial paper
and taxable municipal bonds with original maturities from 0 to
180 days, as compared to $17.7 million as of
December 31, 2001. 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.






|        |                                                
|------- | -----------------------------------------------
|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, 2001 and 2002                                                                                                  |  |      | F-2 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2000, 2001 and 2002                                                                    |  |      | F-3 | 
|Consolidated Statements of Redeemable Convertible
    Preferred Stock and Shareholders Equity (Deficit) for the
    years ended December 31, 2000, 2001 and 2002 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2000, 2001 and 2002                                                                    |  |      | 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 13 to the
    Consolidated Financial Statements.                                                              






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

Not applicable.




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 7, 2003, and is incorporated herein by
reference. Such Proxy Statement will be filed within
120 days of December 31, 2002, the Companys
fiscal year end.

33



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|         |                       
|-------- | ----------------------
|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 7, 2003, and is incorporated herein by
reference. Such Proxy Statement will be filed within
120 days of December 31, 2002, the Companys
fiscal year end.






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

The additional 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 7, 2003, and is incorporated
herein by reference. Such Proxy Statement will be filed within
120 days of December 31, 2002, the Companys
fiscal year end.



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

The following table provides information as of
December 31, 2002 about Corillians common stock that
may be issued upon the exercise of stock options and other
rights granted to employees, consultants or directors under our
currently existing equity compensation plans.

|                                                               |       |                   |           |                   |  |                      |      |      |  |  |           |           | 
|-------------------------------------------------------------- | ----- | ----------------- | --------- | ----------------- |  | -------------------- | ---- | ---- |  |  | --------- | --------- | 
|                                                               |       |                   |           |                   |  | Number of           
|                                                               |       |                   |           |                   |  | securities          
|                                                               |       | Number of         |           |                   |  | remaining available 
|                                                               |       | securities to be  |           | Weighted-         |  | for future issuance 
|                                                               |       | issued upon       |           | average           |  | under               
|                                                               |       | exercise of       |           | exercise price of |  | equity compensation 
|                                                               |       | outstanding       |           | outstanding       |  | plans (excluding    
|                                                               |       | options, warrants |           | options, warrants |  | securities reflected
|Plan Category                                                  |       | and rights        |           | and rights        |  | in the first column)
|                                                               |       |                   |           |                   |  |                     
|Equity compensation plans approved by security
    holders     |       |                   | 3,876,406 | (1)               |  | $                    | 4.69 |      |  |  | 2,721,859 | (2)(3)   
|Equity compensation plans not approved by
    security holders |       |                   |          |                   |  |                      |     |      |  |  |          |          
|                                                               |       |                   |           |                   |  |                      |      |      |  |  |           |          
|                                                               | Total |                   |           | 3,876,406         |  |                      | $    | 4.69 |  |  |           | 2,721,859 | 
|                                                               |       |                   |           |                   |  |                      |      |      |  |  |           |          



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes 8,790 shares of our common stock
    that are issuable upon the exercise of outstanding options that
    were assumed in connection with our acquisition of Hatcher
    Associates Inc. (now Corillian Services, Inc.), with a weighted
    average exercise price of $6.54.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(2) | Includes 2,566,140 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 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
    400,000 additional shares of common stock that became
    available for purchase under the 2000 Stock Incentive
    Compensation Plan on January 1, 2003 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 155,719 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 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

34



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| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | became available for issuance under the 2000
    Employee Stock Purchase Plan on January 1, 2003 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 7, 2003, and is incorporated herein by
reference. Such Proxy Statement will be filed within
120 days of December 31, 2002, the Companys
fiscal year end.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

Based on an evaluation under the supervision and
with the participation of the Companys management as of a
date within 90 days of the filing date of this Annual
Report on Form 10-K, the Companys chief executive
officer and chief financial officer have concluded that the
Companys disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange
Act of 1934, as amended (Exchange Act) are effective to
ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules
and forms.

There were no significant changes in the
Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation. There were no significant deficiencies or
material weaknesses, and therefore there were no corrective
actions taken. Corillians chief executive officer and
chief financial officer do not expect that its disclosure
controls or its internal controls 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. 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. 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.

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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
|        |       |            
|        | 2.1   |             |  | Stock Purchase Agreement, dated as of
    November 24, 2000, by and among Corillian Corporation,
    Hatcher and the Shareholders of Hatcher (incorporated by
    reference from Exhibit 2.1 of Corillians report on
    Form 8-K filed on December 7, 2000)                                                                                                                                        
|        | 2.2   |             |  | Escrow Agreement, dated as of November 24,
    2000, by and among Corillian Corporation, all of the
    Shareholders of Hatcher, Scott C. Collins, as agent and
    representative of the Shareholders of Hatcher, and ChaseMellon
    Shareholder Services, L.L.C., as escrow agent (incorporated by
    reference from Exhibit 2.2 of Corillians report on
    Form 8-K filed on December 7, 2000)
|        | 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)                                                                                                                                                                                                                                                          
|        | 4.2   |             |  | Form of Warrant Issued to Bank One (incorporated
    by reference to Exhibit 4.2 of Corillians report on
    Form 10-K for the year ended December 31, 2000)                                                                                                                                                                                                                                        
|        | 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 99.2 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  |             |  | Sub-underlease among Systems Union Limited,
    Corillian International Limited and Corillian Corporation, dated
    February 8, 2001 (incorporated by reference to
    Exhibit 10.6 of Corillians report on Form 10-K
    for the year ended December 31, 2000)                                                                                                                                    
|        | 10.7  |             |  | Master Loan and Security Agreement between
    Corillian and Transamerica Business Credit Corporation, dated as
    of January 28, 2000 (incorporated by reference to
    Exhibit 10.7 of Corillians Form S-1, as amended,
    File No. 333-95513)                                                                                                                                                  
|        | 10.8* |             |  | 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)                                                                                                                                                                                                            

36



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##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                   
|------- | ------ | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 10.9   |             |  | 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)    
|        | 10.10* |             |  | Employment Agreement, dated as of
    January 23, 2001, between Corillian Corporation and Alex
    Hart (incorporated by reference to Exhibit 4.2 of
    Corillians report on Form 10-K for the year ended
    December 31, 2000)                
|        | 10.11* |             |  | 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)                     
|        | 10.12* |             |  | 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)                                
|        | 10.13* |             |  | Employment Agreement dated April 3, 2002
    between Corillian Corporation and Andrew White (incorporated by
    reference to Exhibit 10.2 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2002)                            
|        | 10.14* |             |  | Employment Agreement dated October 7, 2002
    between Corillian Corporation and Ted Spooner (incorporated by
    reference to Exhibit 10.3 of Corillians report on
    Form 10-Q for the quarter ended September 30, 2002)                      
|        | 10.15* |             |  | First Amendment to Employment Agreement dated
    October 7, 2000 between Corillian Corporation and Alex Hart
    (incorporated by reference to Exhibit 10.4 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2002) 
|        | 10.16  |             |  | 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)
|        | 21.1   |             |  | Subsidiaries of the Company (incorporated by
    reference to Exhibit 21.1 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2001)                                                                                            
|        | 23.1   |             |  | Consent of KPMG LLP, Independent Auditors                                                                                                                                                                                                         
|        | 24.1   |             |  | Power of Attorney (see page 38).                                                                                                                                                                                                                  
|        | 99.1   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                    
|        | 99.2   |             |  | 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:

No reports on Form 8-K were filed during the
year ended December 31, 2002.

37



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##### 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 21, 2003.



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



| |    |                    
| | -- | -------------------
| | By | /s/ STEVEN SIPOWICZ

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

POWER OF ATTORNEY

Each person whose individual signature appears
below hereby authorizes and appoints Steven Sipowicz and Alex
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 21, 2003 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/ STEVEN SIPOWICZSteven Sipowicz       |  | Chief Financial OfficerPrincipal Financial and Accounting Officer
|                                        
|/s/ ROBERT G. BARRETTRobert G. Barrett   |  | Director                                                         
|                                        
|/s/ ERIC DUNNEric Dunn                   |  | Director                                                         
|                                        
|/s/ JOHN MCCOYJohn McCoy                 |  | Director                                                         
|                                        
|/s/ RAVI MOHANRavi Mohan                 |  | Director                                                         
|                                        
|/s/ JAY N. WHIPPLE IIIJay N. Whipple III |  | Director                                                         

38



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##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ------ | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 2.1    |             |  | Stock Purchase Agreement, dated as of
    November 24, 2000, by and among Corillian Corporation,
    Hatcher and the Shareholders of Hatcher (incorporated by
    reference from Exhibit 2.1 of Corillians report on
    Form 8-K filed on December 7, 2000)                                                                                                                                        
|        | 2.2    |             |  | Escrow Agreement, dated as of November 24,
    2000, by and among Corillian Corporation, all of the
    Shareholders of Hatcher, Scott C. Collins, as agent and
    representative of the Shareholders of Hatcher, and ChaseMellon
    Shareholder Services, L.L.C., as escrow agent (incorporated by
    reference from Exhibit 2.2 of Corillians report on
    Form 8-K filed on December 7, 2000)
|        | 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)                                                                                                                                                                                                                                                          
|        | 4.2    |             |  | Form of Warrant Issued to Bank One (incorporated
    by reference to Exhibit 4.2 of Corillians report on
    Form 10-K for the year ended December 31, 2000)                                                                                                                                                                                                                                        
|        | 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 99.2 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   |             |  | Sub-underlease among Systems Union Limited,
    Corillian International Limited and Corillian Corporation, dated
    February 8, 2001 (incorporated by reference to
    Exhibit 10.6 of Corillians report on Form 10-K
    for the year ended December 31, 2000)                                                                                                                                    
|        | 10.7   |             |  | Master Loan and Security Agreement between
    Corillian and Transamerica Business Credit Corporation, dated as
    of January 28, 2000 (incorporated by reference to
    Exhibit 10.7 of Corillians Form S-1, as amended,
    File No. 333-95513)                                                                                                                                                  
|        | 10.8*  |             |  | 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)                                                                                                                                                                                                            
|        | 10.9   |             |  | 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)                                                                                                                                                       
|        | 10.10* |             |  | Employment Agreement, dated as of
    January 23, 2001, between Corillian Corporation and Alex
    Hart (incorporated by reference to Exhibit 4.2 of
    Corillians report on Form 10-K for the year ended
    December 31, 2000)                                                                                                                                                                   
|        | 10.11* |             |  | 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)                                                                                                                                                                        
|        | 10.12* |             |  | 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)                                                                                                                                                                                   
|        | 10.13* |             |  | Employment Agreement dated April 3, 2002
    between Corillian Corporation and Andrew White (incorporated by
    reference to Exhibit 10.2 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2002)                                                                                                                                                                               



---



##### Table of Contents



|        |        |             |  |                                                                                                                                                                                                                                                   
|------- | ------ | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|No.     |        | Description
|        |        |            
|        | 10.14* |             |  | Employment Agreement dated October 7, 2002
    between Corillian Corporation and Ted Spooner (incorporated by
    reference to Exhibit 10.3 of Corillians report on
    Form 10-Q for the quarter ended September 30, 2002)                      
|        | 10.15* |             |  | First Amendment to Employment Agreement dated
    October 7, 2000 between Corillian Corporation and Alex Hart
    (incorporated by reference to Exhibit 10.4 of
    Corillians report on Form 10-Q for the quarter ended
    September 30, 2002) 
|        | 10.16  |             |  | 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)
|        | 21.1   |             |  | Subsidiaries of the Company (incorporated by
    reference to Exhibit 21.1 of Corillians report on
    Form 10-Q for the quarter ended June 30, 2001)                                                                                            
|        | 23.1   |             |  | Consent of KPMG LLP, Independent Auditors                                                                                                                                                                                                         
|        | 24.1   |             |  | Power of Attorney (see page 38).                                                                                                                                                                                                                  
|        | 99.1   |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                    
|        | 99.2   |             |  | 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



CORILLIAN CORPORATION

CERTIFICATIONS PURSUANT TO

SECTION 302 OF


THE SARBANES-OXLEY ACT OF 2002


CERTIFICATION

I, Alex P. Hart, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of Corillian Corporation;                                                                                                                                                                                                                                                               
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 21, 2003

/s/ ALEX P. HART

Alex P. Hart

Chief Executive Officer and President




---



##### Table of Contents



CORILLIAN CORPORATION

CERTIFICATIONS PURSUANT TO

SECTION 302 OF


THE SARBANES-OXLEY ACT OF 2002


CERTIFICATION

I, Steven Sipowicz, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of Corillian Corporation;                                                                                                                                                                                                                                                               
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 21, 2003

/s/ STEVEN SIPOWICZ

Steven Sipowicz

Chief Financial Officer




---



##### 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, 2001 and 2002, and the related consolidated
statements of operations, redeemable convertible preferred stock
and shareholders equity (deficit), and cash flows for each
of the years in the three-year period ended December 31,
2002. 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, 2001 and 2002, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2002 in
conformity with accounting principles generally accepted in the
United States of America.

/s/ KPMG LLP

Portland, Oregon

January 31, 2003


F-1



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##### Table of Contents



CORILLIAN CORPORATION






CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |          |        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------ | ------- | ------ |  | ----- | -------- | ------ | 
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                 
|                                                                                                                                                   |                                                                                                                                                            | December 31,                                                                                    
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                 
|                                                                                                                                                   |                                                                                                                                                            | 2001                                                                                             |        | 2002   
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |        
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                 
|                                                                                                                                                   |                                                                                                                                                            | (In thousands)                                                                                  
|Assets                                                                                                                                            
|Current assets:                                                                                                                                    |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   | Cash and cash equivalents                                                                                                                                  |                                                                                                  | $      | 15,798  |        |  | $     | 16,721   |       
|                                                                                                                                                   | Restricted cash                                                                                                                                            |                                                                                                  |        |        |        |  |       | 1,003    |       
|                                                                                                                                                   | Investments                                                                                                                                                |                                                                                                  |        | 1,905   |        |  |       | 910      |       
|                                                                                                                                                   | Accounts receivable, net                                                                                                                                   |                                                                                                  |        | 9,427   |        |  |       | 3,987    |       
|                                                                                                                                                   | Other receivables                                                                                                                                          |                                                                                                  |        | 301     |        |  |       | 1,805    |       
|                                                                                                                                                   | Revenue in excess of billings                                                                                                                              |                                                                                                  |        | 6,410   |        |  |       | 1,542    |       
|                                                                                                                                                   | Prepaid expenses and deposits                                                                                                                              |                                                                                                  |        | 1,128   |        |  |       | 1,471    |       
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total current assets                                                                             |        |         | 34,969 |  |       |          | 27,439 | 
|Property and equipment, net                                                                                                                        |                                                                                                                                                            |                                                                                                  | 12,995 |         |        |  | 8,376 |         
|Investment in joint venture                                                                                                                        |                                                                                                                                                            |                                                                                                  | 1,990  |         |        |  | 1,074 |         
|Other assets                                                                                                                                       |                                                                                                                                                            |                                                                                                  | 289    |         |        |  | 590   |         
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total assets                                                                                     |        | $       | 50,243 |  |       | $        | 37,479 | 
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|Liabilities, Redeemable Convertible Preferred
    Stock
    and Shareholders Equity (Deficit)                                                    
|Current liabilities:                                                                                                                               |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   | Accounts payable                                                                                                                                           |                                                                                                  | $      | 2,593   |        |  | $     | 1,801    |       
|                                                                                                                                                   | Accrued liabilities                                                                                                                                        |                                                                                                  |        | 2,540   |        |  |       | 2,067    |       
|                                                                                                                                                   | Deferred revenue                                                                                                                                           |                                                                                                  |        | 8,881   |        |  |       | 13,981   |       
|                                                                                                                                                   | Current portion of capital lease obligations                                                                                                               |                                                                                                  |        | 414     |        |  |       | 380      |       
|                                                                                                                                                   | Current portion of long-term debt                                                                                                                          |                                                                                                  |        | 2,185   |        |  |       | 1,865    |       
|                                                                                                                                                   | Other current liabilities                                                                                                                                  |                                                                                                  |        | 597     |        |  |       | 1,421    |       
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total current liabilities                                                                        |        |         | 17,210 |  |       |          | 21,515 | 
|Capital lease obligations, less current portion                                                                                                    |                                                                                                                                                            |                                                                                                  | 319    |         |        |  | 32    |         
|Long-term debt, less current portion                                                                                                               |                                                                                                                                                            |                                                                                                  | 3,411  |         |        |  | 1,568 |         
|Other long-term liabilities                                                                                                                        |                                                                                                                                                            |                                                                                                  | 1,199  |         |        |  | 1,243 |         
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total liabilities                                                                                |        |         | 22,139 |  |       |          | 24,358 | 
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|Redeemable convertible preferred stock, no par
    value; no shares authorized, no shares issued and outstanding at
    December 31, 2001 and 2002 |                                                                                                                                                            |                                                                                                  |       |         |        |  |      |         
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|Commitments and contingencies                                                                                                                      |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|Shareholders equity (deficit):                                                                                                                    |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   | Convertible preferred stock, no par value;
    40,000 shares authorized, no shares issued and outstanding
    at December 31, 2001 and 2002                |                                                                                                  |        |        |        |  |       |         |       
|                                                                                                                                                   | Common stock, no par value; 150,000 shares
    authorized; 35,038 and 36,147 shares issued and outstanding
    at December 31, 2001 and 2002, respectively |                                                                                                  |        | 125,069 |        |  |       | 126,141  |       
|                                                                                                                                                   | Deferred stock-based compensation                                                                                                                          |                                                                                                  |        | (1,169  | )      |  |       | (35      | )     
|                                                                                                                                                   | Accumulated other comprehensive income (loss)                                                                                                              |                                                                                                  |        | (19     | )      |  |       | 49       |       
|                                                                                                                                                   | Accumulated deficit                                                                                                                                        |                                                                                                  |        | (95,777 | )      |  |       | (113,034 | )     
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total shareholders equity (deficit)                                                             |        |         | 28,104 |  |       |          | 13,121 | 
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         
|                                                                                                                                                   |                                                                                                                                                            | Total liabilities, redeemable convertible
    preferred stock and shareholders equity (deficit) |        | $       | 50,243 |  |       | $        | 37,479 | 
|                                                                                                                                                   |                                                                                                                                                            |                                                                                                  |        |         |        |  |       |         

See accompanying notes to consolidated financial
statements.

F-2



---



##### Table of Contents



CORILLIAN CORPORATION






CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |        |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------ | ------- | ---- | ------ | ------ | ------- | - | ------ | ------ | ------- | -
|                                                                                                                                                   |                                                                                                                                                                |                                             
|                                                                                                                                                   |                                                                                                                                                                | Year Ended December 31,                     
|                                                                                                                                                   |                                                                                                                                                                |                                             
|                                                                                                                                                   |                                                                                                                                                                | 2000                                         |        | 2001   |         | 2002
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |     
|                                                                                                                                                   |                                                                                                                                                                |                                             
|                                                                                                                                                   |                                                                                                                                                                | (In thousands, except per share data)       
|Revenues                                                                                                                                           |                                                                                                                                                                | $                                            | 30,853 |        |         | $    | 53,848 |        |         | $ | 39,141 |       
|Cost of revenues, excluding $587, $342 and $148
    in 2000, 2001 and 2002, respectively, of amortization of
    deferred stock-based compensation |                                                                                                                                                                |                                              | 22,499 |        |         |      | 30,357 |        |         |   | 20,422 |       
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Gross profit                                 |        |        | 8,354   |      |        |        | 23,491  |   |        |        | 18,719  |  
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|Operating expenses:                                                                                                                                |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   | Sales and marketing, excluding $3,270, $1,319 and
    $401 in 2000, 2001 and 2002, respectively, of amortization of
    deferred stock-based compensation      |                                              |        | 15,603 |         |      |        | 20,096 |         |   |        | 11,720 |        
|                                                                                                                                                   | Research and development, excluding $448, $210
    and $83 in 2000, 2001 and 2002, respectively, of amortization of
    deferred stock-based compensation      |                                              |        | 13,573 |         |      |        | 11,721 |         |   |        | 7,733  |        
|                                                                                                                                                   | General and administrative, excluding $1,256,
    $635 and $253 in 2000, 2001 and 2002, respectively, of
    amortization of deferred stock-based compensation |                                              |        | 8,110  |         |      |        | 13,950 |         |   |        | 11,029 |        
|                                                                                                                                                   | Amortization of goodwill and other intangible
    assets                                                                                                       |                                              |        | 676    |         |      |        | 6,119  |         |   |        |       |        
|                                                                                                                                                   | Amortization of deferred stock-based compensation                                                                                                              |                                              |        | 5,561  |         |      |        | 2,506  |         |   |        | 885    |        
|                                                                                                                                                   | Litigation settlement charges                                                                                                                                  |                                              |        |       |         |      |        |       |         |   |        | 2,580  |        
|                                                                                                                                                   | Restructuring and impairment charges                                                                                                                           |                                              |        |       |         |      |        | 18,097 |         |   |        | 682    |        
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Total operating expenses                     |        |        | 43,523  |      |        |        | 72,489  |   |        |        | 34,629  |  
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Loss from operations                         |        |        | (35,169 | )    |        |        | (48,998 | ) |        |        | (15,910 | )
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|Other income (expense):                                                                                                                            |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   | Interest income                                                                                                                                                |                                              |        | 2,793  |         |      |        | 1,229  |         |   |        | 184    |        
|                                                                                                                                                   | Interest expense                                                                                                                                               |                                              |        | (435   | )       |      |        | (818   | )       |   |        | (542   | )      
|                                                                                                                                                   | Other expense, net                                                                                                                                             |                                              |        | (444   | )       |      |        | (714   | )       |   |        | (989   | )      
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Total other income (expense)                 |        |        | 1,914   |      |        |        | (303    | ) |        |        | (1,347  | )
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Net loss                                     |        |        | (33,255 | )    |        |        | (49,301 | ) |        |        | (17,257 | )
|Redeemable convertible preferred stock accretion                                                                                                   |                                                                                                                                                                |                                              | (100   | )      |         |      |       |        |         |   |       |       
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|                                                                                                                                                   |                                                                                                                                                                | Net loss attributable to common shareholders |        | $      | (33,355 | )    |        | $      | (49,301 | ) |        | $      | (17,257 | )
|                                                                                                                                                   |                                                                                                                                                                |                                              |        |        |         |      |        |        |         |   |        |       
|Basic and diluted net loss per share                                                                                                               |                                                                                                                                                                | $                                            | (1.33  | )      |         | $    | (1.42  | )      |         | $ | (0.49  | )     
|Shares used in computing basic and diluted net
    loss per share                                                                                  |                                                                                                                                                                |                                              | 25,106 |        |         |      | 34,645 |        |         |   | 35,477 |       

See accompanying notes to consolidated financial
statements.

F-3



---



##### Table of Contents



CORILLIAN CORPORATION

CONSOLIDATED STATEMENTS OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK

AND SHAREHOLDERS EQUITY
(DEFICIT)


(in thousands, except share data)


|                                                                         |  |                                   |             |                 |  |                                |         |             |  |               |            |             |  |               |      |        |  |         |            |           |  |   |         |   |  |   |        |   |  |   |     |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------ |  | --------------------------------- | ----------- | --------------- |  | ------------------------------ | ------- | ----------- |  | ------------- | ---------- | ----------- |  | ------------- | ---- | ------ |  | ------- | ---------- | --------- |  | - | ------- | - |  | - | ------ | - |  | - | --- | - |  | - | -------- | - |  | - | ------- | -
|                                                                         |  |                                   |             |                 |  |                               
|                                                                         |  |                                   |             |                 |  | Shareholders Equity (Deficit)
|                                                                         |  |                                   |             |                 |  |                               
|                                                                         |  |                                   |             |                 |  |                                |         | Accumulated |  |              
|                                                                         |  | Redeemable Convertible            |             | Convertible     |  |                                |         |             |  | Other         |            |             |  | Total        
|                                                                         |  | Preferred Stock                   |             | Preferred Stock |  | Common Stock                   |         | Deferred    |  | Comprehensive |            |             |  | Shareholders
|                                                                         |  |                                   |             |                 |  |                                |         | Stock-based |  | Income        |            | Accumulated |  | Equity       
|                                                                         |  | Shares                            |             | Amount          |  | Shares                         |         | Amount      |  | Shares        |            | Amount      |  | Compensation  |      | (Loss) |  | Deficit |            | (Deficit)
|                                                                         |  |                                   |             |                 |  |                                |         |             |  |               |            |             |  |               |      |        |  |         |            |          
|                                                                         |  |                                  
|                                                                         |  | (In thousands, except share data)
|Balance, December 31, 1999                                               |  |                                   | 14,723,223  |                 |  | $                              | 31,501  |             |  |               | 1,639,730  |             |  |               | 910  |        |  |         | 7,253,550  |           |  |   | 3,482   |   |  |   | (2,877 | ) |  |   |    |   |  |   | (13,221  | ) |  |   | (11,706 | )
|Issuance of common stock and warrant in initial
    public offering, net |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 7,225,000  |           |  |   | 54,674  |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 54,674  |  
|Issuance of common stock in business combinations                        |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 1,967,824  |           |  |   | 24,186  |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 24,186  |  
|Conversion of Series A convertible preferred
    stock                   |  |                                   |            |                 |  |                                |        |             |  |               | (1,639,730 | )           |  |               | (910 | )      |  |         | 1,639,730  |           |  |   | 910     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   |        |  
|Conversion of Series B and C redeemable
    convertible preferred stock  |  |                                   | (14,723,223 | )               |  |                                | (31,601 | )           |  |               |           |             |  |               |     |        |  |         | 14,723,223 |           |  |   | 31,601  |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 31,601  |  
|Exercise of common stock options                                         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 1,220,160  |           |  |   | 753     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 753     |  
|Issuance of common shares under employee stock
    purchase plan         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 90,786     |           |  |   | 726     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 726     |  
|Issuance of common stock for services                                    |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 16,667     |           |  |   | 123     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 123     |  
|Accretion of redeemable convertible preferred
    stock                  |  |                                   |            |                 |  |                                | 100     |             |  |               |           |             |  |               |     |        |  |         |           |           |  |   | (100    | ) |  |   |       |   |  |   |    |   |  |   |         |   |  |   | (100    | )
|Deferred stock-based compensation                                        |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         |           |           |  |   | 6,848   |   |  |   | (6,848 | ) |  |   |    |   |  |   |         |   |  |   |        |  
|Amortization of deferred stock-based compensation                        |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         |           |           |  |   |        |   |  |   | 5,561  |   |  |   |    |   |  |   |         |   |  |   | 5,561   |  
|Foreign currency translation                                             |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         |           |           |  |   |        |   |  |   |       |   |  |   | 30  |   |  |   |         |   |  |   | 30      |  
|Net loss                                                                 |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         |           |           |  |   |        |   |  |   |       |   |  |   |    |   |  |   | (33,255  | ) |  |   | (33,255 | )
|                                                                         |  |                                   |             |                 |  |                                |         |             |  |               |            |             |  |               |      |        |  |         |            |           |  |   |         |   |  |   |        |   |  |   |     |   |  |   |          |   |  |   |         |  
|Balance, December 31, 2000                                               |  |                                   |            |                 |  | $                              |        |             |  |               |           |             |  | $             |     |        |  |         | 34,136,940 |           |  | $ | 123,203 |   |  | $ | (4,164 | ) |  | $ | 30  |   |  | $ | (46,476  | ) |  | $ | 72,593  |  
|Issuance of common stock in business combinations                        |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 24,642     |           |  |   | 306     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 306     |  
|Exercise of common stock options                                         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 608,573    |           |  |   | 683     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 683     |  
|Issuance of common shares under employee stock
    purchase plan         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 267,561    |           |  |   | 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                                               |  |                                   |            |                 |  | $                              |        |             |  |               |           |             |  | $             |     |        |  |         | 35,037,716 |           |  | $ | 125,069 |   |  | $ | (1,169 | ) |  | $ | (19 | ) |  | $ | (95,777  | ) |  | $ | 28,104  |  
|Issuance of common stock in settlement of
    litigation                 |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 500,000    |           |  |   | 745     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 745     |  
|Issuance of common stock in exchange for services                        |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 30,000     |           |  |   | 45      |   |  |   | (45    | ) |  |   |    |   |  |   |         |   |  |   |        |  
|Exercise of common stock options                                         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 359,857    |           |  |   | 226     |   |  |   |       |   |  |   |    |   |  |   |         |   |  |   | 226     |  
|Issuance of common shares under employee stock
    purchase plan         |  |                                   |            |                 |  |                                |        |             |  |               |           |             |  |               |     |        |  |         | 219,267    |           |  |   | 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                                               |  |                                   |            |                 |  | $                              |        |             |  |               |           |             |  | $             |     |        |  |         | 36,146,840 |           |  | $ | 126,141 |   |  | $ | (35    | ) |  | $ | 49  |   |  | $ | (113,034 | ) |  | $ | 13,121  |  
|                                                                         |  |                                   |             |                 |  |                                |         |             |  |               |            |             |  |               |      |        |  |         |            |           |  |   |         |   |  |   |        |   |  |   |     |   |  |   |          |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

F-4



---



##### Table of Contents



CORILLIAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |         |       |        |        |  
|---------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------- | --------------------------------------------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | ------- | ----- | ------ | ------ | -
|                                                                             |                                                                                               |                                                                      
|                                                                             |                                                                                               | Year Ended December 31,                                              
|                                                                             |                                                                                               |                                                                      
|                                                                             |                                                                                               | 2000                                                                  |                                             | 2001                                                                  |        | 2002  
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |       
|                                                                             |                                                                                               |                                                                      
|                                                                             |                                                                                               | (In thousands)                                                       
|Cash flows from operating activities:                                        |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             | Net loss                                                                                      |                                                                       | $                                           | (33,255                                                               | )      |        | $       | (49,301 | )      |        | $       | (17,257 | )    
|                                                                             | Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities: |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |         |      
|                                                                             |                                                                                               | Depreciation and amortization                                         |                                             |                                                                       | 1,983  |        |         |         | 4,666  |        |         |         | 5,431 |       
|                                                                             |                                                                                               | Amortization of deferred stock-based compensation                     |                                             |                                                                       | 5,561  |        |         |         | 2,506  |        |         |         | 885   |       
|                                                                             |                                                                                               | Amortization of goodwill and other intangible
    assets              |                                             |                                                                       | 676    |        |         |         | 6,119  |        |         |         |      |       
|                                                                             |                                                                                               | Impairment of long-lived assets                                       |                                             |                                                                       |       |        |         |         | 16,764 |        |         |         |      |       
|                                                                             |                                                                                               | Non-cash research and development expense                             |                                             |                                                                       | 1,737  |        |         |         | 571    |        |         |         |      |       
|                                                                             |                                                                                               | Issuance of common stock for services                                 |                                             |                                                                       | 123    |        |         |         |       |        |         |         |      |       
|                                                                             |                                                                                               | Issuance of common stock in settlement of
    litigation              |                                             |                                                                       |       |        |         |         |       |        |         |         | 745   |       
|                                                                             |                                                                                               | Equity in losses of joint venture                                     |                                             |                                                                       | 418    |        |         |         | 592    |        |         |         | 916   |       
|                                                                             |                                                                                               | Provision for bad debts                                               |                                             |                                                                       |       |        |         |         |       |        |         |         | 1,317 |       
|                                                                             |                                                                                               | Loss on sale of assets                                                |                                             |                                                                       |       |        |         |         | 90     |        |         |         | 114   |       
|                                                                             |                                                                                               | Changes in operating assets and liabilities, net
    of acquisitions: |                                             |                                                                       |        |        |         |         |        |        |         |         |       |       
|                                                                             |                                                                                               |                                                                       | Restricted cash                             |                                                                       |        |       |         |         |        |       |         |         |       | (1,003 | )     
|                                                                             |                                                                                               |                                                                       | Accounts receivable                         |                                                                       |        | (3,121 | )       |         |        | (806   | )       |         |       | 4,122  |       
|                                                                             |                                                                                               |                                                                       | Other receivables                           |                                                                       |        | (397   | )       |         |        | 386    |         |         |       | (1,488 | )     
|                                                                             |                                                                                               |                                                                       | Revenue in excess of billings               |                                                                       |        | (4,098 | )       |         |        | (1,949 | )       |         |       | 4,868  |       
|                                                                             |                                                                                               |                                                                       | Prepaid expenses, deposits and other assets |                                                                       |        | (495   | )       |         |        | (161   | )       |         |       | (644   | )     
|                                                                             |                                                                                               |                                                                       | Accounts payable and accrued liabilities    |                                                                       |        | 6,555  |         |         |        | (8,833 | )       |         |       | (1,272 | )     
|                                                                             |                                                                                               |                                                                       | Deferred revenue                            |                                                                       |        | 4,229  |         |         |        | 2,885  |         |         |       | 5,100  |       
|                                                                             |                                                                                               |                                                                       | Other liabilities                           |                                                                       |        | 412    |         |         |        | 175    |         |         |       | 868    |       
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             |                                                                                               |                                                                       |                                             | Net cash (used in) provided by operating
    activities               |        |        | (19,672 | )       |        |        | (26,296 | )       |       |        | 2,702  |  
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|Cash flows from investing activities:                                        |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             | Purchase of property and equipment, net                                                       |                                                                       |                                             | (8,482                                                                | )      |        |         | (6,259  | )      |        |         | (780    | )    
|                                                                             | Purchase of investments                                                                       |                                                                       |                                             | (5,413                                                                | )      |        |         | (1,905  | )      |        |         |        |      
|                                                                             | Proceeds from the maturities of investments                                                   |                                                                       |                                             | 15,770                                                                |        |        |         |        |        |        |         | 995     |      
|                                                                             | Net cash used in business acquisitions                                                        |                                                                       |                                             | (738                                                                  | )      |        |         |        |        |        |         |        |      
|                                                                             | Investment in joint venture                                                                   |                                                                       |                                             | (3,000                                                                | )      |        |         |        |        |        |         |        |      
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             |                                                                                               |                                                                       |                                             | Net cash (used in) provided by investing
    activities               |        |        | (1,863  | )       |        |        | (8,164  | )       |       |        | 215    |  
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|Cash flows from financing activities:                                        |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             | Proceeds from the issuance of common stock, net
    of issuance costs                         |                                                                       |                                             | 56,153                                                                |        |        |         | 2,049   |        |        |         | 576     |      
|                                                                             | Proceeds from (payments on) line of credit
    borrowings, net                                |                                                                       |                                             | 6,131                                                                 |        |        |         | (535    | )      |        |         | (2,163  | )    
|                                                                             | Principal payments on capital lease obligations                                               |                                                                       |                                             | (119                                                                  | )      |        |         | (384    | )      |        |         | (467    | )    
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             |                                                                                               |                                                                       |                                             | Net cash provided by (used in) financing
    activities               |        |        | 62,165  |         |        |        | 1,130   |         |       |        | (2,054 | )
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             |                                                                                               |                                                                       |                                             | Effect of exchange rate fluctuations on cash and
    cash equivalents |        |        | 18      |         |        |        | (22     | )       |       |        | 60     |  
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             |                                                                                               |                                                                       |                                             | Increase (decrease) in cash and cash equivalents                      |        |        | 40,648  |         |        |        | (33,352 | )       |       |        | 923    |  
|Cash and cash equivalents at end of year                                     |                                                                                               |                                                                       | 8,502                                       |                                                                       |        |        | 49,150  |         |        |        | 15,798  |        
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|Cash and cash equivalents at end of year                                     |                                                                                               | $                                                                     | 49,150                                      |                                                                       |        | $      | 15,798  |         |        | $      | 16,721  |        
|                                                                             |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|Supplemental disclosures of cash flow information:                           |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             | Cash paid during the period for:                                                              |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |         |      
|                                                                             |                                                                                               | Interest                                                              |                                             | $                                                                     | 435    |        |         | $       | 818    |        |         | $       | 542   |       
|                                                                             |                                                                                               | Taxes                                                                 |                                             |                                                                       | 16     |        |         |         | 228    |        |         |         | 187   |       
|Supplemental disclosures of non-cash investing
    and financing activities: |                                                                                               |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |        
|                                                                             | Property and equipment acquired through capital
    leases                                    |                                                                       |                                             | 993                                                                   |        |        |         |        |        |        |         | 146     |      
|                                                                             | Recorded through business combinations:                                                       |                                                                       |                                             |                                                                       |        |        |         |         |        |        |         |         |      
|                                                                             |                                                                                               | Assets                                                                |                                             |                                                                       | 3,697  |        |         |         |       |        |         |         |      |       
|                                                                             |                                                                                               | Liabilities                                                           |                                             |                                                                       | 1,447  |        |         |         |       |        |         |         |      |       
|                                                                             |                                                                                               | Common shares                                                         |                                             |                                                                       | 24,186 |        |         |         | 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 April
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 loss
contingencies 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 International Ltd.,
Corillian Services Inc. and Corillian South Asia Sdn Bhd. All
significant intercompany balances and transactions have been
eliminated in consolidation.

(c) Revenue
Recognition

Corillian recognizes revenue 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.
Generally, Corillians software licenses are 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.

Revenue 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, is allocated to the elements using the residual method
specified in SOP No. 98-9. Corillian has determined that
post-contractual customer support, training and hosting services
can be separated from software licenses, implementation and
custom software engineering services because
(a) post-contractual customer support, training 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. 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), and on training based on the price customers are
charged when

F-6



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

these services are sold separately. Under the
residual method, the full fair value of post-contractual
customer support, training, and hosting services is 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, hosting
and training services is allocated to software license,
implementation and custom software engineering services and
recognized using contract accounting.

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 corporate policy,
approval and monitoring processes. 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 costs and profits billed at any
point in time during a contracts term. The resulting
difference is recognized as deferred revenue or revenue in
excess of billing, respectively. Provisions for estimated losses
on uncompleted contracts are made in the period in which such
losses are determined.

Revenues associated with software developed for
others 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.

Revenues associated with custom software
engineering services that are not essential to the core
functionality of the software are recognized on a
time-and-materials basis as services are performed. Custom
software engineering services in which Corillian retains and
reserves title and all ownership rights to the software products
and anticipates generating revenues from future sales of the
resulting product are accounted for following the provisions of
the Financial Accounting Standards Boards (FASB) Statement
of Financial Accounting Standards No. 68, Research and
Development Arrangements (Statement No. 68).

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. Revenues from hosting services for transactions
processed by Corillian are recognized ratably as services are
performed.

Customers are billed in accordance with
contractual specifications. Corillian records the unrecognized
portion of billable fees as deferred revenue. Revenues
recognized in excess of contractual billing terms are recorded
as revenues in excess of billings.

For certain projects, ultimate recoverability is
questionable due to inherent hazards. Pursuant to SOP
No. 81-1, 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 revenue and cost, 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 this zero
profit methodology to one existing project. The total
project value for this contract is approximately
$2.1 million. Revenue and expense recognized from this
project accounted for under the zero profit
methodology during the year ended December 31, 2002, was
approximately $271,000.

Corillian recognizes non-refundable license fees
paid by a reseller that has not demonstrated a history of its
ability to successfully install Corillian Voyager in an end
customer environment over the estimated implementation period
for the end customers project. Once a reseller has
successfully demonstrated its ability to implement Corillian
Voyager, Corillian recognizes subsequent non-refundable license
fees from the reseller

F-7



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

on future contracts as a separate element in the
period in which the cash was received, assuming all other SOP
No. 97-2 revenue recognition criteria are met.

(d) Cash
and Cash Equivalents

Cash equivalents consist of mainly of commercial
paper and taxable municipal bonds with original maturities of 90
days or less, which are carried at market value, which
approximates cost. Cash equivalents totaled $3.7 million
and $12.1 million as of December 31, 2001 and 2002,
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 is classified as
restricted cash as of December 31, 2002. These funds will
become unrestricted upon the successful completion of this
customers project, which is anticipated to occur in fiscal
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.

(g) Intangible
Assets

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 $676,000, $6.1 million and $0 for the years
ended December 31, 2000, 2001 and 2002, 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 12 for further discussion).

In accordance with Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, management reviews the Companys long-lived
assets, goodwill and 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 cash flows of the operation to which the assets relate, to
the carrying amount including associated intangible assets of
the operation. If the operation is determined to be unable to
recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-lived
assets of the operation, to 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.

The following table illustrates what
Corillians net loss and basic and diluted net loss per
share would have been during the years ended December 31,
2000 and 2001, exclusive of amortization expense related to the
goodwill and other non-amortized intangible assets.

F-8



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                          |                                                                          |                         |         |      |  |   |         |       | 
|--------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------- | ------- | ---- |  | - | ------- | ----- | 
|                                                          |                                                                          |                        
|                                                          |                                                                          | Year Ended December 31,
|                                                          |                                                                          |                        
|                                                          |                                                                          | 2000                    |         | 2001
|                                                          |                                                                          |                         |         |     
|                                                          |                                                                          |                        
|                                                          |                                                                          | (in thousands)         
|Reported net loss attributable to common
    shareholders |                                                                          | $                       | (33,355 | )    |  | $ | (49,301 | )    
|Add back:                                                 |                                                                          |                         |         |      |  |   |         |      
|                                                          | Amortization of goodwill and other
    non-amortizable intangible assets |                         |         | 676  |  |   |         | 6,119 | 
|                                                          |                                                                          |                         |         |      |  |   |         |      
|Adjusted net loss attributable to common
    shareholders |                                                                          | $                       | (32,679 | )    |  | $ | (43,182 | )    
|                                                          |                                                                          |                         |         |      |  |   |         |      

|                                              |                                                          |                         |       |      |  |   |       |      | 
|--------------------------------------------- | -------------------------------------------------------- | ----------------------- | ----- | ---- |  | - | ----- | ---- | 
|                                              |                                                          |                        
|                                              |                                                          | Year Ended December 31,
|                                              |                                                          |                        
|                                              |                                                          | 2000                    |       | 2001
|                                              |                                                          |                         |       |     
|Reported basic and diluted net loss per share |                                                          | $                       | (1.33 | )    |  | $ | (1.42 | )   
|Add back:                                     |                                                          |                         |       |      |  |   |       |     
|                                              | Amortization of goodwill and other intangible
    assets |                         |       | 0.03 |  |   |       | 0.17 | 
|                                              |                                                          |                         |       |      |  |   |       |     
|Adjusted basic and diluted net loss per share |                                                          | $                       | (1.30 | )    |  | $ | (1.25 | )   
|                                              |                                                          |                         |       |      |  |   |       |     

(h) Investment
in Joint Venture

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. The business of e-Banc is to develop, produce and
market solutions that enable financial institutions to collect
and coordinate their data from all 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 e-Banc a purchase credit of
$5.0 million towards the future purchase of our 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 e-Banc as of
December 31, 2002, was 12.3%. Corillian has one
representative on e-Bancs board of managers. Corillian
will contribute an additional $1.0 million to e-Banc LLC in
the first half of 2003, of which $500,000 was paid in January
2003.

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. Emerging Issues Task Force (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. During the
years ended December 31, 2000, 2001 and 2002, Corillian
recorded $418,000, $592,000 and $916,000, respectively, of
losses related to its investment in e-Banc.

(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

F-9



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the potential for recovery is considered remote.
Corillian does not have any off-balance-sheet credit exposure
related to its customers. At December 31, 2001 and 2002,
Corillians allowance for doubtful accounts receivable was
$0 and $399,000, respectively.

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

|                            |  |      |   |      |  |      |   |  |  |   |       |  
|--------------------------- |  | ---- | - | ---- |  | ---- | - |  |  | - | ----- | -
|                            |  | 2000 |   | 2001 |  | 2002
|                            |  |      |   |      |  |     
|Beginning allowance balance |  | $    |  |      |  | $    |  |  |  | $ |      |  
|Provision                   |  |      |  |      |  |      |  |  |  |   | 1,317 |  
|Charge-offs                 |  |      |  |      |  |      |  |  |  |   | (918  | )
|                            |  |      |   |      |  |      |   |  |  |   |       |  
|Ending allowance balance    |  | $    |  |      |  | $    |  |  |  | $ | 399   |  
|                            |  |      |   |      |  |      |   |  |  |   |       |  

(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. Arrangements in which Corillians research and
development activities are partially funded by others are
accounted for by applying the provisions of Statement
No. 68.

(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.

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, 2002
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.

(m) Concentration
of 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
revenue for the three years ended December 31, 2002. A
majority of Corillians revenue is 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 new, intensely
competitive, highly fragmented 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

F-10



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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. At December 31, 2001, two customers
individually accounted for more than 10% of consolidated
accounts receivable. These customers, in total, accounted for
approximately 24% of Corillians consolidated accounts
receivable balance as of December 31, 2001. At
December 31, 2002, three customers individually 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.

Two customers individually accounted for more
than 10% of Corillians consolidated revenue in excess of
billing balance as of December 31, 2001. These customers,
in total, accounted for approximately 64% of Corillians
consolidated revenue in excess of billing balance as of
December 31, 2001. 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.

Corillian is subject to concentrations of credit
risk from its cash and cash equivalents, investments, accounts
receivables and revenue in excess of billing. Corillian limits
its exposure to credit risk associated with cash and cash
equivalents and investments by placing its cash, cash
equivalents and investments with a major financial institution
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
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 and result of operations and liquidity.

(o) Stock-Based
Compensation

At December 31, 2002, Corillian has various
stock-based compensation plans, including stock option plans and
an employee stock purchase plan, which are described more fully
in Notes 6 and 7. The Company continues to apply the
recognition and measurement principles of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, as allowed by Statement No. 123,
Accounting for Stock-Based Compensation. Under APB
No. 25, no stock-based compensation expense is recognized
for stock awards granted with an exercise price at or above fair
market value on the date of grant. Deferred stock-based
compensation is recorded for those situations where the exercise
price of an option was lower than the fair value of the
underlying common stock. Corillian recorded deferred stock-based
compensation of $6.8 million, $0 and $45,000 for the years
ended December 31, 2000, 2001 and 2002, 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
FASB Interpretation No. 28.

F-11



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table illustrates the effect on net
loss and net loss per share if the company had applied the fair
value recognition provisions of Statement No. 123, to
stock-based employee compensation.

|                                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                                                                    |  |                                      
|                                                                                                                                                    |  | Year Ended December 31,              
|                                                                                                                                                    |  |                                      
|                                                                                                                                                    |  | 2000                                  |         | 2001 |  | 2002
|                                                                                                                                                    |  |                                       |         |      |  |     
|                                                                                                                                                    |  |                                      
|                                                                                                                                                    |  | (in thousands, except per share data)
|Net loss attributable to common shareholders, as
    reported                                                                                       |  | $                                     | (33,355 | )    |  | $    | (49,301 | ) |  | $ | (17,257 | )
|Add: Stock-based compensation expense determined
    under APB No. 25                                                                               |  |                                       | 5,561   |      |  |      | 2,506   |   |  |   | 885     |  
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |  |                                       | (7,630  | )    |  |      | (9,605  | ) |  |   | (6,328  | )
|                                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |         |  
|Pro forma net loss attributable to common
    shareholders                                                                                          |  | $                                     | (35,424 | )    |  | $    | (56,400 | ) |  | $ | (22,700 | )
|                                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |         |  
|Net loss per share:                                                                                                                                 |  |                                       |         |      |  |      |         |   |  |   |         |  
|Basic & Diluted  as reported                                                                                                                       |  | $                                     | (1.33   | )    |  | $    | (1.42   | ) |  | $ | (0.49   | )
|Basic & Diluted 
    pro forma                                                                                                                     |  | $                                     | (1.41   | )    |  | $    | (1.63   | ) |  | $ | (0.64   | )

Information related to the assumptions used in
the above calculations is further described in Notes 6
and 7.

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.



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

Corillian computes net 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 and diluted net loss per share is
computed by dividing the net loss available to common
stockholders for the period by the weighted-average number of
shares of common stock outstanding during the period. Net loss
attributed to common shareholders for the year ended
December 31, 2000 includes the accretion of discounts on
redeemable convertible preferred stock. This accretion ceased
upon Corillians initial public offering of common stock in
April 2000 as all outstanding shares of Corillians
redeemable convertible preferred stock automatically converted
into common stock upon the offering.

The following table sets forth the
weighted-average shares of common stock issuable under stock
options and warrants using the treasury stock method, shares
issuable for acquisitions and convertible preferred stock on an
if-converted basis, which have exercise prices that are less
than the average fair market value of the underlying common
stock for the periods presented below, but which are not
included in calculating net loss per share due to their
antidilutive effect for the periods indicated:

|                                    |  |                         |           |      |  |      |           |  |  |  |         | 
|----------------------------------- |  | ----------------------- | --------- | ---- |  | ---- | --------- |  |  |  | ------- | 
|                                    |  |                        
|                                    |  | Year Ended December 31,
|                                    |  |                        
|                                    |  | 2000                    |           | 2001 |  | 2002
|                                    |  |                         |           |      |  |     
|Shares issuable under stock options |  |                         | 2,808,204 |      |  |      | 1,700,776 |  |  |  | 533,611 | 
|Shares issuable under warrants      |  |                         | 46,826    |      |  |      |          |  |  |  |        | 
|Shares issuable for acquisitions    |  |                         | 24,642    |      |  |      |          |  |  |  |        | 
|                                    |  |                         |           |      |  |      |           |  |  |  |         | 
|                                    |  |                         | 2,879,672 |      |  |      | 1,700,776 |  |  |  | 533,611 | 
|                                    |  |                         |           |      |  |      |           |  |  |  |         | 

F-12



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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,
|                                    |  |                        
|                                    |  | 2000                    |         | 2001 |  | 2002
|                                    |  |                         |         |      |  |     
|Shares issuable under stock options |  |                         | 997,002 |      |  |      | 2,727,446 |  |  |  | 4,623,009 | 
|Shares issuable under warrants      |  |                         |        |      |  |      | 250,000   |  |  |  | 250,000   | 
|                                    |  |                         |         |      |  |      |           |  |  |  |           | 
|                                    |  |                         | 997,002 |      |  |      | 2,977,446 |  |  |  | 4,873,009 | 
|                                    |  |                         |         |      |  |      |           |  |  |  |           | 



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

Corillian has adopted the provisions of Statement
No. 130, Reporting on Comprehensive Income.
Comprehensive income 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 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.



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

The carrying amounts reported in the balance
sheet for cash and cash equivalents, 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 capital leases and
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 $277,000, $333,000 and $88,000 for the
years ended December 31, 2000, 2001 and 2002, respectively.



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

In June 2001, the FASB issued Statement
No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting
and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. Corillian is required to implement Statement No. 143
on January 1, 2003. The Company does not expect this
statement to have a material impact on its consolidated
financial position or results of operations.

In June 2002, the FASB issued Statement
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities. This statement nullifies
EITF 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).

F-13



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Statement No. 146 requires that a liability
for a cost associated with an exit or disposal activity is
recognized when the liability is incurred. Under EITF 94-3,
a liability for an exit cost, as defined in EITF 94-3, was
recognized at the date of an entitys commitment to an exit
plan. The provisions of Statement No. 146 are effective for
exit or disposal activities that are initiated after
December 31, 2002. Statement No. 146 will be adopted
on a prospective basis and therefore did not have an impact as
of December 31, 2002.

In November 2002, the EITF reached a consensus on
EITF 00-21, Revenue Arrangements with Multiple
Deliverables. EITF 00-21 addresses certain aspects of
the accounting by a vendor for arrangements under which the
vendor will perform multiple revenue generating activities.
EITF 00-21 will be effective for interim periods beginning
after June 15, 2003. Corillian does not expect this issue
to have a material impact on its consolidated financial position
and results of operations.

In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN No. 45
requires that upon issuance of a guarantee, a guarantor must
recognize a liability for the fair value of an obligation
assumed under a guarantee. FIN No. 45 also requires
additional disclosures by a guarantor in its financial
statements about the obligations associated with guarantees
issued. The initial recognition and measurement provisions of
FIN No. 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The
disclosure requirements of FIN No. 45 are effective for
financial statements issued after December 15, 2002. The
Company does not expect this interpretation to have a material
impact on its consolidated financial position and results of
operations.

In December 2002, the FASB issued Statement
No. 148, Accounting for Stock-Based Compensation,
Transition and Disclosure. Statement No. 148 provides
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, Statement No. 148 amends the
disclosure requirements of Statement No. 123 to require
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the effect of the method used on
reported results. As allowed under Statement No. 148,
Corillian will continue to account for stock-based compensation
according to APB No. 25. The Company adopted Statement
No. 148 in December 2002.



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

Certain reclassifications have been made to the
consolidated financial statements for 2000 and 2001 in order to
conform to the 2002 presentation.



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



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

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

|                                               |  |                |        |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------ | ---- |  | - | ------- | -
|                                               |  | 2001           |        | 2002
|                                               |  |                |        |     
|                                               |  |               
|                                               |  | (in thousands)
|Computer equipment and software                |  | $              | 11,862 |      |  | $ | 12,507  |  
|Furniture, fixtures and other equipment        |  |                | 3,527  |      |  |   | 3,335   |  
|Leasehold improvements                         |  |                | 4,544  |      |  |   | 4,224   |  
|                                               |  |                |        |      |  |   |         |  
|                                               |  |                | 19,933 |      |  |   | 20,066  |  
|Less accumulated depreciation and amortization |  |                | (6,938 | )    |  |   | (11,690 | )
|                                               |  |                |        |      |  |   |         |  
|                                               |  | $              | 12,995 |      |  | $ | 8,376   |  
|                                               |  |                |        |      |  |   |         |  

F-14



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Depreciation and amortization expense was
$2.0 million, $4.7 million and $5.4 million for
the years ended December 31, 2000, 2001 and 2002,
respectively.



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

Accrued liabilities consisted of the following at
December 31:

|                             |  |                |       |      |  |   |       | 
|---------------------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                             |  | 2001           |       | 2002
|                             |  |                |       |     
|                             |  |               
|                             |  | (in thousands)
|Payroll and related expenses |  | $              | 1,691 |      |  | $ | 1,546 | 
|Other accrued liabilities    |  |                | 849   |      |  |   | 521   | 
|                             |  |                |       |      |  |   |       | 
|                             |  | $              | 2,540 |      |  | $ | 2,067 | 
|                             |  |                |       |      |  |   |       | 



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

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

|         |  |                |         |      |  |      |         |   |  |   |         |  
|-------- |  | -------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|         |  | 2000           |         | 2001 |  | 2002
|         |  |                |         |      |  |     
|         |  |               
|         |  | (in thousands)
|Domestic |  | $              | (31,344 | )    |  | $    | (44,689 | ) |  | $ | (12,052 | )
|Foreign  |  |                | (1,911  | )    |  |      | (4,612  | ) |  |   | (5,205  | )
|         |  |                |         |      |  |      |         |   |  |   |         |  
|         |  | $              | (33,255 | )    |  | $    | (49,301 | ) |  | $ | (17,257 | )
|         |  |                |         |      |  |      |         |   |  |   |         |  

Due to Corillians losses before the
provision for income taxes for the years ended December 31,
2000, 2001 and 2002, there has been no provision for federal and
state income taxes. The reconciliation of the statutory federal
income tax rate to Corillians effective income tax rate is
as follows:

|                                      |                                       |      |     |      |  |      |     |    |  |  |     |    | 
|------------------------------------- | ------------------------------------- | ---- | --- | ---- |  | ---- | --- | -- |  |  | --- | -- | 
|                                      |                                       | 2000 |     | 2001 |  | 2002
|                                      |                                       |      |     |      |  |     
|Federal statutory rate                |                                       |      | (34 | )%   |  |      | (34 | )% |  |  | (34 | )%
|Increases (decreases) resulting from: |                                       |      |     |      |  |      |     |    |  |  |     |   
|                                      | Loss for which no benefit is provided |      |     | 34   |  |      |     | 15 |  |  |     | 34 | 
|                                      | Goodwill                              |      |     |     |  |      |     | 19 |  |  |     |   | 
|                                      |                                       |      |     |      |  |      |     |    |  |  |     |   
|                                      |                                       |      |    | %    |  |      |    | %  |  |  |    | % 
|                                      |                                       |      |     |      |  |      |     |    |  |  |     |   

F-15



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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:

|                          |                                                   |                                      |         |        |        |  |         |        |        | 
|------------------------- | ------------------------------------------------- | ------------------------------------ | ------- | ------ | ------ |  | ------- | ------ | ------ | 
|                          |                                                   | 2001                                 |         | 2002  
|                          |                                                   |                                      |         |       
|                          |                                                   |                                     
|                          |                                                   | (in thousands)                      
|Deferred tax assets:      |                                                   |                                      |         |        |        |  |         |       
|                          | Research and experimentation credit carryforwards |                                      | $       | 1,915  |        |  | $       | 2,230  |       
|                          | Accrued expenses and allowances                   |                                      |         | 328    |        |  |         | 369    |       
|                          | Deferred compensation                             |                                      |         | 3,278  |        |  |         | 3,377  |       
|                          | Domestic net operating loss carryforwards         |                                      |         | 19,316 |        |  |         | 24,435 |       
|                          | Foreign net operating loss carryforwards          |                                      |         | 1,816  |        |  |         | 2,795  |       
|                          | Equity investments                                |                                      |         | 387    |        |  |         | 247    |       
|                          | Goodwill                                          |                                      |         | 378    |        |  |         | 350    |       
|                          | Depreciable assets                                |                                      |         | 133    |        |  |         | 607    |       
|                          | Other                                             |                                      |         | 63     |        |  |         | 24     |       
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Total gross deferred tax assets      |         |        | 27,614 |  |         |        | 34,434 | 
|Less valuation allowance  |                                                   |                                      | (27,551 | )      |        |  | (34,272 | )     
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   |                                      | 63      |        |        |  | 162     |       
|                          |                                                   |                                      |         |        |        |  |         |       
|Deferred tax liabilities: |                                                   |                                      |         |        |        |  |         |       
|                          | Prepaid expenses                                  |                                      |         | 63     |        |  |         | 162    |       
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Total gross deferred tax liabilities |         |        | 63     |  |         |        | 162    | 
|                          |                                                   |                                      |         |        |        |  |         |       
|                          |                                                   | Net deferred tax assets              |         | $      |       |  |         | $      |       | 
|                          |                                                   |                                      |         |        |        |  |         |       

The Company 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 $560,000.

The net change in the total valuation allowance
was an increase of approximately $13.1 million,
$9.9 million and $6.7 million for the years ended
December 31, 2000, 2001 and 2002, respectively.

As of December 31, 2002, Corillian had
federal and state net operating loss carryforwards of
approximately $63.7 million and foreign net operating loss
carryforwards of approximately $13.9 million to offset
against future income and research and experimentation credits
of $2.5 million. These carryforwards expire in 2003 through
2022.

A provision of the Internal Revenue Code requires
the utilization of net operating losses and research and
experimentation credits be limited when there is a change of
more than 50% in ownership of Corillian. Such a change occurred
with the sales of Series A convertible preferred stock
(Series A) in December 1997, the sale of Series B
redeemable convertible preferred stock in April 1999, and the
issuance of common stock in Corillians initial public
offering in April 2000. Accordingly, the utilization of the net
operating loss carryforwards generated from periods prior to
April 2000 is limited.



|    |                                           
|--- | ------------------------------------------
|(5) | Redeemable Convertible Preferred
    Stock

Corillian has designated shares of authorized
preferred stock as redeemable convertible preferred stock.
Series B and Series C redeemable convertible preferred
stock (Series B and Series C). Upon completion of

F-16



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Corillians initial public offering, all
outstanding shares of Series B and Series C
automatically converted into common stock.



|    |                     
|--- | --------------------
|(6) | Shareholders Equity



|    |                
|--- | ---------------
|(a) | Preferred Stock

In conjunction with Corillians initial
public offering on April 12, 2000, all outstanding shares
of Series A automatically converted into common stock.



|    |        
|--- | -------
|(b) | 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 has 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 is outstanding as of
December 31, 2002.



|    |                                      
|--- | -------------------------------------
|(c) | 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. Corillian reserved a total of
333,333 shares of common stock for issuance under the ESPP. All
Corillian employees are eligible if they typically work over
20 hours per week and do not own five percent or more of
Corillians voting stock. At Corillians Annual
Meeting of Shareholders in May 2001, Corillians
shareholders approved an amendment to increase the number of
shares authorized for issuance pursuant to the ESPP from 333,333
to 400,000. On January 1, 2002, the number of shares
authorized for issuance under the ESPP automatically increased,
pursuant to provisions included in the ESPP, from 400,000 to
733,333. As of December 31, 2002, 155,719 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 and 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.

F-17



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The per share weighted-average fair value, as
determined by applying the valuation methodology prescribed in
FASB Technical Bulletin 97-1 to the ESPP in 2000, 2001 and
2002, was $4.19, $2.54 and $0.72, respectively, using the
following assumptions:

|                        |  |                         |             |      |  |      |             |  |  |  |             | 
|----------------------- |  | ----------------------- | ----------- | ---- |  | ---- | ----------- |  |  |  | ----------- | 
|                        |  |                        
|                        |  | Year Ended December 31,
|                        |  |                        
|                        |  | 2000                    |             | 2001 |  | 2002
|                        |  |                         |             |      |  |     
|Risk free interest rate |  |                         | 5.5%        |      |  |      | 4.09%       |  |  |  | 3.10%       | 
|Expected volatility     |  |                         | 100%        |      |  |      | 100%        |  |  |  | 100%        | 
|Expected life in years  |  |                         | 6-24 months |      |  |      | 6-24 months |  |  |  | 6-24 months | 
|Dividend yield          |  |                         |            |      |  |      |            |  |  |  |            | 



|    |                                 
|--- | --------------------------------
|(7) | 1997 and 2000 Stock Option Plans

In 1997, Corillians Board of Directors
approved and adopted a Stock Option Plan (the 1997 Plan). As
adopted, the maximum aggregate number of shares awardable under
the 1997 Plan was 2,000,000 shares of common stock for the grant
of stock options to employees, officers, directors, consultants
or advisors. 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 April 1999,
Corillians Board of Directors approved an increase of
2,243,795 shares available for grant under the 1997 Plan,
increasing the total shares available for grant to 4,243,795. In
March 2000, the Board of Directors approved an amendment that
caps the 1997 Plan at 3,453,193 shares, which were the number of
shares subject to options at that time. Shares generally vest in
yearly installments over a period of three or four years
following the date of grant. Options 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) and
reserved 4,000,000 shares of common stock for issuance of stock
options to employees, officers, directors, consultants or
advisors under the 2000 Plan. At Corillians Annual Meeting
of Shareholders in May 2001, Corillians shareholders
approved an amendment to increase the number of shares
authorized for issuance pursuant to the 2000 Plan from 4,000,000
to 5,000,000. 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 generally
vest over a period of four years following the date of grant.
Options generally expire ten years from the date of grant,
and generally expire three months after termination of
employment with Corillian. On January 1, 2002, the number
of shares authorized for issuance under the 2000 Plan
automatically increased, pursuant to provisions included in the
2000 Plan, from 5,000,000 to 5,352,956.

F-18



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                          |  |           |            |          |  |   |       |  
|------------------------- |  | --------- | ---------- | -------- |  | - | ----- | -
|                          |  |           |            | Weighted
|                          |  |           |            | Average 
|                          |  | Number    |            | Exercise
|                          |  | of Shares |            | Price   
|                          |  |           |            |         
|Balance December 31, 1999 |  |           | 3,619,224  |          |  | $ | 0.84  |  
|Granted                   |  |           | 3,968,438  |          |  |   | 9.59  |  
|Exercised                 |  |           | (1,220,160 | )        |  |   | (0.62 | )
|Cancelled                 |  |           | (541,295   | )        |  |   | (4.16 | )
|                          |  |           |            |          |  |   |       |  
|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  |  
|                          |  |           |            |          |  |   |       |  

The following table summarizes information
regarding stock options outstanding and exercisable as of
December 31, 2002:

|            |  |                     |           |                     |  |           |      |             |  |           |       |  |  |  |           |  |  |   |       | 
|----------- |  | ------------------- | --------- | ------------------- |  | --------- | ---- | ----------- |  | --------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|            |  |                     |           |                     |  |          
|            |  | Options Outstanding |           |                    
|            |  |                     |           | Options Exercisable
|            |  |                     |           | Weighted-           |  |           |      |            
|            |  |                     |           | Average             |  | Weighted- |      |             |  | Weighted-
|            |  |                     |           | Remaining           |  | Average   |      | Exercisable |  | Average  
|Exercise    |  | Number              |           | Contractual         |  | Exercise  |      | Number      |  | Exercise 
|Price       |  | Of Shares           |           | Life                |  | Price     |      | Of Shares   |  | Price    
|            |  |                     |           |                     |  |           |      |             |  |          
|$0.15-1.88  |  |                     | 889,961   |                     |  |           | 2.73 |             |  | $         | 1.19  |  |  |  | 742,336   |  |  | $ | 1.15  | 
|1.96-2.85   |  |                     | 910,750   |                     |  |           | 9.12 |             |  |           | 2.80  |  |  |  | 6,125     |  |  |   | 2.58  | 
|2.95-3.77   |  |                     | 929,992   |                     |  |           | 7.34 |             |  |           | 3.53  |  |  |  | 516,183   |  |  |   | 3.62  | 
|3.81-12.50  |  |                     | 961,462   |                     |  |           | 8.02 |             |  |           | 8.44  |  |  |  | 424,751   |  |  |   | 8.68  | 
|12.69-19.50 |  |                     | 193,031   |                     |  |           | 7.45 |             |  |           | 16.86 |  |  |  | 120,326   |  |  |   | 16.95 | 
|            |  |                     |           |                     |  |           |      |             |  |           |       |  |  |  |           |  |  |   |       | 
|$0.15-19.50 |  |                     | 3,885,196 |                     |  |           | 6.86 |             |  | $         | 4.69  |  |  |  | 1,809,721 |  |  | $ | 4.68  | 
|            |  |                     |           |                     |  |           |      |             |  |           |       |  |  |  |           |  |  |   |       | 

As of December 31, 2002, 2,566,140 shares
were available for grant.

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
vest over one year. Corillian recorded $45,000 of deferred
stock-based compensation associated with this grant of
restricted stock, which is being amortized to expense over the
vesting period.

During 2000, the Company issued 6,667 stock
options to non-employees. The fair value of these stock options
measured at the time of grant, using the Black-Scholes option
pricing model and applying the assumptions in the table below,
totaled $125,000. This amount, which was included in deferred
stock-based compensation, was to be amortized over the stock
option vesting period. During 2000, Corillian accelerated the
vesting period of these options and, as such, re-measured the
fair value of these options and recorded compensation expense
equal to the difference between the total compensation expense
calculated after the

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

options were remeasured less previously
recognized compensation expense. Amortization of stock-based
compensation related to these options was $259,000, $0 and $0
for the years ended December 31, 2000, 2001 and 2002,
respectively.

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 and 2000 Plans, was $7.40, $3.81 and $1.90 during
the years ended December 31, 2000, 2001 and 2002,
respectively, using the following weighted-average assumptions:

|                        |  |              |      |      |  |      |      |   |  |  |      |  
|----------------------- |  | ------------ | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                        |  |             
|                        |  | Year Ended  
|                        |  | December 31,
|                        |  |             
|                        |  | 2000         |      | 2001 |  | 2002
|                        |  |              |      |      |  |     
|Risk free interest rate |  |              | 5.5  | %    |  |      | 4.09 | % |  |  | 3.10 | %
|Expected volatility     |  |              | 100  | %    |  |      | 100  | % |  |  | 100  | %
|Expected life in years  |  |              | 3.85 |      |  |      | 3.93 |   |  |  | 3.99 |  
|Dividend yield          |  |              |     |      |  |      |     |   |  |  |     |  

(8) Commitments and
Contingencies

(a) Litigation

In April 2000, KeyBank National Association
brought a lawsuit in the Court of Common Pleas in Cuyahoga
County, Ohio against one of Corillians employees, alleging
that the employee violated the terms of confidentiality
agreements with KeyBank and misappropriated trade secrets of
KeyBank and used them in performing work for Corillian.
Corillian investigated the allegations and concluded that the
employee did not use trade secrets or confidential information
in performing any substantial services for Corillian. Corillian
continues to employ this employee. In January 2001, KeyBank
named Corillian as a party to the lawsuit, alleging that
Corillian misappropriated KeyBanks trade secrets and
confidential information and used them in performing work for
some of its customers. KeyBank sought unspecified monetary
damages. Corillian filed a counterclaim against KeyBank,
alleging that KeyBank used proprietary information that
Corillian disclosed to KeyBank when Corillian shared its
technology with them in November 1998. Corillian sought
unspecified monetary damages.

In October 2002, Corillian and KeyBank settled
this dispute. 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 of the cash to KeyBank during the fourth
fiscal quarter of 2003. Corillian will pay $250,000 and $175,000
to KeyBank on November 16, 2003 and 2004, respectively.
Corillian issued the shares of common stock during the fourth
fiscal quarter of 2002. Corillian agreed to allow KeyBank to
include its shares in any registration statements Corillian may
file with the Securities and Exchange Commission during the
12 months following the date of the settlement. Corillian
recorded a charge of approximately $2.6 million during the
three-month period ended September 30, 2002 related to this
settlement.

(b) Royalty

Subject to the purchase agreement relating to the
right to license software, Corillian agreed to pay Checkfree
Corporation a royalty of 7% of gross revenues on a quarterly
basis for five years or up to a maximum of $1.75 million.
Corillian had the option to pre-pay any unpaid portion of the
$1.75 million at present value at any time prior to the end
of the royalty period. Royalties were charged to cost of
revenues in the accompanying consolidated financial statements.
Corillian completed its requirements under the royalty agreement
during

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2000 and paid the entire royalty obligation.
Corillian recorded $935,000, $0 and $0 in royalty expenses for
the years ended December 31, 2000, 2001 and 2002,
respectively.

(c) 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
the participants annual compensation. Under this plan,
Corillian made contributions of $332,000, $429,000 and $358,000
during the years ended December 31, 2000, 2001 and 2002,
respectively.

(d) Lease
Obligations

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

|                              |  |                |       |      |  |   |       |  
|----------------------------- |  | -------------- | ----- | ---- |  | - | ----- | -
|                              |  | 2001           |       | 2002
|                              |  |                |       |     
|                              |  |               
|                              |  | (in thousands)
|Computer and other equipment  |  | $              | 1,294 |      |  | $ | 1,416 |  
|Less accumulated depreciation |  |                | (478  | )    |  |   | (841  | )
|                              |  |                |       |      |  |   |       |  
|                              |  | $              | 816   |      |  | $ | 575   |  
|                              |  |                |       |      |  |   |       |  

Corillian also has noncancelable operating
leases, primarily for facilities and computer and other
equipment, which expire over the next seven years. Rental
expense under operating leases was $1.2 million,
$3.7 million and $3.7 million for the years ended
December 31, 2000, 2001 and 2002, respectively.

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

|                                   |      |                                             |      |           |     |  |   |       |        | 
|---------------------------------- | ---- | ------------------------------------------- | ---- | --------- | --- |  | - | ----- | ------ | 
|                                   |      | Capital                                     |      | Operating
|                                   |      | Leases                                      |      | Leases   
|                                   |      |                                             |      |          
|                                   |      |                                            
|                                   |      | (In thousands)                             
|Year ending December 31:           |      |                                             |      |           |     |  |   |      
|                                   | 2003 |                                             | $    | 419       |     |  | $ | 3,037 |       
|                                   | 2004 |                                             |      | 21        |     |  |   | 3,108 |       
|                                   | 2005 |                                             |      | 11        |     |  |   | 2,851 |       
|                                   | 2006 |                                             |      | 3         |     |  |   | 2,881 |       
|                                   | 2007 |                                             |      |          |     |  |   | 2,198 |       
|                                   |      |                                             |      |           |     |  |   |      
|                                   |      | Total minimum lease payments                |      |           | 454 |  |   | $     | 14,075 | 
|                                   |      |                                             |      |           |     |  |   |      
|Less amounts representing interest |      |                                             | (42  | )         |     |  |   |      
|                                   |      |                                             |      |           |     |  |   |      
|                                   |      | Present value of minimum lease payments     |      |           | 412 |  |   |       |        | 
|Less current portion               |      |                                             | (380 | )         |     |  |   |      
|                                   |      |                                             |      |           |     |  |   |      
|                                   |      | Long-term portion of minimum lease payments |      | $         | 32  |  |   |       |        | 
|                                   |      |                                             |      |           |     |  |   |      

(e) Lines
of credit

In January 2000, Corillian obtained a
$3.0 million equipment line of credit with a financial
institution, of which approximately $571,000 was outstanding at
December 31, 2002. Borrowings under this arrangement

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

bear interest at an effective rate of 17.2% per
annum. Under this line of credit, Corillian is obligated to make
fixed monthly payments of approximately $98,000 through March
2003 and a final balloon payment of approximately $302,000 in
April 2003.

In November 2000, Corillian obtained a
$5.0 million equipment line of credit with a financial
institution, of which approximately $2.9 million was
outstanding at December 31, 2002. No credit was available
under this line of credit as of December 31, 2002.
Borrowings under this arrangement bear interest at an effective
rate of 7.9% to 8.6% per annum. Under this line of credit,
Corillian is obligated to make fixed monthly payments of
approximately $123,000 through January 2005 and two monthly
payments thereafter of $29,000 through March 2005. Under this
line of credit, Corillian must comply with affirmative covenants
that require Corillian to maintain a specified tangible net
worth and adjusted quick ratio. Corillian believes it was in
compliance with these covenants as of December 31, 2002.
Certain assets of Corillian secure borrowings under both of
these arrangements.

Long-term debt was as follows at December 31:

|                                                                                                 |                      |                |       |        |   |   |       |        |  
|------------------------------------------------------------------------------------------------ | -------------------- | -------------- | ----- | ------ | - | - | ----- | ------ | -
|                                                                                                 |                      | 2001           |       | 2002  
|                                                                                                 |                      |                |       |       
|                                                                                                 |                      |               
|                                                                                                 |                      | (in thousands)
|Line of credit facility due 2003 with an interest
    rate of 17.2% at December 31, 2002         |                      | $              | 1,554 |        |   | $ | 571   |       
|Line of credit facility due 2005 with an interest
    rates of 7.9% to 8.6% at December 31, 2002 |                      |                | 4,042 |        |   |   | 2,862 |       
|                                                                                                 |                      |                |       |        |   |   |       |       
|                                                                                                 |                      |                | 5,596 |        |   |   | 3,433 |       
|                                                                                                 | Less current portion |                |       | (2,185 | ) |   |       | (1,865 | )
|                                                                                                 |                      |                |       |        |   |   |       |       
|                                                                                                 |                      | $              | 3,411 |        |   | $ | 1,568 |       
|                                                                                                 |                      |                |       |        |   |   |       |       

(f) Ted
Spooner severance

In connection with Ted Spooners departure
as Chief Executive Officer in October 2002, Corillian entered
into an agreement with Mr. Spooner, which requires
Corillian to pay Mr. Spooner a severance payment of
approximately $600,000. $300,000 is due upon termination of the
agreement or Mr. Spooners termination of employment
as Chief Corporate Strategist, and $300,000 of which is due in
four equal quarterly installments beginning 90 days after
such termination. Mr. Spooners agreement terminates
on April 7, 2003. During the three-month period ended
December 31, 2002, Corillian recorded expense of $300,000
in general and administrative expense related to this severance
agreement. Corillian will recognize an additional $300,000 in
expense related to this severance agreement during the
three-month period ended March 31, 2003.

(g) 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. The
indemnification is limited to the amount paid by the customer.
To date, claims under such indemnification provisions have not
been significant.

(9) Segment Information

Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, requires
the 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.

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

(a) Geographic
Information

Corillian derives its revenue from a single
operating segment, providing electronic finance software and
applications. Revenue is generated in this segment through
software license and service arrangements.

Results of operations are substantially derived
from United States operations and substantially all assets
reside in the United States. Our results of operations for the
year ended December 31, 2000, 2001 and 2002 include
approximately $2.2 million, $13.5 million and
$6.0 million, respectively, of expense relating to our
international operations. Our international operations generated
approximately $9.2 million and $826,000, respectively, of
revenue during the years ended December 31, 2001 and 2002.
Corillian International, Ltd., our sole wholly-owned
international subsidiary formed in 2000, did not generate any
revenues during the year ended December 31, 2000. In 2002,
Corillian closed its office in London, England, and elected to
pursue international sales primarily through strategic partners
and value added resellers.

(b) Major
Customers

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

|           |  |                         |       |      |  |      |       |  |  |   |       | 
|---------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|           |  |                        
|           |  | Year Ended December 31,
|           |  |                        
|           |  | 2000                    |       | 2001 |  | 2002
|           |  |                         |       |      |  |     
|           |  |                        
|           |  | (in thousands)         
|Customer A |  | $                       | 7,282 |      |  | $    |      |  |  | $ |      | 
|Customer B |  |                         |      |      |  |      | 8,682 |  |  |   | 4,341 | 

(c) Revenues
and Cost of 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 the Companys licenses
and services are as follows:

|                                  |  |                         |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                  |  |                        
|                                  |  | Year Ended December 31,
|                                  |  |                        
|                                  |  | 2000                    |        | 2001 |  | 2002
|                                  |  |                         |        |      |  |     
|                                  |  |                        
|                                  |  | (in thousands)         
|License and professional services |  | $                       | 29,606 |      |  | $    | 49,240 |  |  | $ | 30,623 | 
|Post-contractual support          |  |                         | 841    |      |  |      | 3,366  |  |  |   | 6,904  | 
|Hosting                           |  |                         | 406    |      |  |      | 1,242  |  |  |   | 1,614  | 
|                                  |  |                         |        |      |  |      |        |  |  |   |        | 
|                                  |  | $                       | 30,853 |      |  | $    | 53,848 |  |  | $ | 39,141 | 
|                                  |  |                         |        |      |  |      |        |  |  |   |        | 

(10) Related Party Transactions

In December 1999, Corillian entered into a
software license and services arrangement totaling
$4.5 million, with a holder of Series C preferred
stock. Upon Corillians initial public offering in April
2000, the

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Series C preferred stock converted into
common stock. Corillian recognized $2.0 million, $531,000
and $463,000 in revenues for the years ended December 31,
2000, 2001 and 2002, respectively, in connection with this
arrangement. At December 31, 2001 and 2002, accounts
receivable from this customer was $728,000 and $1,000,
respectively. At December 31, 2001 and 2002, deferred
revenue from this customer was $362,000 and $362,000,
respectively, and revenue in excess of billing was $31,000 and
$0, respectively.

In April 2000, Corillian entered into a software
license and services arrangement totaling $3.0 million,
with a holder of common stock, which was issued in a private
placement that occurred concurrently with Corillians
initial public offering in April 2000. Corillian recognized
$655,000, $2.5 million and $412,000 in revenues for the
years ended December 31, 2000, 2001 and 2002, respectively,
in connection with this arrangement. At December 31, 2001
and 2002, accounts receivable from this customer was $569,000
and $0, respectively. At December 31, 2001 and 2002,
deferred revenue from this customer was $476,000 and $494,000,
respectively, and revenue in excess of billing was $163,000 and
$0, respectively.

(11) Acquisitions

(a) InterTech
Systems, Inc.

In April 2000, Corillian issued an aggregate of
138,638 shares of its common stock to acquire InterTech Systems,
Inc. (InterTech), a Minnesota corporation, which was a developer
of data aggregation intellectual property and technology. Of the
138,638 shares of Corillian common stock issued, 69,319 of these
shares were held in escrow for one year to secure the
indemnification obligations of the InterTech shareholders.
Following the provisions of Statement No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased or
Otherwise Marketed, Corillian recorded $1.3 million in
research and development expenses consisting of
$1.1 million relating to the 138,638 shares issued to
InterTech and $228,000 for consulting and other services
relating to the acquisition, during 2000, in connection with the
InterTech transaction.

(b) Hatcher
Associates Inc.

In November 2000, Corillian acquired Hatcher
Associates Inc. (Hatcher), a software integration,
implementation and consulting company focused on applications
for consumer banking. Under the terms of the Stock Purchase
Agreement dated November 24, 2000, between Hatcher and
Corillian, approximately 1.9 million shares of Corillian
Common Stock were issued or reserved for issuance for all
outstanding shares of Hatcher. Corillian also assumed
outstanding options for 212,700 shares of the common stock of
Hatcher, which converted into fully vested options for 41,581
shares of Corillian common stock. As a result of the purchase,
Hatcher became a wholly-owned subsidiary of Corillian. Corillian
has since changed Hatchers name to Corillian Services, Inc.

This acquisition was accounted for by the
purchase method of accounting and, accordingly, the consolidated
statement of operations for the year ended December 31,
2000 includes the results of Hatcher beginning November 24,
2000. The assets acquired and liabilities assumed were recorded
at estimated fair values as determined by Corillians
management based on information currently available at the time
of acquisition and on current assumptions as to future
operations. Of the total purchase price of $25.7 million,
approximately $3.7 was allocated to tangible assets acquired,
offset by approximately $1.4 million of liabilities
assumed, and the remainder was allocated to intangible assets,
including customer relationships of $2.6 million, workforce
of $1.8 million and goodwill of $19.0 million.

The following unaudited pro forma financial
information combines the results of operations of Corillian and
Hatcher assuming the purchase of Hatcher was consummated at the
beginning of the periods presented. The pro forma results are
not necessarily indicative of what would have occurred if the
purchase had been in effect for the period presented (in
thousands, except per share data).

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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                     |  |      |         |  
|------------------------------------ |  | ---- | ------- | -
|                                     |  | 2000
|                                     |  |     
|Revenues                             |  | $    | 44,491  |  
|Net loss                             |  |      | (41,060 | )
|Basic and diluted net loss per share |  |      | (1.53   | )

In the fourth quarter of 2001, Corillian
determined that the goodwill and other intangible assets
associated with Hatchers business were impaired. See
Note 12 for further discussion of this asset impairment.

(12) 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 have been communicated to the affected
employees. 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
$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. The
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 have been communicated to the
affected employees. 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.

The following table summarizes the restructuring
charges, the amounts paid and the ending accrual balances for
the year ended December 31, 2002:

|                                                       |  |                |       |          |  |               |     |  |  |   |       | 
|------------------------------------------------------ |  | -------------- | ----- | -------- |  | ------------- | --- |  |  | - | ----- | 
|                                                       |  |                |       | Non-Cash |  |              
|                                                       |  | Accruals       |       | Charges  |  | Total Charges
|                                                       |  |                |       |          |  |              
|                                                       |  |               
|                                                       |  | (In thousands)
|Severance-related payments                             |  | $              | 1,017 |          |  | $             | 200 |  |  | $ | 1,217 | 
|Losses on sale of equipment                            |  |                |      |          |  |               | 90  |  |  |   | 90    | 
|Lease cancellation costs                               |  |                | 27    |          |  |               |    |  |  |   | 27    | 
|                                                       |  |                |       |          |  |               |     |  |  |   |       | 
|                                                       |  | $              | 1,044 |          |  | $             | 290 |  |  | $ | 1,334 | 
|Cash payments during 2001                              |  |                | (889  | )        |  |               |     |  |  |   |       | 
|                                                       |  |                |       |          |  |               |     |  |  |   |       | 
|Accrued restructuring charges at
    December 31, 2001 |  |                | 155   |          |  |               |     |  |  |   |       | 
|Severance-related accruals in 2002                     |  |                | 682   |          |  |               |     |  |  |   |       | 
|Cash payments during 2002                              |  |                | (837  | )        |  |               |     |  |  |   |       | 
|                                                       |  |                |       |          |  |               |     |  |  |   |       | 
|Accrued restructuring charges at
    December 31, 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

F-25



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##### Table of Contents



CORILLIAN CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

(13) Quarterly Financial
Information  Unaudited

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

|                                      |  |                    |         |         |  |              |        |             |  |   |        |   |  |   |         |     
|------------------------------------- |  | ------------------ | ------- | ------- |  | ------------ | ------ | ----------- |  | - | ------ | - |  | - | ------- | ----
|                                      |  |                   
|                                      |  | Quarter Ended 2001
|                                      |  |                   
|                                      |  | March 31           |         | June 30 |  | September 30 |        | December 31
|                                      |  |                    |         |         |  |              |        |            
|Total revenues                        |  | $                  | 13,690  |         |  | $            | 15,213 |             |  | $ | 15,031 |   |  | $ | 9,914   |     
|Gross profit                          |  |                    | 5,386   |         |  |              | 6,706  |             |  |   | 7,230  |   |  |   | 4,169   |     
|Loss from operations                  |  |                    | (10,339 | )       |  |              | (8,290 | )           |  |   | (6,089 | ) |  |   | (24,280 | )(1)
|Net loss                              |  |                    | (10,063 | )       |  |              | (8,299 | )           |  |   | (6,263 | ) |  |   | (24,676 | )   
|Net loss per share, diluted and basic |  |                    | (0.29   | )       |  |              | (0.24  | )           |  |   | (0.18  | ) |  |   | (0.71   | )   

|                                      |  |                    |        |         |  |              |        |             |  |   |        |      |  |   |        |  
|------------------------------------- |  | ------------------ | ------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ | ---- |  | - | ------ | -
|                                      |  |                   
|                                      |  | 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 | )           |  |   | (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  | )



---

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



|    |                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------
|(1) | Corillian recorded restructuring and impairment
    charges of $18,097 during the quarter ended December 31,
    2001.        
|   
|(2) | Corillian recorded a litigation settlement charge
    of approximately $2,580 during the quarter ended
    September 30, 2002.

F-26