• If the merger does not occur, we will not benefit from the expenses we have incurred in preparation for the merger.

• We have a history of losses and may incur losses in future periods if we are not able to, among other things, increase our sales to new and existing customers.

• Our quarterly results fluctuate significantly and may fall short of anticipated levels, which may cause the price of our common stock to decline.

• 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.

• If we, or our implementation partners, do not effectively implement our solutions, we may not achieve anticipated revenues or gross margins.

• If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.

• The lengthy sales cycles of our products may cause revenues and operating results to be unpredictable and to vary significantly from period to period.

• Subscription-based licensing of our products and services may have an adverse effect on near-term revenue.

• We may not achieve anticipated revenues if we do not successfully introduce new products or develop upgrades or enhancements to our existing products.

• Acquisitions may be costly and difficult to integrate, divert management resources or dilute shareholder value.

• Our partners may be unable to fulfill their service obligations and cause us to incur penalties or other expenses with our customers.

• 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.

• Competition in the market for internet-based financial services is intense and could reduce our sales and prevent us from achieving profitability.

• Consolidation in the financial services industry could reduce the number of our customers and potential customers.

• If we lose key personnel, we could experience reduced sales, delayed product development and diversion of management resources.

• If we do not develop international operations as expected or fail to address international market risks, we may not achieve anticipated sales growth.

• 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.

• Network or internet security problems could damage our reputation and business.

• New technologies could render our products obsolete.

• 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.

• Our products and services must interact with other vendors' products, which may result in system errors.

• If we become subject to product liability litigation, it could be costly and time consuming to defend.

• 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.

• Increasing government regulation of the internet and the financial services industry could limit the market for our products and services, impose on our liability for transmission of protected data and increase our expenses.

We do not guarantee future results, levels of activity, performance or achievements. We do not plan to update any of the forward-looking statements after the date of this document to conform them to actual results or to changes in our expectations.
Pending Acquisition of Corillian
On February 13, 2007, we entered into a Merger Agreement pursuant to which CheckFree will acquire all of the outstanding shares of our common stock for $5.15 per share in cash. Our shareholders approved the merger on April 30, 2007. We expect the acquisition to close in the second quarter of 2007, subject to certain regulatory matters. We previously announced that on April 12, 2007, CheckFree submitted an additional responsive document required by the pre-merger notification and report form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") to the Federal Trade Commission ("FTC") and Department of Justice ("DOJ"), relating to the proposed acquisition of Corillian by CheckFree. As a result, the HSR Act waiting period recommenced and is now set to expire at 11:59 p.m. on May 14, 2007, unless earlier terminated by federal antitrust authorities, or extended by a request for additional information from such authorities. We continue to anticipate the merger will close in the second calendar quarter of 2007, shortly following the expiration or termination of the antitrust waiting period. However, the timing of the closing may be affected by formal or informal requests, if any, for additional information from the FTC or DOJ. If we should terminate the Merger Agreement under specified circumstances, including a termination whereby we would enter into an agreement to be acquired by another company, we would be required to pay CheckFree a termination fee of $5.5 million.
All forward-looking statements included in this Annual Report on Form 10-Q, including those in the Management's Discussion and Analysis of Financial Condition, Results of Operations and Risk Factors, are based on management's plans for future operations without consideration given to the pending transaction.
Overview
We are a leading provider of solutions that enable banks, credit unions, brokers 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. We provide a set of applications for Internet banking, online fraud prevention, electronic bill presentment and payment, targeted marketing, data aggregation, alerts and online customer relationship management. 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 support multiple lines of business, including consumer banking, small business banking and credit card management, and to scale to support millions of users. Our current customers include J.P. Morgan Chase, Wachovia Bank, The Huntington National Bank, Capital One and SunTrust Bank.
We have historically 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 also successfully expanded into other markets, including small to mid-size financial institutions, and we intend to continue our efforts towards expanding our penetration of these markets.
As of March 31, 2007, we had a backlog of unfilled orders of $57.7 million, as compared to a backlog of $53.2 million as of December 31, 2006. We expect $42.4 million of our backlog as of March 31, 2007 will be filled over the next 12 months. Backlog represents contractual customer commitments, including fees for licenses, professional services, maintenance, hosting, subscriptions and estimates for usage-based arrangements. Backlog is not necessarily indicative of revenues to be recognized in a specified future period. There are many factors that would impact our filling of backlog, such as our progress in completing projects for our customers and our customers' meeting anticipated schedules for customer-dependent deliverables. 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 revenues in any given period. Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Condensed Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes 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.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that there have been no significant changes during the three months ended March 31, 2007 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2006.
Recent Accounting Pronouncements
See Note 1 to the Condensed Consolidated Financial Statements in Item 1 for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference. Results of Operations
Revenues
Revenues increased to $16.5 million for the three months ended March 31, 2007 from $14.3 million for the three months ended March 31, 2006. The increase of $2.2 million, or 15%, was primarily due to $1.2 million of increased license and professional services revenues from more implementation projects, and approximately $829,000 of increased hosting revenues from several new hosting customers, including one that accounted for $697,000 of the increase.
During the three months ended March 31, 2007, one customer accounted for 11% of consolidated revenues. During the three months ended March 31, 2006, one customer accounted for 13% of consolidated revenues. Cost of Revenues
Cost of revenues consists primarily of salaries and related expenses for professional service personnel and outsourced professional service providers who are responsible for the implementation and customization of our software and for maintenance, hosting and support personnel who are responsible for post-contractual customer support, as well as amortization expense related to acquisition related intangibles and stock-based compensation.
Cost of revenues increased to $8.7 million for the three months ended March 31, 2007 from $7.0 million for the three months ended March 31, 2006. This increase of $1.7 million, or 24%, was primarily due to an increase in professional services payroll and payroll-related costs, consulting expenses, stock-based compensation expense and amortization of project costs. Payroll and payroll-related expenses increased by $914,000, which was due to a combination of average headcount increasing by 15 and fewer employee costs being deferred for implementation projects being recognized under the subscription and completed contract basis of accounting. In addition to the increased headcount, consulting expenses increased by $258,000 from hiring more contractors to assist with an increase in the number of implementation projects. Amortization of deferred project costs increased by $354,000 due to several projects that were being recognized under the subscription basis of accounting being completed subsequent to the first quarter of 2006. Stock-based compensation increased by $141,000 due to the additional expense recognized as a result of the cancellation of the Employee Stock Purchase Plan ("the ESPP") options on February 13, 2007. See Note 4 to the Condensed Consolidated Financial Statements in Item 1 for a full description of the ESPP award modification. 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 stock-based compensation and costs associated with trade shows and other promotional activities.
Sales and marketing expenses decreased to $2.2 million for the three months ended March 31, 2007 from $2.3 million for the three months ended March 31, 2006. This decrease of $100,000, or 4%, was primarily due to lower payroll and payroll-related expenses as average sales and marketing headcount decreased by 4.
Research and Development Expenses
Research and development expenses consist primarily of salaries and related expenses for engineering personnel, stock-based compensation and costs of materials and equipment associated with the design, development and testing of our products.
Research and development expenses increased to $3.7 million for the three months ended March 31, 2007 from $3.6 million for the three months ended March 31, 2006. This increase of $100,000, or 3%, was primarily due to a $102,000 increase in stock-based compensation. This increase was primarily due to the additional expense recognized as a result of the cancellation of the ESPP options on February 13, 2007. See Note 4 to the Condensed Consolidated Financial Statements in Item 1 for a full description of the ESPP award modification. 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 stock-based compensation, professional fees, bad debt expense and other general corporate expenses.
General and administrative expenses increased to $3.3 million for the three months ended March 31, 2007 from $2.6 million for the three months ended March 31, 2006. The increase of $700,000, or 27%, was primarily due to $658,000 in third party costs incurred for legal fees, proxy-related fees and fees associated with the fairness opinion contained in the special proxy filed on March 20, 2007 for the pending acquisition of Corillian by CheckFree. Other Income, Net
Other income (expense), net, consists primarily of interest earned on cash and cash equivalents and short-term investments, interest expense, our share of losses in equity investments, and other miscellaneous items.
Other income, net, increased to $336,000 for the three months ended March 31, 2007 from $268,000 for the three months ended March 31, 2006. Other income increased primarily due to an increase of $69,000 in interest income due to higher balances in cash, cash equivalents and short-term investments throughout the quarter.
Income Taxes
We expect to incur an alternative minimum tax liability for 2007. However, we did not record income tax expense for the three months ended March 31, 2007 due to the treatment of certain discrete items related to costs associated with the pending acquisition of Corillian, as well as stock-based compensation expense related to the suspension of the ESPP. We recorded an income tax charge of $20,000 for the three months ended March 31, 2006. Alternative minimum taxes paid are available to be carried forward to reduce the excess of regular taxes over alternative minimum taxes in future years. Such alternative minimum tax credit carryforwards are includable in deferred tax assets. We have recorded a full valuation allowance against such credit carryforwards in addition to all other net deferred tax assets, as we believe it is more likely than not that these deferred tax assets will not be realized. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to decrease the valuation allowance would increase income in the period such determination was made. Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to employee stock options and employee stock purchases under the ESPP in accordance with FAS 123(R) for the three months ended March 31, 2007 and 2006, which was allocated as follows (in thousands):

                                                      Three Months Ended
                                             March 31, 2007         March 31, 2006
   Cost of revenues                         $            255       $            114
   Sales and marketing                                   142                    111
   Research and development                              222                    120
   General and administrative                            266                    218


   Total stock-based compensation expense   $            885       $            563

In connection with the pending acquisition of Corillian by CheckFree, the Company indefinitely suspended the ESPP on February 13, 2007 and cancelled all remaining awards under the plan. For the three months ended March 31, 2007, this modification resulted in additional stock-based compensation expense of approximately $299,000 related to previously unrecognized compensation cost on the date of modification.
Liquidity and Capital Resources
As of March 31, 2007, we had $28.9 million in cash, cash equivalents and short-term investments, as compared to $25.2 million as of December 31, 2006. The increase in cash, cash equivalents and short-term investments was primarily due to $3.8 million in cash provided by operating activities. Working capital increased to $23.7 million as of March 31, 2007 from $22.8 million as of December 31, 2006.
For the three months ended March 31, 2007, cash provided by operating activities was $3.8 million. The timing of cash receipts from accounts receivable resulted in a $3.2 million increase in cash flow from operations. The remaining increase in cash provided by operating activities was primarily due to an increase of approximately $600,000 that resulted from a net loss of $1.1 million, adjusted for $1.7 million in non-cash items, including depreciation, stock-based compensation and amortization of intangibles. Cash used in investing activities was $713,000 for the three months ended March 31, 2007, which was primarily due to $663,000 of cash used to purchase property and equipment. Cash provided in financing activities was $507,000 for the three months ended March 31, 2007, which was primarily due to $502,000 of proceeds from the issuance of common stock related to employee stock option exercises and employee stock purchases under the ESPP.
For the three months ended March 31, 2006, cash used in operating activities was $894,000. Cash flow from operations was negatively impacted by $1.8 million due to payments of accounts payable and accrued liabilities. The timing of cash receipts from accounts receivable resulted in a $6.2 million increase in cash flow from operations, and changes in deferred revenue and revenue in excess of billings decreased cash flow from operations by $4.8 million due to the timing of billings and revenue recognized. These amounts were offset by an increase of approximately $400,000 that resulted from a net loss of $971,000, adjusted for $1.4 million in non-cash items, including depreciation, stock-based compensation and amortization of intangibles. Cash provided by investing activities was $464,000 for the three months ended March 31, 2006, which was due to $850,000 in proceeds from the sale of available-for-sale investments, which was offset by $386,000 of cash used to purchase property and equipment. Cash provided by financing activities was $361,000 for the three months ended March 31, 2006, which was due to proceeds from the issuance of common stock related to employee stock option exercises and employee stock purchases under the ESPP.
As of March 31, 2007, we were in violation of the net income requirements under our line of credit agreement which requires us to have net income on a semi-annual basis, determined as of each December 31 and June 30; and net income on a quarterly basis. We received a waiver from our lender, dated May 4, 2007, that waived the default rights with respect to the breach for the period ending March 31, 2007. We may be in violation in future periods due to these net income requirements if we are unable to amend our existing covenant requirements. We do not intend to use this line of credit and we believe that our current cash, cash equivalents, short-term investments and cash provided by operating activities will be sufficient to meet our working capital requirements for at least the next 12 months.