<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the quarterly period ended December 31, 2001

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the transition period from                        to
                               ----------------------    -----------------------

                         Commission file number: 0-26802


                              CHECKFREE CORPORATION
             (Exact name of registrant as specified in its charter)


            DELAWARE                                             58-2360335
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


              4411 EAST JONES BRIDGE ROAD, NORCROSS, GEORGIA 30092
          (Address of principal executive offices, including zip code)


                                 (678) 375-3000
              (Registrant's telephone number, including area code)


                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                          if changed since last report)


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

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 87,392,734 shares of
Common Stock, $.01 par value, were outstanding at February 11, 2002.
<PAGE>

                                    FORM 10-Q

                              CHECKFREE CORPORATION

                                TABLE OF CONTENTS
                                -----------------

                                                                        PAGE NO.
                                                                        --------

PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements.

                     Condensed Consolidated Balance Sheets                   3
                         December 31, 2001 and June 30, 2001

                     Condensed Consolidated Statements of Operations         4
                         For the Three and Six Months Ended
                         December 31, 2000 and 2001

                     Condensed Consolidated Statements of Cash Flows         5
                         For the Six Months Ended December 31,
                         2000 and 2001

                     Notes to Interim Condensed Consolidated Unaudited       6
                         Financial Statements For the Three and
                         Six Months Ended December 31, 2000 and 2001

         Item 2. Management's Discussion and Analysis of Financial
                     Condition and Results of Operations.                    10

         Item 3. Quantitative and Qualitative Disclosures About Market Risk  22


PART II. OTHER INFORMATION

         Item 1. Legal Proceedings.                                          N/A

         Item 2. Changes in Securities and Use of Proceeds.                  N/A

         Item 3. Defaults Upon Senior Securities.                            N/A

         Item 4. Submission of Matters to a Vote of Security Holders.        23

         Item 5. Other Information.                                          N/A

         Item 6. Exhibits and Reports on Form 8-K.                           23

         Signatures.                                                         24



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                  JUNE 30,             DECEMBER 31,
                                                                                                    2001                   2001
                                                                                                ------------           ------------
                                                                                                 (IN THOUSANDS, EXCEPT SHARE DATA)
                                       ASSETS

<S>                                                                                             <C>                    <C>
Current assets:
     Cash and cash equivalents .....................................................            $   124,122            $   110,792
     Investments ...................................................................                 35,930                 78,316
     Accounts receivable, net ......................................................                 88,818                 84,464
     Prepaid expenses and other assets .............................................                  8,681                  8,538
     Deferred income taxes .........................................................                 13,725                 10,458
                                                                                                ------------           ------------
         Total current assets ......................................................                271,276                292,568
Property and equipment, net ........................................................                109,226                105,123
Other assets:
     Capitalized software, net .....................................................                187,021                 98,946
     Goodwill, net .................................................................                820,169                613,713
     Strategic agreements, net .....................................................                643,212                581,246
     Other intangible assets, net ..................................................                 47,118                 34,396
     Investments ...................................................................                 96,042                 57,861
     Other noncurrent assets .......................................................                  9,889                  9,297
                                                                                                ------------           ------------
         Total other assets ........................................................              1,803,451              1,395,459
                                                                                                ------------           ------------
              Total ................................................................            $ 2,183,953            $ 1,793,150
                                                                                                ============           ============

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable ..............................................................            $    19,084            $    10,122
     Accrued liabilities ...........................................................                 60,090                 50,714
     Current portion of long-term obligations ......................................                  4,528                  3,615
     Deferred revenue ..............................................................                 44,913                 44,020
                                                                                                ------------           ------------
         Total current liabilities .................................................                128,615                108,471
Accrued rent and other .............................................................                  4,758                  3,911
Deferred income taxes ..............................................................                141,853                 69,985
Obligations under capital leases - less current portion ............................                  4,041                  3,446
Convertible subordinated notes .....................................................                172,500                172,500
Stockholders' equity:
     Preferred stock- 15,000,000 authorized shares, $.01 par value;
         no amounts issued or outstanding ..........................................                     --                     --
     Common stock- 150,000,000 authorized shares, $.01 par value;
         issued 92,472,299 and 92,769,515 shares, respectively;
         outstanding 86,928,475 and 87,225,691 shares, respectively ................                    869                    872
     Additional paid-in-capital ....................................................              2,420,957              2,427,655
     Accumulated deficit ...........................................................               (689,455)              (993,535)
     Unearned compensation .........................................................                   (185)                  (155)
                                                                                                ------------           ------------
         Total stockholders' equity ................................................              1,732,186              1,434,837
                                                                                                ------------           ------------
              Total ................................................................            $ 2,183,953            $ 1,793,150
                                                                                                ============           ============
</TABLE>


   See Notes to Interim Unaudited Condensed Consolidated Financial Statements.



                                       3
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED DECEMBER  31,       SIX MONTHS ENDED DECEMBER 31,
                                                             --------------------------------       -----------------------------
                                                                 2000                2001              2000               2001
                                                             -----------         ------------       ----------         ----------
                                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                                           <C>                <C>                <C>                <C>
Revenues:
  Processing and servicing .............................      $  89,528          $ 103,530          $ 165,687          $ 204,453
  License fees .........................................          7,216              7,744             12,263             11,805
  Maintenance fees .....................................          5,660              6,070             10,307             12,209
  Other ................................................          5,317              3,994             10,221              9,546
                                                              ----------         ----------         ----------         ----------
        Total revenues .................................        107,721            121,338            198,478            238,013

Expenses:
  Cost of processing, servicing and support ............         66,586             67,693            119,658            135,855
  Research and development .............................         14,023             15,366             27,941             30,090
  Sales and marketing ..................................         40,750             15,271             55,054             30,276
  General and administrative ...........................         12,798             11,358             24,290             22,984
  Depreciation and amortization ........................        124,134            114,829            179,868            234,032
  Impairment of intangible assets ......................             --            155,072                 --            155,072
  In-process research and development ..................             --                 --             18,600                 --
                                                              ----------         ----------         ----------         ----------
        Total expenses .................................        258,291            379,589            425,411            608,309
                                                              ----------         ----------         ----------         ----------
Loss from operations ...................................       (150,570)          (258,251)          (226,933)          (370,296)
Interest, net ..........................................          1,450             (1,186)             1,775             (1,715)
                                                              ----------         ----------         ----------         ----------
Loss before income taxes ...............................       (149,120)          (259,437)          (225,158)          (372,011)
Income tax benefit .....................................        (33,098)           (44,304)           (50,778)           (67,931)
                                                              ----------         ----------         ----------         ----------
Net loss ...............................................      $(116,022)         $(215,133)         $(174,380)         $(304,080)
                                                              ==========         ==========         ==========         ==========

Basic loss per share:
     Net loss per common share .........................      $   (1.34)         $   (2.47)         $   (2.32)         $   (3.49)
                                                              ==========         ==========         ==========         ==========
     Equivalent number of shares .......................         86,286             87,217             75,104             87,153
                                                              ==========         ==========         ==========         ==========
Diluted loss per share:
     Net loss per common share .........................      $   (1.34)         $   (2.47)         $   (2.32)         $   (3.49)
                                                              ==========         ==========         ==========         ==========
     Equivalent number of shares .......................         86,286             87,217             75,104             87,153
                                                              ==========         ==========         ==========         ==========
</TABLE>


   See Notes to Interim Unaudited Condensed Consolidated Financial Statements.



                                       4
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                          SIX MONTHS ENDED
                                                                                                            DECEMBER 31,
                                                                                                  --------------------------------
                                                                                                     2000                  2001
                                                                                                  ----------            ----------
                                                                                                            (IN THOUSANDS)

<S>                                                                                               <C>                   <C>
Cash flows from operating activities:
     Net loss ..........................................................................          $(174,380)            $(304,080)
     Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities:
     In-process research and development ...............................................             18,600                    --
     Depreciation and amortization .....................................................            179,868               234,032
     Deferred income tax provision .....................................................            (50,778)              (67,931)
     Impairment of intangible assets ...................................................                 --               155,072
     Purchases of investments - Trading ................................................             (8,051)                   --
     Proceeds from maturities and sales of investments, net - Trading ..................              7,783                    --
     Change in certain assets and liabilities (net of acquisitions and
       dispositions):
         Accounts receivable ...........................................................            (11,318)                4,354
         Prepaid expenses and other ....................................................              2,803                   176
         Other noncurrent assets .......................................................              1,180                   600
         Accounts payable ..............................................................              2,776                (8,962)
         Accrued liabilities ...........................................................              6,343                (5,784)
         Deferred revenue ..............................................................              9,855                  (893)
         Income tax accounts ...........................................................               (266)                 (128)
         Accrued rent and other ........................................................                 76                   (10)
                                                                                                  ----------            ----------
              Net cash provided by (used in) operating activities ......................            (15,509)                6,446
Cash flows from investing activities:
     Purchase of property and software .................................................            (11,842)              (13,237)
     Capitalization of software development costs ......................................             (2,342)               (2,587)
     Cash and cash equivalents from business acquired, net of
       acquisition costs ...............................................................             96,152                    --
     Capitalization of strategic agreement costs .......................................            (10,114)                   --
     Purchase of investments - held to maturity ........................................            (91,583)              (47,236)
     Proceeds from maturities and sales of investments - held to
       maturity ........................................................................             15,390                43,031
                                                                                                  ----------            ----------
              Net cash used in investing activities ....................................             (4,339)              (20,029)
Cash flows from financing activities:
     Principal payments under capital lease obligations ................................             (2,366)               (2,408)
     Proceeds from sale of stock and exercise of warrants ..............................             12,562                    --
     Proceeds from stock options exercised .............................................              4,661                   291
     Proceeds from employee stock purchase plan ........................................              2,183                 2,370
                                                                                                  ----------            ----------
              Net cash provided by financing activities ................................             17,040                   253
                                                                                                  ----------            ----------
Net decrease in cash and cash equivalents ..............................................             (2,808)              (13,330)
Cash and cash equivalents:
     Beginning of period ...............................................................            128,074               124,122
                                                                                                  ----------            ----------
     End of period .....................................................................          $ 125,266             $ 110,792
                                                                                                  ==========            ==========
</TABLE>

  See Notes to Interim Unaudited Condensed Consolidated Financial Statements.


                                       5
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES
     NOTES TO INTERIM CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 2001


         1. INTRODUCTION

            The accompanying condensed consolidated financial statements and
notes thereto have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission for Form 10-Q and include all of the
information and disclosures required by generally accepted accounting principles
for interim financial reporting. The results of operations for the six months
ended December 31, 2000 and 2001 are not necessarily indicative of the results
for the full year.

            These financial statements should be read in conjunction with the
financial statements, accounting policies and financial notes thereto included
in the Company's Annual Report filed with the Securities and Exchange Commission
on Form 10-K. In the opinion of management, the accompanying condensed
consolidated unaudited financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which are necessary for a fair
representation of financial results for the interim periods presented.


         2. IMPAIRMENT OF INTANGIBLE ASSETS

            In accordance with Statement of Financial Accounting Standards
("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," the Company reviews its long-lived assets,
including identifiable intangible assets and goodwill related to those assets,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. If such a review is
warranted, recoverability is measured by comparison of the carrying amount of
the applicable long-lived assets to future undiscounted net cash flows the
assets are expected to generate. If assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds their fair market value.

            --CHECKFREE i-SOLUTIONS

            During the quarter ended December 31, 2001, the Company identified
certain indicators of possible impairment of its long-lived assets, primarily
goodwill and other acquired intangible assets, related to its acquisition of
BlueGill Technologies, Inc. (currently referred to as CheckFree i-Solutions).
The main indicators of impairment were recent economic conditions, accompanied
by internet-based software industry trends that have negatively impacted both
i-Solutions current operations, as well as its expected future growth rates. The
Company first evaluated recoverability by comparing the projected undiscounted
cash flows of the i-Solutions business, including an estimated terminal value,
to the related carrying value of its long-lived assets. As a result of this
comparison, the Company determined that the i-Solutions assets were impaired.
The amount of the impairment was then determined by comparing the estimated fair
value of the i-Solutions assets to the related carrying value. The fair value
was determined using a discounted cash flow approach for the net cash flows of
the i-Solutions business and an estimated terminal value. The assumptions
supporting the estimated cash flows, including the discount rate and estimated
terminal value, reflect management's best estimates at this time. As a result of
the fair value test, the Company recorded a charge reducing the carrying value
of CheckFree i-Solutions goodwill by $107,405,000. This amount is included in
Impairment of intangible assets in the accompanying condensed consolidated
statement of operations. CheckFree i-Solutions is included in the Company's
Software business segment.

            --TRANSPOINT

            During the quarter ended December 31, 2001, the Company performed a
review of the carrying value of technology assets it acquired as part of the
TransPoint acquisition in September 2000. The review was prompted by the
termination of the maintenance agreement for this technology from the last of
our international partners, and the conclusions reached by the Company in
evaluating the service potential of the technology against our present and
future initiatives. As a result of the review, the Company identified two
technologies for which there is no future use and recorded a charge of
$47,667,000 to retire these assets. The charge is included in Impairment of
intangible assets in the accompanying condensed consolidated statement of
operations. In the future, should the Company decide the remaining technologies
have no continued use in our evolving electronic billing product offerings,
those technologies would be retired as well. The book value of the remaining
current technology asset as of December 31, 2001 is $68,600,000 and the
quarterly amortization is $10,291,000.



                                       6
<PAGE>

            The retirement of the TransPoint technology assets noted above was
an indicator to the Company of possible impairment of its long-lived assets,
primarily goodwill and other acquired intangible assets, related to its
acquisition of TransPoint. The Company evaluated the recoverability of all its
Electronic Commerce division long-lived assets by comparing the projected
undiscounted cash flows of the division, including an estimated terminal value,
to the carrying value of its long-lived assets. The assumptions supporting the
estimated cash flows, including the estimated terminal value, reflect
management's best estimates at this time. The result of this test indicated that
there was no impairment of the Company's Electronic Commerce division long-lived
assets.

         3. EARNINGS PER SHARE

            The following table reconciles the differences in income and shares
outstanding between basic and dilutive for the periods indicated (in thousands
except per share data):

<TABLE>
<CAPTION>
                                                                      FOR THE THREE MONTHS ENDED
                                     --------------------------------------------------------------------------------------------
                                                   DECEMBER 31, 2000                                DECEMBER 31, 2001
                                     -------------------------------------------       ------------------------------------------
                                                                          PER-                                             PER-
                                        LOSS              SHARES         SHARE            LOSS             SHARES         SHARE
                                     (NUMERATOR)       (DENOMINATOR)     AMOUNT        (NUMERATOR)      (DENOMINATOR)     AMOUNT
                                     -----------       -------------     -------       -----------      -------------     -------

<S>                                   <C>                 <C>            <C>            <C>                <C>            <C>
Basic EPS ........................    $(116,022)          86,286         $(1.34)        $(215,133)         87,217         $(2.47)
                                                                         ======                                           ======
Effect of dilutive
securities:
  Options and warrants............           --               --                               --              --
                                      ----------          ------                       -----------         ------
Diluted EPS ......................    $(116,022)          86,286         $(1.34)        $(215,133)         87,217         $(2.47)
                                      ==========          ======         =======        ==========         ======         =======
</TABLE>


<TABLE>
<CAPTION>
                                                                       FOR THE SIX MONTHS ENDED
                                      ------------------------------------------------------------------------------------------
                                                    DECEMBER 31, 2000                              DECEMBER 31, 2001
                                      -------------------------------------------     ------------------------------------------
                                                                           PER-                                           PER-
                                         LOSS              SHARES         SHARE           LOSS             SHARES        SHARE
                                      (NUMERATOR)       (DENOMINATOR)     AMOUNT       (NUMERATOR)      (DENOMINATOR)    AMOUNT
                                      -----------       -------------     -------      -----------      -------------    -------

<S>                                   <C>                  <C>            <C>          <C>                <C>            <C>
Basic EPS ........................    $(174,380)           75,104         $(2.32)      $(304,080)         87,153         $(3.49)
                                                                          =======                                        =======
Effect of dilutive
securities:
  Options and warrants ...........           --                --                             --              --
                                      ----------           ------                      ----------         ------
Diluted EPS ......................    $(174,380)           75,104         $(2.32)      $(304,080)         87,153         $(3.49)
                                      ==========           ======         =======      ==========         ======         =======
</TABLE>

            Basic earnings (loss) per common share amounts were computed by
dividing income (loss) available to shareholders by the weighted average number
of shares outstanding. Diluted per-common-share amounts assume the issuance of
common stock for all potentially dilutive equivalent shares outstanding except
in loss periods when such an adjustment would be anti-dilutive. For the periods
reported herein, there were no differences between basic and diluted earnings
per share. The anti-dilutive interest charges and number of equivalent shares
excluded from the per share calculations were as follows (in thousands):

<TABLE>
<CAPTION>
                                                        DECEMBER 31, 2000                      DECEMBER 31, 2001
                                                --------------------------------       --------------------------------
                                                   LOSS               SHARES              LOSS               SHARES
                                                (NUMERATOR)        (DENOMINATOR)       (NUMERATOR)        (DENOMINATOR)
                                                -----------        -------------       -----------        -------------

<S>                                                <C>                 <C>                 <C>                  <C>
Three Month Period Ended                           $2,353              6,924               $2,394               3,246
                                                   ======              =====               ======               =====
Six Month Period Ended                             $4,768              6,824               $4,788               3,574
                                                   ======              =====               ======               =====
</TABLE>


         4. COMMON STOCK

            The Company has issued stock for various employee benefit programs
during the current fiscal year. In the six months ended December 31, 2001, the
Company issued 132,887 shares to fund its 401(k) match, the cost of which was
accrued in the year ended June 30, 2001. In the six months ended December 31,
2001, the Company issued 79,058 shares of common stock in conjunction with its
employee stock purchase plan, which was funded through employee payroll
deductions in the immediately preceding six-month period.



                                       7
<PAGE>

         5. OPERATING LEASES

            The Company entered into certain operating leases for equipment
during the six months ended December 31, 2001. As part of these lease
agreements, the Company has pledged investment securities as collateral for
payments due under terms of the leases. The total amount of securities pledged
was approximately $4,906,000 at December 31, 2001. The associated lease
agreements expire at various dates through November 2004.

            In addition, during the quarter ended December 31, 2001, the Company
entered into a standby letter of credit agreement to secure a lease financing
arrangement. The Company has pledged investment securities as collateral for the
standby letter of credit. The standby letter of credit expires September 30,
2002, and is automatically renewable on an annual basis until its final
expiration on September 30, 2004. The total amount of securities pledged as
collateral for the standby letter of credit were $671,000 at December 31, 2001.

         6. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                          SIX MONTHS            SIX MONTHS
                                                                                            ENDED                 ENDED
                                                                                      DECEMBER 31, 2000     DECEMBER 31, 2001
                                                                                      -----------------     -----------------

<S>                                                                                      <C>                      <C>
            Interest paid ....................................................           $     6,271              $6,159
                                                                                         ============             ======
            Income taxes paid (received) .....................................           $    (1,455)             $   47
                                                                                         ============             ======
            Capital lease additions and purchases of other long term assets ..           $     4,898              $   --
                                                                                         ============             ======
            Stock funding of 401(k) match ....................................           $     2,484              $3,585
                                                                                         ============             ======
            Purchase price of business acquisitions ........................             $(1,352,096)             $   --
            Less: issuance of common stock pursuant to acquisitions ........               1,350,083                  --
            Cash acquired in acquisition ...................................                  97,200                  --
            Acquisition costs paid in prior period .........................                     965                  --
                                                                                         ------------             ------
                     Net cash received .....................................             $    96,152              $   --
                                                                                         ============             ======
</TABLE>


         7. RECENT ACCOUNTING PRONOUNCEMENTS

            In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS 141, "Business Combinations" and SFAS 142, "Goodwill and Other
Intangible Assets." SFAS 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method of accounting. In
addition, it requires application of the provisions of SFAS 142 for goodwill and
other intangible assets related to any business combinations completed after
June 30, 2001, but prior to the adoption date of SFAS 142. SFAS 142 changes the
accounting for goodwill and other intangible assets. Goodwill will no longer be
subject to amortization over its estimated useful life. Rather, goodwill will be
subject to at least an annual assessment for impairment by applying a
fair-value-based test. All other acquired intangibles will be separately
recognized if the benefit of the intangible asset is obtained through
contractual or other legal rights, or if the intangible asset can be sold,
transferred, licensed, or exchanged, regardless of our intent to do so. Other
intangibles will be amortized over their useful lives.

            SFAS 142 becomes effective for the Company on July 1, 2002. The
Company is still assessing the impact of all the statement provisions on our
financial position and results of operations; however, based on our review to
date, we anticipate the following impacts:

                - Upon adoption, we will be required to reclassify approximately
                  $2 million of unamortized workforce in place intangible assets
                  into goodwill.

                - Upon adoption, the balance of goodwill and workforce in place
                  is expected to be $532 million and we will discontinue
                  amortizing these assets at that time. The resulting reduction
                  in amortization expense is estimated at approximately $165
                  million for each of our fiscal years 2003, 2004 and 2005.



                                       8
<PAGE>

                - We will be required to perform a transitional goodwill
                  impairment test as of July 1, 2002. The impairment test will
                  require us to: (1) identify our reporting units, (2) determine
                  the carrying value of each reporting unit by assigning assets
                  and liabilities, including existing goodwill and intangible
                  assets, to those reporting units, and (3) determine the fair
                  value of each reporting unit. If the carrying value of any
                  reporting unit exceeds its fair value, we will determine the
                  amount of any goodwill impairment through a detailed fair
                  value analysis of each of the assigned assets (excluding
                  goodwill). At this time, the Company is evaluating any
                  potential impact resulting from the transitional impairment
                  test. Under the provisions of SFAS 142, we are required to
                  complete the test before December 31, 2002.

            Following the transitional impairment test, our goodwill balances
will be subject to annual impairment tests using the same process described
above. If any impairment is indicated as a result of the annual test, an
impairment charge would be recorded as part of income from operations.

            In August 2001, the FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations." SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. The adoption of SFAS 143 is effective for the
Company for fiscal 2003. The Company is in the process of evaluating the effects
of this new statement.

            In August 2001, FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS 144 supercedes SFAS 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
the accounting and reporting provisions of Accounting Principles Board Opinion
30, "Reporting Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" for the disposal of a segment of a business. SFAS 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and will be effective for the Company's first quarter of
fiscal 2003. The Company is in the process of evaluating the effects of this new
statement.

         8. STRATEGIC AGREEMENTS

            As a result of the strategic agreement signed with Bank of America
in October 2000, Bank of America owns approximately 11.5% of our Company and is
considered a related party. For the six months ended December 31, 2001, we
recorded total revenues, across all our business segments, of $27.1 million from
Bank of America. For the same period we incurred over $12 million of expense to
Bank of America, primarily for reimbursements under a transition services
agreement in place while we complete the conversion of Bank of America customers
to our Genesis processing platform. As of December 31, 2001, amounts due from
Bank of America total $14.1 million and amounts due to Bank of America total
$2.5 million. Once we retire the Bank of America West processing platform in the
quarter ended March 31, 2002, we will no longer incur transition services costs.
Please refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations included in this Form 10-Q for additional information
regarding our transactions with Bank of America.

         9. SUBSEQUENT EVENTS

            In January 2002, the Company announced its decision to close its
Electronic Commerce customer care operations in San Francisco and to discontinue
the sale of certain products within its Investment Services division. The
customer care operations in San Francisco are no longer required due to the
migration of subscribers from the Bank of America processing platform to the
CheckFree processing platform. The San Francisco office will be closed during
the fourth quarter of the fiscal year ending June 30, 2002. The discontinuance
of certain products within the Investment Services division has resulted in a
reduction in workforce, which occurred in January 2002. During the quarter ended
March 31, 2002, the Company expects to incur charges in the range of $5 to $7
million related to severance agreements, lease and other costs associated with
these events.



                                       9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         We are a leading provider of financial electronic commerce services. We
operate our business through three independent but inter-related divisions:

         - Electronic Commerce;
         - Investment Services; and
         - Software.

         Our Electronic Commerce business provides services that allow consumers
to:

         - receive electronic bills through the Internet;
         - pay any bill-- electronic or paper-- to anyone; and
         - perform customary banking transactions, including balance inquiries,
           transfers between accounts and on-line statement reconciliations.

         We provide electronic billing and payment services for over 5.9 million
consumers as of December 31, 2001. Our services reach hundreds of sources,
either directly or through reseller relationships, including:

         - 9 of the 10 largest U.S. banks;
         - 8 of the top 10 U.S. brokerage firms;
         - Internet portals;
         - Internet-based banks;
         - Internet financial sites like Quicken.com; and
         - Personal financial management software like Quicken and Microsoft
           Money.

         We have developed contracts with over 1,100 merchants nationwide that
allows us to remit over 68% of all of our bill payments electronically. We
processed approximately 75 million transactions for the quarter ended December
31, 2001 and, for the year ended June 30, 2001, we processed over 231 million
transactions.

         In March 1997, we introduced electronic billing -- "E-Bill" -- which
enables merchants to deliver billing as well as marketing materials
interactively to their customers over the Internet. In March 2001, we introduced
the latest version of our electronic billing and payment products, "WebPay for
Consumers" (or WebPay 3.2), which provides consumers with the ability to receive
and pay e-bills over e-mail and to exchange money with each other using e-mail
"invitations" to send or receive money. As of December 31, 2001, we have 191
billers in production and are delivering more than 800,000 electronic bills
monthly. Additional biller content became available in the fourth quarter of
fiscal 2001 through our ability to deliver bills scraped from biller-direct
sites, and since then, we have added 25 national credit card bills to the 191
bills available through traditional electronic and billing payment services.

         When a customer instructs us to pay a bill, we have the ability to
process the payment either by electronic funds transfer, by paper check, or by
draft drawn on the customer's account. Our patented bill payment processing
system in Norcross, Georgia determines the preferred method of payment based on
a credit analysis of the customer, assessing the customer's payment history, the
amount of the bill to be paid and other relevant factors. If the results of the
credit analysis are favorable, we will assume the risk of collection of the
funds from the customer's account, and if we have an electronic connection to
the merchant, the remittance will be sent electronically, otherwise, it will be
sent by check. If the results are not favorable, the remittance will be sent to
the merchant by a draft drawn directly on the customer's checking account. In an
electronic remittance, the funds are transmitted electronically to the merchant
with the customer's account number included as an addenda record. For a paper
draft, the customer's name, address, and account number are printed on the face
of the check. In addition, our processing system is able to aggregate multiple
electronic and paper remittances due to merchants. Thus, if multiple payments
are going to the same merchant on the same day, we may send one check for the
sum of these payments and include a remittance statement that provides the
customers' names, addresses, account numbers, and payment amounts. Our strategy
is to drive operational efficiency and improve profitability by increasing the
percentage of transactions we process



                                       10
<PAGE>

electronically. Since June 1998, we have increased our electronic payments ratio
from 32% of total payments processed electronically to over 68% by December
2001.

         We are also a leading provider of institutional portfolio management
and information services and financial application software. Our Investment
Services business offers portfolio accounting and performance measurement
services to investment advisors, brokerage firms, banks and insurance companies
and financial planning application software to financial planners. Our portfolio
management system solution includes:

         - data conversion;
         - personnel training;
         - trading system;
         - graphical client reporting;
         - performance measurement;
         - technical network support and interface setup;
         - Depository Trust Corporation interfacing; and
         - investment manager performance database system.

Our fee-based money manager clients are typically sponsors or managers of wrap
money management products or traditional money managers, managing investments of
institutions and high net worth individuals. Our portfolios under management
have grown to over 1.2 million as of December 31, 2001.

         Our Software businesses provide electronic commerce and financial
applications software and services for businesses and financial institutions. We
design, market, license and support the following software applications, among
others:

         - i-Solutions.

                The i-Solutions product line, which is a set of electronic
           billing and statement software products developed for various
           industry segments, was added through the acquisition of BlueGill
           Technologies, Inc. in April 2000. These products allow billers to
           install and launch an electronic billing product, send e-mail
           notifications and present electronic bills through the Internet, and
           connect to a variety of bill aggregators and payment methods. Each
           product includes an electronic billing web site template that is
           unique to a specific industry segment. Using the template as a sample
           design of their Internet billing site, our customers spend less time
           developing and designing the look and feel of their Internet billing
           sites, which accelerates the product implementation process. Given
           the nature of the process we use to convert billing and/or statement
           information for use over the Internet, these products are equally
           marketable in international markets as well.

         - Electronic Funds Transfer.

                Through our Paperless Entry Processing System Plus software, we
           offer an online, real-time system providing an operational interface
           for originating and receiving payments through the automated
           clearinghouse. The automated clearinghouse is a nationwide electronic
           clearing and settlement system that processes electronically
           originated credit and debit transfers among participating depository
           institutions. These electronic transactions are substitutes for paper
           checks and are typically used for recurring payments like direct
           deposit payroll payments and corporate payments to contractors and
           vendors, debit transfers that consumers make to pay insurance
           premiums, mortgages, loans and other bills, and business to business
           payments. You may obtain additional information on the automated
           clearinghouse at the Federal Reserve Commission's web site at
           http://www.federalreserve.gov. We do not maintain a direct connection
           with the automated clearinghouse, but rather, clear our electronic
           transactions through KeyBank, N.A., under the terms of an automated
           clearinghouse agreement.



                                       11
<PAGE>

         - Reconciliation.

                Through our ReconPlus software, we provide U.S. banks,
           international banks and corporate treasury operations with automated
           check and non-check reconciliations in high volume, multi-location
           environments. Some of the services provided by ReconPlus are
           automated deposit verification, consolidated bank account
           reconciliation and cash mobilization, immediate and accurate funds
           availability data and improved cash control.

         - Other.

                We also provide software solutions such as regulatory compliance
           solutions for Form 1099 processing, safe box accounting and other
           applications.

         During the fiscal year ended June 30, 2001, Electronic Commerce
accounted for 70% of our revenues, Investment Services accounted for 16% of our
revenues, and Software accounted for 14% of our revenues.

         Our current business was developed through expansion of our core
Electronic Commerce business and the acquisition of companies operating in
similar or complementary businesses. Our major acquisitions include Servantis
Systems Holdings, Inc. in February 1996, Security APL, Inc. in May 1996, Intuit
Services Corporation in January 1997, Mobius Group, Inc. in March 1999, BlueGill
Technologies, Inc. in April 2000, and MSFDC, L.L.C (TransPoint) in September
2000. In October 2000, we completed an agreement with Bank of America under
which we acquired certain of Bank of America's electronic billing and payment
assets.


RESULTS OF OPERATIONS

         The following table sets forth as percentages of total operating
revenues, certain consolidated statements of operations data:

<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                    DECEMBER 31,                        DECEMBER 31,
                                                                 2000             2001             2000             2001
                                                                -------          -------          -------          -------

<S>                                                              <C>              <C>              <C>              <C>
Total Revenues:                                                  100.0%           100.0%           100.0%           100.0%

Expenses:
   Cost of processing, servicing and support                      61.8%            55.8%            60.3%            57.1%
   Research and development                                       13.0%            12.7%            14.1%            12.6%
   Sales and marketing                                            37.8%            12.6%            27.7%            12.7%
   General and administrative                                     11.9%             9.4%            12.2%             9.7%
   Depreciation and amortization                                 115.2%            94.6%            90.6%            98.3%
   Impairment of intangible assets                                --              127.8%             --              65.2%
   In-process research and development                            --               --                9.4%             --
                                                                -------          -------          -------          -------
          Total expenses                                         239.8%           312.8%           214.3%           255.6%
                                                                -------          -------          -------          -------
Loss from operations                                            -139.8%          -212.8%          -114.3%          -155.6%

Interest, net                                                      1.3%            -1.0%             0.9%            -0.7%
                                                                -------          -------          -------          -------
Loss before income taxes                                        -138.4%          -213.8%          -113.4%          -156.3%

Income tax benefit                                               -30.7%           -36.5%           -25.6%           -28.5%
                                                                -------          -------          -------          -------
Net loss                                                        -107.7%          -177.3%           -87.8%          -127.8%
                                                                =======          =======          =======          =======
</TABLE>



                                       12
<PAGE>

         Revenues. Total revenue increased by $13.6 million, or 13%, from $107.7
million for the three months ended December 31, 2000 to $121.3 million for the
three months ended December 31, 2001 and by $39.5 million, or 20%, from $198.5
million for the six months ended December 31, 2000 to $238.0 million for the six
months ended December 31, 2001. Quarter over quarter revenue growth is driven by
15% growth in our Electronic Commerce business, 16% growth in our Investment
Services business and a modest decline in our Software business. Year over year
revenue growth is driven by 24% growth in our Electronic Commerce business, 20%
growth in our Investment Services business and flat performance in our Software
business. Growth in Electronic Commerce revenue is driven primarily by growth in
our subscriber base from just over 4.4 million at December 31, 2000 to 5.9
million at December 31, 2001. Additionally, as an increasing number of banks opt
for transaction based pricing, our revenue is impacted by growth in transactions
processed from approximately 55.5 million in the quarter ended December 31, 2000
to over 75 million in the quarter ended December 31, 2001 and from approximately
102.5 million for the six months ended December 31, 2000 to over 144.4 million
for the six months ended December 31, 2001. This growth is offset by a decline
in revenue from interest rate sensitive products such as our account balance
transfer offering caused by significant decreases in interest rates and reduced
implementation fees from lower biller implementations in the current year.
Growth in Investment Services revenue is driven primarily by an increase in
portfolios managed from over 1.04 million as of December 31, 2000 to over 1.21
million as of December 31, 2001. However, as a result of a recessionary economy
in calendar 2001 and the difficult stock market conditions since September 2001,
portfolio growth has slowed significantly in the quarter ended December 2001.
While portfolio growth showed signs of improvement in late November and December
2001, we remain short of historic growth rates in this business. Due to economic
conditions in fiscal 2001, we have experienced flat software sales on a year
over year basis. Although our more mature ACH processing and Reconciliation
products showed signs of renewed growth in the quarter ended December 31, 2001,
sales of i-Solutions electronic billing and statement software are slower than
expected as the recession continues. For the six month period ended December
31, 2001, Bank of America generated total revenue of $27.1 million across all
of our business segments, which represents in excess of 10% of our total year
to date revenue, and they remain the only customer that exceeds 10% of total
revenue.

         Our processing and servicing revenue increased by $14.0 million, or
16%, from $89.5 million for the three months ended December 31, 2000 to $103.5
million for the three months ended December 31, 2001, and by $38.8 million, or
23%, from $165.7 million for the six months ended December 31, 2000 to $204.5
million for the six months ended December 31, 2001. Our acquisition of
TransPoint in September 2000 included a five-year strategic agreement with
Microsoft and a five-year marketing agreement with First Data Corporation, each
of which includes minimum quarterly revenue guarantees, as does our ten-year
strategic agreement with Bank of America. Through December 31, 2001, the
agreements with Microsoft and First Data are operating below the minimum revenue
guarantee level. The Bank of America contract was operating under minimums until
the December 31, 2001 quarter. As a result of these minimum guarantees, overall
subscriber based revenue growth will continue to correlate less directly with
subscriber growth until the TransPoint-related subscribers generate revenue to
exceed the quarterly minimums. Growth in underlying processing and servicing
revenue is driven by the previously mentioned growth in subscribers and
transactions in our Electronic Commerce business and portfolios managed in our
Investment Services business, offset by a decline in revenue from interest rate
sensitive products in Electronic Commerce. Additionally, we presented over
800,000 electronic bills in the month ended December 31, 2001. This has
increased significantly from the 600,000 electronic bills presented in the month
ended September 30, 2001 and the 210,000 electronic bills presented in the month
ended December 31, 2000. In the quarter ended December 31, 2001, we processed
over 75 million transactions, an increase of over 35% compared to the 55.5
million transactions processed in the quarter ended December 31, 2000. Over the
past two years, we have been offering a transaction based pricing model (versus
subscriber based) primarily to our largest customers, and when combined with
strategic agreements operating below minimum quarterly revenue thresholds, an
increasing number of electronic bills presented and new product offerings such
as person to person payments, it will become increasingly more difficult to
correlate revenue solely to the number of our subscribers, with transactions
processed becoming an additional revenue indicator. Over the next several
quarters we will identify and then begin reporting on new revenue indicators
that will become more meaningful as our business continues to evolve.

         Our license fee revenue increased by $0.5 million, or 7%, from $7.2
million for the three months ended December 31, 2000 to $7.7 million for the
three months ended December 31, 2001 and declined by $0.5 million, or 4%, from
$12.3 million for the six months ended December 31, 2000 to $11.8 million for
the six months ended December 31, 2001. Although license sales stalled in the
quarter ended September 30, 2001 due to overall economic conditions, we
experienced an improvement in sales in both our ACH and our Reconciliation
software products in the quarter ended December 31, 2001. However, sales of our
i-Solutions electronic billing and statement software have continued to fall
short of our expectations as a result of the recession. We now provide a hosting
alternative where we receive biller information at our site and convert it to
electronic format for delivery, and



                                       13
<PAGE>

customers are beginning to show interest in this newest offering. We believe
that the environment for software license sales will continue to be challenging
until economic conditions begin to improve, and as a result, our ability to grow
this revenue stream will be hampered.

         Our maintenance fee revenue increased by $0.4 million, or 7%, from $5.7
million for the three months ended December 31, 2000 to $6.1 million for the
three months ended December 31, 2001 and by $1.9 million, or 18%, from $10.3
million for the six months ended December 31, 2000 to $12.2 million for the six
months ended December 31, 2001. Maintenance represents annually renewable
product support for our software customers, which tends to grow with incremental
software license sales. Our growth in maintenance is primarily the result of
first year maintenance generated from license sales in the last four quarters,
combined with annual retention rates of existing customers that exceed 80%.
Pricing has not had a material impact on maintenance revenue growth. An
additional factor that explains the disparity in the year over year growth rate
of 18% versus the quarter over quarter growth rate of 7% was a modification we
made in our maintenance revenue recognition policy that took effect in the
quarter ended September 30, 2000. While we continue to recognize maintenance
revenue ratably over the related service period, we delay the onset of revenue
recognition until cash is received, as opposed to our previous practice of
estimating renewals in advance of cash receipt. The implementation of this new
policy caused some initial timing differences whereby revenue in the quarter
ended September 30, 2000 was lower than normal during the transition. We do not
anticipate any significant timing impact going forward.

         Our other revenue, which consists mostly of consulting fees, decreased
by $1.3 million, or 25%, from $5.3 million for the three months ended December
31, 2000 to $4.0 million for the three months ended December 31, 2001 and by
$0.7 million, or 7%, from $10.2 million for the six months ended December 31,
2000 to $9.5 million for the six months ended December 31, 2001. We earn
consulting fees from implementation engagements in each of our three business
units. The decline in other revenue is the result of lower biller
implementations in our Electronic Commerce business and less software
implementations engagements.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $66.6 million, or 61.8% of total revenue, for the
three months ended December 31, 2000, and was $67.7 million, or 55.8% of total
revenue, for the three months ended December 31, 2001. Cost of processing,
servicing and support was $119.7 million, or 60.3% of total revenue, for the six
months ended December 31, 2000, and was $135.9 million, or 57.1% of total
revenue, for the six months ended December 31, 2001. Cost of processing,
servicing and support as a percentage of servicing only revenue (total revenue
less license fees) was 66.3% for the three months ended December 31, 2000 versus
59.6% for the three months ended December 31, 2001, and was 64.3% for the six
months ended December 31, 2000 versus 60.1% for the six months ended December
31, 2001. We continue to achieve improved efficiency and processing quality
within our Genesis processing platform in our Electronic Commerce business. Our
ratio of electronic payments to total payments has improved from just over 60%
at December 31, 2000 to over 68% at December 31, 2001. Electronic payments carry
a significantly lower variable cost per unit than paper based transactions and
are far less likely to result in a costly customer inquiry or claim. The full
underlying impact of improved efficiency and quality, however, is not readily
apparent in these results. We acquired TransPoint in September 2000 and the
electronic billing and payment assets of Bank of America in October 2000. As a
result of these transactions, we supported two additional billing and payment
processing platforms for much of the year ended June 30, 2001, and one
additional platform into fiscal 2002. For the six month period ended December
31, 2001 we incurred over $12 million of expense to Bank of America for their
support of the Bank of America West processing platform. The acquired platforms
are less efficient than our Genesis processing platform, and therefore more
expensive to operate. We completed the conversion of TransPoint subscribers and
billers onto our Genesis processing platform in the quarter ended June 30, 2001.
We completed the conversion of a portion of the Bank of America East operations
in the quarter ended March 31, 2001, which included subscribers in Georgia,
Tennessee, Florida, Missouri, Arkansas, Iowa, Kansas, Arizona, New Mexico, North
Carolina, South Carolina, Virginia, Maryland and the District of Columbia. We
completed the conversion of the remainder of the Bank of America subscribers,
referred to as Bank of America West, to Genesis in the quarter ended December
31, 2001. We will retire our Austin platform, which provides processing for a
number of smaller banks with a relatively small number of subscribers in the
quarter ended June 30, 2002. We will maintain the Bank of America West platform
through the quarter ended March 31, 2002 to allow for the completion of any
outstanding customer inquiries and remaining payment reconciliation issues, at
which time the platform will be retired. As a result of the retirement of the
Bank of America West platform, we have also announced that we will close our San
Francisco office, which provides customer care services primarily for customers
processing on the legacy Bank of America platform. We expect the retirement of
the Bank of America West processing platform and the resultant closing of the
San Francisco office to reduce quarterly processing costs by approximately $5.0
million, which will first take effect in the quarter ended June 30, 2002. During
this time, we will also continue to drive



                                       14
<PAGE>

programs focused on improved efficiency and quality, all of which we expect to
result in reduced cost per transaction and improving gross margins.

         Research and Development. Our research and development costs were $14.0
million, or 13.0% of total revenue, for the three months ended December 31,
2000, and $15.4 million, or 12.7% of total revenue, for the three months ended
December 31, 2001. Our research and development costs were $27.9 million, or
14.1% of total revenue, for the six months ended December 31, 2000, and $30.1
million, or 12.6% of total revenue, for the six months ended December 31, 2001.
Adjusted for capitalized development costs, our gross research and development
costs were $15.0 million, or 13.9 % of total revenue for the three months ended
December 31, 2000, were $16.8 million, or 13.9% of total revenue, for the three
months ended December 31, 2001, were $30.2 million, or 15.2% of total revenue,
for the six months ended December 31, 2000, and were $32.7 million, or 13.7% of
total revenue, for the six months ended December 31, 2001. During fiscal years
2000 and 2001, we decided to invest heavily in research and development
activities to enhance our product offerings and further distance ourselves from
the competition. Although lower as a percentage of revenue in the current year,
we continue to invest heavily and consistently in research and development
activities on a gross dollar basis in all of our business segments in
anticipation and support of revenue growth, quality enhancement and efficiency
improvement opportunities.

         Sales and Marketing. Our sales and marketing costs were $40.8 million,
or 37.8% of total revenue, for the three months ended December 31, 2000, and
were $15.4 million, or 12.6% of total revenue, for the three months ended
December 31, 2001. Our sales and marketing costs were $55.1 million, or 27.7% of
total revenue, for the six months ended December 31, 2000, and were $30.3
million, or 12.7% of total revenue, for the six months ended December 31, 2001.
The terms of our strategic alliance agreement with Bank of America in October
2000 called for us to provide $25.0 million toward a two year, $45.0 million
marketing campaign to be administered by Bank of America. Because we had no
direct influence or impact on the specific nature, timing or extent of the use
of funds, we expensed the $25.0 million as a period cost in the quarter ended
December 31, 2000. Net of this one time charge, sales and marketing costs were
$15.8 million, or 14.7% of total revenue, for the three months ended December
31, 2000, and were $30.1 million, or 15.1% of total revenue, for the six months
ended December 31, 2000. Although lower as a percentage of total revenue in the
current fiscal year, we continue to invest consistently in sales and marketing
activities on a gross dollar basis. Our marketing staff continues to provide
assistance to our consumer service provider customers in identifying best
practice programs that are successful in driving increased subscriber adoption
and activation.

         General and Administrative. Our general and administrative costs were
$12.8 million, or 11.9% of total revenue, for the three months ended December
31, 2000, and were $11.4 million, or $9.4% of total revenue, for the three
months ended December 31, 2001. Our general and administrative costs were $24.3
million, or 12.2% of total revenue, for the six months ended December 31, 2000,
and were $23.0 million, or 9.7% of total revenue, for the six months ended
December 31, 2001. Our general and administrative costs as a percentage of
revenue continue to decline due to leverage inherent in our business model and
efforts to curtail discretionary spending in a recessionary economy.

         Depreciation and Amortization. Depreciation and amortization costs
decreased from $124.1 million for the three months ended December 31, 2000 to
$114.8 million for the three months ended December 31, 2001, and increased from
$179.9 million for the six months ended December 31, 2000 to $234.0 million for
the six months ended December 31, 2001. The significant depreciation and
amortization amounts are primarily the result of the acquisitions of TransPoint
in September 2000 and the purchase of the electronic banking assets of Bank of
America in October 2000, in addition to remaining intangible amortization of
previous acquisitions. Net of intangible amortization resulting from
acquisitions, our depreciation costs related solely to fixed assets used in
ongoing operations, increased from $8.5 million for the three months ended
December 31, 2000 to $10.0 million for the three months ended December 31, 2001,
and from $16.3 million for the six months ended December 31, 2000 to $19.6
million for the six months ended December 31, 2001. The increase in fixed asset
depreciation is the result of continued capital spending for data processing
equipment, related software, and new and improved facilities in support of the
continued growth of the business.

         Impairment of Intangible Assets. In the quarter ended December 31,
2001, we recorded charges totaling $155.1 million for the impairment of
intangible assets. This was the combined result of a charge of $107.4 million
for the impairment of goodwill associated with our acquisition of BlueGill
Technologies in April 2000 (currently referred to as CheckFree i-Solutions), and
of $47.7 million for the retirement of certain technology assets we acquired
from TransPoint in September 2000.



                                       15
<PAGE>


         Upon successful integration of BlueGill Technologies into the
operations of our Software business, during fiscal 2001, we established a
revenue budget for fiscal 2002 that anticipated continued rapid growth in
software license sales. We saw a drop off in demand for electronic billing
software during the quarter ended September 30, 2001; however, we did not
believe this would impact our longer-term expectations for this product line
and, therefore, there was no impairment at that time. When sales declined again
in the quarter ended December 31, 2001, we reevaluated our long-term
expectations and viewed this as a triggering event that required evaluation of
possible impairment per the guidelines of Statement of Financial Accounting
Standards number 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" (SFAS 121). Our tests relative to the
total tangible and intangible assets related to the i-Solutions product line
revealed that the assets were in fact impaired. This resulted in a charge of
$107.4 million to write down the value of goodwill related to the acquisition of
BlueGill.

         As part of the acquisition of TransPoint in September 2000, we were
required to maintain the TransPoint technology for up to three years for any
customer that wished to remain on the system. When valuing the TransPoint
assets, we established an intangible asset for current technology and assigned
it a three-year life. We have migrated all of the subscribers, billers and
consumer service providers to our Genesis platform and the last of our
international partners gave notice of their intention to cancel their
maintenance agreement with us during the December 2001 quarter. Additionally, we
recently concluded that components of the TransPoint technology were not
compatible with current or future initiatives. We viewed these as triggering
events that required the evaluation of possible impairment per SFAS 121. Our
overall testing indicated that there was no impairment of the TransPoint assets
in general; however, we then evaluated SFAS 121 requirements related to the
retirement of assets and identified two technologies for which we now have no
future use. We retired these two technologies, resulting in a charge of $47.7
million. In the future, should we decide the remaining technologies have no
continued use in our evolving electronic billing product offerings, we would be
required to retire them as well. The book value of the remaining current
technology asset on December 31, 2001 is $68.6 million and the quarterly
amortization is $10.3 million.

         In- Process Research and Development. In the three month period ended
September 30, 2000, we incurred $18.6 million of in-process research and
development costs in relation to our acquisition of TransPoint. For a detailed
discussion of this charge, please refer to the Notes to Consolidated Financial
Statements included in our June 30, 2001 Annual Report.

         Interest. Net interest decreased from net interest income of $1.5
million for the three months ended December 31, 2000 to net interest expense of
$1.2 million for the three months ended December 31, 2001. Net interest
decreased from net interest income of $1.8 million for the six months ended
December 31, 2000 to net interest expense of $1.7 million for the six months
ended December 31, 2001. Net interest is composed of interest income, offset by
interest expense. Interest income decreased from $4.7 million for the three
months ended December 31, 2000 to $2.0 million for the three months ended
December 31, 2001. The decrease is a result of the combined effect of a
reduction of average invested assets of approximately $50.5 million and a
reduction in average annual yield of approximately 3% consistent with the
continued lowering of interest rates over the past year. Interest income has
decreased from $8.4 million for the six months ended December 31, 2000 to $4.7
million for the six months ended December 31, 2001. The reduction is a result of
the combined effect of a decrease in average annual yield of approximately 3%,
offset by an increase in average invested assets of $7.1 million. Interest
expense has declined slightly from $3.3 million for the three months ended
December 31, 2000 to $3.2 million for the three months ended December 31, 2001.
The slight decrease is due to a decrease in average outstanding debt and other
long-term obligations of approximately $2.0 million while average interest rates
have remained flat quarter over quarter. Interest expense has declined slightly
from $6.7 million for the six months ended December 31, 2000 to $6.5 million for
the six months ended December 31, 2001. The decrease is due to a slight drop in
of two basis points in interest rates while average outstanding debt has
remained relatively flat year over year. Note that our interest rate is fixed at
6.5% on our $172.5 million of convertible debt that has remained in place for
all periods.

         Income Taxes. We recorded an income tax benefit of $33.1 million, at an
effective rate of 22.2%, for the three months ended December 31, 2000, and an
income tax benefit of $44.3 million, at an effective rate of 17.1%, for the
three months ended December 31, 2001. We recorded an income tax benefit of $50.8
million, at an effective rate of 22.6% for the six months ended December 31,
2000, and an income tax benefit of $67.9 million, at an



                                       16
<PAGE>

effective rate of 18.3%, for the six months ended December 31, 2001. The
reported effective rates differ from the blended statutory rate of 40% in all
periods due to certain non-deductible goodwill, impairment charges related to
goodwill, in-process research and development and other non-deductible expenses,
offset somewhat by jobs credits and tax exempt interest income.


SEGMENT INFORMATION

         The following table sets forth operating revenue and operating income
by industry segment for the periods noted. Charges identified as purchase
accounting amortization, impairment of intangible assets, one time marketing
charge and in-process research and development were separated from the operating
results for a better understanding of the underlying performance of each
segment.

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                                       DECEMBER 31,                           DECEMBER 31,
                                                              ------------------------------          ------------------------------
                                                                 2000               2001                 2000                2001
                                                              ----------          ----------          ----------          ----------
                                                                                          (IN THOUSANDS)

<S>                                                           <C>                 <C>                 <C>                 <C>
OPERATING REVENUE:
Electronic Commerce ................................          $  74,405           $  85,639           $ 137,363           $ 170,465
Investment Services ................................             17,014              19,725              32,669              39,097
Software ...........................................             16,302              15,974              28,446              28,451
                                                              ----------          ----------          ----------          ----------
       Total Operating Revenue .....................          $ 107,721           $ 121,338           $ 198,478           $ 238,013
                                                              ==========          ==========          ==========          ==========

OPERATING INCOME (LOSS):
Electronic Commerce ................................          $  (6,253)          $   4,181           $ (11,039)          $   7,053
Investment Services ................................              4,022               5,466               8,021              10,835
Software ...........................................              1,244               2,005                 429                 691
Corporate ..........................................             (8,936)             (9,973)            (17,196)            (19,375)
Purchase accounting amortization ...................           (115,647)           (104,858)           (163,548)           (214,428)
Impairment of intangible assets ....................               --              (155,072)               --              (155,072)
One time marketing charge ..........................            (25,000)               --               (25,000)               --
In-process research and development ................               --                  --               (18,600)               --
                                                              ----------          ----------          ----------          ----------
       Total Operating Loss ........................          $(150,570)          $(258,251)          $(226,933)          $(370,296)
                                                              ==========          ==========          ==========          ==========
</TABLE>


         Revenue in our Electronic Commerce business increased by $11.2 million,
or 15%, from $74.4 million for the three months ended December 31, 2000 to $85.6
million for the three months ended December 31, 2001. Revenue increased by $33.1
million, or 24%, from $137.4 million for the six months ended December 31, 2000
to $170.5 million for the six months ended December 31, 2001. Underlying growth
in this business is driven primarily by an increase in subscribers from about
4.4 million at December 31, 2000 to 5.9 million at December 31, 2001. Sequential
subscriber growth for the quarter ended December 30, 2001 was 6%, as subscribers
increased from approximately 5.6 million at September 30, 2001 and was 7% for
the quarter ended September 30, 2001 as subscribers increased from about 5.2
million at June 30, 2001. This compares to eight previous quarters reflecting
subscriber growth of 8% or more. We anticipate that sequential subscriber growth
may remain lower in subsequent quarters, as economic conditions may continue to
cause financial institutions to be more aggressive in managing subscriber
counts.

         With our acquisition of TransPoint in September 2000, we became the
preferred provider of electronic billing and payment services to customers
offered through MicroSoft's MSN and Money Central product offerings. The
agreement with Microsoft provides guaranteed revenue of $120 million over a
five-year period that commenced in January 2001. Additionally, as part of the
TransPoint acquisition, we received $60 million of guaranteed revenue and/or
costs savings opportunities through First Data Corporation over a five-year
period, which began in September. Effective October 1, 2000, we completed a
strategic agreement with Bank of America, the largest bank in the U.S., to offer
electronic billing and payment services to its customer base. This ten-year
agreement provides annual revenue guarantees of $50 million, or $12.5 million on
a quarterly basis. We had been processing certain transactions for Bank of
America prior to the strategic agreement and therefore, the $50 million
guarantee is not entirely incremental to our underlying revenue. However, we did
add approximately 300,000 incremental



                                       17
<PAGE>

subscribers to our subscriber base upon completion of the strategic agreement.
Actual revenue for each of these agreements has been below the guaranteed
minimum level, until the quarter ended December 31, 2001, when Bank of America
exceeded their minimum. Bank of America provides in excess of 10% of the total
Electronic Commerce segment on a year to date basis as of December 31, 2001.

         When combining subscriber growth with guaranteed revenue minimums, an
increasing volume of business opting for a transaction based pricing structure
versus a traditional subscriber based pricing structure, an emerging electronic
billing revenue stream, and volatile interest based revenue sources that
fluctuate with interest rate changes, it has become much more difficult to
correlate revenue solely to the number of subscribers, with transactions
processed becoming an additional key indicator. During the three months ended
December 31, 2001, we processed over 75 million transactions, compared to
approximately 55.5 million for the three months ended December 31, 2000, and,
for the six months ended December 31, 2001, we processed approximately 144.4
million transactions, compared to approximately 102.5 million for the six months
ended December 31, 2000.

         To date, we have 191 primary billers in production with our E-Bill
electronic billing product offering that are delivering over 800,000 electronic
bills per month as of December 31, 2001. A primary biller, in our definition, is
one that has the potential to distribute in excess of 100,000 bills on a monthly
basis. Also, we have added bill aggregation technology to our Genesis platform
that provides access to additional billers through "bill scraping," which will
be available to our consumer service provider partners as they upgrade to our
Web Pay for Consumers product. As of December 31, 2001, we are distributing 25
popular bills through scraping technology and have implemented another 28
non-primary billers for a total consumer choice of among 244 electronic bills.
We believe that a complete, integrated round trip electronic billing and payment
experience for an average of six to ten bills per customer is an important
factor in driving subscriber growth. As of December 31, 2001, we estimate that
the average consumer using our Web Pay for Consumer product has the potential to
receive from six to eight electronic bills in major strategic marketing areas
throughout the United States.

         Operating results in our Electronic Commerce business, net of purchase
accounting amortization, intangible asset impairment charges, a one time
marketing charge, and in-process research and development charges, have improved
from an operating loss of $6.3 million for the three months ended December 31,
2000 to an operating profit of $4.2 million for the three months ended December
31, 2001. On the same basis, our Electronic Commerce operating results have
improved from an operating loss of $11.0 million for the six months ended
December 31, 2000 to an operating profit of $7.1 million for the six months
ended December 31, 2001. We continue to drive improved efficiency and processing
quality within our Genesis processing platform. Our ratio of electronic payments
to total payments has improved from approximately 60% as of December 31, 2000 to
over 68% as of December 31, 2001. Electronic payments carry a significantly
lower variable cost per unit than paper transactions and are far less likely to
result in a costly customer inquiry or claim. The full underlying impact of
improved efficiency and quality are not readily apparent in our results,
however. We acquired TransPoint in September 2000 and the electronic billing and
payment assets of Bank of America in October 2000. As a result of these
transactions, we supported two additional billing and payment processing
platforms for much of the year ended June 30, 2001 and one additional processing
platform through December 2001. The acquired platforms are less efficient than
our Genesis processing platform, and therefore much more expensive to operate.
For the six month period ended December 31, 2001 we incurred over $12 million of
expense to Bank of America for their support of the Bank of America West
processing platform. We completed the conversion of the TransPoint subscribers
and billers onto Genesis in the quarter ended June 30, 2001. We completed the
conversion of the Bank of America subscribers onto Genesis in the quarter ended
December 31, 2001. We will maintain the Bank of America West platform through
the quarter ended March 31, 2002 to allow for completion of any outstanding
customer inquiries and remaining payment reconciliation issues, at which time
the platform will be retired. As a result of the retirement of the Bank of
America West platform, we have announced that we will be closing our San
Francisco customer care office in the quarter ended June 30, 2002. We expect the
retirement of the Bank of America West platform and the resultant closing of the
San Francisco office to reduce quarterly processing costs by approximately $5.0
million, which will first take effect in the quarter ended June 30, 2002. Our
focus for the remainder of fiscal 2002 will be toward improved profitability in
our Electronic Commerce business through programs designed to:

         - drive increased subscriber adoption and activation among our
           partners;
         - improve product design and usability;
         - improve overall customer satisfaction; and
         - reduce variable costs per transaction.



                                       18
<PAGE>

         While there continue to be no guarantees as to the timing or extent of
accelerating adoption of electronic billing and payment services, we believe
that with our continued focus on improved product and service quality,
efficiency and customer satisfaction, we are better positioned to maintain our
market leadership position throughout an accelerated growth cycle should it
occur.

         Revenue in our Investment Services business has increased by 16%, from
$17.0 million for the three months ended December 31, 2000, to $19.7 million for
the three months ended December 31, 2001, and increased by 20%, from $32.7
million for the six months ended December 31, 2000, to $39.1 million for the six
months ended December 31, 2001. Growth in this business is due primarily to an
increase in portfolios managed from approximately 1.1 million at December 31,
2000, to over 1.2 million at December 31, 2001. Much of the revenue growth has
occurred in fee-based versus institutional accounts, mirroring the movement of
the investment industry towards fee-based products and away from the
transactional commission-based model. The lower annual growth in both revenue
and portfolios compared to prior periods is due primarily to the decline in
economic conditions, particularly in the financial services sector, and an
adverse effect caused by industry consolidations where current portfolios are
moved to an internal or competitor's solution. Portfolios managed in the month
of October 2001 remained relatively flat compared to September 2001, and while
we have experienced modest portfolio growth in the months of November and
December 2001, we have not regained our historical growth rate. Revenue streams
from our financial planning software have declined from prior periods and we do
not expect a recovery in the near term due to economic and competitive
pressures. As a result, we have announced plans to discontinue these products
and rationalize the size of our Raleigh, North Carolina office during the
quarter ended March 31, 2002. Although preliminary, our expectations are that
these actions will result in a modest decrease in revenue more than offset by a
modest increase in operating income in future periods.

         During the six month period ended December 31, 2001, the division
released a web-based version of two of its prominent products. The APL Browser
offers clients access via the Internet to the division's portfolio accounting
and reporting product. Similarly, money manager database searches can now be
executed through the web-based M-Search product. These product releases, or
Internet-based wrap services, create a highly visible new distribution channel
for money managers and brokers, and an opportunity for growth for our Investment
Services business.

         Operating income in our Investment Services segment, net of purchase
accounting amortization, has increased by 36%, from $4.0 million for the three
months ended December 31, 2000, to $5.5 million for the three months ended
December 31, 2001, and increased by 35%, from $8.0 million for the six months
ended December 31, 2000, to $10.8 million for the six months ended December 31,
2001. As indicated above, much of our revenue growth has occurred in fee-based
versus institutional accounts that carry a lower unit price, which in turn
places downward pressure on margins as the cost to process this business is not
proportionally lower. However, nonrecurring investment expenses in previous
periods resulted in a return of the margin to its historical rate. We recently
initiated a quality program that focuses attention on improved system
reliability, particularly trading availability, which is critical to the
business unit. For the remainder of fiscal 2002, the Investment Services
division's key initiatives include:

         - extension of product offerings that enhance capabilities and address
           new client products;
         - additional versions of the APL Browser with increased functionality;
           and
         - continued development of a relational database allowing our clients
           easier access to their data.

         Revenue in our Software business declined by $0.3 million, or
approximately 2%, from $16.3 million for the three months ended December 31,
2000 to $16.0 million for the three months ended December 31, 2001. Revenue
remained essentially flat, at $28.4 million for the six months ended December
31, 2000 and 2001. The downturn in economic conditions in calendar 2001 has
caused many businesses to curtail discretionary expenditures, which has resulted
in an overall dampened demand for software solutions. Our approach to addressing
these economic concerns within our i-Solutions business unit has been to offer
two new products:

         - i-Solutions Select, which is a series of industry-tailored packaged
           software choices at lower price points; and
         - new options for billers to host economically-priced electronic
           billing and payment services at CheckFree, which streamlines
           implementation cycles and lowers costs to billers while delivering
           both biller direct and e-bill distribution and payment across our
           network.



                                       19
<PAGE>
We released these two solutions during the quarter ended September 30, 2001 and
while we are seeing increasing interest in the hosting solution, the direct
software sales of both i-Solutions and i-Solutions Select remain slower than
expected. Our more mature software units, CheckFree Financial and Compliance
Solutions (CFACS) and ACH Solutions, both faced the same dampening of demand in
the quarter ended September 30, 2001, but saw increased sales in the December
31, 2001 quarter. Much of the improvement in the mature software divisions came
from closing sales expected for the March 2002 quarter more so than from
closings delayed in the September 2001 quarter, and as a result, we believe that
software sales in general will continue to be challenging until economic
conditions begin to improve.

         Operating results in our Software business, net of purchase accounting
amortization, have improved from operating income of $1.2 million for the three
months ended December 31, 2000 to operating income of $2.0 for the three months
ended December 31, 2001. Operating results have improved slightly, from
operating income of $0.4 million for the six months ended December 31, 2000 to
operating income of $0.7 million for the six months ended December 31, 2001.
Improvement in operating results is primarily the result of stronger than
expected license revenue in the quarter ended December 31, 2001 and continued
efforts to manage discretionary costs in light of current economic conditions.
Expense savings have taken place throughout the Software segment and not in a
particular function or product area.

         Our Corporate segment represents charges for legal, human resources,
finance and other various unallocated overhead expenses. Our Corporate segment
incurred operating expenses of $8.9 million, or 8.3% of total revenue for the
three months ended December 31, 2000, and of $10.0 million, or 8.2% of total
revenue for the three months ended December 31, 2001. Our Corporate segment
incurred operating expenses of $17.2 million, or 8.7% of total revenue, for the
six months ended December 31, 2000, and $19.4 million, or 8.1% of total revenue,
for the six months ended December 31, 2001. On a year over year basis, although
we continue to add corporate resources in support of the growth of the business,
our overhead costs as a percentage of revenue have continued to decline,
reflecting leverage inherent in our current business model.

         The purchase accounting amortization line represents amortization of
intangible assets resulting from all of our various acquisitions from 1996
forward. The total amount of purchase accounting amortization has decreased from
$115.6 million for the three months ended December 31, 2000 to $104.9 million
for the three months ended December 31, 2001. The decline is the result of
shorter-term intangible assets that have fully amortized in the quarter ended
December 31, 2001. The total amount of purchase accounting amortization has
increased from $163.5 million for the six months ended December 31, 2000 to
$214.4 million for the six months ended December 31, 2001. This increase is the
result of intangible assets established by the acquisitions of TransPoint in
September 2000 and the purchase of the electronic billing and payment assets of
Bank of America in October 2000, offset by shorter-term intangible assets that
fully amortized in the quarter ended December 31, 2001.

          In the quarter ended December 31, 2001, we recorded charges totaling
$155.1 million for the impairment of intangible assets. This was the combined
result of a charge of $107.4 million for the impairment of goodwill associated
with our acquisition of BlueGill Technologies in April 2000 (currently referred
to as CheckFree i-Solutions), and of $47.7 million for the retirement of certain
technology assets we acquired from TransPoint in September 2000. Please refer to
Impairment of Intangible Assets in the Results of Operations section of this
report for a detailed explanation of these charges.

         The one time marketing charge took place in the three-month period
ended December 31, 2000. Our strategic alliance with Bank of America called for
us to provide $25.0 million of cash at closing to help support an agreed upon
two year $45.0 million marketing campaign by Bank of America. Because we had no
direct influence or impact on the specific nature, timing or extent of the use
of the funds, we expensed the $25.0 million as a period cost in the quarter
ended December 31, 2000. Additionally, because we do not market directly to
subscribers but rather leave that to our various consumer service provider
customers, we have carved out this charge from ongoing operations as an unusual,
non-recurring event.

          In the three month period ended September 30, 2000, we incurred $18.6
million of in-process research and development costs in relation to our
acquisition of TransPoint. For a detailed discussion of this charge, please
refer to the Notes to Consolidated Financial Statements included in our June 30,
2001 Annual Report.



                                       20
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         The following chart summarizes our Consolidated Statement of Cash Flows
for the three and six months ended December 31, 2001.

<TABLE>
<CAPTION>
                                                                         Three Months          Three Months           Six Months
                                                                            Ended                  Ended                 Ended
                                                                         September 30,          December 31,          December 31,
                                                                             2001                  2001                  2001
                                                                         -------------          ------------          ------------

<S>                                                                        <C>                   <C>                   <C>
Net cash provided by (used in):
   Operating activities ..........................................         $ (1,228)             $  7,674              $  6,446
   Investing activities ..........................................           (5,699)              (14,330)              (20,029)
   Financing activities ..........................................             (417)                  670                   253
                                                                           ---------             ---------             ---------
Net decrease in cash and cash equivalents ........................         $ (7,344)             $ (5,986)             $(13,330)
                                                                           =========             =========             =========
</TABLE>


         As of December 31, 2001, we have $189.1 million of cash, cash
equivalents and short-term investments on hand and additional $57.9 million in
long-term investments. Our balance sheet reflects a current ratio of 2.7 and
working capital of $184.1 million. During the quarter ended December 31, 2001 we
entered into certain operating leases for equipment and we pledged $4.3 million
of investment securities as collateral, which brings our pledged investments to
a total of $5.6 million. We believe that existing cash, cash equivalents and
investments will be more than sufficient to meet our presently anticipated
requirements for the foreseeable future. To the extent that additional capital
resources are required, we have access to an untapped $30.0 million line of
credit.

         For the six months ended December 31, 2001, we generated $6.4 million
of cash for operating activities. During our September quarter we typically use
a significant amount of cash for such things as payment of annual incentive
compensation and commissions related to seasonally high software sales from the
previous quarter. Underlying cash provided by ongoing operations in the December
quarter has offset these seasonally high uses of cash in the September quarter.

         From an investing perspective, we used $20.0 million of cash for the
six months ended December 31, 2001. This is comprised of $13.2 million of cash
used for the purchase of property and software and $2.6 million of capitalized
software development costs and the net use of $4.2 million of cash from the
maturities and sales of held to maturity securities.

         From a financing perspective, for the six months ended December 31,
2001, we received $0.3 million in cash from the exercise of employee stock
options and $2.4 million from payroll deductions set aside for our employee
stock purchase plan. We used $2.4 million of cash for principal payments under
capital lease obligations.


INFLATION

         We believe the effects of inflation have not had a significant impact
on our results of operations.


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q include certain forward-looking
statements within the meaning of Section 27A of the Securities Act, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Those statements
include, but may not be limited to, all statements regarding



                                       21
<PAGE>

our and management's intent, belief and expectations, such as statements
concerning our future profitability, and our operating and growth strategy.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, the factors set forth under the
caption Business - Business Risks in the Annual Report on Form 10-K for the year
ended June 30, 2001, as amended, and other factors detailed from time to time in
our filings with the Securities and Exchange Commission. One or more of these
factors have affected, and in the future could affect, our businesses and
financial results in the future and could cause actual results to differ
materially from plans and projections. Although we believe that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate. Therefore, there can be no assurance
that the forward-looking statements included in this Annual Report will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as representations by us or any other person that our
objectives and plans will be achieved. All forward-looking statements made in
this Annual Report are based on information presently available to our
management. We assume no obligation to update any forward-looking statements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         With the acquisition of BlueGill in April 2000, we obtained operations
in Canada and we have opened offices in the United Kingdom, Singapore and
Australia. As a result, we now have assets and liabilities outside the United
States that are subject to fluctuations in foreign currency exchange rates. Due
to the start up nature of each of these operations, however, we currently
utilize the U.S. dollar as the functional currency for all international
operations. As these operations begin to generate sufficient cash flow to
provide for their own cash flow requirements, we will convert to local currency
as the functional currency in each related operating unit as appropriate.
Because we utilize the U.S. dollar as the functional currency and due to the
immaterial nature of the amounts involved, our economic exposure from
fluctuations in foreign exchange rates is not significant enough at this time to
engage in forward foreign exchange and other similar instruments.

         While our international sales represented less than 2% of our revenue
for the year ended June 30, 2001, we now market, sell and license our products
throughout the world. As a result, our future revenue could be somewhat affected
by weak economic conditions in foreign markets that could reduce demand for our
products.

         Our exposure to interest rate risk is limited to the yield we earn on
invested cash, cash equivalents and investments and interest based revenue
earned on products such as our account balance transfer business. Our
convertible debt carries a fixed rate, as do any outstanding capital lease
obligations. Although our Investment Policy currently prohibits the use of
derivatives for trading or hedging purposes, we believe that our limited
interest rate risk currently does not warrant the use of such instruments.

         We have investments in several e-billing related companies totaling
$3.7 million at December 31, 2001. These companies are in the start-up phase and
can therefore be adversely impacted by economic conditions. During our 2001
fiscal year, we recorded charges to reflect the "other than temporary" decline
in value of these investments. In the future, should the value of these
investments decrease further, we may incur additional charges to reduce the
value of these investments.



                                       22
<PAGE>

                           PART II. OTHER INFORMATION


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

         The Annual Meeting of Stockholders of the Company was held on
Wednesday, November 7, 2001 to elect three Class III Directors of the Company to
serve for a three-year term expiring at the 2004 Annual Meeting of Stockholders.

         Management's proposal as presented in the proxy statement was approved
with the following vote:

         Proposal 1:  The election of three Class III Directors of the Company,
                      to serve until the 2004 Annual Meeting of Stockholders or
                      until his successor is elected and qualified:

<TABLE>
<CAPTION>
                                                              NUMBER OF SHARES VOTED
                                       ---------------------------------------------------------------------
                                                                    WITHHOLD
                                               FOR                  AUTHORITY                 TOTAL
                                       --------------------    --------------------    ---------------------

<S>                                        <C>                      <C>                     <C>
         Peter J. Kight                    59,625,736               4,247,373               63,873,109
         Lewis C. Levin                    61,531,981               2,341,128               63,873,109
         Jeffrey M. Wilkins                61,994,570               1,878,539               63,873,109
</TABLE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a)  EXHIBITS.

             None.

        (b)  REPORTS ON FORM 8-K.

             We did not file any Current Reports on Form 8-K with the Securities
and Exchange Commission during the quarter ended December 31, 2001.



                                       23
<PAGE>

                                   SIGNATURES


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

                                   CHECKFREE CORPORATION

Date: February 13, 2002            By: /s/ David E. Mangum
                                       -----------------------------------------
                                       David E. Mangum, Executive Vice President
                                       and Chief Financial Officer* (Principal
                                       Financial Officer)




Date: February 13, 2002            By: /s/ Joseph P. McDonnell
                                       -----------------------------------------
                                       Joseph P. McDonnell, Vice President,
                                       Controller, and Chief Accounting Officer
                                       (Principal Accounting Officer)


* In his capacity as Executive Vice President and Chief Financial Officer, Mr.
  Mangum is duly authorized to sign this report on behalf of the Registrant.



                                       24