CARREKER ANTINORI INC, 10-K, 2000-05-01

CARREKER ANTINORI INC
10-K, 2000-05-01
COMPUTER PROCESSING & DATA PREPARATION

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K

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(MARK ONE)

<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
OR

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ________________ TO ________________

COMMISSION FILE NUMBER 0-24201

CARREKER-ANTINORI, INC.

(Exact name of registrant as specified in its charter)

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<S> <C>
DELAWARE 75-1622836
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

4055 VALLEY VIEW LANE 75244
DALLAS, TEXAS 75244 (Zip Code)
(Address of principal executive
offices)
</TABLE>

Registrant's telephone number, including area code: (972) 458-1981

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $0.01 per share
(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 such
filing requirements for the past 90 days. Yes /X/ No / /

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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value on March 31, 2000 of the voting and non-voting
common equity held by non-affiliates of the registrant was $128,650,240.

Number of shares of registrant's Common Stock, par value $0.01 per share,
outstanding as of March 31, 2000: 18,571,596.

DOCUMENTS INCORPORATED BY REFERENCE

Selected portions of the registrant's definitive Proxy Statement for the
2000 Annual Meeting of Shareholders are incorporated by reference into Part III
hereof.

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PART I

ITEM 1. BUSINESS.

UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "WE," "US," "OUR,"
"COMPANY," "CARREKER," OR "CARREKER-ANTINORI" WHEN USED IN THIS FORM 10-K
("REPORT") AND IN THE ANNUAL REPORT TO THE STOCKHOLDERS REFERS TO
CARREKER-ANTINORI, INC., A DELAWARE CORPORATION, AND ITS CONSOLIDATED
SUBSIDIARIES AND PREDECESSORS. THIS REPORT CONTAINS SOME FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. WHEN USED THEREIN
IN THIS REPORT, THE WORDS "EXPECTS," "PLANS," "BELIEVES," "ANTICIPATING,"
"ESTIMATES," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING
STATEMENTS. ACTUAL RESULTS AND THE TIMING OF SOME EVENTS COULD DIFFER MATERIALLY
FROM THOSE PROJECTED IN OR CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS DUE TO
A NUMBER OF FACTORS, INCLUDING WITHOUT LIMITATION THOSE SET FORTH UNDER "--RISK
FACTORS" BELOW.

OUR BUSINESS FOCUS

- EPAYMENTSOLUTIONS--software and consulting services that assist banks in
transitioning from paper-based payments systems to electronics.

- ECASHSOLUTIONS--e-finance solutions that enable banks to realize a return
from their non-earning cash assets.

- EBUSINESSSOLUTIONS--consulting services that help banks define and realize
their full revenue potential from the Internet economy.

The environment in which the banking industry operates is changing rapidly,
largely as a result of the availability of new electronic technologies and
workflow processes that have the potential to reduce the costs and enhance the
revenues that banks derive from financial transactions. We believe that our 22
years of experience with the banking industry, combined with our advanced
technological expertise, positions us to effectively address the challenges and
anticipate opportunities faced by banks in today's increasingly competitive
environment. Our customer list comprises over 200 financial institutions in the
United States, Canada, United Kingdom, Ireland and Australia, including 70 of
the largest 100 banks in the United States.

INDUSTRY BACKGROUND

The banking industry is one of the nation's largest industries, with
aggregate annual revenues of nearly $250 billion. While banks historically have
focused on reducing their operating expenses to remain competitive, they are
increasingly focused on developing new sources of revenue growth that leverage
their core competencies, automating operations to increase efficiencies, and
outsourcing commodity-like banking functions to sustain market value growth. To
this end, banks are expending significant resources both internally and on
solutions purchased from external vendors, including outsourcing arrangements.
Specifically, we believe the following industry trends will drive demand for our
e-finance solutions.

1. BUSINESS-TO-BUSINESS (B2B) ELECTRONIC COMMERCE. One area of particular
focus for banks is realizing the full potential from the rapid growth of B2B
electronic commerce (e-commerce). Forrester Research has estimated that the
size of the market for B2B e-commerce in the United States will reach $1.3
trillion by 2003, while the GartnerGroup has estimated that the size of the
worldwide B2B e-commerce market will be $7.29 trillion by 2004. As the trend
towards B2B e-commerce accelerates, businesses face a growing need for
solutions to electronically process, transmit, record, archive, provide
customer service, and mitigate the risks associated with their B2B
transactions. They have the option of developing and implementing these
solutions in-house, purchasing these solutions from

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their banks, or turning to non-bank vendors. As regards the first option,
this is likely to be expensive, time consuming and a major drain on internal
information technology resources. As regards the last, it is unlikely that
non-bank vendors will have a long history of facilitating e-finance
transactions or enjoy a trusted reputation as a financial transaction
intermediary.

That being the case, we believe that business will ultimately turn to their
banks to serve as their e-finance partners. By virtue of their legally
protected franchise in the settlement of financial transactions and
historical role as trusted financial intermediaries, banks have
traditionally dominated financial transaction processing services, including
processing, transmitting, recording, archiving, providing customer service
and mitigating the risk associated with these transactions. This puts banks
in the ideal position to assist their customers in the transition to B2B
e-finance. In this context, our e-finance consulting and software solutions,
which have historically been used by banks to increase their revenues and
reduce their operating expenses, will help banks adapt their cost centers
into profitable revenue opportunities as they assist their customers with
their e-finance needs.

2. CONSOLIDATION. As banks continue to grow by acquisition, they will
require improved operational processes and technological applications that
increase efficiencies in order to enhance their profitability, recapture
acquisition premiums paid, and strengthen their competitive position within
the industry.

3. REGULATORY CHANGE. The banking industry continues to be characterized by
regulatory changes. Regulations in some areas, such as interstate banking
operations, have been relaxed while regulations in other areas, such as
payment systems, have become more restrictive. These changes have presented
banks with both challenges and opportunities to improve their operations and
achieve competitive advantages. In addition, deregulation in some sectors of
the banking industry has led to increased competition for banks from
insurance companies, brokerage houses and other financial institutions in
areas of business which were previously the exclusive domain of banks.

4. EVOLVING TECHNOLOGIES. Rapid technological innovation is creating new
means for participants in the banking industry to gain competitive
advantages, and this development has increased customers' expectations.
Increasingly, customers are requiring that their banks provide a broader
scope of banking services quickly and easily through automated teller
machines, by telephone or over the Internet.

5. BANK INDUSTRY CHANGES. In order to compete effectively in this dynamic
environment, banks often must identify effective and innovative solutions to
address their unique requirements and re-design, and in some cases
completely replace, their operational systems. Effective development and
implementation of these solutions is technically challenging, time-consuming
and expensive. Banks often are faced with a choice between building
internal, custom solutions or purchasing third-party offerings. Internal
solutions usually require additional resources and related fixed costs.
Traditional third-party solutions usually come from multiple providers, and
therefore carry increased costs, more complex implementation, and delayed
realization of benefits. Consequently, banks are in need of a third party,
familiar with the banking industry, to provide integrated consulting
services and technological applications.

THE CARREKER SOLUTION

Our e-finance enabling solutions combine consulting services and software
applications that are tailored to address the unparalleled position of trust
that banks have as a provider of financial transaction processing services and
the unique requirements of the banking industry. We believe that banks will be
able to adapt our solutions to assist businesses with their e-finance
transaction processing needs. In delivering our solutions, we:

- Gather and analyze information about a customer's operations, markets and
external environments.

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- Identify opportunities for maximizing their e-finance opportunities,
leading to increased revenues and reduced costs.

- Develop and propose tailored e-finance solutions, which typically include
one or more of our software applications.

- Design a business case to justify investment in these solutions.

- Build project consensus among senior management.

- Provide e-finance project management, implementation and maintenance
services.

Our solutions are differentiated by the following characteristics:

COMPREHENSIVE APPROACH TO ENABLING E-FINANCE. We believe that our 22 years
of experience in the banking industry, combined with our advanced technological
expertise, will allow us to provide solutions that will position banks as the
trusted processing intermediary for e-finance transactions. Our solutions
embrace every key aspect of e-finance, including the mitigation of fraud, the
electronic processing of paper-based payments, the archiving of historical
transactions and related research and adjustments. We believe we are ideally
positioned to assist banks in leveraging their financial transaction processing
core competencies into profitable revenue opportunities from their commercial
customers, as the latter seek to compete in the B2B e-commerce arena.

INDUSTRY-SPECIFIC CONSULTING EXPERTISE. Our consultants, managers and
employees, many of whom are former bankers, include experts in complex bank
operations. This expertise enables us to develop the most appropriate consulting
services and technological applications for the banking industry.

ADVANCED TECHNOLOGY. We incorporate the latest technological developments
in web-enabled systems and protocols to produce software applications that are
scaleable, functional and able to interface with a bank's legacy systems. In
addition, our participation in various inter-bank organizations enables us to
stay at the forefront of technological innovations in the industry.

INTEGRATED APPROACH. We combine our consulting experience and proprietary
technology to serve as a single-source provider of fully integrated, end-to-end
solutions that address the critical needs of banks. This approach sets us apart
from providers of partial solutions that require banks to seek costly additional
expertise or implementation services to attain a complete solution.

REDUCED CUSTOMER RISK. Our solutions reduce investment risk by increasing
revenues or reducing costs in a relatively short period of time. In addition, in
appropriate circumstances, we value-price some of our solutions whereby we
receive a percentage of the amount of additional revenues or reduced costs
achieved by the customer. These arrangements allow banks to fund their
investments in our solutions with the benefits derived from implementation.

BROAD ARRAY OF SERVICES AND TECHNOLOGY. We believe that our offerings are
the broadest in the banking industry, enabling us to provide a bank with an
expert solution targeted to a narrow area of a bank's operations or to address a
broad range of a bank's operational requirements.

STRATEGY

Our mission is to be the leading provider of integrated consulting and
software solutions that enable banks to leverage their core competencies towards
the maximization of their e-finance potential, thus increasing their revenues,
reducing their costs and growing their market value. Key elements of our
strategy to achieve this mission include the following:

ADVANCE POSITION AS INDUSTRY INNOVATOR. We intend to maintain our
consulting and technology leadership position in the banking industry by
anticipating and responding to evolving industry needs, with

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a particular focus on e-finance. From this leadership position, we intend to
continue providing consulting services and technological applications that
address these evolving industry e-finance needs. As we have successfully done in
the past, our plan is to identify new opportunities for converting leading-edge
technologies and ideas into practical e-finance solutions that banks can use
internally as well as leverage for the benefit of their customers seeking to
participate in B2B e-commerce. Our leadership position is enhanced by our role
in the Electronic Check Clearing House Organization and other strategic banking
initiatives, which enables us to be an infrastructure development partner to the
banking industry as it transitions the check payment system from paper to
electronic formats.

PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. We seek to form alliances with
selected partners whose solutions and expertise, when combined with ours,
provide incremental value-added benefits to banks and their customers. In
addition to these alliances, we also seek to make selective acquisitions of
complementary businesses that would enable us to expand our line of e-finance
solutions, grow our customer base and pursue new business opportunities.

LEVERAGE MARKET POSITION TO EXPAND CUSTOMER BASE. We seek to increase our
customer base by leveraging our strong relationships with the larger banks to
market our solutions to their peers, selected smaller banks and other financial
institutions. We have also partnered with several service providers or
resellers, including ALLTEL, Bisys-Document Solutions, Fiserve, and M&I Data
Services to establish alternate marketing and distribution channels of some of
our solutions through those companies to smaller banks. Additionally, we plan to
leverage our position as a leading provider of e-finance solutions to the
banking industry in the United States market to pursue international customers,
particularly banks elsewhere in North America, Europe and Australia.

BUILD LONG-TERM RELATIONSHIPS. We intend to continue leveraging our
long-term customer relationships to cross-sell additional solutions, which
typically produce higher gross profit margins as we do not incur many of the
customer acquisition costs associated with the development of new relationships.

INCREASE USE OF VALUE-PRICING AND RECURRING REVENUE ARRANGEMENTS. We will
continue to share in the value that our solutions create for customers by
expanding the use of pricing methods and negotiated arrangements to generate
recurring and high-margin revenues. We will seek to increase the use of value-
pricing for solutions in appropriate circumstances where increased revenues or
reduced costs resulting from such solutions can be readily projected or
measured. In addition, we intend to expand our practice of structuring license
fees for software-based solutions according to the number of transactions
processed with the solutions.

PRODUCTS AND SERVICES

Carreker offers a wide range of industry-leading solutions that enable banks
to maximize their e-finance opportunities, increase their revenues and reduce
their costs. Combining consulting services with proprietary technology
applications, we help banks improve their current operations and realize their
full potential from the Internet economy.

Our offerings, uniquely tailored to the needs of the banking industry, fall
into three complementary groups of powerful, Internet-ready solutions. The three
groups, ePaymentSolutions, eCashSolutions and

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eBusinessSolutions, offer a combination of products and services that when
combined deliver optimal benefits. These products and services are:

<TABLE>
<CAPTION>
EPAYMENTSOLUTIONS ECASHSOLUTIONS EBUSINESSSOLUTIONS
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
eFraudLink eiService RevenueEnhancement
eXceptions eCashInventory eFinancialServices
eRM eTransport eStrategic
eTrac
eInform
eTransactions
</TABLE>

The EPAYMENTSOLUTIONS group addresses the needs of a critical function of
banks, and the processing of payments made by one party to another. This
includes the identification and mitigation of fraudulent payments, handling
irregular items such as checks returned unpaid (exceptions), maintaining a
record of past transactions (archiving), responding to related customer
inquiries (research) and correcting any errors that are discovered
(adjustments). Our EPAYMENTSOLUTIONS group approaches these key functions in the
context of improving operational efficiency and a gradual transition from the
paper-based payment systems to electronics.

EFRAUDLINK offers a comprehensive, automated approach to solving the growing
problem of fraudulent financial transactions, with solutions specifically
designed to protect banks against bad checks drawn on them for payment,
fraudulent items deposited with them for credit, and check kiting.

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PRODUCTS & SERVICES OFFERED: EFRAUDLINKONUS, EFRAUDLINKDEPOSIT, EFRAUDLINKKITE,
EFRAUDLINKPOSITIVEPAY, EFRAUDLINKTRACKER, EFRAUDLINKPC,
EFRAUDLINKHOLD
</TABLE>

EXCEPTIONS is designed to reduce the number of exceptions that banks
experience, while using technology to transform traditionally
labor-intensive bank operations into efficient elements of the total
e-payment transaction chain. It features a unique combination of an
automated check research, photo retrieval and adjustment solutions, together
with a flexible workflow engine.

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PRODUCTS & SERVICES OFFERED: EXCEPTIONSCHECKFLOW
</TABLE>

ERM provides powerful tools for customer relationship management in an
e-finance environment. This wide-ranging electronic relationship management
infrastructure is a web-enabled decision support system that incorporates
exception management, risk management, treasury services and document image
archival and retrieval.

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PRODUCTS & SERVICES OFFERED: ERMEXCEPTIONSMANAGEMENT, ERMRISKMANAGEMENT,
ERMTREASURYSERVICES, ERMIMAGEREQUESTOR
</TABLE>

ETRAC is an automated track and trace system designed to monitor items from
the time they enter a bank's processing stream to final disposition. Among
other benefits, this enables a bank to improve labor productivity by
channeling resources to where they are most needed, i.e., potential workflow
bottlenecks. Items tracked range from checks, cash and microfilm records to
internal bank mail.

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PRODUCTS & SERVICES OFFERED: ETRACWORKFLOW, ETRACRECORDS
</TABLE>

EINFORM focuses on performance measurement using the historical data
generated by eTrac. End-users can use this historical data for the purposes
of generating key performance indicators, item processing volume data,
productivity statistics, and quality control benchmarks.

<TABLE>
<S> <C>
PRODUCTS & SERVICES OFFERED: EINFORMMETRICS, EINFORMPERFORM, EINFORMSTATS,
EINFORMQUALITY
</TABLE>

ETRANSACTIONS enables the transition away from paper-based payment systems
to electronics by automating key elements of the processing stream, as well
as improving a bank's yield from float

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management. The aim is to reduce and eventually eliminate the movement of
paper payment instruments through the system, automate error-prone payment
processing functions, consolidate payment information and provide a measure
of fraud prevention.

<TABLE>
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PRODUCTS & SERVICES OFFERED: ETRANSACTIONSCHECKLINK, ETRANSACTIONSCHECKLINKPC,
ETRANSACTIONSDEPOSIT,
ETRANSACTIONSBRANCHTRUNCATIONMANAGEMENT,
ETRANSACTIONSFLOAT, ETRANSACTIONSNOTIFICATION
</TABLE>

The ECASHSOLUTIONS group optimizes inventory management of a bank's
cash-on-hand, how much, when and where it is needed. Web-based software
solutions dramatically reduce the amount of cash banks need to hold in reserve
accounts and as cash-on-hand, while ensuring a high level of customer service
through timely replenishment of cash in ATMs.

EISERVICE advances ATM monitoring and management through the use of Internet
connectivity to provide electronic notification of cash and/or servicing
needs. Scalable to the largest ATM networks, it forecasts cash and servicing
needs, dispatches vendors for cash replenishment and maintenance services,
records completed work and reconciles vendor invoices, all via an electronic
communication infrastructure.

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PRODUCTS & SERVICES OFFERED: EISEMANAGER, EISEGATEWAY, EISEFORECASTER
</TABLE>

ECASHINVENTORY reduces the amount of non-earning assets required in reserve
accounts and as cash-on-hand to meet operating needs. Using both technology
and process reengineering, it provides management tools for forecasting,
tracking and optimizing a bank's inventory of currency. This comprehensive
group of solutions frees underutilized money for more productive uses.

<TABLE>
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PRODUCTS & SERVICES OFFERED: ECASHINVENTORYFORECASTER, ECASHINVENTORYTRACKER,
ECASHINVENTORYRESERVE, ECASHRESERVEPLUS
</TABLE>

ETRANSPORT focuses on reducing armored car transportation costs incurred by
banks in moving cash between locations to another and replenishing ATMs. It
optimizes armored car utilization based on ATM locations and usage, route
structures and delivery frequency, as well as ATM deposit processing
requirements.

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PRODUCTS & SERVICES OFFERED: ETRANSPORTOPTIMIZER, ETRANSPORTCONSULTING
</TABLE>

The EBUSINESSSOLUTIONS group offers a range of consulting services that
enable banks to improve their day-to-day operations and conceive implement and
fund their e-finance initiatives.

REVENUEENHANCEMENT consulting enables a bank to improve workflows, internal
operational processes and customer pricing structures. Opportunities to
improve performance are identified through a systematic evaluation of
existing policies and procedures in a range of functional areas.

<TABLE>
<S> <C>
SERVICES OFFERED: REVENUEENHANCEMENT
</TABLE>

EFINANCIALSERVICES provides conversion, consolidation and integration
consulting on a bank-wide basis. These services are particularly in demand
in the context of continuing acquisition and merger activity in the banking
industry, and the pressure on banks to define and implement their e-finance
strategies.

<TABLE>
<S> <C>
SERVICES OFFERED: EFINANCIALSERVICEPRODUCTMANAGEMENT, EFINANCIASERVICEIT,
EFINANCIALSERVICEFINANCIAL, EFINANCIALSERVICEINTEGRATION
</TABLE>

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ESTRATEGIC assists banks in developing and implementing a comprehensive
e-finance strategy. The scope of work includes defining objectives,
detailing a migration path and time frame and recommending a complete array
of enabling technologies.

<TABLE>
<S> <C>
SERVICES OFFERED: ESTRATEGICMODELING, ESTRATEGICFINANCECONSULTING,
ESTRATEGICINTEGRATEDSALES
</TABLE>

CUSTOMERS AND MARKETS

A majority of our revenues are generated from contracts with Tier I Banks
(banks with assets over $50 billion) and Tier II Banks (banks with assets of
between $5 billion and $50 billion). Our customers include approximately 90% of
Tier I Banks and approximately 75% of Tier II Banks, in the U.S. For the year
ended January 31, 2000, revenues from our five largest customers accounted for
approximately 58% of our total revenues, with Wells Fargo & Co. (including the
former Norwest organization) representing approximately 24% of our total
revenues, primarily in the RevenueEnhancement and eCashSolutions groups. SEE
"--RISK FACTORS--CUSTOMER CONCENTRATION." We also target Tier III banks (banks
with assets of between $550 million and $5 billion). We believe that the Tier
III market affords us an opportunity for growth. SEE "--STRATEGY--LEVERAGE
MARKET POSITION TO EXPAND CUSTOMER BASE" AND "--RISK FACTORS--DEPENDENCE ON
BANKING INDUSTRY."

We enter into numerous types of engagements with customers. The needs of
each customer are unique, and we seek to provide those specific solutions that
most effectively address a customer's needs.

SALES AND MARKETING

We have developed strong relationships with many senior bank executives as a
result of our delivery of effective solutions to Tier I and Tier II Banks for 22
years. We have 19 account relationship managers who are responsible for managing
our day-to-day relationships with our customers. Sixteen are responsible for our
U.S. Tier I, Tier II and Tier III bank relationships, and three are responsible
for Canadian, British, Australian and European bank relationships. Their
responsibilities include identifying customers' needs and assisting our group
managers in presenting their solutions and concluding sales. Our account
relationship managers work closely with our executive officers, who serve as
executive relationship managers to our customers. We also employ technical sales
support staff who are familiar with our technology and who participate in
opportunities to sell technology-based solutions.

We derive a significant portion of our business through customer referrals
and repeat business. In addition, we market our services through a variety of
media, including:

- Our Web site

- Direct mail

- "User" conference conducted exclusively for our customers

- Speaking engagements

- Participation in industry conferences and trade shows

- Publication of "white papers" related to specific aspects of our services

- Customer newsletters

- Informational listings in trade journals

We employ a marketing staff of seven persons, including graphics designers,
writers, administrative coordinators and a Web master.

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STRATEGIC BANKING INITIATIVES

We provide management services to the Electronic Check Clearing House
Organization and Payment Solutions Network, Inc., each of which is playing an
instrumental role in the electronification of paper checks and in reducing
losses from fraud associated with the paper check payment process. From time to
time, we also participate in other strategic banking initiatives.

SOLUTIONS DEVELOPMENT

We seek to maintain our position as a leading innovator in the banking
industry by converting leading-edge technologies and ideas into practical
banking solutions. Our relationships with our customers provides us with
opportunities to identify additional bank needs. Our solutions development
activities focus on prototyping promising applications, test marketing new
products, developing sales strategies and coordinating distribution and on-going
maintenance for each of our solutions.

We frequently receive customer requests for new services and/or software,
develop solutions in response to these requests and historically have been able
to recoup some or all of our development costs from these customers. In addition
to customer-funded solutions development, we have invested significant amounts
in solutions development, including expenditures of $4.8 million, $4.8 million
and $3.6 million for research and development in the years ended January 31,
2000, 1999 and 1998, respectively. Further, some of our key product
introductions have resulted from the adaptation of products developed by
customers for a wider market. In exchange for either a one-time payment and/or
on-going royalties, we are often able to obtain the right to develop, enhance
and market such products.

We believe our leadership role in and interaction with the banking industry
through the Electronic Clearing House Organization and Payment Solutions Network
uniquely positions us to identify and develop interbank solutions that have
bilateral or multilateral banking industry applications. We believe our
management of these organizations provides further opportunities to recognize
and respond to the changing needs of the banking industry.

TECHNOLOGY

We design our software products to incorporate the latest developments in
open systems architecture and protocols to provide maximum scalability and
functionality and to interface with a bank's legacy systems. Our core
proprietary technologies, for both our client/server software products and
mainframe software products, are primarily directed at using a standard set of
components, drivers and application interfaces so that our software products are
constructed from reusable components which are linked together in a tool-set
fashion.

We have adopted the IBM System Application Architecture for developing our
interactive screen designs for our mainframe products and for interactions with
other systems, such as client/server products. Our mainframe software products
have been evolving toward a standard set of core processing components, drivers
and exit points and are more fully leveraging published standard application
programming interfaces. As a result, we can employ reusable components to create
new utility modules and link them together in a tool-set fashion, much like
objects in object-oriented programming.

We have a number of software products that either fall within the
client/server or the batch-oriented file sharing categories. Many of the newer
software products are developed to operate with an OS/2 and/or Windows NT
operating system. Most of our mainframe software products are written in COBOL.
We have several software products that operate on two or more of these operating
systems. For example, our INNOVASION software application operates with the OS/2
operating system, while our DAS software application, a substantially similar
product programmed in C++, operates with the Windows NT operating system.

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We develop our technology both internally and, in some situations, with
third-party preferred developers that can offer technology expertise.

COMPETITION

We compete with third-party providers of services and software products to
the banking industry that include consulting firms and software companies.
Competitive firms providing consulting services include Andersen Consulting,
Electronic Data Systems Corporation and KPMG Peat Marwick LLP. Software
companies include Earnings Performance Group, Inc., Sterling Software, Inc., HNC
Software, Inc., and Transoft International, Inc. Many of these competitors have
significantly greater financial, technical, marketing and other resources than
we do. However, we believe that our market position with respect to these
competitors is enhanced by virtue of our unique ability to deliver fully
integrated consulting services and software solutions focused on enabling banks
to maximize their e-finance opportunities, increase their revenues, reduce their
costs and enhance their delivery of customer services. We believe that we
compete based on a number of factors, including:

- Scope and value of solutions provided

- Industry expertise

- Access to decision makers within banks

- Ease and speed of solutions implementation

- Quality of solutions

- Price

While many of our competitors are better equipped to compete with us in some
of these areas, we believe that we are uniquely qualified to compete effectively
in all of these areas.

In addition to competing with a variety of third parties, we experience
competition from our customers and potential customers. From time to time, such
customers develop, implement and maintain their own services and applications
for e-finance revenue enhancement, cost reductions or enhanced customer service,
rather than purchasing services and related software products from third
parties. As a result, we must continually educate existing and prospective
customers about the advantages of purchasing our services and products. In
addition, customers or potential customers could enter into strategic
relationships with one or more of our competitors to develop, market and sell
competing services or products. SEE "--RISK FACTORS--COMPETITION."

GOVERNMENT REGULATION

Our primary customers are banks. Although the services that we currently
offer have not been subject to any material industry-specific government
regulation, the banking industry is heavily regulated. Our services and products
must allow banking customers to comply with all applicable regulations, and, as
a result, we must understand the intricacies and application of many government
regulations. The regulations most applicable to our provision of solutions to
banks include requirements establishing minimum reserve requirements, governing
funds availability and the collection and return of checks, and establishing
rights, liabilities and responsibilities of parties in electronic funds
transfers. For example, our eCashInventoryReserve software and related
consulting services assist banks with minimizing their reserves while complying
with federal reserve requirements. In addition, the expedited availability and
check return requirements imposed by funds availability regulations have
increased fraud opportunities dramatically and our risk management and float
management services address this concern while complying with such regulations.
SEE "--RISK FACTORS--GOVERNMENTAL REGULATIONS."

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PROPRIETARY RIGHTS

We rely upon a combination of patent, copyright, trademark and trade secret
laws, including the use of confidentiality agreements with employees,
independent contractors and third parties and physical security devices to
protect our proprietary technology and information. We have a number of issued
patents and registered trademarks and have filed applications for additional
patents and trademarks in the United States. We vigorously defend our
proprietary rights.

We enter into invention assignment and confidentiality agreements with our
employees and independent contractors and confidentiality agreements with some
customers. We also limit access to the source codes for our software and other
proprietary information. Further, our software will not operate with computers
that have not been synchronized with our equipment. We believe that due to the
rapid pace of innovation within the software industry, factors such as the
technological and creative expertise of our personnel, the quality of our
solutions, the quality of our technical support and training services, and the
frequency of release of technology enhancements are more important to
establishing and maintaining a technology leadership position than the various
legal protections available for our technology.

We are not aware that we are infringing any proprietary rights of third
parties. We rely upon some software that we license from third parties,
including software that is integrated with our internally developed software and
used in our solutions to perform key functions. We are not aware that any third-
party software being re-sold by us is infringing upon the proprietary rights of
third-parties. SEE "--RISK FACTORS--DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK
OF INFRINGEMENT."

EMPLOYEES

We had 385 employees as of January 31, 2000, with 170 persons providing
consulting services, 66 persons in the technical group, 63 persons performing
sales and marketing, customer relations and business development functions and
86 persons performing corporate, finance and administrative functions. We have
no unionized employees and we believe that our employee relations are good.

INDEPENDENT CONTRACTORS

We provide consulting services and develop software in part through the use
of independent contractors who are not our employees. As of January 31, 2000, we
used 19 independent contractors to provide consulting services, most of whom
work from their homes or from customers' offices. Many of these contractors are
former bank executives, and we believe that our experience in the banking
industry uniquely enables us to provide consulting services to our customers. In
addition, as of January 31, 2000, we had 35 independent contractors who assisted
in the development of technology. These technology contractors spend a majority
of their time performing software development in our offices; however, from time
to time these contractors travel with our personnel and work directly with our
customers. SEE "--RISK FACTORS--USE OF INDEPENDENT CONTRACTORS."

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RISK FACTORS

THIS REPORT AND THE ANNUAL REPORT TO STOCKHOLDERS CONTAINS SOME
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS.
ACTUAL RESULTS AND THE TIMING OF SOME EVENTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN OR CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER
OF FACTORS, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH BELOW AND ELSEWHERE
IN THIS REPORT. IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE
FOLLOWING FACTORS, WHICH MAY AFFECT OUR CURRENT POSITION AND FUTURE PROSPECTS,
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING US AND AN INVESTMENT IN OUR COMMON
STOCK.

DEPENDENCE ON BANKING INDUSTRY

We derive substantially all of our revenues from solutions provided to banks
and other participants in the banking industry. Accordingly, our future success
significantly depends upon the continued demand for our solutions within this
industry. We believe that an important factor in our growth has been the
substantial change in the banking industry, as manifested by continuing
consolidation, regulatory change, technological innovation and other trends. If
this environment of change were to slow, we could experience reduced demand for
our solutions. In addition, the banking industry is sensitive to changes in
economic conditions and is highly susceptible to unforeseen events, such as
domestic or foreign political instability, recession, inflation or other adverse
occurrences that may result in a significant decline in the utilization of bank
services. Any event that results in decreased consumer or corporate use of bank
services, or increased pressures on banks towards the in-house development and
implementation of revenue enhancement or cost reduction measures, could have a
material adverse effect on our business, financial condition and results of
operations. SEE "--BUSINESS--INDUSTRY BACKGROUND."

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

We have experienced in the past, and expect to experience in the future,
significant fluctuations in quarterly operating results. Such fluctuations may
be caused by many factors, including but not limited to: the extent and timing
of revenues recognized, costs incurred under value-pricing contracts, the degree
of customer acceptance of new solutions, the introduction of new or enhanced
solutions by us or our competitors, customer budget cycles and priorities,
competitive conditions in the industry, seasonal factors, bank purchasing
cycles, timing of consolidation decisions by banks, the extent of their
international expansion and general economic conditions. SEE "--CUSTOMER PROJECT
RISKS." In addition, the volume and timing of contract signings during a quarter
are difficult to forecast, particularly in light of our historical tendency to
have a disproportionately large portion of contract signings in the final weeks
of a quarter. Due to the foregoing factors, many of which are beyond our
control, quarterly revenues and operating results are difficult to forecast. It
is possible that our future quarterly results of operations from time to time
will not meet the expectations of securities analysts or investors, which could
have a material adverse effect on the market price of our Common Stock. SEE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--SELECTED CONSOLIDATED QUARTERLY RESULTS OF OPERATIONS."

CUSTOMER CONCENTRATION

Our five largest customers accounted for approximately 58%, 35% and 44% of
total revenues during the years ended January 31, 2000, 1999 and 1998,
respectively. While our significant customers have changed from period to
period, Wells Fargo & Company (including the former Norwest organization) has
consistently ranked as one of our top customers, and accounted for approximately
24%, 11% and 13% of total revenues during the years ended January 31, 2000, 1999
and 1998, respectively. Wells Fargo & Company was our largest customer during
the year ended January 31, 2000. Further, inasmuch as approximately 87% and 86%
of our total revenues in the year ended January 31, 2000 were derived from
companies who were customers of ours in the years ended January 31, 1999 and
1998, respectively, we are dependent to a significant degree on our ability to
maintain our existing relationships with these customers. There can be no
assurance we will be successful in maintaining our existing customer
relationships or in

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<PAGE>
securing additional major customers, and there can be no assurance that we can
retain or increase the volume of business that we do with such customers. In
particular, continuing consolidation within the banking industry may result in
the loss of one or more significant customers. Any failure by us to retain one
or more of our large customers, maintain or increase the volume of business done
for such customers or establish profitable relationships with additional
customers would have a material adverse effect on our business, financial
condition and results of operations.

CUSTOMER PROJECT RISKS

We price our solutions on a time-and-materials, fixed-price, and
value-priced basis. In connection with fixed-price projects, we occasionally
incur costs in excess of our projections and as a result achieve lower margins
than expected or may incur losses with respect to projects. In connection with
value-priced projects, we are paid based on an agreed percentage of either
projected or actual increased revenues or decreased costs derived by the bank
over a period of up to twelve months following the implementation of our
solutions. We typically must first commit time and resources to develop such
projections before a bank will commit to purchase our solutions, and therefore
assume the risk of making these commitments and incurring related expenses with
no assurance that the bank will purchase the solutions. In addition, from time
to time, a customer will not achieve projected revenues or savings because it
belatedly decides not to implement our solutions or the solutions do not produce
the projected results, in which case we may not be able to collect any or all of
the fees provided for in the customer's contract. The nature of our fixed-priced
and value-priced arrangements can result in decreased operating margins or
losses and could materially and adversely affect our business, financial
condition and results of operations. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OVERVIEW," "--BUSINESS--THE
CARREKER SOLUTION--REDUCED CUSTOMER RISK" AND "--STRATEGY--INCREASE USE OF
VALUE-PRICING AND RECURRING REVENUE ARRANGEMENTS."

ABILITY TO MANAGE GROWTH

We have experienced significant growth in recent years, and anticipate that
additional expansion may be required in order to address potential market
opportunities. Any expansion of our business would place further demands on our
management, operational capacity and financial resources. We anticipate that we
will need to recruit large numbers of qualified personnel in all areas of our
operations, including management, sales, marketing, delivery and software
development. There can be no assurance that we will be effective in attracting
and retaining additional qualified personnel, expanding our operational capacity
or otherwise managing growth. In addition, there can be no assurance that our
systems, procedures or controls will be adequate to support any expansion of our
operations. As a result of acquisitions and continued growth, the needs of our
management information systems (MIS) are expected to expand and/or change, which
could result in the implementation of new or modified management information
systems and/or procedures. This may necessitate additional training to existing
personnel or the hiring of additional personnel. If we cannot implement the new,
or modified, management information systems in a timely manner, our ability to
manage growth effectively or generate timely quarterly reports could be
materially and adversely affected. The failure to manage growth effectively
could have a material adverse effect on our business, financial condition and
results of operations. SEE "--BUSINESS--STRATEGY--PURSUE STRATEGIC ALLIANCES AND
ACQUISITIONS."

MARKET ACCEPTANCE OF OUR SOLUTIONS

Our success depends upon continued demand for our solutions. Market
acceptance of our existing and future solutions depends on several factors
including: (i) the ease with which those solutions can be implemented and used;
(ii) the performance and reliability of those solutions; (iii) the degree to
which customers achieve expected revenue gains, cost savings and performance
enhancements; and (iv) the extent to which our customers and prospective
customers are able to implement alternative approaches to

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meet their business development and cost-saving needs. Some of these factors are
beyond our control. Further, we have recently refocused our solutions to
concentrate on e-finance opportunities. We have dedicated significant resources
to this effort and cannot be certain whether this refocusing of our solutions
will achieve market acceptance. There can be no assurance that our customers
will realize the intended benefits of our solutions or that any of our solutions
be accepted in the market. Any significant or ongoing failure to achieve these
benefits or to maintain or increase market acceptance would restrict
substantially the future of our growth and could have a material adverse effect
on our business, financial condition and results of operations. SEE
"--BUSINESS--PRODUCTS AND SERVICES."

ABSENCE OF LONG-TERM AGREEMENTS

We typically provide services to customers on a project-by-project basis
without long-term agreements. When a customer defers, modifies or cancels a
project, we must be able to rapidly re-deploy our personnel to other projects in
order to minimize the under-utilization of our personnel and the resulting
adverse impact on operating results. In addition, our operating expenses are
relatively fixed and cannot be reduced on short notice to compensate for
unanticipated variations in the number or size of projects in progress. As a
result, any termination, significant reduction or modification of our business
relationships with any of our significant customers or with a number of smaller
customers could have a material adverse effect on our business, financial
condition and results of operations. SEE "--MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OVERVIEW" AND
"--BUSINESS--SALES AND MARKETING."

POTENTIAL FOR SOFTWARE AND/OR SOLUTION DEFECTS

Our solutions at times in the past have been, and in the future may be,
incompatible with the operating environments of our customers or inappropriate
to address their needs, resulting in additional costs being incurred by us in
rendering services to our customers. Further, like other software products, our
software occasionally has contained undetected errors, or "bugs," which become
apparent through use of the software. Because our new or enhanced software
initially is installed at a limited number of sites and operated by a limited
number of users, such errors and/or incompatibilities may not be detected for a
number of months after delivery of the software. The foregoing errors in the
past have resulted in the deployment of our personnel and funds to cure errors,
occasionally resulting in cost overruns and delays in solutions development and
enhancement. Moreover, solutions with substantial errors could be rejected by or
result in damages to customers, which could have a material adverse effect on
our business, financial condition, and results of operations. There can be no
assurance that errors or defects will not be discovered in the future,
potentially causing delays in solution implementation or requiring design
modifications that could adversely affect our business, financial condition, and
results of operations. It is also possible that errors or defects in our
solutions could give rise to liability claims against us. SEE
"--BUSINESS--TECHNOLOGY."

COMPETITION

We compete with third-party providers of services and software products to
the banking industry that include consulting firms and software companies.
Competitive firms providing consulting services include Andersen Consulting,
Electronic Data Systems Corporation and KMPG Peat Marwick LLP. Software
companies include Earnings Performance Group, Inc., Sterling Software, Inc., HNC
Software Inc., and Transoft International, Inc. Many of these competitors have
significantly greater financial, technical, marketing and other resources than
we do. Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or to devote greater resources
to the development, promotion and sale of their products than we can. Also,
several of our current and potential competitors have greater name recognition
and larger customer bases that such competitors could leverage to increase
market share at our expense. We expect to face increased competition as other
established and emerging companies enter the banking services market. Increased
competition could result in price

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<PAGE>
reductions, fewer customer orders and loss of market share, any of which could
materially and adversely affect our business, financial condition and results of
operations. There can be no assurance that we will be able to compete
successfully against current or future competitors, and the failure to do so
would have a material adverse effect upon our business, financial condition and
results of operations. SEE "--BUSINESS--COMPETITION."

In addition to competing with a variety of third parties, we experience
competition from our customers and potential customers. From time to time, these
potential customers develop, implement and maintain their own services and
applications for revenue enhancements, cost reductions and/or enhanced customer
services, rather than purchasing services and related products from third
parties. As a result, we must continuously educate existing and prospective
customers about the advantages of purchasing our solutions. There can be no
assurance that these customers or other potential customers will perceive
sufficient value in our solutions to justify investing in them. In addition,
customers or potential customers could enter into strategic relationships with
one or more of our competitors to develop, market and sell competing services or
products.

USE OF INDEPENDENT CONTRACTORS

We often provide solutions through independent contractors. As we do not
treat these individuals as our employees, we do not pay federal or state
employment taxes or withhold federal or state employment or income taxes from
compensation paid to such persons. We also do not consider these persons
eligible for coverage or benefits provided under our employee benefit plans or
include these persons when evaluating the compliance of our employee benefit
plans with the requirements of the Internal Revenue Code. Additionally, we do
not treat such persons as employees for purposes of worker's compensation, labor
and employment, or other legal purposes. From time to time, we may face legal
challenges to the appropriateness of the characterization of these individuals
as independent contractors from governmental agencies, the independent
contractors themselves or some other person or entity. The determination of such
a legal challenge generally will be determined on a case-by-case basis in view
of the particular facts of each case. The fact specific nature of this
determination raises the risk that from time to time an individual that we have
characterized as an independent contractor will be reclassified as an employee
for these or other legal purposes. In the event persons engaged by us as
independent contractors are determined to be employees by the Internal Revenue
Service (the "IRS") or any applicable taxing authority, we would be required to
pay applicable federal and state employment taxes and withhold income taxes with
respect to these individuals and could become liable for amounts required to be
paid or withheld in prior periods and for costs, penalties and interest thereon.
In addition, we could be required to include these individuals in our employee
benefit plans on a retroactive, as well as a current, basis. Furthermore,
depending on the party that makes the legal challenge and the remedy sought, we
could be subject to other liabilities sought by governmental authorities or
private persons. At January 31, 2000, 54 consultants were engaged by us as
independent contractors. Any challenge by the IRS, state authorities or private
litigants resulting in a determination that these individuals are employees
could have a material adverse effect on our business, financial condition and
results of operations. From time to time new legislation may be proposed to
establish more stringent requirements for the engagement of independent
contractors. We are unable to assess the likelihood that any such legislation
will be enacted. Further, our ability to retain independent contractors could in
the future deteriorate, due in part to the lower commitment level that these
contractors have to us. SEE "--BUSINESS--INDEPENDENT CONTRACTORS."

DEPENDENCE ON KEY PERSONNEL

Our future success depends, in significant part, upon the continued services
of John D. Carreker, Jr., our Chairman of the Board and Chief Executive Officer,
as well as other executive officers and key personnel. The loss of services of
Mr. Carreker or one or more of our other executive officers or key employees
could have a material adverse effect on our business, financial condition and
results of

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operations, and there can be no assurance that we will be able to retain our
executive officers or key personnel. We do not maintain key-man life insurance
covering any of our executive officers or other key personnel.

ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL

Our future success depends upon our continuing ability to attract and retain
highly qualified banking, technical and managerial personnel. Competition for
such personnel is intense, and we at times have experienced difficulties in
attracting the desired number of such individuals. Further, our employees
frequently have left us to work in-house with our customers. There can be no
assurance that we will be able to attract or retain a sufficient number of
highly qualified employees or independent contractors in the future. If we are
unable to attract personnel in key positions, our business, financial condition
and results of operations could be materially and adversely affected.

IMPACT OF TECHNOLOGICAL ADVANCES

Our future success will depend, in part, upon our ability to enhance our
existing solutions, develop and introduce new solutions that address the
increasingly sophisticated and varied needs of our current and prospective
customers, develop leading technology and respond to technological advances and
emerging industry standards on a timely and cost-effective basis. There can be
no assurance that future advances in technology will be beneficial to, or
compatible with, our business or that we will be able to incorporate such
advances into our business. In addition, keeping abreast of technological
advances in our business may require substantial expenditures and lead-time.
There can be no assurance that we will be successful in using new technologies,
adapting our solutions to emerging industry standards or developing, introducing
and marketing solution enhancements or new solutions, or that we will not
experience difficulties that could delay or prevent the successful development,
introduction or marketing of these solutions. If we incur increased costs or are
unable, for technical or other reasons, to develop and introduce new solutions
or enhancements of existing solutions in a timely manner in response to changing
market conditions or customer requirements, our business, financial condition
and results of operations could be materially and adversely affected. SEE
"--BUSINESS--SOLUTIONS DEVELOPMENT."

DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT

Our success significantly depends upon our proprietary technology and
information. We rely upon a combination of patent, copyright, trademark and
trade secret laws and confidentiality procedures to protect our proprietary
technology and information. We have a number of issued patents and registered
trademarks. There can be no assurance that the steps we have taken to protect
our services and products are adequate to prevent misappropriation of our
technology or that our competitors independently will not develop technologies
that are substantially equivalent or superior to our technology. Further, it is
very difficult to police unauthorized use of our software due to the nature of
software. Any such misappropriation of our proprietary technology or information
or the development of competitive technologies could have a material adverse
effect on our business, financial condition and results of operations. In
addition, the laws of some countries in which our software is distributed do not
protect our intellectual property rights to the same extent as the laws of the
United States. For example, the laws of a number of foreign jurisdictions in
which we license our software protect trademarks solely on the basis of the
first to register. We currently do not possess any trademark registrations in
foreign jurisdictions, although we do have copyright protection of our software
under the provisions of various international conventions. Accordingly,
intellectual property protection of our services and products may be ineffective
in many foreign countries. In summary, there can be no assurance that the
protection provided by the laws of the United States or such foreign
jurisdictions will be sufficient to protect our proprietary technology or
information.

We could incur substantial costs in protecting and enforcing our
intellectual property rights. Although presently there are no pending or
threatened intellectual property claims against us, third parties may, in

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<PAGE>
the future, assert patent, trademark, copyright and other intellectual property
right claims to technologies which are incorporated into our solutions. In such
event, we may be required to incur significant costs in reaching a resolution to
the asserted claims. There can be no assurance that such a resolution would not
require that we pay damages or obtain a license to the third party's
intellectual property rights in order to continue licensing our software as
currently offered or, if such a third-party license is required, that it would
be available on terms acceptable to us.

Some technology used in our current software and software in development
includes technology licensed from third-parties. These licenses generally
require us to pay royalties and to fulfill confidentiality obligations. The
termination of any such licenses, or the failure of the third-party licensors to
adequately maintain or update their products, could result in delays in our
ability to implement solutions or in delays in the introduction of our new or
enhanced solutions while we search for similar technology from alternative
sources, if any, which could prove costly. Any need to implement alternative
technology could prove to be very expensive for us and any delay in solution
implementation could result in a material adverse effect on the business,
financial condition and results of our operations. It may also be necessary or
desirable in the future to obtain additional licenses for use of third-party
products in our solutions and there can be no assurance that we will be able to
do so on commercially reasonable terms, if at all. See "--Business--Proprietary
Rights."

YEAR 2000 COMPLIANCE

As previously reported, over the past several years we developed and
implemented a plan to address the anticipated impacts of the so-called Year 2000
problem on our products, information technology (IT) systems and on non-IT
systems involving embedded chip technologies. We also surveyed selected third
parties to determine the status of their Year 2000 compliance programs. In
addition, we developed contingency plans specifying what we would do if we, or
important third parties, experienced disruptions to critical business activities
as a result of the Year 2000 problem.

Our Year 2000 plan was completed in all material respects prior to the
anticipated Year 2000 failure dates. As of March 31, 2000, we had not
experienced any material business disruptions or system failures as a result of
Year 2000 issues, nor are we aware of any Year 2000 issues that have impacted
customers, suppliers or other significant third parties to an extent significant
to us. However, Year 2000 compliance has many elements and potential
consequences, some of which may not be foreseeable or may be realized in future
periods. Consequently, there can be no assurance that unforeseen circumstances
may not arise, or that we will not in the future identify equipment or systems
which are not Year 2000 compliant.

As of January 31, 2000, our total incremental costs (historical plus
estimated future costs) of addressing Year 2000 issues are estimated to be
approximately $1.0 million, all of which has been incurred. These costs were
funded through operating cash flow.

POTENTIAL LIABILITY CLAIMS

As a result of our provision of solutions that address critical functions of
bank operations, we are exposed to possible liability claims from banks and
their customers. Although we have not experienced any material liability claims
to date, there can be no assurance that we will not become subject to such
claims in the future. A liability claim against us could have a material adverse
effect on our business, financial condition and results of operations.

RISKS ASSOCIATED WITH POTENTIAL STRATEGIC ALLIANCES, INITIATIVES OR ACQUISITIONS

We regularly evaluate opportunities and may enter into strategic alliances
and/or initiatives, and we may make acquisitions of other companies or
technologies in the future. Risks inherent in alliances or initiatives may
include, among others: (i) substantial investment of our resources in the
alliance or initiative; (ii) inability to realize the intended benefits of an
alliance or initiative; (iii) increased reliance on

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<PAGE>
third parties; (iv) increased payment of third-party licensing fees or royalties
for the incorporation of third-party technology into our solutions; and
(v) inadvertent transfer of our proprietary technology to strategic "partners."
Acquisitions involve numerous risks, including difficulties in assimilating
acquired operations and products, diversion of management's attention from other
business concerns, amortization of acquired intangible assets and potential loss
of key employees of acquired companies. There can be no assurance that we will
be successful in identifying and entering into strategic alliances, if at all,
and any inability to do so could have a material adverse effect on our business,
financial condition and results of operations. In addition, there can be no
assurance that we will be able to integrate successfully any operations,
personnel or services that might be acquired in the future, and a failure by us
to do so could have a material adverse effect on our business, financial
condition and results of operations. SEE "--BUSINESS--STRATEGY."

We are currently providing management services to ECCHO and PSN, which
enables us to be an infrastructure development partner to the banking industry.
These relationships are forms of strategic alliances. In order to support the
formation and growth of PSN, we invested time and technological resources in PSN
and have loans to PSN aggregating $514,000 ($500,000 of which has been reserved
due to our belief that collection is doubtful). In addition, we have
experienced, and may continue to experience, delays in collections of fees from
strategic alliances. On February 3, 2000 PSN entered into an Asset Purchase
agreement with The Small Value Payments Company L.L.C. ("SVPCo") under which
SVPCo acquired certain assets and liabilities from PSN, in return for future
payments to be made from SVPCo to PSN based on the business activities of SVPCo.
SEE "-- BUSINESS--STRATEGIC BANKING INITIATIVES" AND NOTE 6 OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

GOVERNMENT REGULATIONS

Our primary customers are banks. Although the solutions that we currently
offer have not been subject to any material, specific government regulation, the
banking industry is regulated heavily, and we expect that such regulation will
affect the relative demand for our solutions. There can be no assurance that
federal, state or foreign governmental authorities will not adopt new
regulations, and any adoption of new regulations could require us to modify our
current or future solutions. The adoption of laws or regulations affecting us or
our customers' business could reduce our growth rate or could otherwise have a
material adverse effect on our business, financial condition and results of
operations. SEE "--BUSINESS--GOVERNMENT REGULATION."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

We have begun to provide solutions to banks outside the United States, and a
key component of our growth strategy is to broaden our international operations.
Our international operations are subject to risks inherent in the conduct of
international business, including unexpected changes in regulatory requirements,
exchange rates, export license requirements, tariffs and other economic barriers
to free trade, political and economic instability, limited intellectual property
protection, difficulties in collecting payments and potentially adverse tax and
labor consequences. Some of our international sales are denominated in local
currencies, and the impact of future exchange rate fluctuations on our financial
condition and results of operations cannot be accurately predicted. There can be
no assurance that fluctuations in currency exchange rates in the future will not
have a material adverse effect on revenue from international sales and thus our
business, financial condition and results of operations. SEE
"--BUSINESS--STRATEGY."

CONTROL BY OFFICERS AND DIRECTORS

As of January 31, 2000, our executive officers and directors beneficially
owned, in the aggregate, 45% of our outstanding common stock. Accordingly, these
persons, if acting together, have substantial control over matters requiring
approval by our stockholders, including the election of directors. SEE "--ANTI-
TAKEOVER MATTERS."

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ANTI-TAKEOVER MATTERS

Our certificate of incorporation and bylaws contain provisions that may have
the effect of delaying, deterring or preventing a potential takeover that our
stockholders may consider to be in their best interests. The certificate and
bylaws provide for a classified board of directors serving staggered terms of
three years, prevent stockholders from calling a special meeting of stockholders
and prohibit stockholder action by written consent. The certificate also
authorizes only the board of directors to fill vacancies, including
newly-created directorships, and states that our directors may be removed only
for cause and only by the affirmative vote of holders of at least two-thirds of
the outstanding shares of the voting stock, voting together as a single class.
Section 203 of the Delaware General Corporation Law, which is applicable to us,
contains provisions that restrict some business combinations with interested
stockholders, which may have the effect of inhibiting a non-negotiated merger or
other business combination involving us.

STOCK MARKET VOLATILITY

There has been significant volatility in the market price of our common
stock, as well as in the market price of securities of many companies in the
technology and emerging growth sectors. Factors such as announcements of new
products, product enhancements or services by us or our competitors, quarterly
variations in our results of operations or results of operations of our
competitors, changes in earnings estimates or recommendations by securities
analysts, developments in our industry and in the banking industry, general
market and economic conditions and other factors, including factors unrelated to
our operating performance or our competitors, may have a significant impact on
the market price of our common stock.

ITEM 2. PROPERTIES.

Our principal executive office is a leased facility with approximately
72,443 square feet of space in Dallas, Texas. The lease agreement for this space
expires on May 31, 2010. We also lease approximately 20,639 square feet in
Atlanta, Georgia pursuant to a lease agreement which expires on March 1, 2003,
approximately 3,308 square feet in Kansas City, Missouri, pursuant to a lease
agreement which expires February 28, 2002, approximately 5,312 square feet in
Bedford, Texas pursuant to a lease agreement which expires September 30, 2002
and approximately 3,159 square feet in Reading, England, pursuant to a lease
agreement which expires September 4, 2004. We believe that our facilities are
well maintained and in good operating condition and are adequate for our present
and anticipated levels of operations.

ITEM 3. LEGAL PROCEEDINGS.

We are not a party to any material legal proceeding.

TEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted to a vote of our stockholders during the quarterly
period ended January 31, 2000.

18
<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our Common Stock has traded on the NASDAQ National Market under the symbol
"CANI" since May 20, 1998, the date of our initial public offering. At January
31, 2000, there were approximately 3,835 record holders of our Common Stock,
although we believe that the number of beneficial owners of our Common Stock is
substantially greater. The table below sets forth for the fiscal quarters
indicated the high and low sale prices for the Common Stock, as reported by the
NASDAQ National Market.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
January 31, 2000............................................ $ 9.56 $6.25
October 31, 1999............................................ 8.25 5.19
July 31, 1999............................................... 9.50 5.88
April 30, 1999.............................................. 7.81 4.00

January 31, 1999............................................ $ 7.38 $3.88
October 31, 1998............................................ 9.75 4.00
July 31, 1998 (From May 20, 1998)........................... 11.25 8.38
</TABLE>

We have not paid a cash dividend on shares of our common stock since our
incorporation (although prior to its acquisition by us, Antinori Software, Inc.
did make cash dividend payments principally to enable its shareholders to pay
income taxes arising out of Antinori Software's status as an S Corporation). We
currently intend to retain our earnings in the future to support operations and
finance our growth and, therefore, do not intend to pay cash dividends on the
common stock in the foreseeable future. Any payment of cash dividends in the
future will be at the discretion of the board of directors and subject to some
limitations under the Delaware General Corporation Law and will depend upon
factors as our earning levels, capital requirements, financial condition and
other factors deemed relevant by the board of directors.

19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

SELECTED CONSOLIDATED FINANCIAL DATA

The following consolidated statements of operations data for each of the
three years in the period ended January 31, 2000 and the consolidated balance
sheet data as of January 31, 2000 and 1999 have been derived from our audited
consolidated financial statements which are included elsewhere in this Report.
The consolidated balance sheet data as of January 31, 1998 and 1997, and the
consolidated statement of operations data for the year ended January 31, 1997,
have been derived from our audited consolidated financial statements not
included in this Form 10-K. The consolidated financial data as of and for the
year ended January 31, 1996 is derived from our unaudited consolidated financial
statements. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Report.

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Consulting and management service fees.......... $49,725 $26,328 $21,314 $14,407 $ 9,635
Software license fees........................... 13,727 16,327 11,223 6,957 4,316
Software maintenance fees....................... 6,985 5,031 4,274 3,185 2,385
Software implementation fees.................... 5,116 6,557 4,094 3,249 2,219
Hardware and other fees......................... 267 774 1,876 2,737 1,341
------- ------- ------- ------- -------
Total revenues................................ 75,820 55,017 42,781 30,535 19,896
------- ------- ------- ------- -------
Cost of revenues:
Consulting and management service fees.......... 27,574 16,150 12,394 8,794 5,303
Software license fees........................... 1,766 1,216 1,412 1,307 700
Software maintenance fees....................... 2,511 2,387 1,923 1,780 1,279
Software implementation fees.................... 2,381 3,862 4,156 1,808 1,572
Hardware and other fees......................... 208 560 1,556 1,960 965
------- ------- ------- ------- -------
Total cost of revenues........................ 34,440 24,175 21,441 15,649 9,819
------- ------- ------- ------- -------
Gross profit...................................... 41,380 30,842 21,340 14,886 10,077
------- ------- ------- ------- -------
Operating costs and expenses:
Selling, general and administrative............. 25,333 18,444 12,777 9,296 6,251
Research and development........................ 4,813 4,763 3,610 1,318 1,063
Merger related costs............................ -- 485 -- 1,423 54
------- ------- ------- ------- -------
Total operating costs and expenses............ 30,146 23,692 16,387 12,037 7,368
------- ------- ------- ------- -------
Income from operations............................ 11,234 7,150 4,953 2,849 2,709
Other income (expense)............................ 1,100 925 79 (375) 313
------- ------- ------- ------- -------
Income before provision for income taxes.......... 12,334 8,075 5,032 2,474 3,022
Provision for income taxes(1)..................... 4,440 2,903 2,027 1,114 1,163
------- ------- ------- ------- -------
Net income........................................ $ 7,894 $ 5,172 $ 3,005 $ 1,360 $ 1,859
======= ======= ======= ======= =======
Basic earnings per share(2)....................... $ 0.43 $ 0.32 $ 0.24 $ 0.11 $ 0.15
Diluted earnings per share(2)..................... $ 0.42 $ 0.30 $ 0.21 $ 0.10 $ 0.14
Shares used in computing basic earnings per
share(2)........................................ 18,456 16,224 12,717 12,154 12,783
Shares used in computing diluted earnings per
share(2)........................................ 18,980 17,504 14,484 13,118 13,332
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $39,536 20,701 $ 2,485 $ 3,895 $ 3,281
Working capital................................. 56,530 52,117 7,529 5,882 4,455
Total assets.................................... 82,823 68,736 21,486 17,569 11,298
Common stock subject to put option(3)........... -- -- 2,000 2,000 --
Long-term debt, net of current portion.......... -- -- -- -- --
Total stockholders' equity...................... 65,406 57,131 8,803 5,572 5,600
</TABLE>

- ------------------------

(1) Prior to our acquisition of Antinori Software, Inc. ("ASI") on January 31,
1997, ASI had elected to be treated as an S corporation for federal and
state income tax purposes. The provision for income tax included as a
component of net income for the fiscal years prior to the fiscal year ended
January 31, 1998 reflects a pro forma tax provision which includes estimated
federal and state income taxes (by applying statutory income tax rates) that
would have been incurred if ASI had been subject to taxation as a C
corporation.

(2) See Notes 2 and 8 of Notes to Consolidated Financial Statements for
information concerning the calculation of basic and diluted net earnings per
share.

(3) Relates to Common Stock redeemable at the option of Science Applications
International Corporation ("SAIC"). SAIC's right to require us to repurchase
its common stock terminated upon completion of our initial public offering.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF SOME FACTORS
INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS REPORT. THE
FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH "SELECTED
CONSOLIDATED FINANCIAL DATA" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS REPORT.

OVERVIEW

We are a leading provider of integrated consulting and software solutions
that enable banks to maximize their electronic finance (e-finance)
opportunities, increase their revenues, reduce their costs and enhance their
delivery of customer services. We were founded in 1978 to provide consulting
services to banks, and subsequently integrated software products into our
banking solutions. With our acquisition of Antinori Software, Inc. in 1997, we
were able to significantly enhance our portfolio of software products.
Additionally, we acquired Genisys Operations, Inc. ("Genisys") in January 1999,
which provided incremental added-value to our product offerings. The
acquisitions of ASI and Genisys were each accounted for as a pooling of
interests and accordingly, our Consolidated Financial Statements and Notes
thereto, as well as all other financial and statistical data presented in this
Report, have been restated to include the financial position and results of
operations for ASI and Genisys for all periods prior to and including the period
ended January 31, 2000.

We derive our revenue from consulting and management service fees, software
license fees, software maintenance fees, software implementation fees and
hardware and other sales. While many customer contracts provide for both the
performance of consulting services and the license of related software, some
customer contracts require only the performance of consulting services or only a
software license (and, at the election of the customer, related implementation
services and/or annual software maintenance services). We enter into these
contracts with our customers on a project-by-project basis.

21
<PAGE>
A substantial majority of our revenues are generated from contracts with
banks with assets over $50 billion ("Tier I Banks") and banks with assets of
between $5 billion and $50 billion ("Tier II Banks"). We seek to establish
long-term relationships with our customers that will lead to on-going projects
utilizing our solutions. We are typically retained to perform one or more
discrete projects for a customer, and use these opportunities to extend our
solutions into additional areas of the customer's operations. To this end,
approximately 87% and 86% of our total revenues during the year ended January
31, 2000 were derived from companies who were customers of ours during the years
ended January 31, 1999 and 1998, respectively. SEE "--BUSINESS--CUSTOMERS AND
MARKETS."

CONSULTING AND MANAGEMENT SERVICE FEES. We employ three primary pricing
methods in connection with our delivery of consulting and management services.
First, we may price our delivery of consulting and management services on the
basis of time and materials, in which case the customer is charged agreed daily
rates for services performed and out-of-pocket expenses. In this case, fees and
related amounts are generally payable on a monthly basis, and revenue is
recognized as the services are performed. Second, consulting and management
services may be delivered on a fixed-price basis. In this case, payments are
made to us on a monthly basis or pursuant to an agreed upon payment schedule,
and revenue is recognized on a percentage-of-completion basis. Any anticipated
losses on a fixed-price contract are recognized when estimable. Third, we may
deliver consulting and management services pursuant to a value-pricing contract
with the customer. In this case, we are paid, on an agreed upon basis with the
customer, either a specified percentage of (i) the projected increased revenues
or decreased costs that are expected to be derived by the customer over a period
of up to twelve months following implementation of our solution or (ii) the
actual increased revenues and/or decreased costs experienced by the customer
over a period of up to twelve months following implementation of our solution,
subject in either case to a ceiling, if any is agreed to, on the total amount of
payments to be made to us. These contracts typically provide for us to receive
from 10% to 30% of the projected or actual increased revenues or decreased
costs, with payments to be made to us pursuant to an agreed upon schedule
ranging from one to twelve months in length. Revenues generated from rendering
consulting and management services in connection with value-priced contracts
based upon projected results are recognized only upon completion of all services
and agreement upon the actual fee to be paid (even though billings for these
services may be delayed by mutual agreement for periods not to exceed twelve
months). When fees are to be paid based on a percentage of actual revenues or
savings, we recognize revenue only upon completion of all services and as the
amounts of actual revenues or savings are confirmed by the customer. We
typically must first commit time and resources to develop projections associated
with value-pricing contracts before a bank will commit to purchase our
solutions, and therefore assume the risk of making these commitments with no
assurance that the bank will purchase the solutions. We expect that
value-pricing contracts will account for an increasing percentage of our
revenues in the future. In addition, as a consequence of the shift toward the
use of more value-pricing contracts and due to the revenue recognition policy
associated with those contracts, our results of operations will likely fluctuate
significantly from period to period Regardless of the pricing method employed by
us in a given contract, we are reimbursed on a monthly basis for out-of-pocket
expenses incurred on behalf of our customers, which expenses are netted against
reimbursements for financial statement reporting purposes. SEE "--SELECTED
QUARTERLY RESULTS OF OPERATIONS."

SOFTWARE LICENSE FEES. In the event that a software license is sold
together with consulting and management services or on a stand-alone basis,
software license fees are payable to us in one or more installments, as provided
in the customer's contract. Software license revenues for periods subsequent to
January 31, 1998, are recognized in accordance with the American Institute of
Certified Public Accountants' Statement of Position (SOP) 97-2, "Software
Revenue Recognition." Under SOP 97-2, software license revenues are recognized
upon execution of a contract and delivery of software, provided that the license
fee is fixed and determinable, no significant production, modification or
customization of the software is required, and collection is considered probable
by management. For periods prior to January 31, 1998, software license revenues
were recognized in accordance with SOP 91-1, "Software Revenue Recognition."
Under SOP 91-1, software license revenues were recognized upon execution of a
contract

22
<PAGE>
and shipment of the software and after any customer cancellation right had
expired, provided that no significant vendor obligations remained outstanding,
amounts were due within one year, and collection was considered probable by
management. Software licenses continue for an indefinite period and there is no
provision for any renewal fees. We also enter into value-pricing contracts in
connection with our grant of software licenses, in which case payments are made
and revenue is recognized in a similar fashion for these contracts in the
consulting and management services context. Although substantially all of our
current software licenses provide for a set license fee, whether pursuant to a
fixed-price or value-pricing contract, some of our payment electronification
licenses instead provide for per-transaction license fees (in which case fees
are recognized and due on a monthly basis). We expect to increase this practice
of charging license fees on a per-transaction basis in the future as part of our
strategy to increase recurring revenues and smooth our period-to-period
revenues. SEE "--BUSINESS--STRATEGY--INCREASE USE OF VALUE PRICING AND RECURRING
REVENUE ARRANGEMENTS."

SOFTWARE MAINTENANCE FEES. In connection with our sale of a software
license, a customer may elect to purchase software maintenance services. Most of
the customers that purchase software licenses from us also purchase software
maintenance services, which typically are renewed annually. We charge an annual
maintenance fee, which is typically a percent of the initial software license
fee, and generally is payable to us at the beginning of the maintenance period
and is recognized ratably over the term of the related contract.

SOFTWARE IMPLEMENTATION FEES. In connection with our sale of a software
license, a customer may elect to purchase software implementation services,
including software enhancements, patches and other software support services.
Most of the customers that purchase software licenses from us also purchase
software implementation services. We price our implementation services on a
time-and-materials or on a fixed-price basis, and the related revenues are
recognized as services are performed.

HARDWARE AND OTHER SALES. Our computer hardware and supplies sales are made
in tandem with the delivery of related services or software, and are sold on the
basis of our cost plus a specified percentage. Revenues are recognized upon
shipment of the hardware to the customer. We sell hardware at the request of our
customers, but do not consider hardware sales to be a meaningful part of our
business.

In accordance with generally accepted accounting principles, we capitalize
software development costs incurred in developing a product once technological
feasibility of the product has been determined. These capitalized software
development costs also include amounts paid for software that is purchased and
that has reached technological feasibility. Capitalized software development
costs are amortized on the basis of each product's projected revenue or on a
straight-line basis over the remaining economic life of the product (generally
three years). At January 31, 2000, our capitalized software development costs,
net of accumulated amortization, were $6.3 million, which will be amortized over
the next 12 quarterly periods. SEE "--NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS."

23
<PAGE>
RESULTS OF OPERATIONS

The following discussion of our results of operations for the fiscal years
ended January 31, 2000, 1999 and 1998 is based upon data derived from the
statements of operations contained in our audited Consolidated Financial
Statements appearing elsewhere in this Report. The following table sets forth
this data as a percentage of total revenues.

Cost of revenues:
Consulting and management service fees.................... 36.4 29.4 29.0
Software license fees..................................... 2.3 2.2 3.3
Software maintenance fees................................. 3.3 4.3 4.5
Software implementation fees.............................. 3.1 7.0 9.7
Hardware and other fees................................... .3 1.0 3.6
----- ----- -----
Total cost of revenues.................................. 45.4 43.9 50.1
----- ----- -----
Gross profit................................................ 54.6 56.1 49.9
----- ----- -----

Operating costs and expenses:
Selling, general and administrative....................... 33.4 33.5 29.9
Research and development.................................. 6.4 8.7 8.4
Merger related costs...................................... -- .9 --
----- ----- -----
Total operating costs and expenses...................... 39.8 43.1 38.3
----- ----- -----
Income from operations...................................... 14.8 13.0 11.6
Other income (expense)...................................... 1.5 1.7 .2
----- ----- -----
Income before provision for income taxes.................... 16.3 14.7 11.8
Provision for income taxes.................................. 5.9 5.3 4.8
----- ----- -----
Net income.................................................. 10.4% 9.4% 7.0%
===== ===== =====
</TABLE>

YEAR ENDED JANUARY 31, 2000 (FISCAL 1999) COMPARED TO YEAR ENDED JANUARY 31,
1999 (FISCAL 1998)

REVENUES. Our total revenues increased by 37.8% to $75.8 million in fiscal
1999 from $55.0 million in fiscal 1998. The increase was primarily attributable
to growth in revenues from consulting and management services. Revenues from
consulting and management services increased by 88.9% to $49.7 million in fiscal
1999 from $26.3 million in fiscal 1998. This increase reflected the startup of
our eFinancialServices consulting practice and continued growth of our value
priced RevenueEnhancement practice which generated $9.6 million and
$9.4 million, respectively, of the $23.4 million increase as well as continued
demand for our services. Software license revenues decreased 15.9% to
$13.7 million in fiscal 1999 from $16.3 million in fiscal 1998. Software
maintenance revenue increased 37.1% to $6.9 million in fiscal 1999 from
$5.0 million in fiscal 1998. Software maintenance growth resulted from growth in
licenses sold in the prior fiscal year, rate increases under existing contracts
and from renewals of previously terminated agreements due to Year 2000 concerns
by clients. Software implementation revenues decreased by 22.0%

24
<PAGE>
to $5.1 million in fiscal 1999 from $6.6 million in fiscal 1998. Decreases in
software license revenues were precipitated by customer decisions to delay
software purchases due to concerns over Year 2000, and delayed purchase
decisions due to our announced roll out plan for our new research and adjustment
product. Decreases in software implementation revenue resulted from decreases in
license sales. Hardware sales decreased 65.5% to $267,000 in fiscal 1999 from
$774,000 in fiscal 1998. This decrease was primarily due to reduced requests by
customers for bundled hardware and license deliveries.

COST OF REVENUES. Cost of revenues generally consists of personnel costs,
amortization of capitalized software development costs, third-party royalties
and cost of hardware delivered. Total cost of revenues increased by 42.5% to
$34.4 million in fiscal 1999 from $24.2 million in fiscal 1998. This increase
resulted primarily from an increase in the cost of revenues in consulting and
management services and software maintenance. Cost of revenues for consulting
and management services increased by 70.7% to $27.6 million in fiscal 1999 from
$16.2 million in fiscal 1998, which was a result primarily of increases in
personnel to support the growth of the eFinancialServices consulting practice.
Cost of revenues for software licenses increased by 45.2% to $1.8 million in
fiscal 1999 from $1.2 million in fiscal 1998. Increases in cost of license fees
resulted from an increase of 162.5% in amortization costs, to $1.2 million in
fiscal 1999 from $453,000 in fiscal 1998, generated from previously capitalized
software. Cost of revenues of software maintenance increased by 5.2% to $2.5
million in fiscal 1999 from $2.4 million in fiscal 1998. Cost of revenues for
software implementation decreased 38.3% to $2.4 million in fiscal 1999 from
$3.9 million in fiscal 1998. Decreases in implementation costs resulted
principally from lower staffing levels to accomplish fewer implementations sold.
Cost of revenues for hardware sales decreased 62.9% to $208,000 in fiscal 1999
from $560,000 in fiscal 1998 due to reduced hardware sales levels. Total cost of
revenues as a percentage of total revenues increased to 45.4% in fiscal 1999
from 43.9% in fiscal 1998, as a result of increases in staff to facilitate
growth in consulting efforts and increases in software amortization costs. Cost
of revenues for consulting and management service fees as a percentage of
revenues from consulting and management consulting fees declined to 55.5% in
fiscal 1999 from 61.3% in fiscal 1998 due to improved margins on consulting
efforts and value priced engagements.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses generally consist of personnel costs associated with selling,
marketing, general management and software management, as well as fees for
professional services and other related costs. Selling, general and
administrative expenses increased by 37.4% to $25.3 million in fiscal 1999 from
$18.4 million in fiscal 1998. The increase in these expenses primarily reflected
the addition of sales and management staff during fiscal 1999 associated with
our growth. As a percentage of revenues, selling, general and administrative
expenses decreased to 33.4% in fiscal 1999 from 33.5% in fiscal 1998.

RESEARCH AND DEVELOPMENT. Research and development expenses generally
consist of personnel and related costs of developing solutions. Research and
development expenses remained constant at $4.8 million in fiscal 1999 compared
to $4.8 million in fiscal 1998. Research and development expenses as a
percentage of revenues decreased to 6.4% in fiscal 1999 from 8.7% in fiscal
1998.

OTHER INCOME. Other income increased to $1.1 million in fiscal 1999 from
$925,000 in fiscal 1998. Other income increased as a result of earnings on cash
and cash equivalents.

PROVISION FOR INCOME TAXES. Income tax provision increased to $4.4 million
in fiscal 1999 from $2.9 million in fiscal 1999, reflecting an effective tax
rate of 36% for fiscal 1999 and fiscal 1998.

YEAR ENDED JANUARY 31, 1999 (FISCAL 1998) COMPARED TO YEAR ENDED JANUARY 31,
1998 (FISCAL 1997)

REVENUES. Our total revenues increased by 28.6% to $55.0 million in fiscal
1998 from $42.8 million in fiscal 1997. The increase was primarily attributable
to growth in revenues from consulting and management services, software licenses
and software implementation. Revenues from consulting and management services
increased by 23.5% to $26.3 million in fiscal 1998 from $21.3 million in fiscal
1997. This increase

25
<PAGE>
reflected both continued demand for our services, as well as increased use of
value-pricing for services. Software license revenues increased 45.5% to
$16.3 million in fiscal 1998 from $11.2 million in fiscal 1997. Software license
revenue growth stemmed primarily from increased sales in fiscal 1998 over fiscal
1997 of our risk management products of $4.4 million. Total risk management
product license fees accounted for 41.5% and 20.8% of software license revenue
in fiscal 1998 and fiscal 1997, respectively. Software maintenance revenue
increased 17.7% to $5.0 million in fiscal 1998 from $4.3 million in fiscal 1997.
Software maintenance growth resulted from growth in licenses sold, as well as
rate increases under existing contracts. Software implementation revenues
increased by 60.1% to $6.6 million in fiscal 1998 from $4.1 million in fiscal
1997. This increase in software implementation revenues was primarily generated
by increased software product sales, which resulted in increased implementation.
Increased risk management and cash management products accounted for increased
software implementation fees in fiscal 1998 of $1.2 million and increased
software maintenance fees of $762,000, respectively. Hardware sales decreased
58.7% to $774,000 in fiscal 1998 from $1.9 million in fiscal 1997. This decrease
was primarily due to reduced requests by customers for bundled hardware and
license deliveries.

COST OF REVENUES. Cost of revenues generally consists of personnel costs,
amortization of capitalized software development costs, third-party royalties
and cost of hardware delivered. Total cost of revenues increased by 12.8% to
$24.2 million in fiscal 1998 from $21.4 million in fiscal 1997. This increase
resulted primarily from an increase in the cost of revenues in consulting and
management services and software maintenance. Cost of revenues for consulting
and management services increased by 30.3% to $16.2 million in fiscal 1998 from
$12.4 million in fiscal 1997, which was a result primarily of increases in
personnel. Cost of revenues for software licenses decreased by 13.9% to $1.2
million in fiscal 1998 from $1.4 million in fiscal 1997. Decreases in cost of
license fees resulted from a decrease in sales of products subject to royalty
payments. Cost of revenues of software maintenance increased by 24.1% to $2.4
million in fiscal 1998 from $1.9 million in fiscal 1997, which was primarily due
to increases in personnel costs associated with growth of the customer service
function. Cost of revenues for software implementation decreased 7.1% to
$3.9 million in fiscal 1998 from $4.2 million in fiscal 1997. Improvements in
the implementation process and adjustments to staffing requirements facilitated
slightly lower staffing levels to accomplish implementations sold. Cost of
revenues for hardware sales decreased 64.0% to $560,000 in fiscal 1998 from $1.6
million in fiscal 1997 due to reduced hardware sales levels. Total cost of
revenues as a percentage of total revenues decreased to 43.9% in fiscal 1998
from 50.1% in fiscal 1997, as a result of increases in sales of value-priced
consulting and software licenses which have lower associated costs.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses generally consist of personnel costs associated with selling,
marketing, general management and software management, as well as fees for
professional services and other related costs. Selling, general and
administrative expenses increased by 44.4% to $18.4 million in fiscal 1998 from
$12.8 million in fiscal 1997. The increase in these expenses reflected the
addition of software management and marketing staff during fiscal 1998
associated with our growth, as well as additional costs associated with
operation as a public company. As a percentage of revenues, selling, general and
administrative expenses increased to 33.5% in fiscal 1998 from 29.9% in fiscal
1997.

RESEARCH AND DEVELOPMENT. Research and development expenses generally
consist of personnel and related costs of developing solutions. Research and
development expenses increased by 31.9% to $4.8 million in fiscal 1998 from $3.6
million in fiscal 1997. Research and development expenses as a percentage of
revenues increased to 8.7% in fiscal 1998 from 8.4% in fiscal 1997. Growth in
research and development expenses resulted largely from an increase in the
number of development efforts during fiscal 1998.

MERGER RELATED COSTS. Merger related costs consisted of one-time
transaction costs of $485,000 related to the acquisition of Genisys.

26
<PAGE>
OTHER INCOME. Other income increased to $925,000 in fiscal 1998 from
$79,000 in fiscal 1997. Other income increased as a result of interest earned on
funds raised from our initial public offering on May 20, 1998.

PROVISION FOR INCOME TAXES. Income tax provision increased to $2.9 million
in fiscal 1998 from $2.0 million in fiscal 1997, reflecting an effective tax
rate of 36.0% for fiscal 1998 compared with 40.0% for fiscal 1997. The effective
tax rate in fiscal 1998 was reduced compared to fiscal 1997 primarily due to the
tax-exempt status of some interest income earned during fiscal 1998.

27
<PAGE>
SELECTED CONSOLIDATED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth some unaudited quarterly data for each of our
last eight quarters ended January 31, 2000. The data has been derived from our
unaudited consolidated financial statements that, in management's opinion,
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of this information when read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this Report. We believe that quarter-to-quarter comparisons of our financial
results are not necessarily meaningful and should not be relied upon as any
indication of future performance. SEE "BUSINESS--RISK FACTORS--FLUCTUATIONS IN
QUARTERLY OPERATING RESULTS."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
JAN 31, OCT 31, JUL 31, APR 30, JAN 31, OCT 31, JUL 31, APR 30,
2000 1999 1999 1999 1999 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Consulting and management service
fees.................................. $13,290 $15,072 $13,039 $ 8,324 $ 7,452 $ 7,273 $ 6,589 $ 5,014
Software license fees................... 5,180 2,692 2,762 3,093 4,991 3,818 4,061 3,457
Software maintenance fees............... 2,042 1,677 1,764 1,502 1,377 1,226 1,285 1,143
Software implementation fees............ 1,050 1,391 1,232 1,443 1,360 2,072 2,136 989
Hardware and other fees................. 36 34 75 122 56 160 227 331
------- ------- ------- ------- ------- ------- ------- -------
Total revenues........................ 21,598 20,866 18,872 14,484 15,236 14,549 14,298 10,934

Costs of revenues:
Consulting and management service
fees.................................. 8,097 8,044 6,162 5,271 4,390 4,211 3,905 3,644
Software license fees................... 524 394 380 468 410 303 247 256
Software maintenance fees............... 487 689 671 664 701 619 568 499
Software implementation fees............ 385 542 808 646 890 1,130 1,205 637
Hardware and other fees................. 24 23 60 101 32 110 186 232
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues................ 9,517 9,692 8,081 7,150 6,423 6,373 6,111 5,268
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.............................. 12,081 11,174 10,791 7,334 8,813 8,176 8,187 5,666
------- ------- ------- ------- ------- ------- ------- -------

Operating costs and expenses:
Selling, general and administrative..... 7,494 6,907 6,114 4,818 5,182 4,984 4,424 3,854
Research and development................ 826 1,313 1,356 1,318 1,363 962 1,243 1,195
Merger related costs.................... -- -- -- -- 485 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating cost and expenses..... 8,320 8,220 7,470 6,136 7,030 5,946 5,667 5,049
------- ------- ------- ------- ------- ------- ------- -------
Income from operations.................... 3,761 2,954 3,321 1,198 1,783 2,230 2,520 617
Other income (expense).................... 320 223 316 241 336 366 205 18
------- ------- ------- ------- ------- ------- ------- -------
Income before provision for income
taxes................................... 4,081 3,177 3,637 1,439 2,119 2,596 2,725 635
Provision for income taxes................ 1,469 1,144 1,351 476 714 926 1,011 252
------- ------- ------- ------- ------- ------- ------- -------
Net income................................ $ 2,612 $ 2,033 $ 2,286 $ 963 $ 1,405 $ 1,670 $ 1,714 $ 383
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings per share.................. $ 0.14 $ 0.11 $ 0.12 $ 0.05 $ 0.08 $ 0.09 $ 0.10 $ 0.03
Diluted earnings per share................ $ 0.14 $ 0.11 $ 0.12 $ 0.05 $ 0.07 $ 0.09 $ 0.10 $ 0.03
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1999, we generated operating cash of $13.7 million. Operating
cash was generated principally through net income before non-cash charges for
amortization of capitalized software, depreciation and amortization of property
and equipment, and through a net increase in accounts payable and accrued
expenses. Due to negotiated payment terms associated with some sales, accounts
receivable increased using $3.8 million of cash provided by operations. During
fiscal 1998, we used $6.1 million in operating activities principally due to
increases in accounts receivable of $15.1 million. At January 31, 2000 and
1999, we had working capital of $56.5 million and $52.1 million, respectively.

28
<PAGE>
Cash used in investing activities during fiscal 1999 was $8.5 million, and
was primarily related to purchases of property and equipment of $3.5 million,
and purchases and development of capitalized software of $4.3 million. Cash used
in investing activities during fiscal 1998 was $16.6 million, and was primarily
related to purchases of short-term investments of $12.8 million, purchases of
property and equipment of $2.3 million, and development of capitalized software
of $1.5 million.

Cash generated through financing activities for fiscal 1999 was not
significant. Cash generated through financing activities for fiscal 1998 of
$40.9 million resulted primarily from proceeds derived from our initial public
offering completed on May 20, 1998 for $35.8 million after deducting costs of
the offering, and $5.0 million (including $1.4 million of related tax benefits)
resulting from the exercise of stock options.

We no longer maintain a revolving credit facility in light of our current
liquidity position.

Our future liquidity and capital requirements will depend upon numerous
factors. We believe that current cash balances and cash generated from
operations will be sufficient to meet our operating and capital requirements
through at least January 2001. However, there can be no assurance that we will
not require additional financing within this time frame. Our forecast of the
period of time through which our financial resources will be adequate to support
our operations is a forward-looking statement that involves risk and
uncertainties, and actual results could vary. The failure to raise capital when
needed could have a material adverse effect on our business, financial condition
and results of operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133, as amended, is effective for quarters beginning after June 15, 2000.
We do not currently utilize derivative financial instruments. Therefore, we do
not expect that the adoption of SFAS 133 will have a material impact on our
results of operation or financial position.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued Statement of Position ("SOP") No. 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions" ("SOP 98-9"), which amends some provisions of Statement of
Position No. 97-2 "Software Revenue Recognition" ("SOP 97-2"). SOP 98-9 requires
the use of the residual method when vendor specific objective evidence of fair
value does not exist for one or more delivered elements in an arrangement but
there is vendor specific objective evidence of the fair values of all
undelivered elements in a multiple element arrangement. SOP 98-9 is effective
for us on February 1, 2000. We do not expect SOP 98-9 to materially impact our
future results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101) which summarizes some of the staff's views
in applying generally accepted accounting principles to revenue recognition in
financial statements. The effective date of SAB 101 for us is the quarter ended
July 31, 2000. We continue to evaluate the impact that SAB 101 will have on the
timing of revenue recognition in future periods. Based on its initial
evaluation, we believe SAB 101 will not have a material impact on our future
results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATES. We invest our cash in a variety of financial instruments,
primarily tax-advantaged variable rate and fixed rate obligations of state and
local municipalities, and educational entities and agencies. These investments
are denominated in US dollars.

We account for our investment instruments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). All of the cash equivalents and
short-term investments are treated as available-for-sale under SFAS 115.

29
<PAGE>
Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a raise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, our future investment income may fall
short of expectations due to changed in interest rates or we may suffer losses
in principal if forced to sell securities which have seen a decline in market
value due to changes in interest rates. Our investment securities are held for
purposes other than trading. The weighted-average interest rate on investment
securities at January 31, 2000 was 4.7%. Amortized cost of short-term
investments held at January 31, 2000 was $13.6 million, which approximates fair
value.

30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

CARREKER-ANTINORI, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... 32

Consolidated Balance Sheets as of January 31, 2000 and
1999...................................................... 33

Consolidated Statements of Operations for the years ended
January 31, 2000, 1999 and 1998........................... 34

Consolidated Statements of Stockholders' Equity for the
years ended
January 31, 2000, 1999 and 1998........................... 35

Consolidated Statements of Cash Flows for the years ended
January 31, 2000, 1999 and 1998........................... 36

Notes to Consolidated Financial Statements.................. 37
</TABLE>

31
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Carreker-Antinori, Inc.

We have audited the accompanying consolidated balance sheets of
Carreker-Antinori, Inc. (the Company), as of January 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended January 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Carreker-Antinori, Inc. at January 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended January 31, 2000, in conformity with accounting
principles generally accepted in the United States.

ERNST & YOUNG LLP

Dallas, Texas
March 7, 2000

32
<PAGE>
CARREKER-ANTINORI, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JANUARY 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
ASSETS

Current assets
Cash and cash equivalents................................. $25,973 $20,701
Short-term investments.................................... 13,563 12,849
Accounts receivable, net of allowance of $609 and $569 at
January 31, 2000 and 1999, respectively................. 30,263 26,618
Receivable from Electronic Check Clearing House
Organization............................................ 92 343
Receivable from Payment Solutions Network, Inc., net of
allowance of $560 and $565 at January 31, 2000 and 1999,
respectively............................................ 437 545
Receivable from Infiteq, LLC, net of allowance of $188 and
$138 at January 31, 2000 and 1999, respectively......... 51 98
Prepaid expenses and other current assets................. 733 681
Deferred income taxes..................................... 831 736
------- -------
Total current assets........................................ 71,943 62,571
Property and equipment, net of accumulated depreciation of
$4,809 and $2,894 at January 31, 2000 and 1999,
respectively.............................................. 4,197 2,673
Software costs capitalized, net of accumulated amortization
of $4,889 and $3,753 at January 31, 2000 and 1999,
respectively.............................................. 6,349 3,279
Deferred income taxes....................................... 179 178
Other assets................................................ 155 35
------- -------
Total assets................................................ $82,823 $68,736
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,089 $ 2,045
Accrued compensation and benefits......................... 2,030 700
Other accrued expenses.................................... 2,583 961
Income taxes payable...................................... 2,310 1,400
Deferred revenue.......................................... 6,401 5,348
------- -------
Total current liabilities................................... 15,413 10,454
Deferred income taxes....................................... 2,004 1,151
Commitments (Note 7)........................................
Stockholders' equity:
Preferred Stock, $.01 par value:
2,000 shares authorized; no shares issued and
outstanding............................................ -- --
Common Stock, $.01 par value:
100,000 shares authorized; 18,540 and 18,354 shares
issued at January 31, 2000 and 1999, respectively...... 185 184
Additional paid-in capital................................ 44,564 44,563
Deferred compensation..................................... (183) (568)
Retained earnings......................................... 20,846 12,952
Less treasury stock, at cost:
1 common shares as of January 31, 2000.................. (6) --
------- -------
Total stockholders' equity.................................. 65,406 57,131
------- -------
Total liabilities and stockholders' equity.................. $82,823 $68,736
======= =======
</TABLE>

See accompanying notes.

33
<PAGE>
CARREKER-ANTINORI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Consulting and management service fees.................... $49,725 $26,328 $21,314
Software license fees..................................... 13,727 16,327 11,223
Software maintenance...................................... 6,985 5,031 4,274
Software implementation fees.............................. 5,116 6,557 4,094
Hardware sales and other fees............................. 267 774 1,876
------- ------- -------
Total revenues.......................................... 75,820 55,017 42,781
------- ------- -------
Costs of revenues:
Consulting and management service fees.................... 27,574 16,150 12,394
Software license fees..................................... 1,766 1,216 1,412
Software maintenance...................................... 2,511 2,387 1,923
Software implementation fees.............................. 2,381 3,862 4,156
Hardware sales and other fees............................. 208 560 1,556
------- ------- -------
Total cost of revenues.................................. 34,440 24,175 21,441
------- ------- -------
Gross profit................................................ 41,380 30,842 21,340
------- ------- -------
Operating costs and expenses:
Selling, general, and administrative...................... 25,333 18,444 12,777
Research and development.................................. 4,813 4,763 3,610
Merger related costs...................................... -- 485 --
------- ------- -------
Total operating costs and expenses...................... 30,146 23,692 16,387
------- ------- -------
Income from operations...................................... 11,234 7,150 4,953
Other income (expense):
Interest income, net...................................... 1,164 925 79
Other income (expense).................................... (64) -- --
------- ------- -------
Total other income (expense)............................ 1,100 925 79
------- ------- -------
Income before provision for income taxes.................... 12,334 8,075 5,032
Provision for income taxes (Note 4)......................... 4,440 2,903 2,027
------- ------- -------
Net income.................................................. $ 7,894 $ 5,172 $ 3,005
======= ======= =======
Basic earnings per share.................................... $ 0.43 $ .32 $ .24
======= ======= =======
Diluted earnings per share.................................. $ 0.42 $ .30 $ .21
======= ======= =======
Shares used in computing basic earnings per share........... 18,456 16,224 12,717
======= ======= =======
Shares used in computing diluted earnings per share......... 18,980 17,504 14,484
======= ======= =======
</TABLE>

See accompanying notes.

34
<PAGE>
CARREKER-ANTINORI, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------------- PAID-IN DEFERRED RETAINED ------------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS SHARES AMOUNT EQUITY
-------- -------- ---------- ------------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1997... 13,010 $130 $ 1,205 $ -- $ 4,775 387 $(539) $ 5,571

Restricted stock grant........ 85 1 753 (754) -- -- -- --
Sales of treasury stock....... -- -- 39 -- -- (23) 33 72
Purchases of treasury stock... -- -- -- -- -- 3 (4) (4)
Adjustment of shares issued to
Antinori Software
shareholders................ (198) (2) 2 -- -- -- -- --
Issuance of shares of common
stock upon exercises of
stock options............... 350 3 156 -- -- -- -- 159
Net income.................... -- -- -- -- 3,005 -- -- 3,005
------ ---- ------- ----- ------- ---- ----- -------
Balance at January 31, 1998... 13,247 132 2,155 (754) 7,780 367 (510) 8,803

Adjustment of shares issued to
Antinori Software
shareholders................ (141) (1) 1 -- -- -- -- --
Common shares subject to
put......................... -- -- 2,000 -- -- -- -- 2,000
Director option grant......... -- -- 100 (100) -- -- -- --
Sale of stock................. 3,650 37 35,800 -- -- -- -- 35,837
Compensation earned under
employee/ director stock
option plans................ -- -- -- 286 -- -- -- 286
Purchases of treasury stock... -- -- -- -- -- 11 (15) (15)
Issuance of shares of common
stock upon exercises of
stock options............... 1,598 16 3,100 -- -- (378) 525 3,641
Tax benefit from exercises of
stock options............... -- -- 1,407 -- -- -- -- 1,407
Net income.................... -- -- -- -- 5,172 -- -- 5,172
------ ---- ------- ----- ------- ---- ----- -------
Balance at January 31,
1999.................... 18,354 184 44,563 (568) 12,952 -- -- 57,131

Director option grant......... -- -- 28 (28) -- -- -- --
Termination of restricted
stock grant................. (23) -- (80) 80 -- -- -- --
Compensation earned under
employee/ director stock
option plans................ -- -- -- 333 -- -- -- 333
Purchases of treasury stock... -- -- -- -- -- 89 (574) (574)
Issuance of shares of common
stock upon exercises of
stock options............... 209 1 (322) -- -- (88) 568 247
Tax benefit from exercises of
stock options............... -- -- 375 -- -- -- -- 375
Net income.................... -- -- -- -- 7,894 -- -- 7,894
------ ---- ------- ----- ------- ---- ----- -------
Balance at January 31,
2000.................... 18,540 $185 $44,564 $(183) $20,846 1 $ (6) $65,406
====== ==== ======= ===== ======= ==== ===== =======
</TABLE>

See accompanying notes.

35
<PAGE>
CARREKER-ANTINORI, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net income................................................ $ 7,894 $ 5,172 $ 3,005
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and
equipment............................................. 1,997 1,277 639
Amortization of software costs capitalized.............. 1,189 453 745
Compensation earned under employee/director stock option
plans................................................. 333 286 --
Deferred income taxes................................... 757 (199) 651
Provision for doubtful accounts......................... 587 708 832
Changes in operating assets and liabilities
Accounts receivable................................... (3,826) (15,073) (4,108)
Prepaid expenses and other assets..................... (172) 324 32
Accounts payable and accrued expenses................. 2,996 (1,115) 825
Income taxes payable/receivable....................... 910 1,599 (54)
Deferred revenue...................................... 1,053 468 (752)
------- -------- -------
Net cash provided by (used in) operating activities......... 13,718 (6,100) 1,815

Investing Activities:
Purchases of short-term investments....................... (6,016) (12,800) (50)
Sales and maturities of short-term investments............ 5,302 1 --
Purchases of property and equipment....................... (3,521) (2,286) (1,383)
Computer software costs capitalized....................... (4,259) (1,469) (2,019)
------- -------- -------
Net cash used in investing activities....................... (8,494) (16,554) (3,452)

Financing Activities
Purchases of treasure stock............................... (574) (15) (4)
Sales of treasury stock................................... -- -- 72
Proceeds from stock options exercised..................... 247 3,641 159
Tax benefit from stock options exercised.................. 375 1,407 --
Proceeds from sale of stock............................... -- 35,837 --
------- -------- -------
Net cash provided by financing activities................... 48 40,870 227
------- -------- -------
Net increase (decrease) in cash and cash equivalents........ 5,272 18,216 (1,410)
Cash and cash equivalents at beginning of year.............. 20,701 2,485 3,895
------- -------- -------
Cash and cash equivalents at end of year.................... $25,973 $ 20,701 $ 2,485
======= ======== =======

Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 14 $ 45 $ 26
======= ======== =======
Cash paid for income taxes................................ $ 2,357 $ 126 $ 1,611
======= ======== =======
</TABLE>

See accompanying notes

36
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Carreker-Antinori, Inc. ("the Company") is a leading provider of consulting
and software solutions to the banking industry. The Company's solutions include
comprehensive service offerings coupled with a broad array of state-of-the-art,
proprietary software products, which have been designed to address the unique
requirements of the banking industry. These solutions are designed to improve
the competitiveness of a bank's financial performance and operations. As
described in Note 6, the Company also provides consulting and administrative
services to some organizations.

On January 29, 1999 Genisys Operation, Inc. ("Genisys"), a Texas
Corporation, was merged with the Company in a transaction accounted for as a
pooling of interests (Note 3). The accompanying consolidated financial
statements of the Company include the accounts of Genisys.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. Cash and cash equivalents
consist primarily of demand deposit accounts and shares in a demand money market
account comprised of domestic and foreign commercial paper, certificates of
deposit and U.S. government obligations.

SHORT-TERM INVESTMENTS

The Company considers investments with maturities of greater than three
months when purchased, to be short-term investments based on the freely tradable
nature of the investments, and management's expectation that they will not be
held for greater than one year. Short-term investments consist primarily of tax
exempt municipal bonds. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates their designation as of
each balance sheet date. All debt securities have been determined by management
to be available for sale. Available for sale securities are stated at amortized
cost, which approximates fair value. Fair value of debt securities is determined
based upon current market value price quotes by security. As of January 31,
2000, all of the Company's short-term investments mature in less than one year.

ACCOUNTS RECEIVABLE

A significant portion of the Company's business consists of providing
consulting services and licensing software to major domestic banks, which gives
rise to a concentration of credit risk in receivables. The Company performs
on-going credit evaluations of its customers' financial condition and generally
requires no collateral. The Company maintains an allowance for losses based upon
the expected collectibility of all accounts receivable. Write-offs of
receivables during the three years ended January 31, 2000, 1999 and 1998 were
$502,200, $64,000 and $368,000, respectively.

Accounts receivable include unbilled amounts that represent receivables for
work performed for which billings upon mutual agreement have not been presented
to the customers. These receivables are

37
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES (CONTINUED)
generally billed and collected within one year of completion of the service.
Accounts receivable include $15,064,000, and $10,134,000 of unbilled receivables
at January 31, 2000 and 1999, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the respective
assets, generally from three to five years. Leasehold improvements are amortized
using the straight-line method over the shorter of the terms of the related
leases or the respective useful lives of the assets. The components of property
and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
JANUARY 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Furniture................................................. $ 3,937 $ 2,321
Equipment................................................. 4,610 2,921
Leasehold improvements.................................... 459 325
------- -------
Total cost.............................................. 9,006 5,567
Less accumulated depreciation and amoritization........... (4,809) (2,894)
------- -------
Net property and equipment.............................. $ 4,197 $ 2,673
======= =======
</TABLE>

SOFTWARE COSTS CAPITALIZED

The Company capitalizes software development costs incurred in developing a
product once technological feasibility of the product has been determined.
Software development costs capitalized also include amounts paid for purchased
software on products that have reached technological feasibility. Technological
feasibility of the product is determined after completion of a detailed program
design and a determination has been made that any uncertainties related to
high-risk development issues have been resolved. If the process of developing
the product does not include a detail program design, technological feasibility
is determined only after completion of a working model which has been beta
tested. All software development costs capitalized are amortized using an amount
determined as the greater of: (i) the ratio that current gross revenues for a
capitalized software project bears to the total of current and future gross
revenues for that project or (ii) the straight-line method over the remaining
economic life of the product (generally three years). The Company capitalized
$4,259,000, $1,469,000, and $2,019,000 and recorded amortization relating to
software development costs capitalized of $1,189,000, $453,000, and $745,000 in
the years ended January 31, 2000, 1999 and 1998, respectively.

REVENUE RECOGNITION

Revenue for consulting services performed under fixed-price contracts which
are generally in duration in excess of six months is recognized on a
percentage-of-completion method. Revenue from these contracts is recognized in
the proportion that costs incurred bear to total estimated costs at completion.
Anticipated losses on fixed-price contracts are recognized when estimable.

Revenue generated from consulting services and management services contracts
is recognized as services are performed. Revenue generated from value-priced
consulting services is recognized at the completion of all services and the
actual fee to be paid has been agreed to by the customer. Billings for

38
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES (CONTINUED)
value priced consulting services may be delayed by mutual agreement for periods
generally not to exceed twelve months.

Software license revenues for periods subsequent to January 31, 1998, are
recognized in accordance with the American Institute of Certified Public
Accountants' Statement of Position (SOP) 97-2, "Software Revenue Recognition."
Under SOP 97-2, software license revenues are recognized upon execution of a
contract and delivery of software, provided that the license fee is fixed and
determinable, no significant production, modification or customization of the
software is required, and collection is considered probable by management. For
periods prior to January 31, 1998, software license revenues were recognized in
accordance with SOP 91-1, "Software Revenue Recognition." Under SOP 91-1,
software license revenues were recognized upon execution of a contract and
shipment of the software and after any customer cancellation right had expired,
provided that no significant vendor obligations remained outstanding, amounts
were due within one year, and collection was considered probable by management.

Maintenance contract revenue is recognized ratably over the term of the
related contract. Revenue from computer hardware sales is recognized upon
shipment.

In connection with software license agreements entered into with certain
banks and purchase agreements with vendors under which the Company acquired
software technology used in products sold to its customers, the Company is
required to pay royalties on sales of the software. Approximately $577,000,
$746,000 and $816,000 of royalty expense was recorded under these agreements in
the years ended January 31, 2000, 1999 and 1998, respectively.

DEFERRED REVENUE

Deferred revenue represents amounts billed to customers under terms
specified in consulting, software licensing, and maintenance contracts for which
completion of contractual terms or delivery of the software has not occurred.

RESEARCH AND PRODUCT DEVELOPMENT COSTS

Research and product development costs, which are not subject to
capitalization under Statement of Financial Accounting Standards (SFAS) 86,
"Accounting for the Cost of Computer Software to be Sold, Leased, or Otherwise
Marketed," are expensed as incurred and relate mainly to the development of new
products and the ongoing maintenance of existing products.

EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding during each period. Diluted earnings per
share is computed using the weighted average number of shares of common stock
outstanding during each period and common equivalent shares consisting of stock
options (using the treasury stock method).

STOCK-BASED COMPENSATION

Compensation expense on stock options issued to employees is measured in
accordance with Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees" (APB 25).

39
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES (CONTINUED)
RISKS AND UNCERTAINTIES

The Company's future results of operations and financial condition could be
impacted by the following factors, among others: dependence on the banking
industry, ability to manage growth, customer concentration, competition,
dependence on key personnel, rapid technological change and dependence on new
products, international operations, potential acquisitions, proprietary rights,
and product liability.

USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133, as amended, is effective for quarters beginning after June 15, 2000.
The Company does not currently utilize derivative financial instruments.
Therefore, the Company does not expect that the adoption of SFAS 133 will have a
material impact on its results of operation or financial position.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued Statement of Position ("SOP") No. 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions" ("SOP 98-9"), which amends certain provisions of Statement of
Position No. 97-2 "Software Revenue Recognition" ("SOP 97-2"). SOP 98-9 requires
the use of the residual method when vendor specific objective evidence of fair
value does not exist for one or more delivered elements in an arrangement, but
there is vendor specific objective evidence of the fair values of all
undelivered elements in a multiple element arrangement. SOP 98-9 is effective
for the Company on February 1, 2000. The Company does not expect SOP 98-9 to
materially impact its future results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101) which summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. The effective date of SAB 101 for the
Company is the quarter ended July 31, 2000. The Company continues to evaluate
the impact that SAB 101 will have on the timing of revenue recognition in future
periods. Based on the Company's initial evaluation, it believes SAB 101 will not
have a material impact on its future results of operations.

3. BUSINESS COMBINATIONS

On January 31, 1997, the Company acquired all the outstanding common shares
of Antinori Software, Inc, ("ASI") from the shareholders of ASI in exchange for
3,962,528 shares of the Company common stock in a transaction accounted for as a
pooling of interests. Effective with the merger, the combined entity changed its
legal name to Carreker-Antinori, Inc. Subsequently, certain ASI software
products were determined to require significantly more development effort than
anticipated at the time of the merger. On January 29, 1998, the Company and
shareholders of ASI entered into a settlement agreement under which the ASI
shareholders agreed to return 338,800 shares of common stock to the Company. The
Company and the ASI shareholders agreed to the settlement based upon the
additional development costs

40
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS COMBINATIONS (CONTINUED)
incurred by the Company to ready certain of the software products for sale to
customers and the fair value of the Company's common stock on the consummation
date of the merger. At January 31, 1999, all settlement shares of common stock
had been returned to the Company and canceled.

On January 29, 1999, the Company acquired all the outstanding common shares
of Genisys from the shareholders of Genisys in exchange for 1,240,000 shares of
the Company's common stock. The transaction was accounted for as a pooling of
interests, and accordingly, the accompanying consolidated financial statements
have been restated to include the financial position and results of operations
of Genisys for all periods presented. During the year ended January 31, 1999,
the Company recorded charges of $485,000 in connection with the Genisys merger.
These charges consisted of legal, accounting and other fees.

4. PROVISION FOR INCOME TAXES

The Company's provision for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current........................................... $3,278 $2,802 $1,237
Deferred.......................................... 714 (188) 615
------ ------ ------
3,992 2,614 1,852
State:
Current........................................... 404 300 139
Deferred.......................................... 44 (11) 36
------ ------ ------
448 289 175
------ ------ ------
$4,440 $2,903 $2,027
====== ====== ======
</TABLE>

The provisions for income taxes differ from the amounts computed by applying
the statutory United States federal income tax rate to income before provision
for income taxes as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate................ $4,193 $2,744 $1,712
State income taxes, net of U.S. federal benefit..... 399 195 92
Tax exempt interest income.......................... (307) (273) --
Nondeductible expenses.............................. 28 172 67
Other, net.......................................... 127 65 156
------ ------ ------
Provision for income taxes.......................... $4,440 $2,903 $2,027
====== ====== ======
</TABLE>

41
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. PROVISION FOR INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustment................................ $ 102 $ 136
Depreciation of property and equipment.................... -- 178
Accruals not currently deductible......................... 373 152
Stock compensation........................................ 202 --
Allowance for doubtful accounts........................... 495 418
Other..................................................... 65 30
------ ------
Total deferred tax assets................................... 1,237 914
Deferred tax liabilities:
Depreciation of property and equipment.................... 63 --
Capitalized software costs................................ 2,168 1,151
------ ------
Total deferred tax liabilities.............................. 2,231 1,151
------ ------
Net deferred tax liabilities................................ $ (994) $ (237)
====== ======
</TABLE>

5. BENEFIT PLANS

STOCK OPTION PLANS

Effective October 7, 1994, the Company adopted the 1994 Long Term Incentive
Plan (the Long Term Incentive Plan) under which officers and employees may be
granted awards in the form of incentive stock options, non-qualified stock
options and restricted shares. The exercise price per share for the common stock
issued pursuant to incentive stock options under the Long Term Incentive Plan
shall be no less than 100% of the fair market value on the date the option is
granted. The exercise price per share for non-qualified stock options under the
Long Term Incentive Plan may be determined by the Compensation Committee of the
Company's Board of Directors (the Committee), but may not be less than the par
value of the shares. Options granted under the Long Term Incentive Plan become
exercisable and vest as determined by the Committee. To date, options granted
under the Long Term Incentive Plan fully vest within four years from the date of
grant. The term of each option granted under the Long Term Incentive Plan shall
be as the Committee determines, but in no event shall any option have a term of
longer than ten years from the date of grant. Options may be granted pursuant to
the Long Term Incentive Plan up to October 7, 2004, unless the Board of
Directors terminates the Long Term Incentive Plan prior to this date.

On January 31, 1998, the Committee issued 84,700 shares of restricted stock
with a fair market value of $8.90 per share to certain key employees under the
Company's Long Term Incentive Plan. Holders of restricted stock retain all
rights of a stockholder, except the shares cannot be sold until they vest. Upon
employee termination, all unvested shares are forfeited to the Company. On
December 15, 1999, 23,100 shares were forfeited due to an employee termination.
The restricted shares vest in full on January 31, 2001. At January 31, 2000,
1999 and 1998, there was deferred compensation related to the restricted shares

42
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. BENEFIT PLANS (CONTINUED)
totaling $183,000, $503,000 and $754,000, respectively. The deferred
compensation will be charged to expense over the vesting period.

The Company has a Director Stock Option Plan (the Director Plan) under which
non-employee members of the Company's Board of Directors may be granted options
to purchase shares of the Company's Common Stock at prices determined by the
Committee. Options granted under the Director Plan expire ten years from the
date of grant or at an earlier date as determined by the Committee and specified
in the applicable stock option agreement. Each option granted shall become
exercisable immediately or in one or more installments as determined by the
Committee and as provided in the applicable stock option agreement. All shares
issued and options granted pursuant to the Director Plan are subject to
restriction agreements. During the years ended January 31, 2000, and 1999,
options to purchase 9,168 shares and 17,790 shares, respectively, of common
stock were granted to Directors. The exercise price was set at 50% of the fair
market value on the grant date. As a result, the Company recorded deferred
compensation at the dates of grant during the years ended January 31, 2000 and
1999 of $27,500, and $100,026, respectively, to be expensed ratably over a
one-year vesting period. At January 31, 2000, there was no deferred compensation
related to the Director options.

Stock option transactions under all plans for the years ended January 31,
2000, 1999 and 1998, are as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
2000 1999 1998
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year... 3,573 $6.19 4,230 $3.96 2,983 $1.45
Granted.................................. 194 6.47 1,378 6.91 1,932 6.96
Exercised................................ (297) .84 (1,975) 1.87 (350) 0.45
Forfeited................................ (428) 8.02 (60) 8.21 (335) 2.57
------ ------- -----
Options outstanding at end of year......... 3,042 6.47 3,573 6.19 4,230 3.96
====== ======= =====
Options exercisable at end of year......... 1,573 1,221 1,557
Weighted average grant-date fair value of
options granted during the year.......... $4.55 $5.26 $1.58
===== ===== =====
</TABLE>

Information related to options outstanding at January 31, 2000, is
summarized below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED AVERAGE WEIGHTED WEIGHTED
AT JANUARY 31, REMAINING AVERAGE OPTIONS EXERCISABLE AVERAGE
RANGE OF EXERCISE PRICE 2000 CONTRACTUAL LIFE EXERCISE PRICE AT JANUARY 31, 2000 EXERCISE PRICE
- ----------------------- ------------------- ---------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
$0.85 to $5.75........ 683 5.4 $2.53 655 $2.43
$5.81 to $7.20........ 1,179 8.9 6.13 366 6.24
$7.44 to $11.00....... 1,180 8.1 9.09 552 8.99
----- -----
3,042 7.8 6.47 1,573 5.62
===== =====
</TABLE>

43
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. BENEFIT PLANS (CONTINUED)
As of January 31, 2000, the Company has reserved for issuance under the Long
Term Incentive Plan 3,733,689 shares of common stock, of which 61,600 shares of
restricted stock have been issued, 2,993,007 shares are subject to currently
outstanding options to employees, 22,146 shares are subject to currently
outstanding options to directors, and 656,936 shares are reserved for future
awards. As of January 31, 2000, the Company has reserved for issuance under the
Director Plan 100,000 shares of Common Stock, of which 26,418 shares are subject
to currently outstanding options, and 73,582 shares are reserved for future
awards.

The Company has elected to follow APB 25 and related interpretations in
accounting for its employee and director stock options because, as discussed
below, the alternative fair value accounting provided for under SFAS 123
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, no compensation expense is
recorded when the exercise price of the Company's employee stock options equals
the fair value of the underlying stock on the date of grant. Compensation equal
to the intrinsic value of employee stock options is recorded when the exercise
price of the stock options is less than the fair value of the underlying stock
on the date of grant. Any resulting compensation is amortized to expense over
the option's vesting period. During the years ended January 31, 2000 and 1999,
total compensation expense recorded relating to employee stock options was
$332,447 and $286,359, respectively. No compensation expense relating to
employee stock options was recorded during the year ended January 31, 1998.

Information regarding pro forma net income is required by SFAS 123, and has
been determined as if the Company had accounted for its employee and director
stock options under the fair value method of SFAS 123. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model assuming volatility of .862 in 2000, 1.045 volatility in 1999 and no
volatility for 1998, and the following assumptions for 2000, 1999 and 1998,
respectively: weighted-average risk free interest rate of 5.6%, 5.3% and 5.95%,
no dividends, and a weighted average expected life of 4.5 years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee and director stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information (in thousands, except per share amounts) is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income................................ $6,051 $3,710 $2,592
====== ====== ======
Basic pro forma earnings per share.................. $ 0.33 $ 0.23 $ 0.20
====== ====== ======
Diluted pro forma earnings per share................ $ 0.32 $ 0.21 $ 0.20
====== ====== ======
</TABLE>

44
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. BENEFIT PLANS (CONTINUED)
The pro forma disclosures only include the effect of options granted
subsequent to January 31, 1995. Accordingly, the pro forma information does not
reflect the pro forma effect of all previous stock option grants of the Company,
and thus is not indicative of future amounts until SFAS 123 is applied to all
outstanding stock options.

PROFIT SHARING PLAN

The Company has adopted a profit sharing plan pursuant to
Section 401(k) of the Internal Revenue Code (the Code) whereby participants may
contribute a percentage of compensation not in excess of the maximum allowed
under the Code. The plan provides for a matching contribution by the Company.
Effective January 1, 1998, employees of ASI became eligible to participate in
the Company plan. Effective February 1, 1999, employees of Genisys became
eligible to participate in the Company plan. Employer matching contributions
amounted to $792,000, $616,000 and $421,000, in 2000, 1999 and 1998,
respectively. The Company may make additional contributions at the discretion of
the Board of Directors. No discretionary contribution was made during 2000,
1999, or 1998. Prior to January 1, 1998, employees of ASI had a separate profit
sharing plan pursuant to Section 401(k) of the Code, whereby participants could
contribute a percentage of compensation not in excess of the maximum allowed
under the Code. Employer matching contributions were discretionary and amounted
to $260,000 under the ASI plan for the year ended January 31, 1998.

Through January 31, 1999, employees of Genisys had a separate profit sharing
plan pursuant to Section 401(k) of the Code, whereby participants could
contribute a percentage of compensation not in excess of the maximum allowed
under the Code. Employer matching and additional contributions are discretionary
and amounted to $105,000 and $2,000 under the Genisys plan for the years ended
January 31, 1999 and 1998, respectively.

BONUS PLAN

The Company pays discretionary bonuses to key employees based primarily on
Company profitability and the extent to which individuals meet agreed-upon
objectives for the year. The Company recorded bonus expense of approximately
$2,132,000, $513,000 and $1,554,000 in 2000, 1999 and 1998, respectively.

6. MANAGEMENT SERVICES

An employee of the Company serves as Executive Director of the Electronic
Check Clearing House Organization (ECCHO) and provides consulting and
administrative services to ECCHO, for which the Company recorded net revenues of
$888,000, $1,040,000 and $994,000 for the years ended January 31, 2000, 1999 and
1998, respectively. Receivables from ECCHO were $92,000, $343,000 and $566,000
at January 31, 2000, 1999 and 1998, respectively.

The Company owns an equity interest in Payment Solutions Network, Inc. (PSN)
for which the Company has no book basis. PSN's articles of incorporation require
PSN to repurchase the Company's equity interest for $1,250,000 at a rate of
$250,000 per year over a five-year period, with the final year's payment
contingent upon the amount of operating revenue of PSN in the fifth year. The
annual repurchase of these units is subject to PSN maintaining certain cash and
net worth levels. The proceeds from the first scheduled repurchase of $250,000
was received by the Company from PSN in January 1996 and included in other
income. The scheduled 2000, 1999 and 1998 repurchase of $250,000 was not
received

45
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. MANAGEMENT SERVICES (CONTINUED)
due to cash and net worth levels of PSN falling below the amounts stipulated in
its articles of incorporation. Additional payments, if any, to be received by
the Company from PSN in subsequent years will be recognized as other income when
the realization of such amounts is probable.

The Company has a note receivable from PSN with a remaining balance of
$14,000 and $31,000 as of January 31, 2000 and 1999, respectively. Such note
receivable is included in other current assets in the consolidated balance
sheet.

The Company has a management services contract (the PSN Agreement) with PSN
to provide consulting, sales, and administrative support to PSN for a five-year
term beginning January 31, 1995. During the years ended January 31, 2000, 1999
and 1998, the Company recorded management service fees related to the PSN
Agreement of $850,000, $1,216,000 and $1,378,000, respectively. Net receivables
from PSN for management services (excluding the note receivable discussed above)
were $437,000, $545,000 and $797,000 at January 31, 2000, 1999 and 1998,
respectively. The Company maintained an allowance for doubtful accounts balance
of $560,000, $565,000 and $100,000 at January 31, 2000, 1999 and 1998,
respectively, due to delays in collection of fees.

On February 3, 2000 PSN entered into an Asset Purchase agreement with the
Small Value Payments Company L.L.C. ("SVPCo") under which SVPCo acquired certain
assets and liabilities from PSN, in return for future payments to be made from
SVPCo to PSN based on the business activities of SVPCo. As a result of this
agreement, the Company has reduced the level of services provided to PSN to
principally management services, and entered into an agreement with SVPCo to
provide sales and marketing support services.

The Company owns an equity interest (for which the Company has no book
basis) and an employee of the Company serves as Managing Director of INFITEQ,
LLC (INFITEQ), a single-source provider of specialized outsourcing services to
the banking industry for transaction processing, information management,
electronic commerce and image technology. INFITEQ was incorporated on
January 15, 1998. The Company has a Management Services Agreement (the INFITEQ
Agreement) with INFITEQ to provide INFITEQ consulting, sales and administrative
support through January 2008. The Company also is entitled to receive
reimbursement of certain costs it incurs for the benefit of INFITEQ. The Company
provided consulting and management services to INFITEQ, for which the Company
recorded revenues of $51,000 and $1,093,000 for the years ended January 31, 2000
and 1999 respectively. Net receivables from INFITEQ were $51,000 and 98,000 at
January 31, 2000 and 1999.

The Company has not provided guarantees of debt or other obligations, has
not agreed to fund any losses, and is not otherwise contingently liable with
respect to ECCHO, PSN or INFITEQ.

7. LEASE COMMITMENTS

The Company leases office facilities and certain equipment under operating
leases for various periods. Leases that expire are generally expected to be
renewed or replaced by other leases. Rental expense under

46
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LEASE COMMITMENTS (CONTINUED)
operating leases for 2000, 1999 and 1998 was approximately $1,826,000,
$1,038,000 and $620,000, respectively. Future minimum base rents under terms of
non-cancelable operating leases are as follows (in thousands):

Year ending January 31:

<TABLE>
<S> <C>
2001........................................................ $ 2,139
2002........................................................ 2,414
2003........................................................ 2,154
2004........................................................ 1,831
2005 and thereafter......................................... 10,670
-------
TOTAL..................................................... $19,208
=======
</TABLE>

8. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Basic earnings per share:
Net income................................................ $ 7,894 $ 5,172 $ 3,005
======= ======= =======
Weighted average shares outstanding....................... 18,456 16,224 12,717
======= ======= =======
Basic earnings per share.................................. $ 0.43 $ 0.32 $ 0.24
======= ======= =======
Diluted earnings per share:
Net income................................................ $ 7,894 $ 5,172 $ 3,005
======= ======= =======
Weighted average shares outstanding....................... 18,456 16,224 12,717
Assumed conversion of employee stock options.............. 524 1,280 1,767
------- ------- -------
Shares used in diluted earnings per share calculation..... 18,980 17,504 14,484
======= ======= =======
Diluted earnings per share................................ $ 0.42 $ 0.30 $ 0.21
======= ======= =======
</TABLE>

Options totaling 1,381,317 and 845,640 in fiscal years ending January 31,
2000 and 1999, respectively, have been excluded from the diluted earnings per
share computation, as the options were anti-dilutive. No options were excluded
in 1998.

9. SEGMENTS

Effective with the year ended January 31, 1999, the Company adopted the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information (Statement 131)." Segment disclosures required by Statement 131 have
been reported for the years ended January 31, 2000 and 1999. Segment information
for the year ended January 31, 1998 has not been prepared and disclosed as it is
impractical to do so due to the merger with ASI which occurred in 1997 and
organizational changes which occurred in the Company's business effective
February 1, 1998 which impact segment reporting under Statement 131.

47
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SEGMENTS (CONTINUED)

During January 2000, the Company revised their segment disclosures to
reflect their focus on e-finance segments. As a result of this revision segment
disclosures for the current and prior periods have been restated.

The Company has four reportable segments: ePaymentSolutions, eCashSolutions
and eBusinessSolutions. The segments are unique due to the focus of the products
and services being offered. The Company evaluates performance and allocates
resources based on profit or loss from operations before income taxes, not
including gains and losses on the Company's investment portfolio.

EPaymentSolutions consist primarily of eXceptions software, eTrac software,
eInformSolutions, eTransaction consulting and software, eFraudLink consulting
and software and ECCHO Management services. eCashSolutions consists primarily of
eiService and eCashInventory consulting and software and eTransport consulting.
eBusinessSolutions consists primarily of RevenueEnhancement consulting,
eFinancialServices and eStrategic consulting.

Due to the solution approach to delivering products and services from
multiple business segments, contracts are broken down by segment with few
transactions between reportable segments.

Included in corporate and unallocated are costs related to selling and
marketing, unallocated corporate overhead expense, general software management,
and incentive bonuses. Business segment results include costs for research and
development as well as product royalty expense. Receivables, property and
equipment and other assets are not included in the measures reviewed by the
Company's chief operating decision-maker. Therefore, all Company assets have
been included in the corporate and unallocated category in the following
reportable segment disclosure (in thousands):

YEAR ENDED JANUARY 31, 2000

<TABLE>
<CAPTION>
EBUSINESSSOLUTIONS
------------------------
REVENUE EFINANCIAL CORPORATE
EPAYMENTSOLUTIONS ECASHSOLUTIONS ENHANCEMENT SERVICES UNALLOCATED TOTAL
----------------- -------------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Consulting and management
service fees............. $ 6,017 $3,301 $19,849 $20,558 $ -- $49,725
Software license fees...... 10,567 3,160 -- -- -- 13,727
Software maintenance
fees..................... 5,458 1,527 -- -- -- 6,985
Software implementation
fees..................... 4,274 842 -- -- -- 5,116
Hardware and other fees.... 267 -- -- -- -- 267
------- ------ ------- ------- -------- -------
Total revenues........... $26,583 $8,830 $19,849 $20,558 $ -- $75,820
======= ====== ======= ======= ======== =======
Operating income (loss)...... $ 1,181 $3,504 $13,219 $ 7,904 $(14,574) $11,234
Assets....................... $ -- $ -- $ -- $ -- $ 83,281 $83,281
Depreciation and
amortization............... $ 1,227 $ 373 $ 140 $ 100 $ 1,346 $ 3,186
Capital expenditures......... $ -- $ -- $ -- $ -- $ 3,521 $ 3,521
</TABLE>

48
<PAGE>
CARREKER-ANTINORI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SEGMENTS (CONTINUED)
YEAR ENDED JANUARY 31, 1999

<TABLE>
<CAPTION>
EBUSINESSSOLUTIONS
------------------------
REVENUE EFINANCIAL CORPORATE
EPAYMENTSOLUTIONS ECASHSOLUTIONS ENHANCEMENT SERVICES UNALLOCATED TOTAL
----------------- -------------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Consulting and management
service fees............. $ 3,634 $1,311 $10,422 $10,961 $ -- $26,328
Software license fees...... 12,350 3,977 -- -- -- 16,327
Software maintenance
fees..................... 4,147 884 -- -- -- 5,031
Software implementation
fees..................... 4,901 1,656 -- -- -- 6,557
Hardware and other fees.... 774 -- -- -- -- 774
------- ------ ------- ------- -------- -------
Total revenues........... $25,806 $7,828 $10,422 $10,961 $ -- $55,017
======= ====== ======= ======= ======== =======
Operating income (loss)...... $ 3,826 $3,101 $ 7,171 $ 3,513 $(10,461) $ 7,150
Assets....................... $ -- $ -- $ -- $ -- $ 68,736 $68,736
Depreciation and
amortization............... $ 827 $ 34 $ 87 $ 52 $ 730 $ 1,730
Capital expenditures......... $ -- $ -- $ -- $ -- $ 2,286 $ 2,286
</TABLE>

Revenues of $17,998,000 to a major customer accounted for 24% of total
revenues in the year ended January 31, 2000. Revenues of $5,934,000 to a major
customer accounted for 11% of total revenues in the year ended January 31, 1999.
Revenues of $11,956,000 to two major customers accounted for 28% of total
revenues in the year ended January 31, 1998.

10. SUBSEQUENT EVENT

On February 10, 2000, the Company acquired all of the outstanding stock of
Automated Integrated Solutions, Inc. ("AIS") a Canadian company for cash
consideration of $2,300,000. AIS shareholders are entitled to receive up to an
additional $2,000,000 over the three years ended January 31, 2003 based on
performance incentives. The transaction was facilitated through a Canadian
subsidiary of the Company set up to complete the transaction.

49
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information set forth under the captions "Election of Directors" and
"Executive Officers of the Company" of the Company's definitive Proxy Statement
for the Company's 2000 Annual Meeting of Stockholders is incorporated herein by
reference.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- -------- --------------------------------------------------------
<S> <C> <C>
John D. Carreker, Jr................. 57 Chairman of the Board and Chief Executive Officer

Royce D. Brown....................... 51 Vice Chairman of the Office of the President, Executive
Vice President and Managing Director

John S. Davis, Jr.................... 42 Executive Vice President and Managing Director

Terry L. Gage........................ 42 Executive Vice President, Treasurer, Chief Financial
Officer and Assistant Secretary

Richard J. Jerrier................... 57 Executive Vice President and Managing Director

Wyn P. Lewis......................... 50 Director, Vice Chairman of the Office of the President,
Executive Vice President and Managing Director

Robert M. Olson, Jr.................. 44 Executive Vice President and Managing Director
</TABLE>

JOHN D. CARREKER, JR., has served as Chairman of the Board and Chief
Executive Officer of the Company since the Company's formation in 1978, and
served as the Company's President from 1978 until July 1997, at which time
Richard L. Linting became president of the Company.

ROYCE D. BROWN was appointed Vice Chairman of the Office of the President on
September 19, 1999. Mr. Brown has served as Executive Vice President and
Managing Director since February 1996. From March 1994 to January 1996,
Mr. Brown served as Vice President and Managing Director of the Company's
Software Group.

JOHN S. DAVIS, JR. has served as Executive Vice President and Managing
Director of the Company since April 1997. From February 1996 to April 1997,
Mr. Davis served as Senior Vice President and Managing Director of the Company's
Software Group. From February 1993 to January 1996, Mr. Davis served as Director
of Sales and Marketing for the Company's Software Group.

TERRY L. GAGE has served as Executive Vice President, Treasurer, Chief
Financial Officer and Assistant Secretary since April 1997 and has served as
Senior Vice President, Treasurer and Chief Financial Officer of the Company
since October 1995. From October 1986 to April 1995, Mr. Gage served as
Treasurer and Chief Financial Officer of FAAC Incorporated, a company
specializing in technology engineering and consulting services.

RICHARD J. JERRIER has served as Executive Vice President and Managing
Director since January 1999. Mr. Jerrier served as the Senior Vice President and
Director of New Business for Atlantic Data Services (ADS) from 1993 until
December 1998.

50
<PAGE>
WYN P. LEWIS was appointed Vice Chairman of the Office of the President on
September 19, 1999. Mr. Lewis has served as Executive Vice President and
Managing Director of the Company since March 1996. From March 1993 to March
1996, Mr. Lewis served as Vice President and Managing Director for Yield
Management.

ROBERT M. OLSON, JR. has served as Executive Vice President and Managing
Director since September 1998. Mr. Olson served as Executive Vice President,
Operations & Technology for Magna Group, Inc. from May 1994 until July 1998.

All executive officers are elected annually by the Board of Directors to
serve until the next annual meeting of the Board of Directors and until their
respective successors are chosen and qualified.

ITEM 11. EXECUTIVE COMPENSATION.

The information set forth under the caption "Executive Compensation and
Other Matters" of the Company's definitive Proxy Statement for the Company's
2000 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information set forth under the caption "Outstanding Capital Stock and
Stock Ownership of Directors, Certain Executive Officers and Principal
Stockholders" of the Company's definitive Proxy Statement for the Company's 2000
Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information set forth under the caption "Certain Transactions" and
"Executive Compensation and Other Matters--Compensation of Directors" of the
Company's definitive Proxy Statement for the Company's 2000 Annual Meeting of
Stockholders is incorporated herein by reference.

51
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

<TABLE>
<C> <C> <S>
The following financial statements are filed as part of this
(a) 1. report:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of January 31, 2000 and 1999
Consolidated Statements of Operations for the years ended
January 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity for the
years ended January 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended
January 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules
Financial Statement Schedules for which provision is made in
the applicable accounting regulations of the Securities and
Exchange Commission have been excluded, as they are not
required under the related instructions, or information
required has been included in the Company's Consolidated
Financial Statements.
The following documents are filed or incorporated by
3. reference as exhibits to this report:
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger between Carreker-Antinori,
Inc., a Texas corporation, and Carreker-Antinori, Inc., a
Delaware corporation (incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

2.2 Agreement and Plan of Merger, dated January 29, 1999, by and
among Carreker-Antinori, Inc., GO Acquisition Corp., Genisys
Operation, Inc., and Kevin J. Taylor, Ronald W. Kreykes,
Thomas R. Flannery, Robert A. Walsh, and Patrick M.
Rogal-Davis (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed February 12,
1999).

2.3 List of Schedules and Attachments omitted from Exhibit 2.2,
Agreement and Plan of Merger (incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K
filed February 12, 1999).

3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-48399)).

3.2 Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

4.1 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

4.2 Amended and Restated Certificate of Incorporation and Bylaws
of the Company (incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement on Form S-1
(Registration No. 333-48399)).

+10.1 Employment Agreement dated January 31, 1997 between the
Company and John D. Carreker, Jr. (incorporated by reference
to Exhibit 10.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.2 Employment Agreement dated March 19, 1998 between the
Company and Terry L. Gage (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).
</TABLE>

52
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------
<C> <S>
+10.3 Employment Agreement dated March 12, 1998 between the
Company and Wyn P. Lewis (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.4 Employment Agreement dated March 10, 1998 between the
Company and Richard L. Linting (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.5 Employment Agreement dated March 13, 1998 between the
Company and Royce D. Brown (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.6 Amended and Restated Carreker-Antinori 1994 Long Term
Incentive Plan (incorporated by reference to Exhibit 10.7 to
the Company's Registration Statement on Form S-1
(Registration No. 333-48399)).

+10.7 Carreker-Antinori Director Stock Option Plan (incorporated
by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (Registration No. 333-48399)).

+10.8 Carreker-Antinori Profit Sharing Incentive Plan
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-48399)).

10.9 Management Services Agreement dated November 18, 1993
between the Company and Payment Systems Network, Inc. (as
amended) (incorporated by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-48399)).

10.10 Management Services Agreement dated January 15, 1998 between
the Company and INFITEQ, LLC (incorporated by reference to
Exhibit 10.12 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.11 Indemnification Agreement between the Company and John D.
Carreker, Jr. (together with a schedule) (incorporated by
reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Registration No. 333-48399)).

10.12 Form of the Company's independent contractor agreement
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-48399)).

10.13 Agreement and Plan of Merger between the Company and CAG
Newco, Inc. and Antinori Software, Inc. dated as of
January 29, 1997 (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

10.14 Promissory Note dated September 1, 1997, between the Company
and John S. Davis (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

10.15 Office Lease between Granite Tower, Ltd. and the Company
dated as of March 31, 1999 (incorporated by reference to
Exhibit 10.26 of the Registration Form 10-K for fiscal year
ended January 31, 1999)

*10.16 Office Lease between Granite Tower, Ltd. and the Company
dated August 31, 1999.

21.1 Subsidiaries of the Company.

(a) Genisys Operation, Inc.

(b) Antinori Software, Inc.

*23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------
<C> <S>
24.1 Power of Attorney (included on first signature page).

*27.1 Financial Data Schedule.
</TABLE>

- ------------------------

+ Management contract or compensatory plan or arrangement. The Company will
furnish a copy of any exhibit listed above to any shareholder without charge
upon written request to Mr. Terry L. Gage, Chief Financial Officer, 4055
Valley View Lane, Suite 1000, Dallas, TX 75244.

* Filed herewith.

(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.

(c) The Index to Exhibits filed or incorporated by reference pursuant to
Item 601 of Regulation S-K and the Exhibits being filed with this Report are
included following the signature pages to this Form 10-K

(d) Not applicable.

54
<PAGE>
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each of Carreker-Antinori, Inc., a
Delaware corporation, and the undersigned directors and officers of
Carreker-Antinori, Inc. hereby constitutes and appoints John D. Carreker, Jr.
and Terry L. Gage, or any one of them, its or his true and lawful
attorney-in-fact and agent, for it or him and in its or his name, place and
stead, in any and all capacities, with full power to act alone, to sign any and
all amendments to this Report, and to file each such amendment to the Report,
with all exhibits thereto, and any and all other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent full power and authority to do and perform any
and all acts and things requisite and necessary to be done in and about the
premises as fully to all intents and purposes as it or he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.

SIGNATURES

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

<TABLE>
<S> <C> <C>
CARREKER-ANTINORI, INC.

By: /s/ JOHN D. CARREKER, JR.
-----------------------------------------
John D. Carreker, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>

Dated: April 28, 1999

55
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
in the capacities indicated on April 25, 2000.

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ JOHN D. CARREKER, JR.
------------------------------------------- Chairman of the Board and Chief Executive
John D. Carreker, Jr. Officer (Principal Executive Officer)

/s/ WYN P. LEWIS Director, Vice Chairman of the Office of the
------------------------------------------- President, Executive Vice President and
Wyn P. Lewis Managing Director

/s/ TERRY L. GAGE Executive Vice President and Chief Financial
------------------------------------------- Officer (Principle Financial and Accounting
Terry L. Gage Officer)

/s/ RONALD R. ANTINORI
------------------------------------------- Vice Chairman of the Board
Ronald R. Antinori

/s/ JAMES D. CARREKER
------------------------------------------- Director
James D. Carreker

/s/ JAMES L. FISCHER
------------------------------------------- Director
James L. Fischer

/s/ DONALD L. HOUSE
------------------------------------------- Director
Donald L. House

/s/ RICHARD R. LEE, JR.
------------------------------------------- Director
Richard R. Lee, Jr.

/s/ LARRY J. PECK
------------------------------------------- Director
Larry J. Peck

/s/ DAVID K. SIAS
------------------------------------------- Director
David K. Sias
</TABLE>

56
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
2.1 Agreement and Plan of Merger between Carreker-Antinori,
Inc., a Texas corporation, and Carreker-Antinori, Inc., a
Delaware corporation (incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-48399)).

3.2 Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

4.1 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.3 Employment Agreement dated March 12, 1998 between the
Company and Wyn P. Lewis (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement on
Form S-1 (Registration No. 333-48399)).

+10.7 Carreker-Antinori Director Stock Option Plan (incorporated
by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (Registration No. 333-48399)).

+10.8 Carreker-Antinori Profit Sharing Incentive Plan
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-48399)).
</TABLE>

57
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
10.9 Management Services Agreement dated November 18, 1993
between the Company and Payment Systems Network, Inc. (as
amended) (incorporated by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-48399)).

10.12 Form of the Company's independent contractor agreement
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-1 (Registration
No. 333-48399)).

*10.16 Office Lease between Granite Tower, Ltd, and the Company
dated August 31, 1999.

21.1 Subsidiaries of the Company.

(a) Genisys Operation, Inc.
(b) Antinori Software, Inc.
(c) Carreker-Antinori, Ltd.

*23.1 Consent of Ernst & Young LLP, Independent Auditors.

24.1 Power of Attorney (included on first signature page).

*27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* Filed herewith.

<PAGE>

FIRST AMENDMENT TO LEASE AGREEMENT

This First Amendment to Lease Agreement for Granite Tower at The Centre Office
Building, made and entered into as of the __________ day of August, 1999, by
and between 520 Partners, Ltd. (successor in interest to Granite Tower, Ltd.),
as "Landlord", and Carreker-Antinori, Inc., as "Tenant".

W I T N E S S E T H:

WHEREAS, by Lease Agreement dated March 31, 1999 (the "Lease Agreement"),
Granite Tower, Ltd., as (the "Former Landlord") and Carreker-Antinori, Inc., as
"Tenant" executed and entered into that certain Lease Agreement covering
approximately 47,720 rentable square feet in an office building located at 4055
Valley View Lane, in Dallas, Texas, known as "Granite Tower at The Centre"
office building and except as otherwise defined herein. Terms defined in the
Lease Agreement, when used herein, shall have the same meanings as are ascribed
to them in the Lease Agreement; and

WHEREAS, the Former Landlord has heretofore assigned and transferred the Former
Landlord's interest in the Lease Agreement to Landlord; and

WHEREAS, the Landlord and Tenant desire that the Lease Agreement be modified and
amended as hereinafter set forth.

AGREEMENT

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed by the respective
parties hereto, Landlord and Tenant do hereby agree as follows:

1. Modifications. Effective as of March 1, 2000, the Lease Agreement is
hereby amended as follows:

(a) The "Premises" in Section 1.01 (c) of Article I shall be
amended to 72,433 square feet of net rentable area to reflect
an expansion of the entire eighth floor consisting of 24,713
square feet of rentable area (the "Expansion Space") as
further described in Exhibit "A-1" "Floor Plan", which is
attached hereto and made a part hereof. Accordingly, from and
after March 1, 2000, the Premises shall include the Expansion
Space.

(b) Parking in Section 1.01 (d) of Article 1 shall be amended as
follows:

Surface Parking Garage Parking

56 Unreserved spaces @ $0.00 223 Unreserved spaces @ $0.00
-- ---- --- ----
per month each per month each

16 Reserved spaces @ $0.00
-- -----
per month each

Landlord agrees to substitute the thirty-one (31) surface parking
spaces with thirty-one (31) garage parking spaces on a month to
month basis. If, in Landlord's opinion, it becomes necessary,
Landlord may, with thirty (30) days prior written notice to Tenant,
take back the thirty-one substitute garage parking spaces and
replace with thirty-one (31) surface parking spaces.

(d) The "Base Rent" in Section 1.01(j) of Article I shall be
amended as follows:

<TABLE>
<CAPTION>
BASE BASE
RENTAL ANNUAL MONTHLY
PERIOD RENT RENT
------ ---- ----
<S> <C> <C>
March 1, 2000 - May 31, 2000 $ 869,196.00 $ 72,433.00
June 1, 2000 - May 31, 2004 $1,593,525.96 $132,793.83
June 1, 2004 - May 31, 2010 $1,665,959.04 $138,829.92
</TABLE>

(e) Paragraph 2.1 of Exhibit "D" to the Lease Agreement is hereby
amended to (i) provide Tenant with an additional Finish
Allowance for Tenant Improvements to the Expansion Space,
which additional allowance shall be in the amount of $25.62
per rentable square foot based on 24,713 square feet of net
rentable area in the Expansion Space, and (ii) the last
sentence of Paragraph 2.1 of Exhibit "D" shall be deleted in
its entirety and be of no further force or effect.
Construction of the Expansion Space shall be in accordance
with the terms as contained in Exhibit "D".

<PAGE>

(f) Landlord and Tenant hereby represents and certifies that all
obligations and conditions under the Lease have been performed
to date by Landlord or Tenant and have been satisfied free of
defenses and setoffs.

(g) All of the other terms and conditions of the Lease are hereby
ratified and confirmed to the extent not inconsistent with the
terms set forth in this First Amendment to Lease Agreement.

EXCEPT AS EXPRESSLY AMENDED BY THIS FIRST AMENDMENT ALL OTHER TERMS
AND CONDITIONS OF THE SAID LEASE TO REMAIN UNCHANGED AND IN FULL
FORCE AND EFFECT.

EXECUTED as of this day of , 19 .
------- --------------------- -------

LANDLORD: 520 Partners, Ltd. TENANT: Carreker-Antinori, Inc.
By: SF Realty, Inc.
Its: General Partner

By: By:
-------------------------- --------------------------
Name: Jim Kirchhoff Name:
Title: Director of Leasing ------------------------
Title:
----------------------

<PAGE>

EXHIBIT "A-1"

<PAGE>
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement
on Form S-3 (No. 333-83983) of Carreker-Antinori, Inc. and the related
Prospectus, and in the Registration Statement on Form S-8 (No. 333-63517)
pertaining to the Amended and Restated Carreker-Antinori, Inc. 1994 Long Term
Incentive Plan and the Carreker-Antinori, Inc. Director Stock Option Plan of our
report dated March 7, 2000, with respect to the consolidated financial
statements of Carreker-Antinori, Inc. included in the Annual Report (Form 10-K)
for the year ended January 31, 2000.

ERNST & YOUNG LLP

Dallas, Texas
April 26, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CARREKER-ANTINORI, INC'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
TWELVE MONTHS ENDED JANUARY 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 25,973
<SECURITIES> 13,563
<RECEIVABLES> 32,200
<ALLOWANCES> 1,357
<INVENTORY> 0
<CURRENT-ASSETS> 71,943
<PP&E> 9,006
<DEPRECIATION> 4,809
<TOTAL-ASSETS> 82,823
<CURRENT-LIABILITIES> 15,413
<BONDS> 0
0
0
<COMMON> 185
<OTHER-SE> 65,221
<TOTAL-LIABILITY-AND-EQUITY> 82,823
<SALES> 267
<TOTAL-REVENUES> 75,820
<CGS> 208
<TOTAL-COSTS> 34,440
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 587
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 12,334
<INCOME-TAX> 4,440
<INCOME-CONTINUING> 7,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,894
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.42

</TABLE>