<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 March 31, 2002
                                       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: 88,060,896 shares of
Common Stock, $.01 par value, were outstanding at May 13, 2002.


<PAGE>


                                    FORM 10-Q

                              CHECKFREE CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     PAGE NO.
                                                                                     --------
<S>                                                                                   <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements.
                      Condensed Consolidated Balance Sheets                             3
                           March 31, 2002 and June 30, 2001

                      Condensed Consolidated Statements of Operations                   4
                           For the Three and Nine Months Ended
                           March 31, 2001 and 2002

                      Condensed Consolidated Statements of Cash Flows                   5
                           For the Nine Months Ended
                           March 31, 2001 and 2002

                      Notes to Interim Condensed Consolidated Unaudited                 6
                           Financial Statements For the Three and Nine
                           Months Ended March 31, 2001 and 2002

         Item 2.  Management's Discussion and Analysis of Financial
                      Condition and Results of Operations.                              11

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk            24

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.                  N/A

         Item 5.  Other Information.                                                    N/A

         Item 6.  Exhibits and Reports on Form 8-K.                                     25

         Signatures.                                                                    26
</TABLE>


                                       2
<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          JUNE 30,            MARCH 31,
                                                                                            2001                 2002
                                                                                      -----------------    -----------------
                                                                                                 (IN THOUSANDS)
<S>                                                                                        <C>                   <C>
                                       ASSETS
Current assets:
     Cash and cash equivalents................................................        $       124,122       $       123,926
     Investments..............................................................                 35,930                92,197
     Accounts receivable, net.................................................                 88,818                74,105
     Prepaid expenses and other assets........................................                  8,681                 7,853
     Deferred income taxes....................................................                 13,725                13,480
                                                                                      ----------------      ----------------
         Total current assets.................................................                271,276               311,561
Property and equipment, net...................................................                109,226                99,586
Other assets:
     Capitalized software, net................................................                187,021                84,218
     Goodwill, net                                                                            820,169               572,236
     Strategic agreements, net................................................                643,212               550,260
     Other intangible assets, net.............................................                 47,118                29,771
     Investments..............................................................                 96,042                58,221
     Restricted investments...................................................                     --                 3,000
     Other noncurrent assets..................................................                  9,889                 9,000
                                                                                      ----------------      ----------------
         Total other assets...................................................              1,803,451             1,306,706
                                                                                      ----------------      ----------------
              Total...........................................................        $     2,183,953       $     1,717,853
                                                                                      ================      ================

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable.........................................................        $        19,084       $        16,542
     Accrued liabilities......................................................                 60,090                63,539
     Current portion of long-term obligations.................................                  4,528                 3,066
     Deferred revenue.........................................................                 44,913                40,111
                                                                                      ----------------      ----------------
         Total current liabilities............................................                128,615               123,258
Accrued rent and other........................................................                  4,758                 3,902
Deferred income taxes.........................................................                141,853                53,392
Obligations under capital leases - less current portion.......................                  4,041                 3,135
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- 500,000,000 authorized shares, $.01 par value;
         issued 92,472,299 and 93,539,748 shares, respectively;
         outstanding 86,928,475 and 88,011,404 shares, respectively...........                    869                   880
     Additional paid-in-capital...............................................              2,420,957             2,431,920
     Accumulated deficit......................................................               (689,455)          (1,070,994)
     Unearned compensation....................................................                   (185)                (140)
                                                                                      ----------------      ----------------
         Total stockholders' equity...........................................              1,732,186             1,361,666
                                                                                      ----------------      ----------------
              Total...........................................................        $     2,183,953       $     1,717,853
                                                                                      ================      ================
</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                      NINE MONTHS ENDED
                                                               MARCH 31,                                MARCH 31,
                                                    -------------------------------          -------------------------------
                                                        2001              2002                   2001             2002
                                                    -------------      ------------          -------------    --------------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>               <C>                   <C>                <C>
Revenues:
     Processing and servicing..................     $     95,636       $   108,603           $    261,324     $     313,056
     License fees..............................            7,577             7,085                 19,840            18,890
     Maintenance fees..........................            5,232             5,595                 15,539            17,804
     Other.....................................            4,624             3,303                 14,845            12,849
                                                    -------------      ------------          -------------    --------------
                    Total revenues.............          113,069           124,586                311,548           362,599

Expenses:
     Cost of processing, servicing and support.           68,289            66,961                187,947           202,816
     Research and development..................           13,276            13,464                 41,218            43,554
     Sales and marketing.......................           16,790            13,142                 71,843            43,418
     General and administrative................           12,843             9,654                 37,133            32,638
     Depreciation and amortization.............          125,126           100,831                304,995           334,863
     In-process research and development.......               --                --                 18,600                --
     Impairment of intangible assets...........               --                --                     --           155,072
     Reorganization charge.....................               --            15,871                     --            15,871
                                                    -------------      ------------          -------------    --------------
                    Total expenses.............          236,324           219,923                661,736           828,232
                                                    -------------      ------------          -------------    --------------
Loss from operations...........................        (123,255)          (95,337)              (350,188)         (465,633)
Interest, net..................................              629           (1,272)                  2,402           (2,987)
Loss on investments............................         (14,144)                --               (14,144)                --
                                                    -------------      ------------          -------------    --------------
Loss before income taxes.......................        (136,770)          (96,609)              (361,930)         (468,620)
Income tax benefit.............................         (35,703)          (19,150)               (86,486)          (87,081)
                                                    -------------      ------------          -------------    --------------
Net loss.......................................     $  (101,067)       $ (77,459)            $  (275,444)     $   (381,539)
                                                    =============      ============          =============    ==============

Basic earnings (loss) per share:
     Net income (loss) per common share........     $     (1.17)       $    (0.89)           $     (3.49)     $      (4.37)
                                                    =============      ============          =============    ==============
     Equivalent number of shares...............           86,682            87,446                 78,909            87,250
                                                    =============      ============          =============    ==============
Diluted earnings (loss) per share:
     Net income (loss) per common share........     $     (1.17)       $    (0.89)           $     (3.49)     $      (4.37)
                                                    =============      ============          =============    ==============
     Equivalent number of shares...............           86,682            87,446                 78,909            87,250
                                                    =============      ============          =============    ==============
</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>
                                                                                  NINE MONTHS ENDED
                                                                                      MARCH 31,
                                                                           ---------------------------------
                                                                                2001              2002
                                                                           ---------------    --------------
                                                                                    (IN THOUSANDS)
<S>                                                                           <C>                <C>
Cash flows from operating activities:
     Net loss........................................................      $    (275,444)     $   (381,539)
     Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities:
     In-process research and development.............................              18,600                --
     Loss on investments.............................................              14,144                --
     Loss on disposal of property and equipment......................                  79                --
     Depreciation and amortization...................................             304,995           334,863
     Deferred income tax provision...................................            (86,395)          (87,081)
     Impairment of intangible assets.................................                  --           155,072
     Non-cash portion of reorganization charge.......................                  --             1,640
     Purchases of investments - Trading..............................            (12,304)                --
     Proceeds from maturities and sales of investments, net - Trading              19,004                --
     Change in certain assets and liabilities (net of acquisitions and
       dispositions):
         Accounts receivable.........................................            (23,020)            14,713
         Prepaid expenses and other..................................               1,745               858
         Other noncurrent assets.....................................               1,462               897
         Accounts payable............................................               4,072           (2,542)
         Accrued liabilities.........................................              17,990             8,105
         Deferred revenue............................................               8,650           (4,802)
         Income tax accounts.........................................               (352)             (118)
         Accrued rent and other......................................                 161              (19)
                                                                           ---------------    --------------
              Net cash provided by (used in) operating activities....             (6,613)            40,047
Cash flows from investing activities:
     Purchase of property and software...............................            (22,171)          (17,307)
     Proceeds from sale of property and equipment....................                 832                --
     Capitalization of software development costs....................             (4,063)           (3,632)
     Cash and cash equivalents from business acquired, net of
       acquisition costs...........................................                96,083                --
     Capitalization of strategic agreement costs.....................            (10,114)                --
     Purchase of investments - held to maturity......................           (138,474)          (77,615)
     Increase in restricted investments..............................                  --           (3,000)
     Proceeds from maturities and sales of investments - held to
       maturity......................................................              68,450            59,169
                                                                           ---------------    --------------
              Net cash used in investing activities..................             (9,457)          (42,385)
Cash flows from financing activities:
     Principal payments under capital lease obligations..............             (3,190)           (3,268)
     Proceeds from sale of stock and exercise of warrants............              12,562               688
     Proceeds from stock options exercised...........................               6,731             1,576
     Proceeds from employee stock purchase plan......................               3,067             3,146
                                                                           ---------------    --------------
              Net cash provided by financing activities..............              19,170             2,142
                                                                           ---------------    --------------
Net increase (decrease) in cash and cash equivalents.................               3,100             (196)
Cash and cash equivalents:
     Beginning of period.............................................             128,074           124,122
                                                                           ---------------    --------------
     End of period...................................................      $      131,174     $     123,926
                                                                           ===============    ==============
</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 NINE MONTHS ENDED MARCH 31, 2001 AND 2002

         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
nine months ended March 31, 2001 and 2002 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 the 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 March 31, 2002 is $58,300,000 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 the time. The result of this test indicated that
there was no impairment of the Company's Electronic Commerce division long-lived
assets.

         3.       REORGANIZATION CHARGES

                  During the quarter ended March 31, 2002, the Company announced
it would streamline operations in its Electronic Commerce division, refine its
strategy for the i-Solutions business unit of its Software division, and
discontinue certain product lines associated with its Investment Services
division. As a result of these actions, the Company will close or consolidate
operations in several locations and eliminate certain other positions in the
Company. The streamlining of its Electronic Commerce division operations is the
result of efficiencies gained from the consolidation of three legacy transaction
processing platforms to its Genesis platform and will result in the closing of
its San Francisco, California location on April 30th, and its Houston, Texas and
Austin, Texas locations on or about June 30th. The refinement in strategy for
the i-Solutions business resulted in the closing of its Ann Arbor, Michigan and
Singapore locations on March 19th.

As a result of these actions, the Company recorded $15,871,000 of reorganization
charges, including $1,640,000 of non-cash asset impairment charges, $11,016,000
of severance related to the termination of 706 employees, and $3,215,000 of
other exit costs, including lease termination fees and other closure, employee
and professional costs. These amounts are included in reorganization charge in
the accompanying condensed consolidated statement of operations. Revenues and
operating income related to the discontinued product lines in the Investment
Services division are immaterial to the Company.

                  A summary of activity related to the reorganization charges
recorded in the quarter ended March 31, 2002, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                           REORGANIZATION
                                                  REORGANIZATION                             RESERVE AT
                                                   CHARGES (1)         CASH PAYMENTS       MARCH 31, 2002
                                                 -----------------    -----------------    ----------------
<S>                                                     <C>                   <C>                <C>
Severance and other employee costs                      $  11,016             $  (662)           $  10,354
Office closure and business exit costs                      3,130                   --               3,130
Other exit costs                                               85                 (34)                  51

                                                 -----------------    -----------------    ----------------
Total reorganization                                    $  14,231             $  (696)           $  13,535
                                                 =================    =================    ================

(1) Excludes $1,640,000 of non-cash asset impairment charges

</TABLE>

                  In conjunction with the reorganization activities described
above, the Company revised the estimated useful lives of the Existing Product
Technology and Customer Base intangible assets related to the product lines that
are to be discontinued from its Mobius Group acquisition, the Workforce
intangible asset from its strategic agreement with Bank of America, and certain
property and equipment assets associated with office locations that are to be
closed. This resulted in additional depreciation and amortization expense of
$840,000 for the three and nine months ended March 31, 2002, which represents an
after-tax impact of $675,000 for the same periods and an impact to earnings per
share of $(0.01) for the three months ended March 31, 2002.


                                       7
<PAGE>
         4.       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
                     -------------------------------------------------------------------------------------------------
                                     MARCH 31, 2001                                     MARCH 31, 2002
                     -----------------------------------------------     ---------------------------------------------
                          LOSS              SHARES          PER-SHARE        LOSS             SHARES         PER-SHARE
                       (NUMERATOR)       (DENOMINATOR)      AMOUNT        (NUMERATOR)      (DENOMINATOR)       AMOUNT
                     ----------------    --------------     --------     -------------    ---------------    ---------
<S>                    <C>                   <C>            <C>           <C>                  <C>           <C>
Basic EPS..........    $   (101,067)         86,682         $ (1.17)      $  (77,459)          87,446        $ (0.89)
                                                            ========                                         =========
Effect of dilutive
securities:
  Options and
    warrants.......             --              --                                               --
                       --------------    --------------                  -------------    ---------------
Diluted EPS........    $   (101,067)         86,682         $ (1.17)      $  (77,459)          87,446        $ (0.89)
                       ==============    ==============     ========     =============    ===============    =========

                                                           FOR THE NINE MONTHS ENDED
                     -------------------------------------------------------------------------------------------------
                                     MARCH 31, 2001                                     MARCH 31, 2002
                     ------------------------------------------------    ---------------------------------------------

                          LOSS              SHARES          PER-SHARE        LOSS             SHARES         PER-SHARE
                       (NUMERATOR)       (DENOMINATOR)      AMOUNT       (NUMERATOR)      (DENOMINATOR)      AMOUNT
                     ----------------    --------------     ---------    -------------    ---------------    ---------
Basic EPS..........    $   (275,444)         78,909         $ (3.49)      $ (381,539)         87,250         $  (4.37)
                                                            ========                                         =========
Effect of dilutive
securities:
  Options and
    warrants.......             --                --                              --             --
                       --------------    --------------                  -------------    ---------------
Diluted EPS........    $   (275,444)         78,909         $ (3.49)        (381,539)         87,250         $  (4.37)
                       ==============    ==============     ========     =============    ===============    =========
</TABLE>

                  Basic loss per common share amounts were computed by dividing
loss available to stockholders 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>
                                               MARCH 31, 2001                         MARCH 31, 2002
                                    -------------------------------------    ----------------------------------
                                         LOSS                SHARES              LOSS              SHARES
                                      (NUMERATOR)        (DENOMINATOR)       (NUMERATOR)        (DENOMINATOR)
                                      ==============    =================    =============     ================
<S>                                          <C>                   <C>             <C>                   <C>
       Three Month Period Ended              $2,195                5,867           $2,342                2,921
                                      ==============    =================    =============     ================
       Nine Month Period Ended               $6,951                5,870           $7,130                3,283
                                      ==============    =================    =============     ================
</TABLE>

         5.       COMMON STOCK

                  The Company has issued stock for various employee benefit
programs during the current fiscal year. In the nine months ended March 31,
2002, 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 three months ended
September 30, 2001 and March 31, 2002, the Company issued 79,058 and 135,721
shares, respectively, 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.

         6.       OPERATING LEASES

                  The Company entered into certain operating leases for
equipment during the nine months ended March 31, 2002. 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 $4,733,000 at March 31, 2002, including $3,000,000 in
restricted investments. 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


                                       8
<PAGE>


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 March 31, 2002.

         7.       SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                               NINE MONTHS               NINE MONTHS
                                                                  ENDED                     ENDED
                                                             MARCH 31, 2001             MARCH 31, 2002
                                                         ------------------------    ---------------------
                                                                           (IN THOUSANDS)
<S>                                                                 <C>                        <C>
           Interest paid...........................                 $      6,293               $    6,300
                                                         ========================    =====================
           Income taxes paid (received)............                 $     (1,150)              $       49
                                                         ========================    =====================
           Capital lease additions and purchases
              other long term assets...............                 $      4,953               $       --
                                                         ========================    =====================
           Stock funding of 401(k) match...........                 $      2,484               $    3,621
                                                         ========================    =====================
           Purchase price of business acquisitions.                 $ (1,352,165)              $       --
           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..............                 $     96,083               $       --
                                                         ========================    =====================
</TABLE>

         8.       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 $2,000,000 of
                                    unamortized workforce in place intangible
                                    assets into goodwill.

                           -        Upon adoption, the balance of goodwill and
                                    workforce in place is expected to be
                                    $533,000,000 and we will discontinue
                                    amortizing these assets at that time. The
                                    resulting reduction in amortization expense
                                    is estimated at approximately $165,000,000
                                    for each of our fiscal years 2003, 2004 and
                                    2005.

                           -        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 initial test
                                    before December 31, 2002.

                  Following the transitional impairment test, our goodwill
balances will be subject to annual


                                       9
<PAGE>


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.

         9.       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 the Company
and is considered a related party. For the nine months ended March 31, 2002, we
recorded total revenues, across all our business segments, of $42,300,000 from
Bank of America. For the same period we incurred $19,400,000 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 March 31, 2002, amounts due from Bank of
America total $15,200,000 and amounts due to Bank of America total $8,400,000.
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.


                                       10
<PAGE>


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

OVERVIEW

         We are the leading provider of electronic billing and payment 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 6.3 million
consumers as of March 31, 2002. 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 70% of all of our bill payments electronically. We
processed approximately 82 million transactions for the quarter ended March 31,
2002 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 and 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 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 March 31, 2002, we have 250 billers in production
and are delivering more than 1.1 million 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 26 national credit card bills to the 250 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 will combine them in a single
mailing to the merchant. Our strategy is to drive operational efficiency and
improve profitability by increasing the percentage of transactions we process
electronically. Since June 1998, we have increased our electronic payments ratio
from 32% of total payments processed electronically to over 70% by March 2002.


                                       11
<PAGE>


         We are also a leading provider of institutional portfolio management
and information service software. Our Investment Services business offers
portfolio accounting and performance measurement services to investment
advisors, brokerage firms, banks and insurance companies and money manager
search software to investment managers and consultants. Our portfolio management
system solution includes:

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

         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 about 1.2 million as of March 31, 2002.

         Our money manager database software includes:

         -        qualitative and quantitative data on over 1,300 firms;
         -        both a web-based and desktop version;
         -        graphical client reporting;
         -        multiple investment universe options.

         Our money manager database clients are typically investment advisors or
financial consultant (independent or affiliated) and money management firms,
which use the product as a competitive assessment tool.

         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 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


                                       12
<PAGE>


              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.

         -        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 the strategic agreement we entered into with
Bank of America in April 2000, 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                 NINE MONTHS ENDED
                                                            MARCH 31,                       MARCH 31,
                                                       2001          2002              2001          2002
                                                     ----------    ----------        ----------    ----------
<S>                                                     <C>           <C>               <C>           <C>
Total Revenues:                                         100.0%        100.0%            100.0%        100.0%

Expenses:
   Cost of processing, servicing and support             60.4%         53.7%             60.3%         55.9%
   Research and development                              11.7%         10.8%             13.2%         12.0%
   Sales and marketing                                   14.8%         10.5%             23.1%         12.0%
   General and administrative                            11.4%          7.7%             11.9%          9.0%
   Depreciation and amortization                        110.7%         80.9%             97.9%         92.4%
   Impairment of intangible assets                         --            --                --          42.8%
   Reorganization charge                                   --          12.7%                            4.4%
   In-process research and development                     --            --               6.0%            --
                                                     ----------    ----------        ----------    ----------
          Total expenses                                209.0%        176.5%            212.4%        228.4%
                                                     ----------    ----------        ----------    ----------
Loss from operations                                   -109.0%        -76.5%           -112.4%       -128.4%
Interest, net                                             0.6%         -1.0%              0.8%         -0.8%
Loss on investments                                     -12.5%           --              -4.5%            --
                                                     ----------    ----------        ----------    ----------
Loss before income taxes                               -120.9%        -77.5%           -116.2%       -129.2%
Income tax benefit                                      -31.5%        -15.4%            -27.8%        -24.0%
                                                     ----------    ----------        ----------    ----------

Net loss                                                -89.4%        -62.2%            -88.4%       -105.2%
                                                     ==========    ==========        ==========    ==========
</TABLE>


                                       13
<PAGE>


         Revenues. Total revenue increased by $11.5 million, or 10%, from $113.1
million for the three months ended March 31, 2001 to $124.6 million for the
three months ended March 31, 2002 and by $51.1 million, or 16%, from $311.5
million for the nine months ended March 31, 2001 to $362.6 million for the nine
months ended March 31, 2002. Quarter over quarter revenue growth is driven by
12% growth in our Electronic Commerce business and 12% growth in our Investment
Services business, offset by a 3% decline in our Software business. Year over
year revenue growth is driven by 20% growth in our Electronic Commerce business
and 17% growth in our Investment Services business, offset slightly by a 1%
decline in our Software business. Growth in Electronic Commerce revenue is
driven primarily by growth in our subscriber base from about 4.8 million at
March 31, 2001 to 6.3 million at March 31, 2002. Additionally, as an increasing
number of banks opt for transaction versus subscriber based pricing, our revenue
is impacted by growth in transactions processed from 75 million in the quarter
ended March 31, 2001 to 82 million in the quarter ended March 31, 2002 and from
approximately 164.5 million for the nine months ended March 31, 2001 to
approximately 226.4 million for the nine months ended March 31, 2002. This
growth is offset by a decline in revenue from interest rate sensitive products
such as our account balance transfer product 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 less than 1.1 million at March 31,
2001 to about 1.2 million at March 31, 2002. Industry consolidations have
resulted in the loss of 0.1 million portfolios over the past year. However, the
majority of these portfolios possessed a much lower price point than average
based on the services provided, resulting in a less negative impact. Also, in
the quarter ended March 31, 2002, we announced plans to eliminate certain of our
financial planning software products within Investment Services and this has
caused a modest decrease in revenue in the quarter over quarter and year over
year periods. As a result of a recessionary economy in calendar 2001 and into
2002, and the difficult stock market conditions since September 2001, portfolio
growth has slowed significantly. We remain short of historic growth rates in
this business. Due to economic conditions in fiscal 2002, we have experienced a
modest decline in software sales on a quarter over quarter and year over year
basis. Although our more mature ACH processing and Reconciliation products show
signs of renewed growth in the quarter ended March 31, 2002, sales of
i-Solutions electronic billing and statement software are slower than expected
as the recession continues. For the nine-month period ended March 31, 2002, Bank
of America generated total revenue of $42.3 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 $13.0 million, or
14%, from $95.6 million for the three months ended March 31, 2001 to $108.6
million for the three months ended March 31, 2002, and by $51.7 million, or 20%,
from $261.3 million to $313.0 million for the nine months ended March 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 March 31,
2002, the agreements with Microsoft and First Data are operating below the
minimum guarantee level. The Bank of America contract operated 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
sufficient 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
processed over 1.1 million electronic bills in the month ended March 31, 2002.
This has increased significantly from the 800,000 bills presented in the month
ended December 31, 2001 and the 350,000 electronic bills presented in the month
ended March 31, 2001. In the quarter ended March 31, 2002, we processed over 82
million transactions, an increase of over 32% compared with the 62 million
transactions processed in the quarter ended March 31, 2001. 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, and
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 subscribers, with transactions
processed, and possibly additional metrics, becoming additional revenue
indicators. Over the next several quarters we will identify and begin reporting
on new revenue indicators that will be more meaningful as our business continues
to evolve.


                                       14
<PAGE>


         Our license fee revenue decreased by $0.5 million, or 6%, from $7.6
million for the three months ended March 31, 2001 to $7.1 million for the three
months ended March 31, 2002 and declined by $0.9 million, or 5%, from $19.8
million for the nine months ended March 31, 2001 to $18.9 million for the nine
months ended March 31, 2002. Although license sales stalled in the quarter ended
September 30, 2001 due to overall economic conditions, we have experienced an
improvement in sales in both our ACH and our Reconciliation software products
since that time. 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
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 improve, and as a result, our ability to growth this
revenue stream will be hampered.

         Our maintenance fee revenue increased by $0.4 million, or 7%, from $5.2
million for the three months ended March 31, 2001 to $5.6 million for the three
months ended March 31, 2002 and by $2.3 million, or 15%, from $15.5 million for
the nine months ended March 31, 2001 to $17.8 million for the nine months ended
March 31, 2002. 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 15% 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 29%, from $4.6 million for the three months ended March 31,
2001 to $3.3 million for the three months ended March 31, 2002 and by $2.0
million, or 13%, from $14.8 million for the nine months ended March 31, 2001 to
$12.8 million for the nine months ended March 31, 2002. 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 implementation engagements due to lower
license sales.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $68.3 million, or 60.4% of total revenue, for the
three months ended March 31, 2001, and was $67.0 million, or 53.7% of total
revenue, for the three months ended March 31, 2002. Cost of processing,
servicing and support was $187.9 million, or 60.3% of total revenue, for the
nine months ended March 31, 2001, and was $202.8 million, or 55.9% of total
revenue, for the nine months ended March 31, 2002. Cost of processing, servicing
and support as a percentage of servicing only revenue (total revenue less
license fees) was 64.7% for the three months ended March 31, 2001 versus 56.8%
for the three months ended March 31, 2002, and was 64.4% for the nine months
ended March 31, 2001 versus 59.0% for the nine months ended March 31, 2002. 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 62% at March 31, 2001 to
70% at March 31, 2002. Electronic payments carry a significantly lower variable
cost per unit than paper based payments 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 platforms for much of the year
ended June 30, 2001, and one additional platform through March 31, 2002. For the
nine-month period ended March 31, 2002 we incurred over $19 million of expense
to Bank of America for their support of the Bank of America West processing
platform. The acquired platforms were 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. After running out the backlog of open
customer care


                                       15
<PAGE>


claims during the quarter ended March 31, 2002, we will retire the Bank of
America processing platform in its entirety and will no longer reimburse Bank of
America for running the platform on our behalf. Additionally, by June 2002, we
plan to retire our Austin platform, which provides processing for a number of
smaller banks with a relatively small number of subscribers. As a result of the
retirement of these two platforms, we announced the closing of our San Francisco
customer care facility effective April 30, 2002 and the closing of our Austin
office and Houston customer care facility effective on or about June 30, 2002.
We expect the retirement of the Bank of America platform and the resultant
closing of the San Francisco, Houston and Austin offices to reduce quarterly
processing costs by approximately $6.0 million, which will first take effect in
the quarter ending June 30, 2002. During this time, we will also continue to
drive programs focused on improved efficiency and quality, all of which we
expect to result in reduced cost per transaction and improving gross margins.
Refer to the Reorganization Charge paragraph below and note number three in the
Notes to the Interim Condensed Consolidated Unaudited Financial Statements
within this filing for information regarding the one time charge we incurred as
a result of these actions.

         Research and Development. Our research and development costs were $13.3
million, or 11.7% of total revenue, for the three months ended March 31, 2001,
and $13.5 million, or 10.8% of total revenue, for the three months ended March
31, 2002. Research and development costs were $41.2 million, or 13.2% of total
revenue, for the nine months ended March 31, 2001, and $43.6 million, or 12.0%
of total revenue, for the nine months ended March 31, 2002. Adjusted for
capitalized development costs, our gross research and development costs were
$15.0 million, or 13.2% of total revenue, for the three months ended March 31,
2001, were $14.5 million, or 11.6% of total revenue, for the three months ended
March 31, 2002, were $45.2 million, or 14.5% of total revenue, for the nine
months ended March 31, 2001 and were $47.2 million, or 13.1% of total revenue,
for the nine months ended March 31, 2002. During fiscal years 2000 and 2001, we
invested heavily in research and development activities to enhance our product
offerings and further distance ourselves from the competition. We have continued
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.
On March 19, 2002, we announced a company reorganization that resulted in a
reduction in workforce that impacted all areas of the company, including
research and development. As a result, we expect our quarterly costs to be
reduced on an absolute dollar basis, but anticipate continuing to invest
significantly in research and development.

         Sales and Marketing. Our sales and marketing costs were $16.8 million,
or 14.8% of total revenue, for the three months ended March 31, 2001, and were
$13.1 million, or 10.5% of total revenue, for the three months ended March 31,
2002. Our sales and marketing costs were $71.8 million, or 23.1% of total
revenue, for the nine months ended March 31, 2001, and were $43.4 million, or
12.0% of total revenue, for the nine months ended March 31, 2002. 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 $46.8 million, or 15% of
total revenue, for the nine months ended March 31, 2001, and were $43.4 million,
or 12.0% of total revenue, for the nine months ended March 31, 2002. Although
lower as a percentage of total revenue in the current fiscal year, we continue
to invest heavily in sales and marketing activities on a gross dollar basis.
Current year commission expenses are lower due to lower overall software sales
and lower new biller signings and implementations. Although our sales and
marketing staff was also impacted by the reduction in force announced on March
19, 2001, our existing 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. With the
exception of seasonally high commissions in our June quarter, we expect sales
and marketing expenses to decline in total dollars as a result of the reduction
in staff on a going forward basis.

         General and Administrative. Our general and administrative costs were
$12.8 million, or 11.4% of total revenue, for the three months ended March 31,
2001, and were $9.7 million, or 7.7% of total revenue, for the three months
ended March 31, 2002. Our general and administrative costs were $37.1 million,
or 11.9% of total revenue, for the nine months ended March 31, 2001, and were
$32.6 million, or 9.0% of total revenue, for the nine months ended March 31,
2002. 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. Because we have managed
general and administrative expenses down on an ongoing basis through attrition
in related areas, we do not expect further declines as a result of the
previously mentioned reduction in force.


                                       16
<PAGE>


         Depreciation and Amortization. Depreciation and amortization costs
decreased from $125.1 million for the three months ended March 31, 2001 to
$100.8 million for the three months ended March 31, 2002, and increased from
$305.0 million for the nine months ended March 31, 2001 to $334.9 million for
the nine months ended March 31, 2002. The significant depreciation and
amortization amounts are primarily the result of the acquisition 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 $8.6 million for the three months ended March
31, 2001 to $10.5 million for the three months ended March 31, 2002 and from
$25.0 million for the nine months ended March 31, 2001 to $30.1 million for the
nine months ended March 31, 2002. The increase in fixed asset depreciation is
the result of continued capital spending for data processing equipment, related
software, and facility improvements in support of the continued growth of the
business. As a result of the decision to close our San Francisco, Houston and
Austin offices, we have certain fixed assets that will have no future use to us.
We have accelerated the depreciation on those assets to reduce their book value
to zero to reflect the timing of office closings and the resulting revised end
of their useful life. Therefore, we expect our depreciation expense related to
fixed assets to increase by nearly $1.0 million for the quarter ending June 30,
2002 due to the acceleration of deprecation, and return to a lower baseline
level starting in the quarter ending September 30, 2002.

         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.

         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.

         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 quarter ended December 31, 2001.
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

         Reorganizaton Charge. In January 2002 we announced our plans to close
our customer care facility in San Francisco, effective April 30, 2002, which
resulted in the termination of employees at that facility. At that time we also
announced our intent to eliminate certain of our financial planning products
within our Investment Services


                                       17
<PAGE>
division, which also resulted in a small reduction of employees in our Raleigh,
North Carolina office. On March 19, 2002, we further announced the closing of
our Houston, Texas; Austin, Texas; Ann Arbor, Michigan; and Singapore offices,
along with a net reduction in force totaling approximately 450 employees. As a
result of these actions, we have incurred a charge of $15.9 million consisting
primarily of severance and related employee benefits and lease termination fees.
We accounted for these actions in accordance with Emerging Issues Task Force
(EITF) abstract number 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity." For further details
relating to this charge, please refer to the Notes to Interim Condensed
Consolidated Unaudited Financial Statements elsewhere in this Form 10-Q.

         Interest. Net interest decreased from net interest income of $0.6
million for the three months ended March 31, 2001 to net interest expense of
$1.3 million for the three months ended March 31, 2002. Net interest decreased
from net interest income of $2.4 million for the nine months ended March 31,
2001 to net interest expense of $3.0 for the nine months ended March 31, 2002.
Net interest is composed of interest income, offset by interest expense.

         Interest income decreased from $3.8 million for the three months ended
March 31, 2001 to $1.9 million for the three months ended March 31, 2002. The
decrease is a result of the combined effect of a decrease of 2.8% in our average
annual yield and a decrease in our average invested assets of $11.6 million. The
lower yield is consistent with continued lowering of interest rates over the
past year and the fact that the majority of our investments are short-term in
nature. Interest income decreased from $12.3 million for the nine months ended
March 31, 2001 to $6.6 million for the nine months ended March 31, 2002. The
decrease is a result of the combined effect of a decrease of 3.6% in our average
annual yield, offset by an increase in our average invested assets of $29.8
million.

         Interest expense has declined slightly, from $3.2 million for the three
months ended March 31, 2001 to $3.1 million for the three months ended March 31,
2002. The decrease is due to a decrease in our average outstanding debt and
other long-term obligations of approximately $2.1 million while average interest
rates have remained flat quarter over quarter. Interest expense declined
slightly, from $9.9 million for the nine months ended March 31, 2001 to $9.6
million for the nine months ended March 31, 2002. The decrease is due to a
slight drop in interest rates combined with a reduction in our average
outstanding debt and other long-term obligations of approximately $0.3 million.
Note that the interest rate on our $172.5 million convertible debt balance is
fixed at 6.5% and the debt has remained in place for all periods discussed.

         Income Taxes. We recorded an income tax benefit of $35.7 million, at an
effective rate of 26.1%, for the three months ended March 31, 2001, and an
income tax benefit of $19.2 million, at an effective rate of 19.8% for the three
months ended March 31, 2002. We recorded an income tax benefit of $86.5 million,
at an effective rate of 24.0%, for the nine months ended March 31, 2001, and an
income tax benefit of $87.1 million, at an effective rate of 18.5%, for the nine
months ended March 31, 2002. The reported effective rates differ from the
blended statutory rate of 40% in all periods due to certain non-deductible
goodwill amortization, impairment charges related to goodwill, non-deductible
in-process research and development expenses and other non-deductible expenses,
offset somewhat by jobs credits and tax exempt interest income.







                     We intentionally left this space blank.


                                       18
<PAGE>


SEGMENT INFORMATION

         The following table sets forth operating revenue and operating income
by industry segment for the periods noted (in thousands):

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                           MARCH 31,                           MARCH 31,
                                                  ----------------------------       ------------------------------
                                                     2001            2002               2001             2002
                                                  ------------    ------------       ------------    --------------
<S>                                               <C>             <C>                   <C>               <C>
OPERATING REVENUE:
Electronic Commerce......................         $    79,870     $   89,773          $  217,234        $  260,240
Investment Services......................              17,914         20,014              50,584            59,111
Software.................................              15,284         14,799              43,730            43,248
                                                  ------------    ------------       ------------    --------------
       Total Operating Revenue...........         $   113,068     $  124,586          $  311,548        $  362,599
                                                  ============    ============       ============    ==============


OPERATING INCOME (LOSS):
Electronic Commerce......................         $    (2,462)    $    9,390          $  (13,501)       $   16,444
Investment Services......................               5,182          6,882              13,203            17,717
Software.................................                (436)         2,539                  (7)            3,229
Corporate................................              (9,059)        (7,984)            (26,255)          (27,359)
Purchase accounting amortization.........            (116,480)       (90,293)           (280,028)         (304,721)
Impairment of intangible assets..........                  --             --                  --          (155,072)
Reorganization charge....................                  --        (15,871)                 --           (15,871)
One time marketing charge................                  --             --             (25,000)               --
In-process research and development......                  --             --             (18,600)               --
                                                  ------------    ------------        ------------    --------------
       Total Operating Loss..............         $  (123,255)    $  (95,337)         $ (350,188)       $ (465,633)
                                                  ============    ============        ============    ==============
</TABLE>



         Electronic Commerce. Revenue in our Electronic Commerce business
increased by $9.9 million, or 12%, from $79.9 million for the three months ended
March 31, 2001 to $89.8 million for the three months ended March 31, 2002.
Revenue increased by $43.0 million, or 20%, from $217.2 million for the nine
months ended March 31, 2001 to $260.2 million for the nine months ended March
31, 2002. Underlying growth in this business is driven primarily by an increase
in subscribers from about 4.8 million at March 31, 2001 to 6.3 million at March
31, 2002. Sequential subscriber growth for the quarter ended March 31, 2002 was
5%, for the quarter ended December 31, 2001 it was 6%, and for the quarter ended
September 30, 2001 it was 7%. This compares to eight previous consecutive
quarters reflecting subscriber growth of 8% or more. We anticipate that
sequential subscriber growth may remain lower than historic growth rates in
subsequent quarters, as economic conditions may continue to cause financial
institutions to remain 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
cost savings opportunities through First Data Corporation over a five-year
period, which began in September 2000. Effective October 1, 2000, we completed a
strategic agreement 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 $50.0 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 subscribers to our subscriber base upon
completion of the strategic agreement. Underlying revenue for each of these
agreements had been below the guaranteed minimum level, until the quarter ended
December 31, 2001, when Bank of America exceeded their minimums. Bank of America
provides in excess of 10% of the total revenue of our Electronic Commerce
segment on a year to date basis as of March 31, 2002.

         When combining subscriber growth with guaranteed minimums, an
increasing volume of businesses 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 increasingly more difficult
to correlate revenue solely to the number of subscribers, with


                                       19
<PAGE>


transactions processed becoming an additional key indicator. During the three
months ended March 31, 2002, we processed over 82 million transactions, compared
to 62 million for the three months ended March 31, 2001, and, for the nine
months ended March 31, 2002, we processed approximately 226.4 million
transactions, compared to approximately 164.5 million for the nine months ended
March 31, 2001.

         To date, we have 194 primary billers in production with our E-Bill
electronic billing product offering that are delivering over 1.1 million
electronic bills per month as of March 31, 2002. A primary biller, by 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 consumer service provider partners as they
upgrade to our Web Pay for Consumers product. As of March 31, 2002, we are
distributing 26 bills through scraping technology and have implemented another
30 non-primary billers, for a total consumer choice of among 250 electronic
bills. We believe that a complete, integrated round trip electronic billing and
payment experience for an average of six to ten bills per month per customer is
an important factor in driving subscriber growth. As of March 31, 2002, we
estimate that the average consumer using our Web Pay for Consumer product has
the ability to receive from seven to nine 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, in-process research and development charges and reorganization
charges, have improved from an operating loss of $2.5 million for the three
months ended March 31, 2001 to operating income of $9.4 million for the three
months ended March 31, 2002. On the same basis, our Electronic Commerce
operating results have improved from an operating loss of $13.5 million for the
nine months ended March 31, 2001 to operating income of $16.4 million for the
nine months ended March 31, 2002. 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 62% as of March 31, 2001
to over 70% as of March 31, 2002. Electronic payments carry a significantly
lower variable cost per unit than paper payments 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 our
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
through March 2002. The acquired platforms were less efficient than our Genesis
processing platform, and therefore much more expensive to operate. For the
nine-month period ended March 31, 2002, we incurred over $18.0 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. After processing the remaining pre-conversion customer
inquiries and claims during the quarter ended March 31, 2002, we will now retire
the Bank of America platform. As a result of the successful conversion of Bank
of America subscribers to Genesis and our ability to retire the Bank of America
platform, we have announced the closing of our San Francisco customer care
facility effective April 30, 2002 and our Houston customer care facility
effective June 30, 2002. On March 19, 2002, we also announced an overall company
reorganization that will result in a reduction in force of approximately 450
employees across the company, including the closing of offices mentioned.
Additionally, upon retirement of our legacy Austin processing platform expected
in the quarter ending June 30, 2002, we will also be closing our Austin office.
We expect the combined impact of these various actions to reduce our quarterly
costs by approximately $6.0 million starting in the quarter ending June 30,
2002. Our focus for the remainder of fiscal 2002 continues to be geared toward
improved profitability in our Electronic Commerce business through programs
designed to:

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

         While there continues to be no guarantee 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, customer
satisfaction and cost efficiency, we are better positioned to maintain our
marked leadership position throughout an accelerated growth cycle, should it
occur.


                                       20
<PAGE>


         Investment Services. Revenue in our Investment Services business has
increased by $2.1 million, or 12%, from $17.9 million for the three months ended
March 31, 2001, to $20.0 million for the three months ended March 31, 2002, and
increased by $8.5 million, or 17%, from $50.6 million for the nine months ended
March 31, 2001, to $59.1 million for the nine months ended March 31, 2002.
Growth in this business is due primarily to an increase in portfolios managed
from under 1.1 million at March 31, 2001, to about 1.2 million at March 31,
2002. 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 we have not regained our historical growth rate. In
addition, industry consolidations have resulted in the loss of over 0.1 million
portfolios. However, the majority of these portfolios possessed a much lower
price point than average based on the services provided, resulting in a less
negative impact. The rationalization of our Raleigh, North Carolina office and
discontinuation of our financial planning products has been completed. 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 three month period ended March 31, 2002, the division
released two new product offerings. First, based on strong market demand, a new
trading and reporting tool for multiple strategy portfolios was released to
compliment CheckFree APL. Secondly, the APL Browser offers clients access via
the Internet to the division's portfolio accounting and reporting product,
creating 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 $1.7 million, or 33%, from $5.2
million for the three months ended March 31, 2001, to $6.9 million for the three
months ended March 31, 2002, and increased by $4.5 million, or 34%, from $13.2
million for the nine months ended March 31, 2001, to $17.7 million for the nine
months ended March 31, 2002. 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 initiated a quality program that focuses attention on
improved system reliability, particularly trading availability, which is
critical to the business unit as well as enhanced our disaster recovery
capabilities. For the remainder of fiscal 2002, the Investment Services
division's key initiatives include:

         -        extension of product offerings with a shortened time to
                  market;
         -        additional versions of the APL Browser with increased
                  functionality; and
         -        continued development of a relational database allowing our
                  clients easier access to their data.

         Software. Revenue in our Software business declined by $0.5 million, or
3%, from $15.3 million for the three months ended March 31, 2001 to $14.8
million for the three months ended March 31, 2002. Revenue declined by $0.5
million, or 1%, from $43.5 million for the nine months ended March 31, 2001 to
$43.2 million for the nine months ended March 31, 2002. The downturn in economic
conditions in calendar 2001 and continuing into calendar 2002 has caused many
businesses to curtail discretionary expenditures, which has resulted in an
overall dampening of demand for software solutions. To address these economic
concerns within our i-Solutions business unit, we released two new product
offerings in fiscal 2002:

         -        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.

         We released these two solutions during quarter ended September 30, 2001
and while we continue to see increasing interest in the hosting solution, the
direct software sales of both i-Solutions and i-Solutions Select remain slower
than expected during the extended recessionary economy. Our more mature software
units, CheckFree Financial and Compliance Services (CFACS) and ACH Solutions,
both faced the same dampening of demand earlier in the year, but began seeing
increased sales late in the December 31, 2001 quarter and into the March 31,
2002 quarter.


                                       21
<PAGE>
Overall, however, we continue to 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, impairment of intangible assets and reorganization charges, have
improved from an operating loss of $0.4 million for the three months ended March
31, 2001 to operating income of $2.5 million for the three months ended March
31, 2002. Operating results have improved from an operating loss of less than
$0.1 million for the nine months ended March 31, 2001 to operating income of
$3.2 million for the nine months ended March 31, 2002. Improvement in operating
results is primarily the result of continued efforts to manage discretionary
costs in light of current economic conditions. On March 19, 2002, we announced a
company-wide reorganization that resulted in a reduction of force of
approximately 450 employees. As part of these actions, we announced the closing
of our Ann Arbor, Michigan office effective immediately. As a result, although
we continue to expect a seasonal increase in year end expense related to
commission and other quota based compensation programs, we expect a moderate
decline in underlying costs in the Software division as a result of the
reorganization.

         Corporate. Our Corporate segment represents costs for legal, human
resources, finance and various other unallocated overhead expenses. Our
Corporate segment incurred operating expenses of $9.1 million, or 8% of total
revenue, for the three months ended March 31, 2001, and $8.0 million, or over 6%
of total revenue, for the three months ended March 31, 2002. Our Corporate
segment incurred operating expenses of $26.3 million, or over 8% of total
revenue, for the nine months ended March 31, 2001, and $27.4 million, or over 7%
of total revenue, for the nine months ended March 31, 2002. On a year over year
basis, although our total overhead expenses have increased slightly, as a
percentage of revenue, they continue to improve, reflecting the leverage
inherent in our business model. On March 19, 2002, we announced a company-wide
reorganization that ultimately impacted 450 employees. We have been reducing
corporate costs through attrition and discretionary cost management throughout
the year and, therefore, we did not incur significant additional reductions in
staff in this segment and do not anticipate significant reductions in this
segment in the quarter ending June 30, 2002 and going forward.

         Purchase Accounting Amortization. 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 $116.5 million for the three months ended March
31, 2001 to $90.3 million for the three months ended March 31, 2002. The decline
is the combined result of shorter-term intangible assets that have fully
amortized in the quarter ended December 31, 2001 and the decline in amortization
expense resulting from the intangible asset impairment charge we recorded in the
quarter ended December 31, 2001. The total amount of purchase accounting
amortization has increased from $280.0 million for the nine months ended March
31, 2001 to $304.7 million for the nine months ended March 31, 2002. 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
and the decline in amortization expense resulting from the intangible asset
impairment charge we recorded in the quarter ended December 31, 2001.

         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. Please refer to Impairment of Intangible
Assets in the Results of Operations section of this report for a detailed
explanation of these charges.

         Reorganization Charge. In January of 2002, we announced our plans to
close our customer care facility in San Francisco, California, effective April
30, 2002, which resulted in the termination of employees at that facility. At
that time we also announced our intent to eliminate certain of our financial
planning products within our Investment Services division, which also resulted
in a small reduction of employees in our Raleigh, North Carolina office. On
March 19, 2002, we further announced the closing of our Houston, Texas; Austin,
Texas; Ann Arbor, Michigan; and Singapore offices, along with a net reduction in
force totaling approximately 450 employees. As a result of these actions, we
have incurred a charge of $15.9 million consisting primarily of severance and
related employee benefits and lease termination fees. We accounted for these
actions in accordance with Emerging Issues Task Force (EITF) abstract number
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity." For further details relating to this charge, please
refer to the Notes to Interim


                                       22
<PAGE>


Condensed Consolidated Unaudited Financial Statements elsewhere in this Form
10-Q.

         One-Time Marketing Charge. 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-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.

LIQUIDITY AND CAPITAL RESOURCES

         The following chart summarizes our Consolidated Statement of Cash Flows
for the three months ended September 30, 2001, December 31, 2001, March 31, 2002
and the nine months ended March 31, 2000 (in thousands).

<TABLE>
<CAPTION>
                                             Three months        Three months        Three months        Nine months
                                                ended                ended              ended               ended
                                           September 30,         December 31,         March 31,           March 31,
                                                 2001                2001                2002               2002
                                           -----------------    ----------------    ---------------     --------------
<S>                                          <C>                      <C>                <C>               <C>
Net cash provided by (used in):
   Operating activities................      $   (1,228)          $   7,674           $  33,601          $   40,047
   Investing activities.................         (5,699)            (14,330)            (22,356)            (42,385)
   Financing activities................            (417)                670               1,889               2,142
                                           -----------------    ----------------    ---------------     --------------
Net increase (decrease) in cash
      and cash equivalents............       $   (7,344)          $  (5,986)          $  13,134          $     (196)
                                           =================    ================    ===============     ==============
</TABLE>


         As of March 31, 2002, we have $216.1 million of cash, cash equivalents
and short-term investments on hand and additional $58.2 million in long-term
investments. Our balance sheet reflects a current ratio of 2.5 and working
capital of $188.3 million. We believe that existing cash, cash equivalents and
investments will be 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 nine months ended March 31, 2002, we generated $40.0 million of
cash from 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. As a result of efforts to improve our operating efficiency, we
have been able to generate an increasing amount of cash from operating
activities over the past two quarters. While timing of cash payments and
collections can cause fluctuations from quarter to quarter, we expect to
generate positive cash from operations for the full year ending June 30, 2002
and further expect this trend to continue into fiscal 2003.

         From an investing perspective, we used $42.4 million of cash for the
nine months ended March 31, 2002. This is comprised of $17.3 million of cash
used to purchase of property and software, $3.6 million of software development
costs and $21.5 million of cash used in the net sales and maturities of held to
maturity securities.

         From a financing perspective, for the nine months ended March 31, 2002,
generated $2.1 million of cash flow. We received $2.3 million in cash from the
exercise of employee stock options and warrants and $3.1 million from payroll
deductions set aside for our employee stock purchase plan. We used $3.3 million
of cash for principal payments under capital lease obligations.


                                       23
<PAGE>


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 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 Technologies, Inc. (currently referred
to as CheckFree i-Solutions) in April 2000, we obtained operations in Canada and
recently 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. On March 19,
2002, as a result of low sales volume in Southeast Asia, we announced the
closing of our Singapore office. As operations in Canada, the United Kingdom,
and Australia 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.


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<PAGE>


PART II.  OTHER INFORMATION

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

         (a)      EXHIBITS.

                  None.

         (b)      REPORTS ON FORM 8-K.

                  We filed the following Current Reports on Form 8-K with the
Securities and Exchange Commission during the quarter ended March 31, 2002:

                  (i)      A current report on Form 8-K, dated January 28, 2002,
                           was filed with the Securities and Exchange Commission
                           on January 29, 2002 (Items 5 and 7).


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<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:  May 15, 2002            By:     /s/ David E. Mangum
                                       -----------------------------------------
                                       David E. Mangum, Executive Vice President
                                       and Chief Financial Officer* (Principal
                                       Financial Officer)




Date:  May 15, 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.



                                       26