8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 8, 2004

CHORDIANT SOFTWARE, INC.

(Exact name of Registrant as specified in its charter)

Delaware	93-1051328
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

Commission file number:

000-29357

20400 Stevens Creek Boulevard, Suite 400

Cupertino, CA 95014

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 517-6100

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On December 27, 2004, Chordiant Software, Inc. (the terms “Chordiant”, “we” and “our” used herein refer to Chordiant Software, Inc.), filed a Current Report on Form 8-K/A to update it’s previously filed report on Form 8-K, which is incorporated herein by reference. On December 8, 2004, Chordiant Software International, Inc. (“Chordiant International”), a wholly-owned subsidiary Chordiant, entered into a share purchase agreement (the “Purchase Agreement”), and Chordiant entered into a registration rights agreement (the “Registration Rights Agreement”), with Rob Walker, David Barrow, Colin Baker, Zukke Spijkers B.V. and the persons or entities represented by Commonwealth Investments B.V. (the “Shareholders”), the holders of all of the issued shares of KiQ Limited, a privately held United Kingdom company (“KiQ”). In addition, on December 8, 2004, Chordiant International and KiQ entered into a Trust Deed (the “Trust Deed”), which provides a mechanism for the cancellation of all stock options or other potentially dilutive securities of KiQ.

This Amendment No. 2 amends Item 9.01 of the Form 8-K/A Current Report filed by Chordiant Software, Inc. (“Chordiant”) on December 27, 2004

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of business acquired.

The audited financial statements of KiQ Limited required by this item, as of and for the years ended June 30, 2004 and June 30, 2003 and the unaudited interim financial statements of KiQ Limited required by this item as of September 30, 2004 and for the three months ended September 30, 2004 and September 30, 2003 are being filed as Exhibit 99.1 to this report, and are incorporated herein by reference.

(b) Pro forma financial information.

The unaudited pro forma condensed combined consolidated financial statements of Chordiant Software, Inc. as of and for the nine months ended September 30, 2004, giving effect to the acquisition of KiQ Limited in accordance with Article 11 of Regulation S-X, are being filed as Exhibit 99.2 to this report, and are incorporated herein by reference.

(c) Exhibits.

Exhibit Number	Description
23.1	Consent of Independent Accountants
99.1	Financial statements of KiQ Limited for the year ended 30 June, 2004 and unaudited management accounts for the period ended 30 September, 2004
99.2	Unaudited pro forma condensed combined consolidated financial statements of Chordiant Software, Inc. as of and for the nine months ended September 30, 2004, giving effect to the acquisition of KiQ Limited in accordance with Article 11 of Regulation S-X.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Chordiant Software, Inc.
Date: March 29, 2005	By:	/s/ George de Urioste
		George de Urioste
		Chief Operating Officer and Chief Financial Officer

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-100843, No. 333-83506, No. 333-60156, No. 333-49032, 333-42844, 333-34502 and No. 333-110743 ) and on Form S-3 (No. 333-91570, No. 333-61874 and No. 333-112698) of Chordiant Software, Inc. of our report dated 7 December 2004 relating to the financial statements of KiQ Limited, which appears in the Current Report on Form 8-K of Chordiant Software, Inc. dated March 25, 2005.

/S/ PETERS ELWORTHY & MOORE

Chartered Accountants and Registered Auditors

Salisbury House

Station Road

Cambridge

CB1 2LA

EX-99.1

Exhibit 99.1

KiQ Limited

1 Financial statements for the year ended 30 June 2004 and
unaudited management accounts for the period
ended 30 September 2004

KiQ Limited

Financial Statements for the Year Ended 30 June 2004 and unaudited management accounts for the period ended 30 September 2004

Contents

1.	Audited financial statements for the year ended 30 June 2004
2.	Cashflow statement and Note 12 to the financial statements for the year ended 30 June 2004
3.	Unaudited management accounts for the period ended 30 September 2004

KiQ Limited
1.	Financial Statements
	For the Year Ended 30 June 2004
	Company Registration Number 2528273

KiQ Limited

Financial Statements

Year Ended 30 June 2004

Contents	Pages
Officers and Professional Advisers	1
The Directors’ Report	2 to 3
Independent Auditors’ Report to the Shareholders	4 to 5
Profit and Loss Account	6
Statement of Total Recognised Gains and Losses	7
Balance Sheet	8
Notes to the Financial Statements	9 to 11

KiQ Limited

Officers and Professional Advisers

The Board of Directors	D Barrow
	C W Baker
Company Secretary	D Barrow
Registered Office	Salisbury House
	Station Road
	Cambridge
	CB1 2LA
Auditors	Peters Elworthy & Moore
	Chartered Accountants
	& Registered Auditors
	Salisbury House
	Station Road
	Cambridge
	CB1 2LA

KiQ Limited

The Directors’ Report

Year Ended 30 June 2004

The directors present their report and the financial statements of the company for the year ended 30 June 2004.

Principal Activities and Review of the Business

The principal activities of the company during the year were the development and sale of computer software systems and the provision of related consultancy.

Product development continued with the broadening of the product range and with developments for real-time intelligent decisioning. January 2004 saw the release of OMEGA 3.3 with features to facilitate data preparation, deployment management and business monitoring. In parallel, development has continued on real-time servers and decision-support applications and on deployment and monitoring for real-time decisioning. This advanced area of support for intelligent, real-time and batch decisioning will be the focus for the company going forward.

The company has licensed the distribution of OMEGA for decisioning in the health care field.

Market demand has grown through the year as KiQ has become better known. Sales have been made to O2 in the UK and DSB Bank, SNS Bank, Lotto and Telfort in Holland, and additional product has been sold to Fortis, Levob and T-Mobile. Notably, the company has been successful in completing large and more complex projects around the installation and integration of its products.

The very high quality and dedicated staff have continued to show great loyalty and perseverance in very challenging and demanding times. The company owes them its continued gratitude.

The result has been a profitable year, and the outlook is positive. The management expects further growth within the next financial year, both in terms of the number of deals and in the scale of our geographic operation.

The Directors and their Interests in the Shares of the Company

The directors who served the company during the year together with their beneficial interests in the shares of the company were as follows:

	Ordinary Shares of £0.01 each
	At 30 June 2004	At 1 July 2003
D Barrow	700	700
C W Baker	311	311

Directors’ Responsibilities

Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company at the end of the year and of the profit or loss for the year then ended.

In preparing those financial statements, the directors are required to select suitable accounting policies, as described on page 9, and then apply them on a consistent basis, making judgements and estimates that are prudent and reasonable. The directors must also prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

KiQ Limited

The Directors' Report (continued)

Year Ended 30 June 2004

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Auditors

A resolution to re-appoint Peters Elworthy & Moore as auditors for the ensuing year will be proposed at the annual general meeting in accordance with section 385 of the Companies Act 1985.

Small Company Provisions

This report has been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985.

Signed by order of the directors

/s/ D Barrow

D Barrow

Company Secretary

Approved by the directors on 25 November 2004

KiQ Limited

Independent Auditors’ Report to the Shareholders of KiQ Limited

Year Ended 30 June 2004

We have audited the financial statements on pages 6 to 11 which have been prepared in accordance with the Financial Reporting Standard for Smaller Entities (effective June 2002), under the historical cost convention and the accounting policies set out on page 9.

This report is made solely to the company’s shareholders, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s shareholders those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of Directors and Auditors

As described in the Statement of Directors’ Responsibilities the company’s directors are responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the company is not disclosed.

We read the Directors’ Report and consider the implications for our report if we become aware of any apparent misstatements within it.

Basis of Audit Opinion

We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

KiQ Limited

Independent Auditors’ Report to the Shareholders of KiQ Limited (continued)

Year Ended 30 June 2004

Opinion

In our opinion the financial statements give a true and fair view of the state of the company’s affairs as at 30 June 2004 and of its profit for the year then ended, and have been properly prepared in accordance with the Companies Act 1985.

	/s/ PETERS ELWORTHY & MOORE
	PETERS ELWORTHY & MOORE
Salisbury House	Chartered Accountants
Station Road	& Registered Auditors
Cambridge
CB1 2LA

7 December 2004

KiQ Limited

Profit and Loss Account

Year Ended 30 June 2004

		2004	2003
			(restated)
	Note	£	£
Turnover		1,706,295	425,454
Cost of sales		870,530	809,474
Gross Profit/(Loss)		835,765	(384,020	)
Administrative expenses		281,917	234,964
Operating Profit/(Loss)	2	553,848	(618,984	)
Interest receivable		450	128
Profit/(Loss) on Ordinary Activities Before Taxation		554,298	(618,856	)
Tax on profit/(loss) on ordinary activities		—	—
Retained Profit/(Loss) for the Financial Year		554,298	(618,856	)

The notes on pages 9 to 11 form part of these financial statements.

KiQ Limited

Statement of Total Recognised Gains and Losses

Year Ended 30 June 2004

	2004		2003
			(restated)
	£		£
Profit/(Loss) for the financial year attributable to the shareholders	554,298		(618,856	)
Currency translation differences on foreign currency net investments	5,471		(29,664	)
Total recognised gains and losses relating to the year	559,769		(648,520	)
Prior year adjustment (see note 3)	(128,485	)
Total gains and losses recognised since the last annual report	431,284

The notes on pages 9 to 11 form part of these financial statements.

KiQ Limited

Balance Sheet

30 June 2004

			2004			2003
						(restated)
	Note	£	£		£	£
Fixed Assets
Tangible assets	4		1,281			13,079
Current Assets
Debtors	5	561,481			191,849
Cash at bank		78,033			14,019
		639,514			205,868
Creditors: Amounts Falling due Within One Year	6	349,574			541,132
Net Current Assets/(Liabilities)			289,940			(335,264	)
Total Assets Less Current Liabilities			291,221			(322,185	)
Capital and Reserves
Called-up equity share capital	9		19			19
Share premium account			2,059,254			2,059,254
Other reserves	10		53,637			—
Profit and loss account	11		(1,821,689	)		(2,381,458	)
Shareholders’ Funds/(Deficiency)			291,221			(322,185	)

These financial statements have been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985 and with the Financial Reporting Standard for Smaller Entities (effective June 2002).

These financial statements were approved by the directors on 25 November 2004 and are signed on their behalf by:

/s/ D Barrow

The notes on pages 9 to 11 form part of these financial statements.

KiQ Limited

Notes to the Financial Statements

Year Ended 30 June 2004

1. Accounting Policies

Basis of accounting

The financial statements have been prepared under the historical cost convention, and in accordance with the Financial Reporting Standard for Smaller Entities (effective June 2002).

Turnover

The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of value added tax.

Fixed assets

All fixed assets are initially recorded at cost.

Depreciation

Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

Computer & Equipment	-	25.0% straight line
Furniture	-	33.3% straight line

Operating lease agreements

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken to the profit and loss account.

2. Operating Profit/(Loss)

Operating profit/(loss) is stated after charging/(crediting):

	2004		2003
			(restated)
	£		£
Directors’ emoluments	44,771		48,378
Depreciation of owned fixed assets	11,798		12,086
Auditors’ fees	3,000		3,000
Net profit on foreign currency translation	(203	)	(51,620	)

3. Prior Year Adjustment

In accordance with FRS 5 Reporting the Substance of Transactions, specifically Application Note G Revenue Recognition, revenue is now recognised in line with performance on contracts and with the fulfilment of contractual obligations. Revenue on annual licences and maintenance contracts is therefore spread over the period of the contract. This has resulted in a prior year adjustment of £128,485. The effect on the current period is £177,539.

KiQ Limited

Notes to the Financial Statements

Year Ended 30 June 2004

4. Tangible Fixed Assets

	Computer & Office Equipment	Furniture	Total
	£	£	£
Cost
At 1 July 2003 and 30 June 2004	49,471	10,174	59,645
Depreciation
At 1 July 2003	39,436	7,130	46,566
Charge for the year	8,754	3,044	11,798
At 30 June 2004	48,190	10,174	58,364
Net Book Value
At 30 June 2004	1,281	—	1,281
At 30 June 2003	10,035	3,044	13,079

5.      Debtors

	2004	2003
		(restated)
	£	£
Trade debtors	546,150	168,680
VAT recoverable	—	7,346
Other debtors	15,331	15,823
	561,481	191,849

6.      Creditors: Amounts Falling due Within One Year

	2004	2003
		(restated)
	£	£
Trade creditors	46,481	186,315
Other creditors	303,093	354,817
	349,574	541,132

7.      Commitments under Operating Leases

At 30 June 2004 the company had aggregate annual commitments under non-cancellable operating leases as set out below.
	2004	2003
		(restated)
	£	£
Operating leases which expire:
Within 2 to 5 years	65,777	65,777

KiQ Limited

Notes to the Financial Statements

Year Ended 30 June 2004

8. Related Party Transactions

The directors are D Barrow and C Baker.

During the year, the company received consultancy services of £80,955 (2003: £71,100) from David Barrow & Associates, a business in which D Barrow has an interest. Expenses of £3,687 (2003: £2,178) were also incurred and recharged to the company by David Barrow and Associates. At the year end, a total of £16,863 (2003: £58,787) was outstanding as a creditor.

Included in other creditors is £700 (2003: £700) owed to D Barrow and £300 (2003: £300) owed to C Baker.

9. Share Capital

Authorised share capital:
		2004		2003
				(restated)
		£		£
10,000 Ordinary shares of £0.01 each		100		100
Allotted, called up and fully paid:
		2004		2003
	No	£	No	£
Ordinary shares of £0.01 each	1,901	19	1,901	19

10. Other Reserves

	2004	2003
		(restated)
	£	£
Issue of options in the year and balance carried forward	53,637	—

During the year, options over 40 ordinary 1p shares in the company were granted for consideration of £53,637.

The options each have an exercise price of €500, and can be exercised up to ten years after the date of grant (being May 2004).

11. Profit and Loss Account

	2004		2003
			(restated)
	£		£
Original balance brought forward	(2,252,973	)	(1,732,938	)
Prior year adjustment (note 3)	(128,485	)	—
Restated balance brought forward	(2,381,458	)	(1,732,938	)
Retained profit/(accumulated loss) for the financial year	554,298		(618,856	)
Foreign currency retranslation	5,471		(29,664	)
Balance carried forward	(1,821,689	)	(2,381,458	)

KiQ Limited

2.     Cashflow statement and Note 12 to the Financial Statements

        For the Year Ended 30 June 2004

KiQ Limited

Independent Auditors’ Report to the Shareholders of KiQ Limited

Cashflow Statement and Note 12 to the Financial Statements for the Year Ended 30 June 2004

By reference to our audit report dated 7 December 2004 on the financial statements for the year ended 30 June 2004, we have extended the scope of our work to include the cashflow statement for the year. The respective responsibilities of Directors and Auditors and the Basis of Audit Opinion are as previously referred to in our report.

Opinion

In our opinion the cashflow statement gives a true and fair view of the state of the company’s cashflow for the year ended 30 June 2004, and has been properly prepared in accordance with the Companies Act 1985, and, as discussed in Note 12, there are no significant differences between US and UK generally accepted accounting principles used in the financial statements of KiQ Limited to which we consider attention should be drawn.

	/s/ PETERS ELWORTHY & MOORE
	PETERS ELWORTHY & MOORE
Salisbury House	Chartered Accountants
Station Road	& Registered Auditors
Cambridge
CB1 2LA

.1 KiQ Limited

Cashflow Statement and Note 12 to the Financial Statements for the Year Ended 30 June 2004

	£		£
	Year ended June 30
	2004		2003
.A Operating Activities
Net income	554,298		(618,856	)
Depreciation	11,798		12,086
Debtors	(369,632	)	122,990
Creditors	(191,558	)	424,516
Total Operating Activities	4,906		(59,264	)
Investing Activities
Purchase of fixed assets	—		—
Total Investing Activities	—		—
Financing Activities
Sale of options	53,637		—
Foreign Currency translation	5,471		(29,664	)
Total Financing Activities	59,108		(29,664	)
Net cash Flow	64,014		(88,298	)
Beginning Cash	14,019		102,947
Ending Cash	78,033		14,019

.1 KiQ Limited

Cashflow Statement and Note 12 to the Financial Statements for the Year Ended 30 June 2004

12. Comparison between US and UK generally accepted accounting practice (GAAP)

There are no significant differences between US and UK GAAP used in the financial statements of KiQ Limited to which we consider attention should be drawn.

KiQ Limited

3.     Unaudited management accounts

For the Period Ended 30 September 2004

The following pages 1 to 6 show the unaudited management accounts for the period ended 30 September 2004. They do not form part of the audited financial statements and are not subject to the independent auditors’ reports on the audited financial statements and the cashflow statement as shown previously in this report.

KiQ Limited

.1 Unaudited Management Accounts for the Period Ended 30 September 2004

Profit and loss account

	£		£
	3 months ended September 30
	2004		2003
	(unaudited)		(unaudited)
Turnover	363,290		185,037
Cost of Sales	299,299		191,582
Gross Profit	63,991		(6,545	)
Administrative expenses	97,116		55,418
Operating Profit / (Loss)	(33,125	)	(61,963	)
Interest Receivable	131		—
Profit (loss) on Ordinary Activities Before Taxation	(32,994	)	(61,963	)
Tax on Profit/(loss) on ordinary activities	—		—
Retained Profit / (Loss) for the Financial year	(32,994	)	(61,963	)

KiQ Limited

Unaudited Management Accounts for the Period Ended 30 September 2004

Balance Sheet at 30 September 2004

	£
	2004 September 30
	(unaudited)
Fixed Assets
Tangible Assets
Cost	71,690
Accumulated Depreciation	60,649
	11,041
Current Assets
Debtors:
Trade debtors	317,569
VAT recoverable	—
Other debtors	21,841
	339,410
Cash at Bank	285,917
	625,327
Creditors: Amounts Falling due Within One Year
Trade creditors	85,366
Other creditors	292,775
	378,141
Net Current Assets / (Liabilities)	247,186
Total Assets Less Current Liabilities	258,227
Capital and Reserves
Called-up equity share capital	19
Share premium account	2,059,254
Other reserves	53,637
Profit and loss account	(1,854,683	)
Shareholders’ Funds / (Deficiency)	258,227

KiQ Limited

Unaudited Management Accounts for the Period Ended 30 September 2004

Cashflow Statement

	£		£
	3 months ended September 30
	2004		2003
	(unaudited)		(unaudited)
.B Operating Activities
Net income	(32,994	)	(61,963	)
Depreciation	2,285		2,950
Debtors	222,071		138,858
Creditors	28,567		(78,151	)
Total Operating Activities	219,929		1,694
Investing Activities
Purchase of fixed assets	(12,045	)	—
Total Investing Activities	(12,045	)	—
Financing Activities
Sale of options	—		—
Foreign Currency translation	—		—
Total Financing Activities	—		—
Net cash Flow	207,884		1,694
Beginning Cash	78,033		14,019
Ending Cash	285,917		15,713

KiQ Limited

Unaudited Management Accounts for the Period Ended 30 September 2004

Notes to the unaudited management accounts

1. Accounting Policies

Basis of accounting

The financial statements have been prepared under the historical cost convention, and in accordance with the Financial Reporting Standard for Smaller Entities (effective June 2002).

Turnover

The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of value added tax.

Fixed assets

All fixed assets are initially recorded at cost.

Depreciation

Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

Computer & Equipment	-	25.0% straight line
Furniture	-	33.3% straight line

Operating lease agreements

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken to the profit and loss account.

2. Operating Profit/(Loss)

Operating profit/(loss) is stated after charging/(crediting):

	September 2004
	£
Directors’ emoluments	13,734
Depreciation of owned fixed assets	2,285
Auditors’ fees	—
Net profit on foreign currency translation	—

KiQ Limited

Unaudited Management Accounts for the Period Ended 30 September 2004

Notes to the unaudited management accounts

3. Tangible Fixed Assets

	Computer & Office Equipment	Furniture	Total
	£	£	£
Cost
At 1 July 2004	49,471	10,174	59,645
Additions in the period	12,045		12,045
At 30 September 2004	61,516	10,174	71,690
Depreciation
At 1 July 2004	48,190	10,174	58,364
Charge for the period	2,285	—	2,285
At 30 September 2004	50,475	10,174	60,649
Net Book Value
At 30 September 2004	11,041	—	11,041
At 30 June 2004	1,281	—	1,281

4. Debtors

	September 2004
	£
Trade debtors	317,569
VAT recoverable	—
Other debtors	21,841
	339,410

5. Creditors: Amounts Falling due Within One Year

	September 2004
	£
Trade creditors	85,366
Other creditors	292,775
	378,141

KiQ Limited

Unaudited Management Accounts for the Period Ended 30 September 2004

Notes to the unaudited management accounts

6. Share Capital

Authorised share capital:

	September 2004
	£
10,000 Ordinary shares of £0.01 each	100

Allotted, called up and fully paid:
	September 2004
	No	£
Ordinary shares of £0.01 each	1,901	19

7. Other Reserves

	September 2004
	£
Issue of options brought forward and carried forward	53,637

In May 2004, options over 40 ordinary 1p shares in the company were granted for consideration of £53,637. The options each have an exercise price of €500, and can be exercised up to ten years after the date of grant.

8. Profit and Loss Account

	September 2004
	£
Balance brought forward	(1,821,689	)
Retained profit/(accumulated loss) for the financial period	(32,994	)
Foreign currency retranslation
Balance carried forward	(1,854,683	)

9. Comparison between US and UK generally accepted accounting practice (GAAP)

There are no significant differences between US and UK GAAP used in the financial statements of KiQ Limited to which we consider attention should be drawn.

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements are presented to illustrate the estimated effects of the acquisition of KiQ Limited (“KiQ”) on our historical financial position and our results of operations. We have derived our historical consolidated financial data for the nine months ended September 30, 2004 from our audited consolidated financial statements.

We have derived the historical combined financial data for KiQ for the nine months ended September 30, 2004 from its unaudited interim financial statements for the six months ended June 30, 2004 and the three months ended September 30, 2004. The historical financial statements of KiQ were prepared in Great British Pounds Sterling (“GBP”) using generally accepted accounting principles (GAAP) in the United Kingdom and include a reconciliation to United States GAAP in the Notes to the Financial Statements.

The following unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2004 assume that the acquisition took place on January 1, 2004 and the unaudited pro forma condensed combined balance sheet as of September 30, 2004 assumes that the acquisition took place on that date, after giving effect to purchase accounting adjustments. The information presented in the unaudited pro forma condensed combined financial statements does not purport to represent what our financial position or results of operations would have been had the acquisition occurred as of the dates indicated, nor is it indicative of our future financial position or results of operations for any period.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and assumptions, our historical consolidated financial statements and related notes included in our Transition Annual Report on Form 10-K/T for the nine months ended September 30, 2004.

	Pro Forma Balance Sheets At September 30, 2004 (in thousands)
	Chordiant Software, Inc			KiQ Limited			Adjustments			Proforma Combined
				(Unaudited)			(Unaudited)			(Unaudited)
Current assets:
Cash	$	55,748		$	734		$	(8,604	)[A]	$	47,878
Marketable securities and restricted cash		4,279									4,279
Accounts receivable, net		20,161			299						20,460
Prepaid expenses & other current assets		3,097			10						3,107
Total current assets		83,285			1,043			(8,604	)		75,724
Restricted cash		2,057									2,057
Property & equipment, net		3,237			20						3,257
Goodwill		24,874						7,154	[B]		32,028
Intangible assets, net		244						8,030	[C]		8,274
Other assets		1,643									1,643
Total assets	$	115,340		$	1,063		$	6,580		$	122,983
Current liabilities:
Accounts payable		6,394			114						6,508
Accrued expenses		11,681			281			1,984	[D]		13,946
Deferred revenue		18,459			220			(138	)[E]		18,541
Current portion of capital lease obligations		191									191
Total current liabilities		36,725			615			1,846			39,186
Deferred revenue - long term		2,122									2,122
Long-term portion of capital lease obligations		317									317
Total liabilities		39,164			615			1,846			41,625
Shareholders equity:
Common stock		72			—			4	[F]		76
Additional paid-in capital		262,703			4,005			5,435	[F]		272,143
Deferred stock-based compensation		(339	)		—			(4,262	)[G]		(4,601	)
Accumulated deficit		(189,349	)		(3,557	)		3,557	[F]		(189,349	)
Accumulated other comprehensive income		3,089			—						3,089
Total stockholders’ equity		76,176			448			4,734			81,358
Total liabilities and stockholders’ equity	$	115,340		$	1,063		$	6,580		$	122,983

	Pro Forma Condensed Combined Statement of Operations Nine Months Ended September 30, 2004 (in thousands, except per share data)
	Chordiant Software, Inc			KiQ Limited		Adjustments			Proforma Combined
				(Unaudited)		(Unaudited)			(Unaudited)
Revenues:
License	$	23,661		$	1,682	$	—		$	25,343
Service		37,362			1,454					38,816
Total revenues		61,023			3,136		—			64,159
Cost of revenues:
License		1,262								1,262
Service		21,510								21,510
Stock-based compensation		(75	)							(75	)
Amortization of intangible assets		1,044								1,044
Total cost of revenues		23,741			—		—			23,741
Gross profit		37,282			3,136		—			40,418
Operating expenses:
Sales and marketing		17,763			825					18,588
Research and development		13,153			430					13,583
General and administrative		6,717			680					7,397
Stock-based compensation		(282	)							(282	)
Amortization of intangible assets		126					2,173	[H]		2,299
Restructuring expense		172								172
Total operating expenses		37,649			1,935		2,173			41,757
Income (loss) from operations		(367	)		1,201		(2,173	)		(1,339	)
Interest income (expense), net		498			1					499
Other income (loss), net		(132	)							(132	)
Net income (loss) before income taxes	$	(1	)		1,202	$	(2,173	)	$	(972	)
Provision for income taxes		442								442
Net income (loss)	$	(443	)	$	1,202	$	(2,173	)	$	(1,414	)
Other comprehensive income:
Foreign currency translation gain		48								48
Comprehensive income (loss)	$	(395	)	$	1,202	$	(2,173	)	$	(1,366	)
Net loss per share—basic and diluted	$	(0.01	)			$	(0.50	)	$	(0.02	)
Weighted average shares used in computing basic and diluted net loss per share		69,761					4,352			74,113

Note 1 – Adjustments to pro-forma financial information

[A] To record cash paid in partial consideration of 100% of KiQ shares outstanding

[B] To record goodwill

[C] To record the fair value of intangible assets acquired

[D] To record consideration payable for the cancellation of KiQ stock options and accruals for transaction costs

[E] To record reduction of deferred revenue acquired to reflect the net present value of associated cash flow

[F] To record elimination of KiQ equity acquired, net of amortization of intangible assets.

[G] To record deferred compensation arising from the issuance of restricted stock

[H] To record amortization of intangible assets

Note 2 - Purchase price and allocation of the purchase price to the fair value of assets acquired and liabilities assumed.

The table below summarizes the total purchase price for the acquisition (in thousands, except share and per share data, unaudited):

Acquisition date			December 21, 2004
Shares issued				4,352,084
Average per share value used to value the share consideration	$	2.17
Purchase price:
Value of shares issued			$	9,444
Cash in consideration of cancelled options, pursuant to the Trust Deed				1,049
Cash				8,604
Direct acquisition costs				935
Total purchase price			$	20,032

The total purchase price has been allocated to the fair value of assets acquired and liabilities assumed as follows (in thousands):

Tangible assets acquired and liabilities assumed (net)	$	586
In-process research and development		1,940
Deferred compensation		4,262
Developed, core technology		4,530
Customer relationships		1,150
Tradename		410
Goodwill		7,154
Total purchase price	$	20,032

Note 3 – Tangible assets and liabilities:

Tangible assets acquired principally include cash and cash equivalents, accounts receivable, fixed assets and other assets. Liabilities assumed principally include accounts payable and accrued expenses.

Note 4 – In-process research and development

The value of the purchased in-process research and development was determined by estimating the projected net cash flows related to products under development, based upon our estimates of costs to complete the development of the technology, and the future revenue to be earned upon commercialization of the related products. The estimated stage of completion (expressed as a percentage of completion) was calculated and then applied to the net cash flow for these products. A discount rate of 25% was then applied to the projected cash flows associated with the in-process research and development to determine the net present value. KiQ’s in-process research and development efforts consisted of developing a new product module based on an improved architecture to allow for more power, functionality, improved performance, as well as enhancing the product’s scalability and increasing automation to existing modules. Also included were development efforts to complete a new user interface and various optimized data preparation projects. The estimated state of completion for all projects was approximately 80%. In accordance with application of SFAS 141, the value attributed to in-process research and development was charged to expense in the period we completed the acquisition.

Note 5 – Deferred compensation

It is anticipated that the two principal sellers, in addition to other employees of KiQ, will remain our employees. We issued 1,964,279 shares of our common stock, issued to the two principal sellers, which we are allowed to buy back from them at a price of $.001 per share if their employment is terminated under certain circumstances. Our right to repurchase these shares diminishes on a monthly basis in accordance with a 30 month vesting schedule which begins on the acquisition date. We plan to recognize the deferred compensation as compensation expense over the period of the vesting schedule.

Note 6 – Developed, core technology

The value of the developed, core technology was determined by estimating the projected net cash flows related to products which are or anticipated to be commercialized based on this technology, less any estimated cost to complete commercialization. A discount rate of 20% was then applied to the projected cash flows associated with the developed, core technology to determine the net present value. We plan to amortize the intangible asset related to the developed, core technology over a period of five years.

Note 7 – Customer relationships and tradename

The value of the customer relationships was determined by estimating the projected net cash flows associated with existing customers and applying estimated attrition rates for these customers of from 5% to 95% over future periods. A discount rate of 22.5% was then applied to the projected cash flows associated with the customer relationships to determine the net present value. The value of the tradename was determined by estimating what the projected net cash flows associated with royalties derived from licensing KiQ’s tradename would be over future periods if a third party were using the name. A discount rate of 22.5% was then applied to the projected cash flows associated with the trademname to determine the net present value. We plan to amortize the intangible assets related to customer relationships and tradename over a period of five years.