<PAGE>   1
                                                                      Exhibit 13

                             SELECTED FINANCIAL DATA

Our selected consolidated financial data as of and for the fiscal years ended
June 30, 1997, 1998 and 1999 have been derived from our consolidated financial
statements included elsewhere in this Annual Report, which have been audited by
Deloitte and Touche, LLP, independent auditors, whose report thereon is also
included elsewhere in this Annual Report. Our selected consolidated financial
data as of and for the six-months ended June 30, 1996 and the years ended
December 31, 1994 and 1995 have been derived from our audited consolidated
financial statements, which are not included in this Annual Report. The selected
consolidated financial data as of and for the six-months ended June 30, 1995 and
the twelve months ended June 30, 1996 are derived from unaudited consolidated
financial statements, which, in the opinion of management, reflect all
adjustments necessary for a fair representation of the respective periods. The
selected consolidated financial data set forth below should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Consolidated Financial Statements and Notes
thereto elsewhere in this Annual Report. The earnings per share amounts prior to
fiscal year 1998 have been restated to comply with Statement of Financial
Accounting Standards 128 "Earnings per Share" (SFAS 128) as required. For
further discussion of earnings per share and the impact of SFAS 128, see Note 1
to the consolidated financial statements.

<TABLE>
<CAPTION>
                                                          TWELVE
                                      YEAR ENDED          MONTHS         SIX MONTHS ENDED
                                     DECEMBER 31,          ENDED              JUNE 30,                 YEAR ENDED JUNE 30,
                               ----------------------     JUNE 30,    ----------------------    ----------------------------------
                                 1994         1995         1996         1995         1996         1997         1998         1999
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
<S>                            <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS:
Revenues:
  Processing, servicing and
    merchant discount ......   $  38,282    $  49,330    $  59,053    $  23,581    $  33,305    $ 104,522    $ 159,255    $ 201,059
  License fees .............        --           --         10,970         --         10,970       33,088       28,952       15,975
  Maintenance fees .........        --           --          1,978         --          1,978       22,567       25,848       17,746
  Other ....................         984         --          4,788         --          4,787       16,268       19,809       15,351
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
            Total revenues .      39,266       49,330       76,789       23,581       51,040      176,445      233,864      250,131

Expenses
  Cost of processing,
   servicing and support ...      24,212       30,258       51,236       14,461       35,438      102,721      129,924      146,704
  Research and development .       4,724        6,876       13,765        3,019        9,907       32,869       36,265       21,085
  Sales and marketing ......       4,427        7,242       21,349        3,060       17,167       32,670       28,839       32,354
  General and administrative       2,598        4,134        9,598        1,915        7,338       18,707       20,677       31,466
  Depreciation and
   amortization ............       1,922        2,485        8,246        1,194        6,997       24,919       24,999       24,630
  In-process research and
   development .............        --           --        122,358         --        122,358      140,000          719        2,201
  Charge for stock warrants         --           --           --           --           --           --         32,827         --
  Exclusivity amortization .        --           --           --           --           --          5,958        2,963         --
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
            Total expenses .      37,883       50,995      226,552       23,649      199,205      357,844      277,213      258,440
  Net gain on dispositions
   of assets ...............        --           --           --           --           --          6,250       36,173        4,576
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
  Income (loss) from
   operations ..............       1,383       (1,665)    (149,763)         (68)    (148,165)    (175,149)      (7,176)      (3,733)
  Interest:
    Income .................         298        2,135        3,104          535        1,659        2,153        3,464        2,799
    Expense ................        (795)        (645)        (484)        (330)        (325)        (834)        (632)        (618)
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
  Income (loss) before
   income tax ..............         886         (175)    (147,143)         137     (146,831)    (173,830)      (4,344)      (1,552)
  Income tax expense
   (benefit) ...............         400           40       (8,650)          62       (8,628)     (12,017)        (641)     (12,009)
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
  Income (loss) before
   extraordinary item ......         486         (215)    (138,493)          75     (138,203)    (161,813)      (3,703)      10,457
  Extraordinary item .......        --           --           (364)        --           (364)        --           --           --
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    --------
  Net income (loss) ........   $     486    $     215    $(138,857)   $      75    $(138,567)   $(161,813)   $  (3,703)   $  10,457
                               =========    =========    =========    =========    =========    =========    =========    =========

Diluted income (loss) per
  common share before
  extraordinary item........   $    0.02    $   (0.01)   $   (4.14)   $    --      $   (3.69)   $   (3.44)   $   (0.07)   $    0.18
Diluted income (loss) per
   common share ............   $    0.02    $   (0.01)   $   (4.15)   $    --      $   (3.70)   $   (3.44)   $   (0.07)   $    0.18
Equivalent number of shares
   outstanding .............      27,103       28,219       33,435       29,299       37,420       46,988       55,087       56,529

BALANCE SHEET DATA:
  Working capital ..........   $  11,399    $  81,792    $  45,496    $  10,481    $  45,496    $  20,002    $  78,238    $  24,245
  Total assets .............      30,512      115,642      196,230       31,696      196,230      223,836      250,112      252,761
  Long-term obligations,
   less current portion ....       8,213        7,282        8,324        7,735        8,324        8,401        6,467        3,882
  Total stockholder's equity      16,372       99,325      137,675       16,493      137,675      148,644      183,854      186,903
</TABLE>

                                      13-1
<PAGE>   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.
Our Electronic Commerce business provides services that allow customers 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 currently provide services for nearly 3 million consumers
through over 350 financial institutions, Internet financial sites like
Quicken.com and personal financial management software like Quicken, Microsoft
Money and Managing Your Money. As part of our strategy to broaden availability
of our electronic billing and payment services on the Internet, we recently
entered into a distribution contract with Yahoo! Additionally, we recently
extended a processing agreement with Bank One Corporation to provide services,
including electronic billing and payment, to WingspanBank.com. We are currently
in discussions with other Internet portals, including Excite@Home, to whom we
expect to begin providing our billing and payment services by December 31, 1999.
We plan to undertake significant marketing initiatives with Yahoo!,
WinspanBank.com and other Internet portals to dramatically accelerate the
adoption of our services by consumers. We have developed relationships with over
1,100 merchants nationwide that enable us to remit approximately 50% of all of
our bill payments electronically. During the three-month period ended June 30,
1999, we processed an average of more than 12 million transactions per month
and, for the twelve months ended June 30, 1999, we processed more than 125
million transactions.

         In March 1997, we introduced electronic billing - "E-Bill" - which
enables merchants to deliver billing as well as marketing materials
interactively to their customers over the Internet. As of June 30, 1999, we have
signed contracts for E-Bill services with 64 of the country's largest billers,
who together deliver more than 500 million bills each month. During the month of
June 1999, we presented and paid more than 13,000 electronic bills through 20
financial institutions and Internet portals, which is a more than 30% increase
since March 1999 and more than double the number of bills presented through
E-Bill services in February 1999.

         We are also a leading provider of portfolio management and information
services and financial applications software. During the fiscal year ended June
30, 1999, Electronic Commerce accounted for 68% of our revenues, Software
accounted for 16% of our revenues, and Investment Services accounted for another
16% 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 complimentary businesses. Our major acquisitions include Servantis
Systems Holdings, Inc. in February 1996, Security APL, Inc. in May 1996, Intuit
Services Corporation in January 1997 and Mobius Group, Inc. in March 1999.

         During fiscal 1998, we made the decision to sell some of our software
businesses that did not directly promote our strategic direction. These
divestitures included the sale of our recovery management business in August
1997, our item processing business in March 1998, our wire and electronic
banking businesses in April 1998, our leasing business in July 1998, our
mortgage business in September 1998 and our imaging business in October 1998.
While we have no pending agreements to dispose of our remaining software
businesses, we do receive offers for them from time to time.

                                      13-2
<PAGE>   3


RESULTS OF OPERATIONS

         The following table sets forth percentages of revenue represented by
certain consolidated statements of operations data:

<TABLE>
<CAPTION>
                                                         YEAR ENDED JUNE 30,
                                               ----------------------------------
                                                 1997         1998         1999
                                               --------     --------     --------
<S>                                               <C>          <C>          <C>
Total revenues .............................      100.0%       100.0%       100.0%
Expenses:
   Cost of processing, servicing and support       58.2         55.6         58.7
   Research and development ................       18.6         15.5          8.4
   Sales and marketing .....................       18.5         12.3         12.9
   General and administrative ..............       10.6          8.8         12.6
   Depreciation and amortization ...........       14.1         10.7          9.8
   In-process research and development .....       79.3          0.3          0.9
   Charge for stock warrants ...............       --           14.0         --
   Exclusivity amortization ................        3.4          1.3         --
                                               --------     --------     --------
                Total expenses .............      202.8        118.5        103.3
   Net gain on dispositions of assets ......        3.5         15.4          1.8
                                               --------     --------     --------
   Loss from operations ....................      (99.3)        (3.1)        (1.5)
   Interest:
      Income ...............................        1.2          1.5          1.1
      Expense ..............................       (0.4)        (0.3)        (0.2)
                                               --------     --------     --------
   Loss before income taxes ................      (98.5)        (1.9)        (0.6)
   Income tax benefit ......................       (6.8)        (0.3)        (4.8)
                                               --------     --------     --------
   Net income (loss) .......................      (91.7)%       (1.6)%        4.2%
                                               ========     ========     ========
</TABLE>


YEARS ENDED JUNE 30, 1998 AND 1999

         Revenues. Our total reported revenue increased by $16.2 million, or 7%,
from $233.9 for the year ended June 30, 1998 to $250.1 million for the year
ended June 30, 1999. This increase in revenue was due to growth in our
Electronic Commerce and Investment Services segments, offset by a decrease in
our Software segment. The decrease in our Software segment revenue was the
result of our divestitures of certain of our software businesses. We divested
our recovery management business in August 1997, our item processing business in
March 1998, our wire and electronic banking businesses in April 1998, our
leasing business in July 1998, our mortgage business in September 1998 and our
imaging business in October 1998.

         On a pro forma basis, excluding the impact of our divested software
businesses, the discontinuance of our web investor business in our Electronic
Commerce segment in June 1998, and revenue from the Mobius Group acquisition in
our Investment Services segment in March 1999, our total revenue increased 21%,
from $204.4 million for the year ended June 30, 1998 to $246.4 million for the
year ended June 30, 1999. The increase in our pro forma revenue from fiscal 1998
to fiscal 1999 was driven by increases of 23% in our Electronic Commerce
segment, 26% in our Investment Services segment and 6% in our Software segment.
Our growth in pro forma Electronic Commerce revenue was driven primarily by
subscriber growth from approximately 2.4 million at June 30, 1998 to nearly 3.0
million at June 30, 1999. Our growth in pro forma Investment Services revenue
was driven primarily by an increase in portfolios managed from approximately
500,000 at June 30, 1998 to approximately 700,000 at June 30, 1999, offset by
lower average revenue per portfolio, as marketing efforts have shifted the mix
of new business toward retail versus institutional portfolios. Although demand
has been somewhat dampened due to customer focus on Year 2000 projects, in our
Software segment we had moderate pro forma revenue growth, primarily due to
increased implementations in our ACH product line.

                                      13-3
<PAGE>   4

         Our reported processing and servicing revenue increased by $41.8
million, or 26%, from $159.3 million for the year ended June 30, 1998 to $201.1
million for the year ended June 30, 1999. On a pro forma basis, adjusted for
revenue contributed by our acquisition of Mobius Group in March 1999 and the
discontinuance of our web investor business in our Electronic Commerce segment
in June 1998, revenue increased by 26% from $158.4 million for the year ended
June 30, 1998 to $199.2 million for the year ended June 30, 1999. This growth
was primarily the result of increases in our subscribers in our Electronic
Commerce segment and the number of portfolios managed in our Investment Services
segment as discussed in the foregoing paragraph. In January 1999, we announced
the signing of a material Internet distribution agreement with Yahoo!. Although
there are no guarantees in the timing or extent of its success, we believe this
agreement has the potential to provide significant increases in the number of
our subscribers over the next year and beyond. Due to introductory promotional
pricing incentives, we do not expect significant incremental revenue from this
channel in fiscal year 2000. Longer term, our per subscriber revenue
contribution from the portal channel is expected to be comparable to our
existing financial institution channel.

         Our reported license revenue declined by $13.0 million, from $29.0
million for the year ended June 30, 1998 to $16.0 million for the year ended
June 30, 1999. This decline was primarily due to our divestitures of certain of
our software business previously described. On a pro forma basis, excluding the
impact of the divested software businesses, our license fee revenue declined by
$1.3 million, from $17.0 million for the year ended June 30, 1998 to $15.7
million for the year ended June 30, 1998. The pro forma decline in license fee
revenue was primarily due to softness in our software sales resulting from
purchasing moratoriums imposed by customers and potential customers focusing on
their Year 2000 issues.

         Our reported maintenance revenue declined by $8.1 million, from $25.8
million for the year ended June 30, 1998 to $17.7 million for the year ended
June 30, 1999. On a pro forma basis, excluding the impact of our divestitures of
certain of our software businesses, previously mentioned, our maintenance fee
revenue increased by $0.7 million, from $16.1 million for the year ended June
30, 1998 to $16.8 million for the year ended June 30, 1999. The increase in our
pro forma maintenance revenue was primarily due to first year maintenance
revenue related to new software sales generated in the second half of fiscal
1998 combined with high retention rates and moderate price increases related to
renewal maintenance revenues.

         Our reported other revenue, consisting mainly of consulting fees,
declined by $4.4 million from $19.8 million for the year ended June 30, 1998 to
$15.4 million for the year ended June 30, 1999. On a pro forma basis, excluding
the impact of our divested software businesses, our other revenue increased by
$1.8 million, from $12.9 million for the year ended June 30, 1998 to $14.7
million for the year ended June 30, 1999. The increase was primarily due to
implementations related to new software sales in the second half of fiscal 1998
and early fiscal 1999 and consulting projects related to implementations and
client requested Year 2000 contract-based assistance in our Investment Services
segment.

         Cost of Processing, Servicing and Support. Our processing, servicing
and support costs consist primarily of data processing costs, customer care,
technical support, third party transaction fees and consulting delivery costs.
The cost of processing, servicing and support was $129.9 million or 55.6% of
total revenue for the year ended June 30, 1998 and $146.7 million or 58.7% of
total revenue for the year ended June 30, 1999. Our processing, servicing and
support cost as a percentage of servicing only revenue (which includes all
revenue except license revenue) was 63.4% for the year ended June 30, 1998 and
62.7% for the year ended June 30, 1999.

         Our revenue growth in our Electronic Commerce segment slowed as
financial institutions have been focusing on converting our electronic billing
and payment offerings from a PC software-based to a web-based product. Although
we continued to realize cost savings as a result of our successful efforts to
increase the percentage of our bill payment transactions processed
electronically versus paper, during this period, we continued to invest in added
capacity in anticipation of expected revenue growth as our customers complete
their web-based conversions and refocus their efforts on marketing these
products to achieve higher subscriber growth. While subscriber growth during the
third and fourth quarters of fiscal 1999 was approximately 6%, Internet-based
subscriber growth in the same quarters exceeded 20%, which

                                      13-4
<PAGE>   5

may indicate that web-based offerings will spur consumer adoption. Additionally,
we are incurring the costs of implementing customers for electronic billing and
payment for E-Bill without receiving adequate revenue to fully offset the costs.
Finally, our Yahoo! distribution agreement has resulted in an increase in our
operating expenses during the second half of fiscal 1999. These additional
operating costs for professional service programs to support timely and
effective electronic billing and payment offerings by billers, investments in
hardware, software and technical staff to deliver dial-tone quality to up to one
million additional subscribers and additional customer care staff and related
training, will continue into fiscal year 2000.

         Research and Development. Our research and development costs consist
primarily of salaries and consulting fees paid to software engineers and
business development personnel and were stated net of capitalized software
development costs. Our research and development costs were $36.3 million or
15.5% of total revenue for the year ended June 30, 1998 and $21.1 million or
8.4% of total revenue for the year ended June 30, 1999. The divested software
businesses incurred research and development costs of $8.5 million in the year
ended June 30, 1998. Additionally, upon completion of the base Genesis Platform
in late fiscal 1998 and the transition of resources from Year 2000-related
projects that may not be capitalized for GAAP purposes, we capitalized software
development costs of $0.7 million for the year ended June 30, 1998 and $7.4
million in the year ended June 30, 1999. As a result, on an absolute dollar
basis and net of divested business units, our total research and development
expenditures and capitalized software development costs remained constant at
$28.5 million for the years ended June 30, 1998 and 1999. We are continuing to
invest significantly in research and development in all three of our business
segments in anticipation and support of expected revenue growth, quality
improvement and efficiency enhancement opportunities.

         Sales and Marketing. Our sales and marketing expenses consist primarily
of salaries and commissions of sales and product marketing associates, public
relations and advertising costs, customer acquisition fees, and royalties paid
to distribution partners. Our sales and marketing costs were $28.8 million or
12.3% of total revenue for the year ended June 30, 1998 and $32.4 million or
12.9% of total revenue for the year ended June 30, 1999. Reduced sales and
marketing expenses resulting from our divested software businesses have been
replaced by increased sales expenses related to activities in our electronic
billing area and funding for the creation and launch of a new trade group, the
Electronic Banking Association, which is expected to increase the general
population's awareness of, and interest in, the electronic banking industry.
Additionally, during the fourth quarter of fiscal 1999, we experienced a system
error that led some users of our electronic bill payment service to experience
intermittent problems accessing and using the system. In response to this
situation, we provided service fee credits of approximately $1.9 million, over
and above contractually determined penalties, to our financial institution
customers. Our sales and marketing expenses are expected to increase in fiscal
2000 upon the launch of products related to our Yahoo! distribution agreement.

         General and Administrative. Our general and administrative expenses
consist primarily of salaries for administrative, executive, accounting and
finance, and human resource employees. Our general and administrative expenses
were $20.7 million or 8.8% of total revenue for the year ended June 30, 1998 and
$31.5 million or 12.6% of total revenue for the year ended June 30, 1999. During
the year ended June 30, 1999 we recognized several non-recurring charges
including: $1.3 million in real estate expenses related to the sale of a
facility in Columbus, Ohio and a separate move to a new facility in Jersey City,
New Jersey, $0.9 million in charges related to an uncompleted follow-on stock
offering in June 1999, $0.6 million in charges related to the establishment of a
benefits company intended to better manage future benefit expenses in
anticipation of growth in associates, and charges to third parties to support
various other tax and legal related matters. The divestiture of our various
software businesses has not resulted in a corresponding reduction in existing
infrastructure since business specific systems and administrative functions must
remain to support our retained software businesses and our growing Electronic
Commerce and Investment Services segments. As anticipated revenue growth
materializes, we expect general and administrative expenses to decline as a
percentage of revenue from its current level and return to levels more in line
with our historical experience.

                                      13-5
<PAGE>   6

         Depreciation and Amortization. Our depreciation and amortization
expenses were $25.0 million for the year ended June 30, 1998 and $24.6 million
for the year ended June 30, 1999. Our divestiture of several software businesses
resulted in a significant reduction in depreciation and amortization from the
elimination of both tangible and intangible assets. These reductions have been
offset by incremental depreciation resulting from significant capital
investments throughout fiscal 1998 and 1999 in support of the data center
migration to our Norcross, Georgia facility, the development of the Genesis
project and the support of new business initiatives such as preparation for the
release of products related to our Yahoo! distribution agreement.

         In-Process Research and Development. The in-process research and
development charge of $2.2 million incurred in fiscal 1999 resulted from our
purchase of the Mobius Group in March 1999. Please refer to the Notes to
Consolidated Financial Statements included herein for a detailed discussion of
this charge. Since the Mobius acquisition, the M-Plan Retirement and Estate
Planning Module was delivered on schedule in May 1999 and the M-Search Revision,
M-Vest Revision and M-Plan Cash Flow, Tax and Education modules are all expected
to be delivered as planned on the expected release dates as outlined in the
footnote referred to above. The in-process research and development charge of
$0.7 million in fiscal 1998 resulted from our acquisition of Advanced Mortgage
Technology, Inc. in October 1997. The related development projects from the AMTI
acquisition continued as planned until the time the software and assets of the
mortgage product line, including these projects, were sold in September 1998.

         Charge for Stock Warrants. The $32.8 million charge for stock warrants
in the year ended June 30, 1998 resulted from two separate transactions. A $32.4
million charge resulted from the vesting of three million warrants in March 1998
related to a ten year processing agreement with a strategic partner that we
announced in October 1997. A $0.4 million charge resulted from the vesting of
25,000 warrants in June of 1998 related to a five year consulting agreement with
a third party. These non-cash charges were based on a Black-Scholes option
pricing model valuation of the warrants at the date of vesting. An additional
seven million warrants will vest incrementally upon achievement of a series of
certain strategic targets and each incremental vesting will result in a future
non-cash charge based on the fair market value of warrants and our common stock
at the date of vesting.

         Exclusivity Amortization. The exclusivity amortization of $3.0 million
in the year ended June 30, 1998 was the final amortization related to an
exclusivity arrangement we entered into with Intuit, Inc. in conjunction with
our purchase of Intuit Services Corporation in January 1997.

         Net Gain on Dispositions of Assets. The net gain of $36.2 million in
the year ended June 30, 1998 was the result of several transactions. We recorded
gains on the sales of our recovery management business of $28.2 million, our
item processing business of $3.2 million and our wire and electronic banking
businesses of $ 14.7 million. The gains in 1998 were offset by a loss on the
sale of our leasing business of $4.7 million, expected losses on non-cancelable
contracts and related costs totaling $1.0 million resulting from the decision to
exit the web investor portion of our Electronic Commerce segment and charges
totaling $4.2 million for certain equipment and other assets related primarily
to data center consolidations where we determined that the book value of the
assets exceeded their net realizable value. The net gain of $4.6 million in the
year ended June 30, 1999 was also the result of several transactions. We
recorded gains on the sale of our mortgage business of $6.4 million and the sale
of a building in Columbus, Ohio of $1.1 million and offset these gains with a
loss on the sale of our imaging business of $2.9 million.

         Interest. Our interest income decreased from $3.5 million for the year
ended June 30, 1998 to $2.8 million for the year ended June 30, 1999. The
reduction was primarily due to a decrease in average cash and investments from
$49.3 million for the year ended June 30, 1998 to $43.3 million for the year
ended June 30, 1999. Cash proceeds from the various software divestitures in
fiscal 1998 and early in fiscal 1999 were significantly offset by a share
repurchase in the first and second quarters of fiscal 1999.

         Our interest expense remained constant at $0.6 million for the years
ended June 30, 1998 and 1999. At the end of fiscal 1999 we paid off
approximately $2.5 million in debt related to the sale of our building in
Columbus, Ohio. We expect leasing activities to increase in fiscal 2000 that
will more than offset interest expense savings resulting from the debt
reduction.

                                      13-6
<PAGE>   7

         Income Taxes. Our effective tax rate was 14.8% for the year ended June
30, 1998 and was not meaningful in the year ended June 30, 1999. The difference
in our effective rate and our statutory rate of 35% in fiscal 1998 was primarily
due to non-deductible in-process research and development expenses,
non-deductible intangible amortization and state and local taxes. In fiscal
1999, we recorded a one-time tax benefit of approximately $12.2 million arising
out of the medical benefits management subsidiary. Net of this one-time benefit,
the resulting tax expense would have been $0.2 million against a pre-tax loss of
$1.6 million. The difference between this adjusted number and the statutory rate
of 35% is primarily due to non-deductible in-process research and development
expenses, non-deductible intangible amortization and state and local taxes.

YEARS ENDED JUNE 30, 1997 AND 1998

         Revenues. Our total revenue increased by $57.5 million, or 32.6%, from
$176.4 million for the year ended June 30, 1997 to $233.9 million for the year
ended June 30, 1998. We eliminated estimated purchased profits in deferred
revenues assumed in our Servantis acquisition in February 1996 as a purchase
accounting adjustment, reducing 1997 revenue by approximately $7.8 million.

         On a pro forma basis, our total revenue increased 32.3% as a result of
growth of 50% in our Electronic Commerce segment, 33% in our Investment Services
segment and 6% in our Software segment. The pro forma results are defined as
prior year results excluding the elimination of purchased profits and adjusting
for our Intuit Services Corporation acquisition and divestitures of our
securities business which was sold in October 1996, our credit card processing
business which was sold in March 1997, and our recovery management business
which was sold in August 1997. Our pro forma growth in our Electronic Commerce
segment was driven primarily by an increase in subscribers from approximately
1.7 million at June 30, 1997 (which number includes the Intuit Services
Corporation subscribers acquired in January 1997) to approximately 2.4 million
at June 30, 1998. Our Investment Services revenue growth was primarily due to an
increase in portfolios managed from approximately 350,000 at June 30, 1997 to
over 500,000 at June 30, 1998. Growth in our Software segment was primarily the
result of license and related maintenance and services growth in the
reconciliation and compliance product lines from fiscal 1997 to fiscal 1998. It
should be noted that the rate of our subscriber growth is primarily determined
by the direct marketing efforts of our financial institution clients. Historical
subscriber growth, therefore, may not be indicative of future growth. For
example, in the fourth quarter of fiscal 1998, many of our financial institution
clients reduced marketing efforts to their customers to convert from a PC-based
software offering to a more efficient web-based offering, which resulted in a
lower rate of subscriber growth that continued throughout fiscal 1999.

         Our reported processing and servicing revenue increased from $94.5
million for the year ended June 30, 1997 to $159.3 million for the year ended
June 30, 1998. On a pro forma basis, excluding the elimination of purchased
profits and the sale of our recovery management business, processing and
servicing revenue increased by 46% from $109.4 million for the year ended June
30, 1997 to $159.3 million for the year ended June 30, 1998. This growth was due
primarily to the increase in subscribers in our Electronic Commerce segment and
the increase in portfolios managed in our Investment Services segment previously
discussed.

         Our reported merchant discount revenue decreased from $10.0 million for
the year ended June 30, 1997 to $0 for the year ended June 30, 1998 due to the
sale of our credit card processing business in March 1997.

         Our reported license fee revenue decreased from $33.1 million for the
year ended June 30, 1997 to $29.0 for the year ended June 30, 1998. On a pro
forma basis, adjusting for the sales of our securities and recovery management
businesses, license revenue increased from $26.3 million in fiscal 1997 to $29.0
million in fiscal 1998. Increases in our pro forma license revenue were driven
primarily by growth in reconciliation and compliance software sales.

                                      13-7
<PAGE>   8

         Our reported maintenance revenue increased from $22.6 million for the
year ended June 30, 1997 to $25.8 million for the year ended June 30, 1998. On a
pro forma basis, excluding elimination of purchased profits and adjusting for
the sales of our securities and recovery management businesses, our maintenance
revenue increased from $25.2 million for the year ended June 30, 1997 to $25.8
million for the year ended June 30, 1998. Increases from maintenance price
increases of approximately 7% and first year maintenance from new license sales
were offset by customer retention rates in the mid-to-upper 80% range.

         Our reported other revenue, consisting mainly of consulting fees,
increased from $16.3 million for the year ended June 30, 1997 to $19.8 million
for the year ended June 30, 1998. On a pro forma basis, excluding the
elimination of purchased profits and adjusting for the sales of our securities
and recovery management businesses, other revenue increased from $15.9 million
for fiscal 1997 to $19.8 million for fiscal 1998. Year to date increases were
due to increased implementations in all of our business segments.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $102.7 million or 58.2% of total revenue for the year
ended June 30, 1997 and $129.9 million or 55.6% of total revenue for the year
ended June 30, 1998. Our cost of processing, servicing and support as a
percentage of servicing only revenue (which includes all revenue except license
revenue) and net of purchased profits of $6.5 million in the 1997 servicing only
revenue, was 68.5% for the year ended June 30, 1997 and 63.4% for the year ended
June 30, 1998. The efficiency improvement from fiscal 1997 to fiscal 1998 was
due primarily to the economies of scale and leverage inherent in our business
model as well as an increase in the percentage of electronic transaction
processing versus paper processing, which resulted in lower customer care and
remittance costs per transaction. For the year ended June 30, 1998, we added 10%
to the rate of payments processed electronically. Electronic transactions for
Intuit Services Corporation operations alone increased from 10% at June 1997 to
19% at June 1998.

         Research and Development. Our research and development costs were $32.9
million or 18.6% of total revenue for the year ended June 30, 1997 and $36.3
million or 15.5% of total revenue for the year ended June 30, 1998. Excluding
purchased profits, research and development costs were 17.8% of total revenue
for the year ended June 30, 1997 and 15.5% of total revenue for the year ended
June 30, 1998. The absolute dollar increase of $3.4 million was primarily due to
additional resources supporting our platform integration efforts referred to as
project Genesis and efforts associated with Year 2000 compliance activities.
There were no software development costs capitalized for Year 2000 activities or
for project Genesis in either fiscal year, however approximately $0.7 million of
software development cost was capitalized in fiscal 1998 for initial phases of
key customer care and electronic billing initiatives.

         Sales and Marketing. Our sales and marketing costs were $32.7 million
or 18.5% of total revenues for the year ended June 30, 1997 and $28.8 million
or 12.3% of total revenues for the year ended June 30, 1998. In conjunction with
our purchase of Intuit Services Corporation, we agreed to pay a $1.0 million per
month marketing charge to Intuit, Inc. for six months commencing in February
1997. Excluding purchased profits and five months of Intuit, Inc. marketing
charges in fiscal 1997 and one month in fiscal 1998, our sales and marketing
costs were 15.0% of total revenue for the year ended June 30, 1997 and 11.9% of
total revenue for the years ended June 30, 1998. Underlying costs as a
percentage of revenue has declined due to economies of scale and leverage
inherent in our business model.

         General and Administrative. Our general and administrative expenses
were $18.7 million or 10.6% of total revenue for the year ended June 30, 1997
and $20.7 million or 8.8% of total revenue for the year ended June 30, 1998.
Excluding purchased profits, our general and administrative expenses were 10.2%
of total revenue for the year ended June 30, 1997 and 8.8% of total revenue for
the year ended June 30, 1998. Overall, our general and administrative costs
decreased as a percentage of revenue from fiscal 1997 to fiscal 1998 due to our
ability to leverage corporate support services as revenue continues to grow.

         Depreciation and Amortization. Our depreciation and amortization
expenses increased slightly from $24.9 million for the year ended June 30, 1997
to $25.0 million for the year ended June 30, 1998. Amortization declined due to
the sales of our securities business in October 1996, our recovery management
business in August 1997, our item processing business in March 1998 and our wire
and

                                      13-8
<PAGE>   9

electronic banking businesses in April 1998, reductions in intangible assets
related to the release of a deferred tax benefit valuation allowance in the
quarter ended September 30, 1997 and a purchase price adjustment related to our
Intuit Services Corporation acquisition in the quarter ended December 31, 1997.
These reductions were offset by depreciation and amortization resulting from
purchases of property, plant and equipment required for Genesis development,
data center centralization and in support of growth of the business and tangible
and intangible asset additions related to our purchase of Intuit Services
Corporation in January 1997.

         In-Process Research and Development. The in-process research and
development charge of $140.0 million in 1997 was related to our purchase of
Intuit Services Corporation and $0.7 million in 1998 was related to our purchase
of Advanced Mortgage Technologies, Inc. Amounts allocated to in-process research
and development for each of the acquisitions were based on independent
appraisals and were expensed at the time of the related acquisition.

         Charge for Stock Warrants. The $32.8 million charge for stock warrants
in the year ended June 30, 1998 resulted from two separate transactions. A $32.4
million charge resulted from the vesting of three million warrants in March 1998
related to a ten-year processing agreement that we announced in October 1997
with a strategic partner. A $0.4 million charge resulted from the vesting of
25,000 warrants in June of 1998 related to a five-year consulting agreement with
a third party. These non-cash charges were based on a Black-Scholes option
pricing model valuation of the warrants at the date of vesting. An additional
seven million warrants will vest incrementally upon achievement of a series of
certain strategic targets and each incremental vesting of warrants will result
in a future non-cash charge based on the fair market value of our warrants and
our common stock at the date of vesting.

         Exclusivity Amortization. The exclusivity amortization expense in the
years ended June 30, 1997 and 1998 were the result of the exclusivity
arrangement we entered into with Intuit, Inc. in connection with our purchase of
Intuit Services Corporation in January 1997.

         Net Gain on Dispositions of Assets. The net gain on dispositions of
assets totaling $6.3 million in the year ended June 30, 1997 resulted from the
sale of the credit card business in March 1997. The gain of $36.2 million in
fiscal 1998 was the net result of several transactions. We realized gains on the
sales of our recovery management business of $28.2 million, our item processing
business of $3.2 million, and electronic banking and wire businesses of $14.7
million. These gains were offset by an anticipated loss from the pending sale of
the leasing business of $4.7 million, expected losses on non-cancelable
contracts and related costs totaling $1.0 million resulting in the decision to
exit the web investor portion of our Investment Services segment and charges
totaling $4.2 million for certain equipment and other assets related primarily
to data center consolidations where we determined the book value of the assets
exceeded their net realizable value.

         Interest. Our interest income increased by $1.3 million or 59%, from
$2.2 million for the year ended June 30, 1997 to $3.5 million for the year ended
June 30, 1998. This increase was the result of an increase in average cash and
investments from $39.2 million to $49.3 million combined with an increase in
average yield.

         Our interest expense decreased from $0.8 million for the year ended
June 30, 1997 to $0.6 million for the years ended June 30, 1998 due to lower
outstanding notes payable and capital lease obligations from fiscal 1997 to
fiscal 1998.

         Income Taxes. Our effective income tax benefit was 6.9% for the year
ended June 30, 1997 and 14.8% for the year ended June 30, 1998. For both years,
the difference between our effective rate and the statutory rate of 35% was due
primarily to non-deductible in-process research and development expenses,
non-deductible intangible amortization, and state and local taxes.





                                      13-9
<PAGE>   10
SEGMENT INFORMATION

         The following table sets forth our operating revenue and operating
income by industry segment for the periods noted. Charges identified as
exclusivity amortization, in-process research and development, charge for stock
warrants, and net gain on dispositions of assets were separated from the
operating results of the segment for a better understanding of the underlying
performance of each segment. Explanations of these charges can be found in the
discussions above:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                                       --------------------------------------
                                                          1997          1998          1999
                                                       ----------    ----------    ----------
                                                                   (in thousands)
<S>                                                    <C>           <C>           <C>
Operating Revenue:
   Electronic Commerce .............................   $   85,926    $  137,972    $  169,443
   Software ........................................       68,113        66,143        41,384
   Investment Services .............................       22,406        29,749        39,304
                                                       ----------    ----------    ----------
            Total Operating Revenue ................   $  176,445    $  233,864    $  250,131
                                                       ==========    ==========    ==========

Operating Income (Loss):
   Operating Income (Loss) Excluding Specific Items:
      Electronic Commerce ..........................   $  (20,487)   $   (1,342)   $   (5,490)
      Software .....................................        4,324         8,393        14,637
      Investment Services ..........................        2,171         6,225         8,093
      Corporate ....................................      (21,449)      (20,116)      (23,348)
   Specific Items:
      Exclusivity Amortization .....................       (5,958)       (2,963)         --
      In-Process Research and Development ..........     (140,000)         (719)       (2,201)
      Charge for Stock Warrants ....................         --         (32,827)         --
      Net Gain on Dispositions of Assets ...........        6,250        36,173         4,576
                                                       ----------    ----------    ----------
            Total Operating Income (Loss) ..........   $ (175,149)   $   (7,176)   $   (3,733)
                                                       ==========    ==========    ==========
</TABLE>

YEARS ENDED JUNE 30, 1998 AND 1999

         Revenue in our Electronic Commerce segment increased by 23%, or $31.4
million, from $138.0 million for the year ended June 30, 1998, to $169.4 million
for the year ended June 30, 1999. This increase was primarily due to an increase
in subscribers from approximately 2.4 million at June 30, 1998 to approximately
3.0 million at June 30, 1999.

         Our operating loss in our Electronic Commerce segment increased from a
loss of $1.3 million for the year ended June 30, 1998 to a loss of $5.5 million
for the year ended June 30, 1999. This increase in our operating loss was due to
the temporary slowing of revenue growth caused by financial institutions
converting their PC-based systems to our new web-based platform. At the same
time, we continued to invest in our payment processing infrastructure to enhance
our future quality and efficiency in anticipation of the revenue growth expected
when financial institutions complete their technology conversions and refocus
their marketing efforts on new subscriber growth. These investments include
additional customer care resources geared toward improved quality and
significant E-Bill implementation costs, which were not offset by additional
revenue during the year ended June 30, 1999.

         As of June 30, 1999, we had activated 29 billers for our E-Bill product
offering, had an additional 21 billers actively engaged in the implementation
process and had another 14 awaiting implementation. We believe that as we
continue to activate additional billers for our electronic billing and payment
product offerings, the number of users will continue to increase, which should
drive revenue and operating income growth in the future.



                                     13-10
<PAGE>   11

         In January 1999, we announced a distribution agreement with Yahoo!
designed to promote on-line billing, payment and electronic banking to Internet
users. Our planned investments related to this agreement has placed downward
pressure on margins in the second half of fiscal 1999, however, these costs will
prepare us for up to one million additional subscribers for our services. These
investments have allowed us to grow our professional services and customer care
staff to support anticipated greater deployment of electronic billing and
payment services by billers, as well as expand our sales and marketing and
related training activities.

         In April 1999, we experienced a system error that led some users of our
electronic bill payment service to experience intermittent problems accessing
and using the system. As a result of this outage, we recorded charges totaling
$2.7 million. Net of this charge, the operating loss in our Electronic Commerce
segment would have been $2.8 million in the year ended June 30, 1999.

         Revenues in our Software segment declined by $24.7 million or 37%, from
$66.1 million for the year ended June 30, 1998 to $41.4 million for the year
ended June 30, 1999. This decline reflects the impact of the divestiture of
several of our software businesses. Excluding the effects of the divestitures,
revenue in our Software segment rose by $2.2 million or 6%, from $37.4 million
in the year ended June 30, 1998 to $39.6 million for the year ended June 30,
1999. Despite this increase, our license revenue was lower than anticipated due
primarily to purchasing moratoriums imposed by potential customers who deferred
new software purchases as a result of addressing their internal Year 2000
issues. This slowdown in license sales was offset by greater maintenance and
consulting revenue resulting from prior sales of software licenses.

         Operating income in our Software segment increased from $8.4 million
for the year ended June 30, 1998 to $14.6 million for the year ended June 30,
1999. Excluding the effects of the divestitures, operating income increased from
$10.7 million for the year ended June 30, 1998 to $16.4 million for the year
ended June 30, 1999. Of the increase in retained business operating income of
$5.7 million, $2.2 million was a result of the revenue growth previously
described and approximately $2.4 million was a reporting anomaly related to
allocated corporate fixed costs in the fiscal 1998 results. Our pro forma
operating income in the year ended June 30, 1998 was carrying a full burden of
allocated overhead from our Software segment to avoid unreasonably impacting
other segments on a restated pro forma basis. When the effects of allocations
are ignored, underlying operating profit margins in our Software segment
remained fairly consistent from year to year.

         Revenues in our Investment Services segment increased by $9.6 million,
or 32%, from $29.7 million for the year ended June 30, 1998 to $39.3 million for
the year ended June 30, 1999. On March 8, 1999, we acquired Mobius Group to
augment the product line of this segment. Investment consultants and asset
managers may now use Mobius Group's M-Vest service to determine the ideal asset
allocation for their clients; use M-Search to determine the ideal investment
manager candidates; use CheckFree APL and APL wrap products to provide
investment platform and trading tools; and use either M-Watch or CheckFree APL
for their investment oversight and reporting to the end client. Excluding the
effects of the acquisition, revenue increased by $7.6 million, or 26%, from
$29.7 million for the year ended June 30, 1998 to $37.4 million for the years
ended June 30, 1999. The increase was due primarily to an increase in the number
of institutional portfolios managed from approximately 500,000 at June 30, 1998
to approximately 715,000 at June 30, 1999, offset somewhat by an increase in the
number of retail brokerage accounts managed which carry a lower unit price.

         Operating income in our Investment Services segment increased from $6.2
million for the year ended June 30, 1998 to $8.1 million for the year ended June
30, 1999. Excluding the effects of the acquisition of Mobius Group, operating
income increased from $6.2 million for the year ended June 30, 1998 to $8.7
million for the year ended June 30, 1999. This increase was due to the greater
number of portfolios managed, offset somewhat by costs of approximately $0.9
related to the moving of the segment's main office in fiscal 1999.

         Expenses in our Corporate segment represent charges for human
resources, legal, finance and various other unallocated overhead charges. The
Corporate segment charges were $20.1 million and $23.3



                                     13-11
<PAGE>   12

million for the years ended June 30, 1998 and 1999, respectively. The fiscal
1999 results included one-time charges of $0.6 million incurred in December 1998
for the formation of a special-purpose subsidiary created to administer our
employee medical benefits program; $0.4 million in real estate related charges
incurred in the sale of a building in Columbus, Ohio in June of 1998; and $0.9
million in charges incurred in the preparation of a follow-on stock offering
that was terminated in June 1998. Net of these one-time charges, our corporate
charges remained relatively consistent at 8.6% of total revenue in both years.

YEARS ENDED JUNE 30, 1997 AND 1998

         Revenue in our Electronic Commerce business unit increased by $52.0
million, or 61%, from $85.9 million for the year ended June 30, 1997 to $137.9
million for the year ended June 30, 1998. On a pro forma basis, assuming twelve
months of Intuit Services Corporation results are included in and the credit
card processing business is excluded from reported results, our revenue
increased 50%. This growth was driven primarily by growth in subscribers from
approximately 1.7 million at June 30, 1997 to approximately 2.4 million at June
30, 1998.

         Operating losses in our Electronic Commerce segment improved from $20.5
million for the year ended June 30, 1997 to $1.3 million for the year ended June
30, 1998. On a pro forma basis, operating results improved from a loss of $31.4
million for the year ended June 30, 1997 to a loss of $1.3 million for the year
ended June 30, 1998. Favorable operating results are primarily due to continued
revenue growth as well as continued efficiency improvements in remittance and
customer care costs, reduction in costs from the integration of Intuit Services
Corporation and significant economies of scale and leverage inherent in the
segment's business model. Cost improvements in customer care and remittance are
primarily the result of growth in the percentage of electronic versus paper
payments, year over year. In the fourth quarter of fiscal 1998, many of our
financial institution clients reduced marketing efforts toward new subscribers
to allow them time to convert from a PC based software front-end offering to a
more efficient web-based offering. This resulted in a decline in quarter over
quarter subscriber growth and had a dampening effect on subscriber growth going
forward.

         Revenue in our Software segment decreased from $68.1 million for the
year ended June 30, 1997 to $66.1 million for the year ended June 30, 1998. On
a pro forma basis, adjusting the prior year to exclude the effect of purchased
profits and to eliminate results of the divested credit management business,
revenue increased by 6% year over year. Revenue growth was primarily the result
of increased license sales driven by growth in our reconciliation and compliance
products and related maintenance and services revenue generated from new license
sales in fiscal 1997 and 1998.

         Operating profits in our Software segment improved from $4.3 million
for the year ended June 30, 1997 to $8.4 million for the year ended June 30,
1998. On a pro forma basis, operating income increased from $5.3 million to $8.3
million for the same periods, respectively. Gains on the sale of divested
businesses allowed us to release a deferred tax benefit valuation allowance
which in turn reduced goodwill and other intangible assets resulting from our
Servantis acquisition. Additionally, at the end of the third quarter of fiscal
1998, when we announced intentions to divest software units, related intangible
assets were reclassified on the balance sheet as assets held for sale and we
discontinued amortization on these assets at that time. The resulting decrease
in intangible amortization in our Software segment on a year over year basis was
approximately $3.7 million, which was the primary reason for the improvement.

         Revenue in our Investment Services segment increased from $22.4 million
for the year ended June 30, 1997 to $29.7 million for the year ended June 30,
1998. This improvement is due primarily to an increase in portfolios managed
from approximately 350,000 at June 30, 1997 to approximately 500,000 at June 30,
1998.

         Operating profits in our Investment Services segment increased from
$2.2 million for the year ended June 30, 1997 to $6.2 million in the year ended
June 30, 1998. Improvements in operating results were due to revenue growth and
the leverage and economies of scale inherent in the segment's business model.



                                     13-12
<PAGE>   13

         Our Corporate segment incurred expenses of $21.4 million for the year
ended June 30, 1997 and $20.1 million for the year ended June 30, 1998. The
improvement was due to successful efforts to assimilate the various acquisitions
and leverage the existing infrastructure in response to overall growth in the
business.

YEAR 2000 READINESS

         The following statements are "Year 2000 Readiness Disclosures" in
conformance with the Year 2000 Information and Readiness Disclosure Act (15
U.S.C. 1) enacted on October 19, 1998.

         Our goal is to ensure that all systems and products will be ready for
any date-based processing related to the millennium. The following readiness
disclosure is presented for all of our business segments; Electronic Commerce,
Software and Investment Services.

         State of Readiness. We are moving all of our Electronic Commerce
segment processing to Year 2000-ready environments and are making satisfactory
progress to ensure that all of our systems will be ready for any date-based
functions related to the millennium. Previous implementation phases included
building a Year 2000-ready data center and the physical move of the processing
systems to that center. The final implementation phase includes the migration of
customers from our Chicago and Columbus systems to the Year 2000-ready Genesis
Platform followed by applicable testing on that system which will be completed
by September 30, 1999. In anticipation of limited customer migration from our
Austin system to Genesis before January 1, 2000, we have made the Austin system
Year 2000 ready and testing with financial institutions is substantially
complete. Our Electronic Commerce processing systems are subject to regulation
by the Office of the Comptroller of the Currency and are required to meet their
Year 2000 readiness requirements by June 30, 1999 and we are substantially
complete in these requirements. All Software segment products have been made
Year 2000 ready and only minor efforts necessary to remediate internal support
systems remain. Prior to the acquisition of Mobius Group, all Investment
Services customer-related processing systems had been made Year 2000 ready and
only customer testing and final remediation of internal systems at Mobius Group
remain. Final corporate initiatives require resources to complete installation
of date related "patches" to related infrastructure hardware and software
applications. All remaining remediation efforts are on target to be completed
during the quarter ended September 30, 1999.

         We maintain and periodically update an inventory of all information
technology and non-information technology systems. We have solicited most of our
third party vendors to determine the status of their Year 2000 readiness and
those functions that are likely to have a material effect on us have been
identified and assessed. We have received responses from all of our critical
vendors and over half of our other vendors. Validation is based on third party
representations and/or internal testing. To date, in excess of 95% of our
mission critical applications are deemed to be Year 2000-ready. Based on a
review of third party representations, we are not currently aware of any third
party issue applicable to the Year 2000 that is likely to have a material impact
on the conduct of our business, the results of our operations or our financial
condition. We have not performed our own tests on many of these third party
systems and not assurances can be given that these systems are Year 2000 ready.

         Costs to Address Our Year 2000 Issues. Although the development of the
Genesis Platform has taken into account relevant Year 2000 issues, the planned
conversion was not accelerated due to Year 2000 issues and year 2000 related
costs in the development of the Genesis Platform are therefore not included in
our costs below. The following chart reflects our Year 2000 specific costs. The
fiscal year 1998 costs were attributed to remediation of legacy systems and
applications. The cost to complete includes remediation, testing and
verification, but is primarily budgeted to remedy any Year 2000 related
situations that we have not yet anticipated. The estimate of total cost has
increased by $0.7 million since our last estimate at March 31, 1999 due to
additional support we are providing our financial institution customers in their
testing requirements and our decision to perform a complete revalidation of our
testing. We believe that associated costs are adequately budgeted and provided
for in our operating plans.

                                     13-13
<PAGE>   14

<TABLE>
<CAPTION>
                           FISCAL           FISCAL            FISCAL           COST TO
  BUSINESS SEGMENT          1997             1998              1999            COMPLETE            TOTAL
-------------------   ---------------   ---------------   ---------------   ---------------   ---------------
                                                           (IN THOUSANDS)
<S>                   <C>               <C>               <C>               <C>               <C>
Electronic Commerce   $             0   $           100   $         1,360   $           800   $         2,260
Software ..........              --                 500               525               100             1,125
Investment Services              --                 375               937               239             1,551
Corporate .........              --                --                 270               100               370
                      ---------------   ---------------   ---------------   ---------------   ---------------
      Total .......   $             0   $           975   $         3,092   $         1,239   $         5,306
                      ===============   ===============   ===============   ===============   ===============
</TABLE>

         Risks of Our Year 2000 Issues. In order to accurately process
transactions, we must rely on technology supported by our customers and
suppliers. Transaction processing relies on transmissions of data from consumer
personal computers, through financial institution and merchant web servers and
the Internet, over third party data and voice communication lines, and through
the Federal Funds System. Failure by us, our customers or our suppliers to
adequately address the Year 2000 issues in a timely manner could impede our
ability to process transactions and can have a direct impact on our ability to
generate revenue per our agreements with financial institution, portfolio
management, merchant and direct customers. This in turn could have a material
impact on the conduct of our business, the results of our operations and our
financial condition. Accordingly, we plan to address all Year 2000 issues before
problems materialize. We believe that associated costs are adequately budgeted
to handle any remaining issues. Should our efforts or the efforts of our
customers and suppliers fail to adequately address relevant Year 2000 issues,
the most likely worst case scenario would be a total loss of revenue.

         Our Contingency Plans. We are internally reviewing and testing all
mission critical systems and major components for Year 2000 readiness.
Contingency plans are in place to address mission critical customer related
processes such as back-up communications plans for incoming customer payment and
portfolio transactions, paper based payment transaction processing in the event
of failure of electronic payment systems and alternative power supply in the
event of prolonged power outages. We will continue to incorporate additional
Year 2000 considerations into our business contingency plans as necessary.

         We cannot guarantee that our efforts will prevent all consequences and
there may be undetermined future costs due to business disruption that may be
caused by customers, suppliers or unforeseen circumstances.

LIQUIDITY AND CAPITAL RESOURCES

         The following table sets forth a summary of cash flow activity and
should be referred to in conjunction with statements regarding our liquidity and
capital resources:

<TABLE>
<CAPTION>
                                                                        SUMMARY OF CASH FLOWS FOR
                                                                           YEAR ENDED JUNE 30,
                                                                    --------------------------------
                                                                      1997        1998        1999
                                                                    --------    --------    --------
                                                                           (IN THOUSANDS)
<S>                                                                 <C>         <C>         <C>
Cash flow provided by (used in) operating activities ............   $ (8,472)   $(11,673)   $ 25,571
Cash flow provided by (used in) investing activities ............     25,553      12,767     (16,217)
Cash flow provided by (used in) financing activities ............     (5,982)      3,355     (33,443)
                                                                    --------    --------    --------
    Net increase  (decrease) in cash and cash  equivalents ......   $ 11,099    $  4,449    $(24,089)
                                                                    ========    ========    ========
</TABLE>

         During the quarters ended September 30, 1998 and December 31, 1998, we
expended approximately $31.2 million to repurchase shares of our own stock. In
spite of this expenditure, we retained approximately $23.0 million in cash, cash
equivalents and short-term investments as of June 30, 1999. Our June 30, 1999
balance sheet reflects a current ratio of 1.41 and working capital of $24.2
million.


                                     13-14
<PAGE>   15

Over the next fiscal year, we expect to generate positive cash flow from our
operations. Additionally, we are negotiating a significant lease line of credit
to finance future equipment needs in support of expected growth. We believe that
existing cash, cash equivalents, short-term investments and available financing
alternatives will be more than sufficient to meet our presently anticipated
requirements for the foreseeable future. To the extent that additional capital
resources are required, we have access to an untapped $20.0 million line of
credit and are in the process of expanding this credit facility as well.

         For the year ended June 30, 1999, we generated $25.6 million of cash
flow from operations. Of this amount, $14.3 million represented net proceeds
from trading securities transactions, which GAAP requires us to reflect in cash
flow from operations.

         From an investing perspective we used $40.4 million for the purchase of
property and software, of which approximately $14.9 million was for the purchase
of land and a building in Dublin, Ohio and another $6.4 million in leasehold
improvements to ready the building for occupancy. The remaining $19.1 million
was used for computer equipment and software and leasehold improvements in
support of initiatives to grow the business and improve quality. We received
$18.4 million from the net sale of the various software business divestitures
during the fiscal year and the sale of a building in Columbus, Ohio and $14.9
million from the repayment of a note receivable established in fiscal 1998
related to the purchase of the Dublin, Ohio facility. We capitalized $8.0
million in software development costs related to new business initiatives in all
three of our business segments. Additionally, we spent approximately $0.2
million in cash in connection with the acquisition of Mobius Group, purchased
$1.9 million in held-to-maturity securities and received $1.0 million in
proceeds from the sale of held-to-maturity securities.

         From a financing perspective, we used $31.3 million in the purchase of
approximately 4.7 million shares of treasury stock for an average price of
approximately $6.65 per share. We used $3.3 million in cash for principal
payments under capital leases and another $3.6 million to fund an escrow account
to release our obligation for bonds with the Department of Economic Development
of the State of Ohio to facilitate the sale of land and a building in Columbus,
Ohio. We received $2.9 million in proceeds from the exercise of options under
the employee stock option plan and $1.9 million from the purchase of shares
under the employee stock purchase plan.

         For the year ended June 30, 1998, we used $11.7 million of cash flow in
operating activities. During this year, $24.5 million in net investments in
trading securities were reflected as cash used in operations. In previous
periods, all of our investments were classified as available for sale, and,
therefore, related investment activities did not impact operating cash flow. The
change to trading securities reflects efforts to maximize yields within our
conservative investment guidelines and not to significantly impact the risk
profile of our portfolio. From an investing perspective, we generated $54.9
million of cash from the sale of various software businesses, $24 million from
sales and maturities of available-for-sale investments, $8.9 million from
receipt of a purchase price adjustment related to our Intuit Services
Corporation acquisition and $0.3 from the sales of other assets. Investing
receipts were offset by $27.9 million in investment in property additions,
primarily for computer and operational equipment and facilities related to
completion of the Genesis Platform, $20.3 million in the purchase of
investments, $14.9 million of investment in a note receivable in conjunction
with the proposed purchase of a building in Dublin, Ohio, $10.0 million as final
payment on the purchase of Intuit Services Corporation; payment of $1.0 million
for the purchase of Advanced Mortgage Technology, Inc., and $0.7 million in
capitalization of software development costs. From a financing perspective, $5.4
million of cash was provided by stock option exercises under our Stock Option
Plans, stock purchases under our Associate Stock Purchase Plan and our matching
contributions under our 401(k) Plan, which was offset by payments of $1.1
million in satisfaction of an outstanding note payable and $0.9 million in
capital lease obligations. As a result of the above, our current ratio improved
from 1.3 at June 30, 1997 to 2.3 at June 30, 1998 and related working capital
increased from $20.0 million at June 30, 1997 to $78.2 million at June 30, 1998.

         For the year ended June 30, 1997, we used $8.5 million for operating
activities. The sale of businesses generated proceeds of $29.5 million while
$0.6 million was received from the exercise of stock options during the year. We
invested $11.4 million, net of cash acquired, for the purchase of Intuit
Services Corporation. Some stockholders from the Security APL acquisition
exercised options to sell

                                     13-15
<PAGE>   16

276,469 common shares back to us at a price of $19.00 per share. We received
proceeds of $19.5 million on net maturities and sales of available-for-sale
investments and we invested $9.1 million in property and software additions.
Principal payments on capital leases totaled $1.1 million.

INFLATION

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

RECENT ACCOUNTING PRONOUNCEMENTS

         In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which is effective for fiscal years beginning after
December 15, 1998. The Statement distinguishes accounting for the costs of
computer software developed or obtained for internal use from guidance under
SFAS 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." The adoption of SOP 98-1 is not expected to have a material
impact on the Company's software capitalization policies or financial statement
disclosures.

         In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which will require that all derivative
financial instruments be recognized as either assets or liabilities in the
balance sheet. SFAS 133 will be effective for the Company's first quarter of
fiscal 2001. The Company is in the process of evaluating the effects of this new
statement.


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

         Except for the historical information contained herein, the matters
discussed in our annual report 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, our
operating and growth strategy, and Year 2000 issues. 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,
1999 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 a representation 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.


                                     13-16
<PAGE>   17

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
  CheckFree Holdings Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of CheckFree
Holdings Corporation (the "Company") and its subsidiaries as of June 30, 1998
and 1999, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended June 30, 1997, 1998, and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries at
June 30, 1998 and 1999, and the results of their operations and their cash flows
for the years ended June 30, 1997, 1998, and 1999 in conformity with generally
accepted accounting principles.



Atlanta, Georgia
August 9, 1999


                                     13-17
<PAGE>   18


                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 1998 AND 1999

<TABLE>
<CAPTION>
                                                                             1998           1999
                                                                           ---------    ---------
                                                                               (IN THOUSANDS,
                                                                              EXCEPT SHARE DATA)
                                  ASSETS
<S>                                                                        <C>          <C>
CURRENT ASSETS:
     Cash and cash equivalents .........................................   $  36,535    $  12,446
     Investments .......................................................      24,533       10,266
     Accounts receivable, net ..........................................      32,960       45,660
     Assets held for sale ..............................................      15,881         --
     Note receivable ...................................................      14,882         --
     Prepaid expenses and other assets .................................       4,678        7,800
     Deferred income taxes .............................................       7,231        6,513
                                                                           ---------    ---------
                    Total current assets ...............................     136,700       82,685
PROPERTY AND EQUIPMENT, Net ............................................      50,920       69,823
OTHER ASSETS:
     Capitalized software, net .........................................      11,387       20,059
     Intangible assets, net ............................................      30,474       45,875
     Investments .......................................................       1,006        1,875
     Deferred income taxes .............................................      12,889       21,920
     Other noncurrent assets ...........................................       6,736       10,524
                                                                           ---------    ---------
                    Total other assets .................................      62,492      100,253
                                                                           ---------    ---------
                                                                           $ 250,112    $ 252,761
                                                                           =========    =========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable ..................................................   $   8,536    $   9,634
     Accrued liabilities ...............................................      25,160       26,971
     Current portion of long-term obligations ..........................       1,180        1,640
     Deferred revenue ..................................................      19,710       20,195
     Income taxes payable ..............................................       3,876         --
                                                                           ---------    ---------
                    Total current liabilities ..........................      58,462       58,440
ACCRUED RENT AND OTHER .................................................       1,329        3,536
OBLIGATIONS UNDER CAPITAL LEASES- Less current portion .................       6,467        3,882
COMMITMENTS (Note 21)
STOCKHOLDERS' EQUITY:
     Preferred stock- 15,000,000 authorized shares, $.01 par value;
        no amounts issued or outstanding ...............................        --           --
      Common stock- 150,000,000 authorized shares, $.01 par value;
        issued 56,364,839  and 57,305,659 shares, respectively;
        outstanding 56,364,839 and 51,756,278 shares, respectively .....         564          518
     Additional paid-in-capital ........................................     492,109      480,385
     Less:
        Treasury stock- at cost; 963,295 shares, no shares, respectively      (4,362)        --
        Accumulated deficit ............................................    (304,457)    (294,000)
                                                                           ---------    ---------
                    Total stockholders' equity .........................     183,854      186,903
                                                                           ---------    ---------
                                                                           $ 250,112    $ 252,761
                                                                           =========    =========
</TABLE>

                 See notes to consolidated financial statements


                                     13-18
<PAGE>   19

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                     1997            1998            1999
                                                 ------------    ------------    ------------
                                                        (IN THOUSANDS, EXCEPT SHARE DATA)

<S>                                              <C>             <C>             <C>
REVENUES:
     Processing and servicing ................   $     94,528    $    159,255    $    201,059
     Merchant discount .......................          9,994            --              --
     License fees ............................         33,088          28,952          15,975
     Maintenance fees ........................         22,567          25,848          17,746
     Other ...................................         16,268          19,809          15,351
                                                 ------------    ------------    ------------
                    Total revenues ...........        176,445         233,864         250,131

EXPENSES:
     Cost of processing, servicing and support        102,721         129,924         146,704
     Research and development ................         32,869          36,265          21,085
     Sales and marketing .....................         32,670          28,839          32,354
     General and administrative ..............         18,707          20,677          31,466
     Depreciation and amortization ...........         24,919          24,999          24,630
     In-process research and development .....        140,000             719           2,201
     Charge for stock warrants ...............           --            32,827            --
     Exclusivity amortization ................          5,958           2,963            --
                                                 ------------    ------------    ------------
                    Total expenses ...........        357,844         277,213         258,440
     Net gain on dispositions of assets ......          6,250          36,173           4,576
                                                 ------------    ------------    ------------
LOSS FROM OPERATIONS .........................       (175,149)         (7,176)         (3,733)
OTHER:
     Interest income .........................          2,153           3,464           2,799
     Interest expense ........................           (834)           (632)           (618)
                                                 ------------    ------------    ------------
LOSS BEFORE INCOME TAXES .....................       (173,830)         (4,344)         (1,552)
INCOME TAX BENEFIT ...........................        (12,017)           (641)        (12,009)
                                                 ------------    ------------    ------------
NET INCOME (LOSS) ............................   $   (161,813)   $     (3,703)   $     10,457
                                                 ============    ============    ============

BASIC EARNINGS (LOSS) PER SHARE:
     Net income (loss) per common share ......   $      (3.44)   $      (0.07)   $       0.20
                                                 ============    ============    ============
     Equivalent number of shares .............     46,988,225      55,086,742      52,444,375
                                                 ============    ============    ============
DILUTED EARNINGS (LOSS) PER SHARE:
     Net income (loss) per common share ......   $      (3.44)   $      (0.07)   $       0.18
                                                 ============    ============    ============
     Equivalent number of shares .............     46,988,225      55,086,742      56,529,165
                                                 ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements


                                     13-19
<PAGE>   20


                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              NUMBER OF            COMMON       ADDITIONAL      NUMBER OF
                                              SHARES OF           STOCK AT       PAID-IN        SHARES OF
                                             COMMON STOCK           PAR          CAPITAL      TREASURY STOCK
                                             ------------       ------------   -----------    --------------
                                                            (IN THOUSANDS, EXCEPT SHARE DATA)

<S>                                            <C>           <C>             <C>                 <C>
BALANCE- JUNE 30, 1996 ...................     42,274,800    $        423    $    276,822        (757,536)
     Net loss ............................           --              --              --              --
     Stock options exercised .............        636,309               6             591            --
     Tax benefit associated with exercise
          of stock options ...............           --              --               887            --
     Issuance of common stock and stock
          options pursuant to acquisitions     12,635,212             126         176,550            --
     Treasury stock acquired .............           --              --              --          (284,016)
                                             ------------          ------       ---------      ----------
BALANCE- JUNE 30, 1997 ...................     55,546,321             555         454,850      (1,041,552)
     Net loss ............................           --              --              --              --
     Stock options exercised .............        708,661               8           2,204            --
     Employee stock purchases ............        109,857               1           1,572            --
     401(k) match ........................           --              --              --            78,257
     Warrants issued .....................           --              --            32,827            --
     Tax benefit associated with exercise
          of stock options ...............           --              --               656            --
                                             ------------          ------       ---------      ----------
BALANCE- JUNE 30, 1998 ...................     56,364,839             564         492,109        (963,295)
     Net income ..........................           --              --              --              --
     Stock options exercised .............        354,758               3           1,605            --
     Employee stock purchases ............         48,748               1             968          48,631
     401(k) match ........................           --              --              --            74,981
     Treasury stock acquired .............           --              --              --        (4,709,698)
     Treasury stock retired ..............     (5,549,381)            (55)        (33,610)      5,549,381
     Issuance of common stock pursuant to
          acquisition ....................        537,314               5          17,995            --
     Tax benefit associated with exercise
          of stock options ...............           --              --             1,318            --
                                             ------------          ------       ---------      ----------
BALANCE- JUNE 30, 1999....................     51,756,278          $  518       $ 480,385            --
                                             ============          ======       =========      ==========
</TABLE>
<TABLE>
<CAPTION>
                                               TREASURY                         TOTAL
                                               STOCK AT       ACCUMULATED    STOCKHOLDERS'
                                                 COST           DEFICIT        EQUITY
                                             -------------    ------------   ------------
                                                  (IN THOUSANDS, EXCEPT SHARE DATA)

<S>                                         <C>             <C>             <C>
BALANCE- JUNE 30, 1996 ..................   $        (629)   $   (138,941)     $  137,675
     Net loss ............................           --          (161,813)       (161,813)
     Stock options exercised .............           --              --               597
     Tax benefit associated with exercise
          of stock options ...............           --              --               887
     Issuance of common stock and stock
          options pursuant to acquisitions           --              --           176,676
     Treasury stock acquired .............         (5,378)         (5,378)         (5,378)
                                            -------------    -------------     ----------
BALANCE- JUNE 30, 1997 ...................         (6,007)       (300,754)        148,644
     Net loss ............................           --            (3,703)         (3,703)
     Stock options exercised .............            (47)           --             2,165
     Employee stock purchases ............           --              --             1,573
     401(k) match ........................          1,692            --             1,692
     Warrants issued .....................           --              --            32,827
     Tax benefit associated with exercise
          of stock options ...............           --              --               656
                                            -------------    -------------     ----------
BALANCE- JUNE 30, 1998 ...................         (4,362)       (304,457)        183,854
     Net income ..........................           --            10,457          10,457
     Stock options exercised .............           --              --             1,608
     Employee stock purchases ............          1,070            --             2,039
      401(k) match .......................            963            --               963
     Treasury stock acquired .............        (31,336)           --           (31,336)
     Treasury stock retired ..............         33,665            --              --
     Issuance of common stock pursuant to
          acquisition ....................           --              --            18,000
     Tax benefit associated with exercise
          of stock options ...............           --              --             1,318
                                            -------------    -------------     ----------
BALANCE- JUNE 30, 1999....................  $        --      $    (294,000)    $  186,903
                                            =============    =============     ==========
</TABLE>


                 See notes to consolidated financial statements


                                     13-20
<PAGE>   21


                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED JUNE 30,
                                                                            --------------------------------------------
                                                                                1997            1998            1999
                                                                            ------------    ------------    ------------
                                                                                            (IN THOUSANDS)
<S>                                                                         <C>             <C>             <C>
OPERATING ACTIVITIES:
     Net income (loss) ..................................................   $   (161,813)   $     (3,703)   $     10,457
     Adjustments to reconcile net income (loss) to net cash provided
         by (used in) operating activities:
     Write off of in-process research and development ...................        140,000             719           2,201
     Write off of capitalized software ..................................          3,619            --              --
     Issuance of warrants ...............................................           --            32,827            --
     Exclusivity amortization ...........................................          4,938           2,963            --
     Depreciation and amortization ......................................         24,919          24,999          24,630
     Deferred income tax provision ......................................        (13,101)         (5,499)            854
     Net gain on dispositions of assets .................................         (6,250)        (36,173)         (4,576)
     Purchases of investments- Trading ..................................           --           (28,799)        (10,416)
     Proceeds from maturities and sales of investments, net- Trading ....           --             4,267          24,683
     Change in certain assets and liabilities (net of acquisitions and
          dispositions):
          Accounts receivable ...........................................        (10,952)         (5,095)         (6,976)
          Prepaid expenses and other ....................................         (2,976)         (1,834)          1,434
          Accounts payable ..............................................          1,249           1,492             988
          Accrued liabilities ...........................................          4,203            (568)         (2,194)
          Deferred revenue ..............................................          7,509             239           1,739
          Income tax accounts ...........................................            183           2,492         (17,253)
                                                                            ------------    ------------    ------------
                    Net cash provided by (used in) operating activities .         (8,472)        (11,673)         25,571
INVESTING ACTIVITIES:
     Purchase of property and software ..................................         (9,114)        (27,939)        (40,444)
     Proceeds from sale of assets .......................................         29,488          54,990          18,435
     Purchase of note receivable ........................................           --           (14,882)           --
     Proceeds from repayment of note receivable .........................           --              --            14,882
     Proceeds from purchase price adjustment ............................           --             8,889            --
     Capitalization of software development costs .......................           --              (731)         (8,031)
     Purchase of business, net of cash acquired .........................        (11,363)        (11,000)           (190)
     Purchases of investments- Held to maturity .........................         (3,000)         (1,006)         (1,875)
     Proceeds from maturities and sales of investments- Held to maturity            --              --             1,006
     Purchases of investments- Available for sale .......................           --           (19,311)           --
     Proceeds from maturities and sales of investments- Available
          for sale ......................................................         19,542          23,757            --
                                                                            ------------    ------------    ------------
                    Net cash provided by (used in) investing activities .         25,553          12,767         (16,217)
FINANCING ACTIVITIES:
     Repayment of notes payable and other debt extinguishment ...........            (69)         (1,144)           --
     Principal payments under capital lease obligations .................         (1,082)           (931)         (3,327)
     Escrow deposit associated with capital lease obligation ............           --              --            (3,637)
     Proceeds from stock options exercised, including related tax benefits            597           2,165          2,926
     Proceeds from employee stock purchase plan ..........................           --             1,573          1,931
     Proceeds from employee 401(k)plan ...................................           --             1,692           --
     Purchase of treasury stock ..........................................         (5,378)           --          (31,336)
     Payments on stockholder notes .......................................            (50)           --             --
                                                                             ------------    ------------   -------------
                    Net cash provided by (used in) financing activities ..         (5,982)          3,355        (33,443)
                                                                             ------------    ------------   -------------
NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS ....................................................         11,099           4,449        (24,089)
CASH AND CASH EQUIVALENTS:
     Beginning of period .................................................         20,987          32,086         36,535
                                                                             ------------    ------------   -------------
     End of period .......................................................   $     32,086    $     36,535   $     12,446
                                                                             ============    ============   =============
</TABLE>

                 See notes to consolidated financial statements



                                     13-21
<PAGE>   22


                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           AS OF AND FOR THE YEARS ENDED JUNE 30, 1997, 1998 AND 1999

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Organization - CheckFree Holdings Corporation (the "Company") is the
      parent company of CheckFree Corporation ("CFC"), the principal operating
      company of the business. CFC was organized in 1981 and is a leading
      provider of transaction processing services, software and related products
      to financial institutions and businesses and their customers throughout
      the United States. See Note 19 for a description of the Company's business
      segments. Following a number of acquisitions and divestitures, CFC
      reorganized its corporate structure on December 22, 1997. In connection
      with the reorganization, holders of common stock ("Common Stock") of CFC
      became holders of an identical number of shares of Common Stock of the
      Company. The restructuring was effected by a merger conducted pursuant to
      Section 251(g) of the Delaware General Corporation Law, which provides for
      the formation of a holding company structure without a vote of the
      stockholders of the Company.

      Principles of Consolidation - The accompanying consolidated financial
      statements include the results of operations of the Company, its
      wholly-owned subsidiaries, and CheckFree Management Corporation, of which
      the Company is the majority owner. All significant intercompany
      transactions have been eliminated.

      The accompanying consolidated financial statements have been prepared in
      accordance with generally accepted accounting principles ("GAAP"). The
      preparation of financial statements in conformity with GAAP requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.

      Processing Agreements - The Company has agreements with transaction
      processors to provide origination and settlement services for the Company.
      Under the agreements, the Company must fund service fees and returned
      transactions when presented. These agreements expire at various dates.

      Transaction Processing - In connection with the timing of the Company's
      financial transaction processing, the Company is exposed to credit risk in
      the event of nonperformance by other parties, such as returns and
      chargebacks. The Company utilizes credit analysis and other controls to
      manage its credit risk exposure. The Company also maintains a reserve for
      future returns and chargebacks.

      Cash and Cash Equivalents - The Company considers all highly liquid debt
      instruments (primarily United States government agency obligations and
      commercial paper) purchased with maturities of three months or less to be
      cash equivalents. Substantially all cash and cash equivalents are on
      deposit with six financial institutions.

      Investments - The Company's investments consist primarily of United States
      government, government agency or state obligations. The Company classifies
      these investments as available-for-sale, trading or held-to-maturity
      securities in accordance with Statement of Financial Accounting Standards
      ("SFAS") 115, "Accounting for Certain Investments in Debt and Equity
      Securities". Investments classified as available-for-sale are carried at
      fair value, with unrealized holding gains and losses reported as a
      separate component of stockholders' equity. Trading securities are carried
      at market value and unrealized holding gains and losses are included in
      income. Held-to-maturity securities are carried at amortized cost.

      Property and Equipment - Property and equipment are stated at cost.
      Property and equipment are depreciated using the straight-line method over
      the estimated useful lives as follows: land improvements, building and
      building improvements, 15 to 30 years; computer equipment, software, and
      furniture, 3 to 7 years. Equipment under capital leases are amortized
      using the straight-line method over the lesser of their estimated useful
      lives or the terms of the leases. Leasehold improvements are amortized
      over the lesser of the estimated useful lives or remaining lease periods.



                                     13-22
<PAGE>   23

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      Capitalized Software Costs - Software development costs incurred prior to
      the establishment of technological feasibility are expensed as incurred.
      Software development costs incurred after the technological feasibility of
      the subject software product has been established are capitalized in
      accordance with SFAS 86, "Accounting for the Costs of Computer Software to
      Be Sold, Leased, or Otherwise Marketed." Capitalized software development
      costs are amortized on a product-by-product basis using either the
      estimated economic life of the product on a straight-line method over
      three to five years, or the ratio of current year gross product revenue to
      current and anticipated future gross product revenue, whichever is
      greater. Unamortized software development costs in excess of estimated
      future net revenues from a particular product are written down to
      estimated net realizable value.

      Amortization of software costs totaled $7,687,000, $5,198,000 and
      $2,567,000, for the years ended June 30, 1997, 1998 and 1999,
      respectively.

      Intangible Assets - The costs of identified intangible assets are
      generally amortized on a straight-line basis over periods from 8 months to
      15 years. Goodwill is amortized on a straight-line basis over 10 to 15
      years. At each balance sheet date, a determination is made by management
      to ascertain whether the intangible assets have been impaired based on
      several criteria, including, but not limited to, sales trends,
      undiscounted operating cash flows, and other operating factors.

      Capital Stock - The Company is authorized to issue up to 150,000,000
      shares of $.01 par value Common Stock. In addition, the Company is
      authorized to issue up to 15,000,000 shares of $.01 par value preferred
      stock in one or more series and to establish such relative voting,
      dividend, redemption, liquidation, conversion and other powers,
      preferences, rights, qualifications, limitations and restrictions as the
      Board of Directors may determine without further stockholder approval. No
      preferred shares have been issued.

      Basic and Diluted Earnings (Loss) Per Share -The Company reports Basic and
      Diluted Earnings (Loss) Per Share in accordance with the provisions of
      SFAS 128 "Earnings Per Share". Basic earnings (loss) per common share is
      determined by dividing income (loss) available to common shareholders by
      the weighted average number of common shares outstanding. Diluted
      per-common-share amounts assume the issuance of common stock for all
      potentially dilutive equivalent shares outstanding.

      Impairment of Long-Lived Assets - In accordance with SFAS 121, "Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
      Disposed Of," the Company periodically assesses the likelihood of
      recovering the cost of long-lived assets based on its expectations of
      future profitability and undiscounted cash flows of the related business
      operations. These factors, along with management's plans with respect to
      the operations, are considered in assessing the recoverability of
      property, equipment and purchased intangibles. During 1998, in conjunction
      with the Company's platform integration efforts referred to as project
      Genesis, the Company consolidated three processing centers from Chicago,
      Illinois, Austin, Texas, and Columbus, Ohio, into one processing center
      located in Norcross, Georgia. As a result of this consolidation and a
      physical inventory of fixed assets at the related business units, all
      identified assets which were determined to have no alternative use or
      value were written off. Of the total write-off of $4.0 million, $3.0
      million was recorded in the quarter ended September 30, 1997 and the
      remaining $1.0 million in the quarter ended June 30, 1998.

      Comprehensive Income - On July 1, 1998, the Company adopted SFAS 130,
      "Reporting Comprehensive Income." The Statement requires disclosure of
      total non-shareowner changes in equity and its components. Total
      non-shareowner changes in equity includes all changes in equity during a
      period except those resulting from investments by and distributions to
      shareowners. The only component of other comprehensive income applicable
      to the Company would be unrealized holding gains or losses on the
      Company's available-for-sale securities. There were no available-for-sale
      securities held during the year ended June 30, 1999 and the carrying value
      of available-for-sale securities held during the years ended June 30, 1998
      and 1997 approximated market value. As a result, there were no reported
      unrealized gains or losses on available-for-sale securities during the
      years ending June 30, 1997, 1998 and 1999.



                                     13-23
<PAGE>   24

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



      Business Segments - On July 1, 1998, the Company adopted SFAS 131,
      "Disclosures about Segments of an Enterprise and Related Information". The
      Statement defines how operating segments are determined and requires
      disclosure of certain financial and descriptive information about a
      company's operating segments. The adoption of SFAS 131 did not have a
      material impact on the Company's financial statement disclosures.

      Recent Accounting Pronouncements - In March 1998, the Accounting Standards
      Executive Committee ("AcSEC") issued Statement of Position ("SOP") 98-1,
      "Accounting for the Costs of Computer Software Developed or Obtained for
      Internal Use," which is effective for fiscal years beginning after
      December 15, 1998. The Statement distinguishes accounting for the costs of
      computer software developed or obtained for internal use from guidance
      under SFAS 86, "Accounting for the Costs of Computer Software to Be Sold,
      Leased, or Otherwise Marketed." The adoption of SOP 98-1 is not expected
      to have a material impact on the Company's software capitalization
      policies or financial statement disclosures.

      In June 1998, the Financial Accounting Standards Board issued SFAS 133,
      "Accounting for Derivative Instruments and Hedging Activities," which will
      require that all derivative financial instruments be recognized as either
      assets or liabilities in the balance sheet. SFAS 133 will be effective for
      the Company's first quarter of fiscal 2001. The Company is in the process
      of evaluating the effects of this new statement.

      Reclassifications - Certain amounts in the prior years' financial
      statements have been reclassified to conform to the 1999 presentation.

      REVENUE RECOGNITION

      -    Processing and Servicing - Processing and servicing revenues include
           revenues from transaction processing, electronic funds transfer and
           monthly service fees on consumer funds transfer services. The Company
           recognizes revenue when the services are performed.

           As part of processing certain types of transactions, the Company
           earns interest from the time money is collected from its customers
           until the time payment is made to the applicable merchants. These
           revenues, which are generated from trust account balances not
           included on the Company's balance sheet, are included in processing
           and servicing and totaled $3,228,000, $9,676,000 and $11,846,000, for
           the years ended June 30, 1997, 1998 and 1999, respectively.

      -    Merchant Discount - Merchant discount revenues are recognized when
           the services are performed. Interchange fees incurred in the
           settlement of merchant credit card transactions are included in
           processing and servicing expenses.

      -    License Fees - On July 1, 1998, the Company adopted SOP 97-2,
           "Software Revenue Recognition". The Statement provides guidance for
           recognizing revenue on software transactions and supersedes SOP 91-1,
           "Software Revenue Recognition". In accordance with the provisions of
           SOP 97-2, the Company recognizes revenue from software license
           agreements when there is persuasive evidence that an arrangement
           exists, the fee is fixed and determinable, collectibility is probable
           and the software has been shipped, provided that no significant
           obligation remains under the contract.

      -    Maintenance Fees - Maintenance fee revenue is recognized ratably
           over the term of the related contractual support period, generally 12
           months.

      -    Other - Other revenue consists primarily of consulting and training
           services. Consulting revenue is recognized principally on a
           percentage-of-completion basis and training revenue is recognized
           upon delivery of the related service.



                                     13-24
<PAGE>   25

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      EXPENSE CLASSIFICATION

      -    Processing, Servicing and Support - Processing, servicing and
           support costs consist primarily of data processing costs, customer
           care and technical support, and third party transaction fees, which
           consist primarily of ACH transaction fees.

      -    Research and Development - Research and development expenses consist
           primarily of salaries and consulting fees paid to software engineers
           and business development personnel, and are reported net of
           applicable capitalized development costs.

      -    Sales and Marketing - Sales and marketing expenses consist primarily
           of salaries and commissions of sales employees, public relations and
           advertising costs, customer acquisition fees and royalties paid to
           distribution partners.

      -    General and Administrative - General and administrative expenses
           consist primarily of salaries for administrative, executive, finance,
           and human resource employees.

      -    Depreciation and Amortization - Depreciation and amortization on
           capitalized assets is recorded on a straight-line basis over the
           appropriate useful lives.

      -    In-process Research and Development - In-process research and
           development consists of charges resulting from acquisitions whereby
           the purchase price allocated to in-process software development was
           based on the determination that in-process research and development
           had no alternative future use after taking into consideration the
           potential for usage of the software in different products, resale of
           the software, or other internal use.

      -    Charge for Stock Warrants - Charge for stock warrants consists of
           noncash charges for vested warrants issued to third parties under
           agreements whereby issued warrants vest upon achievement of certain
           strategic objectives.

      -    Exclusivity Amortization - Exclusivity amortization consists of the
           amortization of an intangible asset established in conjunction with a
           marketing agreement with a strategic partner whereby the Company
           retains certain exclusive rights to bill payment processing through
           the partner's financial management software over a specific period of
           time.

2.    ACQUISITIONS AND DISPOSITIONS

      On March 8, 1999, the Company acquired Mobius Group, Inc. ("Mobius Group")
      for a total of $19.1 million, consisting of 537,314 shares of common stock
      valued at $18 million, $0.2 million of acquisition costs, and $0.9 million
      of assumed debt. The acquisition was treated as a purchase for accounting
      purposes, and, accordingly, the assets and liabilities were recorded based
      on their fair values at the date of the acquisition. The values ascribed
      to acquired intangible assets and their respective useful lives are as
      follows:

                                                    INTANGIBLE      USEFUL
                                                       ASSET         LIFE
                                                      -------       -------
                                                  (IN THOUSANDS)
      Goodwill ...................................   $10,392           15
      Customer base ..............................     4,429           15
      Tradenames .................................     3,709           10
      Existing product technology ................     1,864            5
      Workforce ..................................       940            5


                                     13-25
<PAGE>   26

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      Amortization of intangible assets is on a straight line basis over the
      assets' respective useful life. Mobius Group's operations are included in
      the consolidated statements of operations from the date of acquisition.

      At the acquisition date, Mobius Group had four products under development
      that had not demonstrated technological or commercial feasibility. These
      products included M-Plan Retirement & Estate Planning Modules, M-Plan Cash
      Flow, Tax and Education Planning Modules, a new version of M-Search and a
      new version of M-Vest. The in-process technology has no alternative use in
      the event that the proposed products do not prove to be feasible. These
      development efforts fall within the definition of In-Process Research and
      Development ("IPR&D") contained in SFAS 2.

      M-Plan Integrated Financial Planning System- M-Plan will be a Windows
      based integrated financial planning system for retirement and estate
      planning, cash flow, tax and educational planning and capital needs
      analysis. It will produce over 100 reports for retirement, new
      investments, estate planning, and other analysis, as well as provide
      historical returns and standard deviations for various asset allocations
      integrated with extensive modeling to provide detailed and usable
      analysis. M-Plan's wizards will give users the ability to produce and to
      analyze alternative scenarios quickly. M-Plan will consist of five main
      disciplines: Retirement and Estate Planning, Cash Flow, Tax and Education
      modules. M-Plan Retirement and Estate Planning are the core disciplines; a
      user must own one of these two in order to add future disciplines.

      -   M-Plan Retirement & Estate Planning Modules. Significant development
          is required to convert trust and gift tax calculations from formulas
          to C++ programming language. Additionally, work must be performed to
          create necessary database fields to capture a variety of user scenario
          analyses. These modules will be used by sophisticated financial
          planners that will be expected to produce reports for a variety of
          individuals with specific circumstances and therefore, calculations
          must produce results under all possible scenarios. In addition, there
          are over 100 reports to be programmed and customized into usable and
          readable format and Mobius Group does not currently have the ability
          to insert data into all of the reports. Finally, developed technology
          is not in a modular format and, as M-Plan will be sold in modules,
          additional work must be performed to divide code into modules.

      -   Cash Flow, Tax and Education Planning Modules. Reports for the Cash
          Flow Planning module have not yet been developed. Mobius Group had not
          yet determined how it would integrate tax tables into its tax
          calculations, as only tax rate calculations are currently available in
          the Tax Planning module and significant work remains to complete
          reports and database fields. There has been no significant data
          gathering for the Education Planning module and therefore the code had
          not yet been written for the calculations, the database fields and the
          reports.

      The technology utilized in the M-Plan is based entirely on new technology.
      Although the Company has been selling another comprehensive financial
      planning program, it operated on a DOS platform and the new programs are
      being developed in C++ for Windows.

      M-Search Revision - M-Search is Mobius Group's Investment Manager Database
      System, containing comprehensive qualitative and quantitative data on over
      1,300 investment management firms and 5,000 composites. In-process
      development is designed to allow the user to customize reports based on
      selection criteria, which the current version does not offer. This effort
      requires a rewrite of a significant portion of the source code. Based on
      software engineers' estimates of the percentage of reuse of developed
      technology within particular components of the product, 25% of its value
      is attributable to core technology.

      M-Vest Revision - M-Vest is Mobius Group's 16-bit asset allocation system
      that is under development to port the entire program over to 32-bit. This
      development effort requires significant changes to the user interface, a
      revision of most of the reports and changes to core algorithms. Management
      estimates that it would have taken six man months to recreate the code
      from the beginning and the entire porting would take 12 man months and as
      a result, 30% of its value is attributable to core technology.


                                     13-26
<PAGE>   27

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)





      The following table presents information regarding the status of various
      in-process research and development projects acquired in connection with
      the Mobius Group acquisition:

<TABLE>
<CAPTION>
                                                  ESTIMATED STAGE         EXPECTED        EXPECTED COST
                                                   OF COMPLETION          RELEASE          TO COMPLETE        VALUATION
                                                 ------------------     -------------    ----------------     -----------
                                                                                         (IN THOUSANDS)     (IN THOUSANDS)
<S>                                               <C>                   <C>               <C>                <C>
         M-Plan:
              Retirement and Estate Planning
                   Module...................             92%             May 1999           $      49         $       693
              Cash Flow, Tax and Education
                   Module...................             64%             December 1999            208                 183
         M-Search Revision..................             56%             September 1999           176               1,218
         M-Vest Revision....................             20%             September 1999           220                 107
                                                                                            ---------         -----------
                        Total...............                                                $     653         $     2,201
                                                                                            =========         ===========
</TABLE>

      The method used to allocate the purchase consideration to IPR&D was the
      modified income approach. Under the income approach, fair value reflects
      the present value of the projected free cash flows that will be generated
      by the IPR&D projects and that is attributable to the acquired technology,
      if successfully completed. The modified income approach takes the income
      approach, modified to include the following factors:

      -   Analysis of the stage of completion of each project;
      -   Exclusion of value related to research and development yet-to-be
          completed as part of the on-going IPR&D projects; and
      -   The contribution of existing products/technologies.

      The projected revenues used in the income approach are based upon the
      incremental revenues associated with a portion of the project related to
      Mobius Group's technology likely to be generated upon completion of the
      project and the beginning of commercial sales, as estimated by the
      Company's management. The projections assume that the product will be
      successful and the products' development and commercialization are as set
      forth by management. The discount rate used in this analysis is an
      after-tax rate of 20%

      Certain risks and uncertainties are associated with the completion of the
      development with a reasonable projected period of time. These risks
      include:

      -   The Retirement and Estate Planning module has been sent to a
          development partner for testing and identification of errors. Due to
          the nature of the product and the necessity that all calculations work
          correctly in order for the product to be commercially viable and to
          function as designed, this testing is considered a significant part of
          the development effort.
      -   The cash flow module reports have not been developed. As the reports
          are the only output seen by the end user, this represents a major
          development effort.
      -   The Company has not yet determined how it will integrate tax tables
          into its tax calculation in the tax module. Significant work remains
          to complete reports and database fields.
      -   For the education module, significant data gathering had not occurred
          and, therefore, the code had not yet been written for the
          calculations, the database fields, and the reports.
      -   Significant risks still exist related to the completion and
          reintegration of the M-Plan Modules (Retirement and Estate Planning
          and Cash Flow, Tax, and Education Modules). For example, a user who
          borrows for education purposes from his retirement fund should see his
          retirement decrease (in the Retirement Module) and education
          investment increase (in the Education Module).
      -   The M-Plan Modules are based entirely on new technology, since they
          are written in C++ for a windows platform and utilize no existing
          technology.
      -   M-Vest is Mobius Group's current asset allocation system. There is an
          on-going development program to migrate this program to run on 32-bit
          hardware. This effort requires significant changes to interfaces, to
          reports and some core algorithms.


                                     13-27
<PAGE>   28

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      -   Each of the acquired IPR&D projects have not demonstrated their
          technological or commercial feasibility as of the valuation date.
          Significant risks exist because of uncertainties the Company may face
          in the form of time and costs necessary to produce technologically
          feasible products.
      -   If the proposed products fail to become viable, there is uncertainty
          that the Company would be able to realize any value from the sale of
          the technology to another party.

      On October 3, 1997, the Company acquired certain assets of Advanced
      Mortgage Technologies, Inc. ("AMTI") for cash of $1.0 million. The
      acquisition was treated as a purchase for accounting purposes, and
      accordingly, the assets and liabilities were recorded based on their fair
      values at the date of the acquisition. Of the total purchase price, $0.2
      million was allocated to goodwill and $0.1 million to other identifiable
      intangible assets. Additionally, $0.7 million was allocated to in-process
      research and development, which was charged to operations at the time of
      the acquisition.

      On January 27, 1997, the Company acquired Intuit Services Corporation
      ("ISC") for a total of $199.0 million, including 12.6 million shares of
      common stock valued at $177.2 million, the present value of cash payments
      due to Intuit, Inc. under the Services and License Agreement of $19.6
      million and acquisition costs of $2.2 million. The acquisition was treated
      as a purchase for accounting purposes, and, accordingly, the assets and
      liabilities were recorded based on their fair values at the date of the
      acquisition. Of the total purchase price, $28.9 million was allocated to
      goodwill. In addition, $140.0 million was allocated to in-process research
      and development, which was charged to operations at the time of the
      acquisition. $7.9 million was allocated to an exclusivity agreement with
      Intuit, Inc. and was amortized on a straight-line basis over the
      contractual life of eight months. A further $3.5 million was allocated to
      other identifiable intangible assets and $20.3 million allocated to
      tangible assets. ISC's operations are included in the consolidated results
      of operations from the date of the acquisition.

      Consistent with the Company's policy for internally developed software,
      the Company determined the amounts to be allocated to in-process research
      and development based on whether technological feasibility had been
      achieved and whether there was any alternative future use for the
      technology. As of the date of the acquisitions, the Company concluded that
      the in-process research and development had no alternative future use
      after taking into consideration the potential for usage of the software in
      different products, resale of the software and internal usage.

      The unaudited pro forma results of operations of the Company for the years
      ended June 30, 1998 and 1999, assuming the acquisitions occurred at the
      beginning of each period are as follows (in thousands, except per share
      data):

<TABLE>
<CAPTION>
                                                        YEAR ENDED JUNE 30,
                                                ----------------------------------
                                                      1998               1999
                                                ---------------    ---------------

<S>                                             <C>                <C>
      Total revenues ........................   $       239,701    $       255,427
      Net income (loss) .....................   $        (3,417)   $        13,462
      Basic earnings per share:
           Net income (loss) per common share   $         (0.06)   $          0.25
                                                ===============    ===============
           Equivalent number of shares ......            55,624             52,815
                                                ===============    ===============
     Diluted earnings per share:
           Net income (loss) per common share   $         (0.06)   $          0.24
                                                ===============    ===============
           Equivalent number of shares ......            55,624             56,900
                                                ===============    ===============
</TABLE>

      This information is presented to facilitate meaningful comparisons to
      on-going operations and to other companies. The unaudited pro forma
      amounts above do not include a charge for in-process research and
      development of $2.2 million arising from the Mobius acquisition in 1999.
      Previous operations of AMTI were insignificant and therefore, require no
      pro forma considerations. The unaudited pro forma information is not
      necessarily indicative



                                     13-28
<PAGE>   29

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      of the actual results of operations had the transactions occurred at the
      beginning of the periods presented, nor should it be used to project the
      Company's results of operations for any future periods.

      On October 1, 1998 the Company sold certain software and other assets
      related to its imaging line of business for $0.8 million consisting of a
      note receivable of $0.5 million and future services of $0.3 million. Loss
      on the sale amounted to $2.9 million.

      On September 11, 1998 the Company sold certain software and other assets
      related to its mortgage line of business for $19.1 million, net of a
      working capital adjustment. As part of the sales agreement, the Company
      retained responsibility for certain customer obligations and agreed to
      subcontract with the acquiring company to perform consulting services at
      retail hourly rates for these retained obligations. The Company received
      cash of $15 million, net of $4.0 million of prepaid subcontract services
      due the acquiring company. Net gain on the sale amounted to $6.4 million.

      On July 6, 1998 the Company divested itself of certain software related to
      its leasing line of business. The Company paid the acquiring party
      $639,000 in cash and agreed to five additional quarterly installments of
      $60,000 each. Additionally, in conjunction with this transaction, the
      Company agreed to pay $3.0 million to a customer to relieve the Company
      and acquiring party of further obligations relating to a product related
      consulting agreement. The loss of $4.7 million was recorded in the fourth
      quarter of the year ended June 30, 1998.

      On April 20, 1998, the Company sold certain software and related assets of
      its wire transfer and cash management businesses for cash of $18.25
      million resulting in a net gain on the sale of $14.7 million.

      On March 24, 1998, the Company sold certain software and related assets of
      its item processing business for cash of $3.4 million resulting in a net
      gain on the sale of $3.2 million.

      On August 29, 1997, the Company sold certain software and related assets
      of its recovery management business for cash of $33.5 million resulting in
      a net gain on the sale of $28.2 million.

      On March 26, 1997, the Company sold certain assets and certain contracts
      and licensed certain proprietary software for processing automatic
      accounts receivable through credit cards or the Automated Clearing House
      resulting in a net gain on the sale of $6.3 million.

      The gain or loss on sale of assets described above is included in Net Gain
      on Dispositions of Assets in the Company's Consolidated Statements of
      Operations.

3.    INVESTMENTS

      Investments consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                    JUNE 30,
                                                                              ------------------
                                                                                1998       1999
                                                                              --------   --------
<S>                                                                           <C>        <C>
      Held-to-Maturity-State Obligations ...................................   $  1,006   $   --
      Held-to-Maturity-U.S. Government Agency Obligations ..................       --        1,875
      Trading ..............................................................     24,533     10,266
                                                                               --------   --------
                          Total ............................................   $ 25,539   $ 12,141
                                                                               ========   ========
</TABLE>


      Held-to-Maturity - The difference between the amortized cost and the
      aggregate fair value of held-to-maturity investments at June 30, 1998 and
      1999 was insignificant. The held-to-maturity investment at June 30, 1998
      was



                                     13-29
<PAGE>   30

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     sold to provide funding for treasury stock purchases. The realized gain on
     the sale of this investment was insignificant.

     Trading - Trading investments are classified as current assets and are
     recorded at fair value.

     Contractual maturities of debt securities classified as held-to-maturity at
     June 30, 1999 are as follows:


<TABLE>
<S>                                                                                    <C>
             Due after one year through five years..................................   $ 1,875
                                                                                      ===========
</TABLE>


      Expected maturities may differ from contractual maturities because debt
      issuers may have the right to call or prepay obligations with or without
      call or prepayment penalties.

4.    ACCOUNTS RECEIVABLE

      Accounts receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                    JUNE 30,
                                                                              -------------------
                                                                                1998       1999
                                                                              --------   --------
<S>                                                                         <C>        <C>
      Trade accounts receivable ............................................  $ 22,739   $ 31,366
      Unbilled trade accounts receivable ...................................    10,654     16,334
      Other receivables ....................................................     3,037      2,390
                                                                              --------   --------
                         Total .............................................    36,430     50,090
      Less allowance for doubtful accounts .................................     3,470      4,430
                                                                              --------   --------
                         Accounts receivable, net .........................   $ 32,960   $ 45,660
                                                                              ========   ========
</TABLE>

5.    ASSETS HELD FOR SALE

      In April 1998, the Company announced plans to divest several of its
      software businesses through the sale of software and related assets.
      Assets of the Company's mortgage, leasing, imaging, and safe box
      accounting businesses totaling $15.9 million at June 30, 1998, were
      comprised of trade, unbilled, and other accounts receivable (net of an
      allowance for doubtful accounts), property and equipment dedicated to the
      businesses, capitalized software, and other purchased intangible assets.
      Sales of all businesses, with the exception of safe box accounting, were
      completed during the year ended June 30, 1999. The Company decided not to
      divest the safe box accounting business and its assets are therefore
      included with the Company's other operating assets at June 30, 1999.

6.    NOTE RECEIVABLE

      In May 1998, in anticipation of a tax-free exchange of property, the
      Company loaned $14.9 million to a third party to purchase a building on
      its behalf. Interest of 8% was earned monthly commencing in June 1998. In
      June 1999, the Company completed its tax-free exchange and the note was
      paid in full. At June 30, 1998, the estimated fair value of the note
      receivable approximated the carrying value based on currently available
      instruments with similar interests rates and remaining maturities.


                                     13-30
<PAGE>   31

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.     INCOME TAXES

      The Company accounts for income taxes in accordance with SFAS 109,
      "Accounting for Income Taxes," which requires an asset and liability
      approach to financial accounting and reporting for income taxes. In
      accordance with SFAS 109, deferred income tax assets and liabilities are
      computed annually for differences between the financial statement and tax
      bases of assets and liabilities that will result in taxable or deductible
      amounts in the future based on enacted tax laws and rates applicable to
      the periods in which the differences are expected to affect taxable
      income. Income tax expense (benefit) is the tax payable or refundable for
      the period plus or minus the change during the period in deferred tax
      assets and liabilities.




      The Company's income tax benefit consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                                            YEAR ENDED JUNE 30,
                                                                     --------------------------------
                                                                       1997        1998        1999
                                                                     --------    --------    --------
<S>                                                                <C>         <C>         <C>
      Current:
           Federal ...............................................   $   --      $  3,795    $(10,555)
           State and local .......................................      1,084       1,063      (2,308)
                                                                     --------    --------    --------
                     Total current ...............................      1,084       4,858     (12,863)
      Deferred federal and state .................................    (13,101)     (5,499)        854
                                                                     --------    --------    --------
                     Total income tax benefit ....................   $(12,017)   $   (641)   $(12,009)
                                                                     ========    ========    ========
</TABLE>

      Income tax expense differs from the amounts computed by applying the U.S.
      federal statutory income tax rate of 35 percent to income before income
      taxes as a result of the following (in thousands):


<TABLE>
<CAPTION>
                                                                            YEAR ENDED JUNE 30,
                                                                     --------------------------------
                                                                       1997        1998        1999
                                                                     --------    --------    --------
<S>                                                                 <C>         <C>         <C>
      Computed "expected" tax benefit ............................   $(60,844)   $ (1,520)   $   (543)
      Nondeductible in-process research and
         development of acquired businesses ......................     49,000         252         770
      Nondeductible intangible amortization ......................        839       1,189       1,137
      State and local taxes, net of federal income tax
         benefits ................................................       (553)         21      (1,741)
      Loss from  medical benefits subsidiary .....................       --          --       (10,665)
      Other, net .................................................       (459)       (583)       (967)
                                                                     --------    --------    --------
                     Total income tax benefit ....................   $(12,017)   $   (641)   $(12,009)
                                                                     ========    ========    ========
</TABLE>

      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at June
      30, 1998 and 1999 are as follows (in thousands):

                                     13-31
<PAGE>   32

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

<TABLE>
<CAPTION>
                                                                                JUNE 30,
                                                                         ---------------------
                                                                            1998        1999
                                                                         ---------   ---------
<S>                                                                      <C>         <C>
      Deferred tax assets:
           Federal and state net operating loss carryforwards .........   $   1,155   $  12,739
           Federal and state tax credit carryforwards .................        --         2,145
           Intangible assets ..........................................       1,870        --
           Allowance for bad debts and returns ........................       1,699       1,996
           Accrued compensation and related items .....................       1,731       2,028
           Stock warrants .............................................      12,964      12,964
           Reserve accruals ...........................................       3,212       3,410
                                                                           --------    --------
                     Total deferred tax assets ........................      22,631      35,282
      Deferred tax liabilities:
           Capitalized software .......................................      (1,926)     (2,246)
           Property and equipment .....................................         (19)     (2,327)
           Deferred revenue ...........................................        --          (128)
           Intangible assets ..........................................        --        (1,354)
           Prepaid expenses............................................        (566)       (794)
                                                                           --------    --------
                     Total deferred tax liabilities ..................       (2,511)     (6,849)
                                                                           --------    --------
                     Net deferred tax asset ..........................     $ 20,120    $ 28,433
                                                                           ========    ========
</TABLE>

      At June 30, 1999, the Company has approximately $3,072,000 of state and
      $9,667,000 of federal net operating loss carryforwards available, expiring
      in 2009 to 2013 and 2009 to 2019, respectively. Additionally, at June 30,
      1999, the Company has approximately $306,000 of state and $1,839,000 of
      federal tax credit carryforwards available, expiring in 2008 to 2009 and
      2009 to 2019, respectively. During the year ended June 30, 1999, the
      Company established a subsidiary to administer the Company's employee
      medical benefits program. The Company recognized a one-time combined
      federal and state tax benefit of $12.2 million arising from the creation
      of this subsidiary.

8.    PROPERTY AND EQUIPMENT

      The components of property and equipment are as follows (in thousands):



<TABLE>
<CAPTION>
                                                                           JUNE 30,
                                                                     -------------------
                                                                       1998       1999
                                                                     --------   --------
<S>                                                                 <C>        <C>
      Land and land improvements .................................   $  3,146   $  4,341
      Building and building improvements .........................     16,692     31,226
      Computer equipment and software licenses ...................     55,526     72,138
      Furniture and equipment ....................................      9,002     11,404
                                                                     --------   --------
                     Total .......................................     84,366    119,109
      Less accumulated depreciation and amortization .............     33,446     49,286
                                                                     --------   --------
                     Property and equipment, net .................   $ 50,920   $ 69,823
                                                                     ========   ========
</TABLE>

                                     13-32
<PAGE>   33

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9.    INTANGIBLE ASSETS

      The components of intangible assets are as follows (in thousands):


                                                                JUNE 30,
                                                        ----------------------
                                                          1998          1999
                                                        -------        -------
        Workforce ..................................... $ 5,179        $ 6,171
        Tradenames.....................................     815          4,568
        Customer base..................................   1,231          5,758
        Goodwill.......................................  28,927         39,318
                                                       --------       --------
                       Total...........................  36,152         55,815
        Less accumulated amortization..................   5,678          9,940
                                                       --------       --------
                       Intangible assets, net......... $ 30,474       $ 45,875
                                                       ========       ========


10.   ACCRUED LIABILITIES

      The components of accrued liabilities are as follows (in thousands):

                                                               JUNE 30,
                                                       ------------------------
                                                          1998           1999
                                                       ---------      ---------
        Salaries and related costs.................... $  9,374      $  10,307
        Liabilities associated with contract and other
          losses......................................    5,655              -
        Processing fees...............................    2,335            908
        Reserve for returns and chargebacks...........    1,944          1,664
        Other.........................................    5,852         14,092
                                                       ---------      ---------
                        Total.........................  $25,160      $  26,971
                                                       =========      =========




      The liabilities associated with contract and other losses at June 30, 1998
      is comprised of $4.7 million related to an estimated loss from the sale of
      the leasing business that occurred on July 7, 1998 (see Note 2,
      "Acquisitions and Dispositions") and $1.0 million for accrued contract
      losses and related costs which resulted from the decision to exit the Web
      Investor business.

11.   LINE OF CREDIT

      In May, 1997 the Company obtained a working capital line-of-credit, which
      enables the Company to borrow up to $20 million, based on the collateral
      of eligible accounts receivable. The line expires in October 1999, and
      contains certain restrictive covenants, including defined quarterly
      operating results, minimum tangible net worth requirements, and the
      prohibition of dividend payments. No amounts were outstanding under the
      line at June 30, 1998 and 1999.

12.   OBLIGATIONS UNDER CAPITAL LEASES

      During 1993, the Company entered into a 20-year lease with the Department
      of Development of the State of Ohio for land and an office building
      located in Columbus, Ohio. The Company had the option to purchase the land
      and building for $1 at the termination of the lease and thus, the Company
      recorded the transaction as a capital lease. In June, 1999, the Company
      completed a tax-free exchange of property involving the land and building
      under this capital lease. In order to exercise its purchase option and
      complete the transaction, the Company paid $2.5 million of principal
      obligations under the lease, and placed an additional $3.6 million in
      escrow. The Company and the State of Ohio entered into an escrow agreement
      whereby the funds deposited will be used to make scheduled principal and
      interest payments through September 1, 2000, and retire the remaining
      principal obligation at that date. The net gain resulting from the sale of
      the property amounted to $1.1 million and is included in the Net Gain on
      Dispositions of Assets in the Company's Consolidated Statement of
      Operations. Amounts deposited with the escrow trustee and the related
      obligations are included in current and noncurrent assets and liabilities,
      based on the respective principal repayment dates, in the Company's June
      30, 1999 Consolidated Balance Sheets.


                                     13-33
<PAGE>   34

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      The Company also leases certain computer equipment, furniture and
      telephone equipment under capital leases. The Company is required to pay
      certain taxes, insurance and other expenses related to the leased
      property.

      The following is a summary of property under capital leases included in
      the accompanying balance sheets (in thousands):


                                                               JUNE 30,
                                                       ------------------------
                                                         1998           1999
                                                       ---------      ---------
        Land and land improvements.....................$   3,146      $       -
        Building and building improvements.............    4,526              -
        Computer equipment and software licenses.......    2,371          3,654
                                                       ---------      ---------
                       Total...........................   10,043          3,654
        Less accumulated depreciation and amortization.    2,017          2,266
                                                       ---------      ---------
                       Property and equipment, net.....$   8,026      $   1,388
                                                       =========      =========

      Future minimum lease payments required by the capital leases and the net
      future minimum lease payments are as follows (in thousands):


                 FISCAL YEAR
                 ENDING JUNE 30,
                 -------------------
                 2000.................................................   $944
                 2001.................................................  3,253
                 2002.................................................    390
                 2003.................................................    373
                 2004.................................................     62
                 Thereafter...........................................      -
                                                                      -------
                                Total future minimum lease payments...  5,022
                 Less amount representing interest....................    182
                                                                      -------
                                Net future minimum lease payments..... $4,840
                                                                      =======



13.   OPERATING LEASES

      The Company leases certain office space and equipment under operating
      leases. Certain leases contain renewal options and generally provide that
      the Company shall pay for insurance, taxes and maintenance. In addition,
      certain leases include rent escalations throughout the terms of the
      leases. Total expense under all operating lease



                                     13-34
<PAGE>   35

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      agreements for the years ended June 30, 1997, 1998 and 1999, was
      $5,882,000, $5,800,000 and $8,492,000, respectively.

      Minimum future rental payments under these leases are as follows (in
      thousands):

                 FISCAL YEAR
                 ENDING JUNE 30,
                 -------------------
                 2000............................................... $11,464
                 2001...............................................  10,922
                 2002...............................................   8,966
                 2003...............................................   5,650
                 2004...............................................   3,837
                 Thereafter.........................................  16,271
                                                                     -------
                           Net future minimum lease payments........ $57,110
                                                                     =======




14.   EMPLOYEE BENEFIT PLANS

      Retirement Plan - The Company has a defined contribution 401(k) retirement
      plan covering substantially all of its employees. Under the plan eligible
      employees may contribute a portion of their salary until retirement and
      the Company, at its discretion, may match a portion of the employee's
      contribution. Total expense under the plan amounted to $1,862,000,
      $859,000 and $1,218,000, for the years ended June 30, 1997, 1998 and 1999,
      respectively.

      Deferred Compensation Plan - In January, 1999, the Company established a
      deferred compensation plan (the "DCP") covering highly-compensated
      employees as defined by the DCP. Under the plan, eligible employees may
      contribute a portion of their salary on a pre-tax basis. The DCP is a
      non-qualified plan, therefore the associated liabilities are included in
      the Company's June 30, 1999 Consolidated Balance Sheet. In addition, the
      Company has established a rabbi trust to finance obligations under the DCP
      with corporate-owned life insurance policies on participants. The cash
      surrender value of such policies is also included in the Company's June
      30, 1999 Consolidated Balance Sheet. Total expense under the DCP for the
      period ended June 30, 1999 amounted to $40,000.

      Group Medical Plans - The Company has a group medical self-insurance plan
      covering certain of its employees. The Company has employed an
      administrator to manage this plan. Under terms of this plan, both the
      Company and eligible employees are required to make contributions to this
      plan. The administrator reviews all claims filed and authorizes the
      payment of benefits. The Company has stop-loss insurance coverage on all
      individual claims exceeding $100,000. In addition, the Company offers
      medical insurance coverage under managed care health plans. Total expense
      for medical insurance coverage amounted to $3,458,000, $3,752,000, and
      $4,430,000, for the years ended June 30, 1997, 1998 and 1999,
      respectively. Under the self-insurance plan, the Company expenses amounts
      as claims are incurred and recognizes a liability for incurred but not
      reported claims. At June 30, 1998 and 1999, the Company accrued $308,000
      and $315,000 respectively, as a liability for costs incurred but not paid
      under this plan.

      In December, 1998, a subsidiary, CheckFree Management Corporation, was
      created to administer the Company's employee medical benefits program. The
      Company owns a controlling interest in the subsidiary, and therefore, the
      accompanying consolidated financial statements include the subsidiary's
      results of operations.

15.   COMMON STOCK

      During 1995, the company adopted the 1995 Stock Option Plan (the "1995
      Plan). The 1995 Plan replaces in its entirety the 1993 Stock Option Plan
      (the "1993 Plan"). The options granted under the 1995 and 1993 Plans may
      be either incentive stock options or non-statutory stock options. The
      terms of the options granted under the 1995



                                     13-35
<PAGE>   36

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      and 1993 Plans are at the sole discretion of a committee of members of the
      Company's Board of Directors, not to exceed ten years. Generally, options
      vest at either 33% or 20% per year from the dated of grant. The 1995 Plan
      originally provided that the Company may grant options for not more than
      5,000,000 shares of common stock to certain key employees, officers and
      directors. In November of 1998, the 1995 Plan was amended by a vote of the
      Company's shareholders to extend the maximum option grants to not more
      than 8,000,000 shares. Options granted under the 1995 and 1993 Plans are
      exercisable according to the terms of each option, however, in the event
      of a change in control or merger as defined, the options shall become
      immediately exercisable. At June 30, 1999, 2,920,684 additional shares are
      available for grant in the aggregate for all Plans.

      Previously, the Company had adopted the 1983 Incentive Stock Option Plan
      and the 1983 Non-Statutory Stock Option Plan (collectively, the "1983
      Plans"), which provided that the Board of Directors may grant options for
      shares of common stock to certain employees and directors. Under the terms
      of the 1983 Plans, options are exercisable over a period up to ten years
      from the grant date. In the event the Company is sold, options outstanding
      under the 1983 Plans must be repurchased at a price calculated as if the
      options had been fully exercised.

      All options granted under the 1983 Plans, the 1993 Plan and the 1995 Plan
      were granted at exercise prices not less than the fair market value of the
      underlying common stock at the date of grant. In the event that shares
      purchased through the exercise of incentive stock options are sold within
      one year of exercise, the Company is entitled to a tax deduction. The tax
      benefit of the deduction is not reflected in the consolidated statements
      of operations but is reflected as an increase in additional paid-in
      capital.

      The following table summarizes stock option activity from July 1, 1996 to
      June 30, 1999:

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED
                                                    -------------------------------------------------------------------------------
                                                           JUNE 30, 1997                JUNE 30, 1998             JUNE 30, 1999
                                                    -------------------------------------------------------------------------------
                                                     NUMBER OF       WEIGHTED      NUMBER OF    WEIGHTED     NUMBER OF    WEIGHTED
                                                       SHARES        AVERAGE        SHARES      AVERAGE        SHARES      AVERAGE
                                                                     EXERCISE                   EXERCISE                  EXERCISE
                                                                      PRICE                      PRICE                     PRICE
                                                     ---------       --------      ---------    --------     ---------    --------
<S>                                                  <C>           <C>             <C>          <C>          <C>          <C>
         Outstanding - Beginning of period.......... 2,908,218     $   4.58        4,441,461    $  9.59      4,365,562    $  15.23
         Granted.................................... 2,282,056        14.32        1,377,334      25.60      1,575,057       36.40
         Exercised..................................  (636,309)        1.01         (708,661)      3.17       (354,758)       4.56
         Cancelled..................................  (112,504)       14.88         (744,572)     12.63       (389,261)      16.12
                                                     ---------                     ---------                 ---------
         Outstanding - End of period................ 4,441,461     $   9.59        4,365,562    $ 15.23      5,196,600    $  18.69
                                                     =========     ========        =========    =======      =========    ========
         Options exercisable at end of period....... 1,218,341     $   1.17        1,352,516    $  6.81      1,394,269    $   9.00
                                                     =========     ========        =========    =======      =========    ========

         Weighted average per share fair value of
            options granted during the year.......                 $   6.68                     $ 10.77                   $  17.65
                                                                   ========                     =======                   ========
</TABLE>

      The following table summarizes information about options outstanding at
      June 30, 1999:

<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                                        -----------------------------------------      ----------------------
                                                           WEIGHTED AVERAGE               WEIGHTED AVERAGE
                                                     ----------------------------      ----------------------
      Range of Exercise Price                           REMAINING        EXERCISE                    EXERCISE
      ------------------------            NUMBER     CONTRACTUAL LIFE     PRICE        NUMBER         PRICE
                                        ---------    ----------------    --------      ------        --------
<S>                                     <C>          <C>                 <C>           <C>           <C>
      $ 0.85 - $10.00...............      764,769           4.4          $   1.17      672,427       $   1.03
      $10.01 - $20.00...............    3,014,916           8.4             13.30      623,955          15.03
      $20.01 - $30.00...............      266,815           8.9             25.55       97,887          25.25
      $30.01 - $40.00...............      196,300           9.7             34.85            -              -
      $40.01 - $50.00...............      953,800           9.8             44.56            -              -
                                        ---------                                    ---------
                                        5,196,600                        $  18.69    1,394,269       $   9.00
                                        =========                        ========    =========       ========
</TABLE>

                                     13-36
<PAGE>   37

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the years ended June 30, 1997, 1998 and 1999,
respectively: dividend yield of 0% in all periods; expected volatility of 47%,
48% and 49%; risk-free interest rates of 6.41%, 5.21%, and 5.87%; and expected
lives of 3-5 years.

Under the 1997 Associate Stock Purchase Plan, effective for the six-month period
beginning January 1, 1997, the Company is authorized to issue up to 1,000,000
shares of Common Stock to its full-time employees, nearly all of whom are
eligible to participate. Under the terms of the Plan, employees can choose,
every six months, to have up to 15% of their salary withheld to purchase the
Company's Common Stock. The purchase price of the stock is 85% of the lower of
its beginning-of-period or end-of-period market price. Approximately 39% of
eligible employees participated in the Plan in the second half of the year ended
June 30, 1997, approximately 32% in the first half of fiscal 1998, approximately
49% in the second half of fiscal 1998, approximately 30% in the first half of
fiscal 1999 and approximately 31% in the second half of fiscal 1999. Under the
Plan, 53,013 shares were issued in July of 1997, 56,844 in January of 1998,
48,631 in July of 1998, 48,748 in January of 1999 and 46,819 in July of 1999
from employees' salary withholdings from the respective previous six-month
period. Following is a summary of the weighted average fair market value of this
look-back option estimated on the grant date using the Black-Scholes option
pricing model, and the related assumptions used:

<TABLE>
<CAPTION>

                                                  SIX MONTH PERIOD ENDED
                               --------------------------------------------------------------
                               JUNE 30,   DECEMBER 31,   JUNE 30,    DECEMBER 31,    JUNE 30,
                                 1997         1997         1998         1998           1999
                               --------   ------------   --------    ------------    --------
<S>                            <C>        <C>            <C>         <C>             <C>
Fair value of options........    $3.93        $14.10       $ 9.68          $ 7.18       $5.51
Assumptions:
   Risk-free interest rate...      5.1%          5.0%         5.0%            4.9%        4.9%
   Expected life............. 3 months      3 months     3 months         3 months   3 months
   Volatility................     47.0%         48.0%        48.0%           49.0%       49.0%
   Dividend yield............      0.0%          0.0%         0.0%            0.0%        0.0%
</TABLE>



The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees"
and related Interpretations in accounting for its stock option plans and
employee stock purchase plan. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans in accordance with the provisions of
SFAS 123, "Accounting for Stock-Based Compensation," the Company's net income
(loss) and net income (loss) per share would have been as follows (in thousands,
except per share data):

                                                     YEAR  ENDED JUNE 30,
                                         ---------------------------------------
                                             1997             1998       1999
                                         -----------       ---------    ------
Pro forma net income (loss)..............$ (164,089)       $ (9,521)    $1,032
                                         ===========       =========    ======
Pro forma net income (loss) per share;
      Basic and Diluted..................$    (3.49)       $  (0.17)    $ 0.02
                                         ===========       =========    ======

The pro forma amounts are not representative of the effects on reported net
income (loss) for future years.



                                     13-37
<PAGE>   38

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



      In September 1998, the Company offered an option repricing program to its
      employees. Under the terms of the offer, employees had one week to decide
      whether to return any outstanding option grant in its entirety and replace
      it on a share-for-share basis with an option grant with an exercise price
      equal to the fair market value of the Company's Common Stock at the new
      grant date. Only those exchanges received within one day of the designated
      grant date were accepted and any vested options in such returned grants
      were forfeited. The lives of returned historical grants typically ranged
      from three to five years with straight line vesting beginning one year
      from the original grant date. All newly issued option grants had a life of
      five years and vesting occurs at 40% beginning two years from the new
      grant date and 20% for each year thereafter. A total of 1,418,403 options
      were returned and had the offer taken place at June 30, 1998, the options
      exercisable would have decreased by 95,614.

      As described below, the Company has issued certain stock warrants to third
      parties and has accounted for the issuance of such warrants in accordance
      with the provisions of EITF 96-18, "Accounting for Equity Instruments That
      Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services."

      In January 1998 the Company entered into a 10-year processing agreement
      with a strategic partner. Under the terms of the agreement, the partner
      acquired 10-year warrants exercisable at $20 15/16 for 10 million shares
      of the Company's Common Stock. Three million warrants vested upon the
      execution of a related processing outsourcing agreement on March 9, 1998
      which resulted in the Company recording a non-cash charge of $32.4
      million. The charge was based on a Black-Scholes option pricing model
      valuation of $10.80 per vested share using the following assumptions:
      risk-free rate of 5.7%, expected life of 10 years, and volatility rate of
      56.4%. The remaining seven million warrants are to vest upon achievement
      of specific performance targets set forth in the agreement. Any shares
      acquired by the strategic partner under the terms of this agreement are
      subject to certain transfer and other restrictions. In March 1997 the
      Company entered into a consulting agreement with a third party. Under the
      terms of the agreement the consultant acquired 5-year options exercisable
      at $13.00 for up to 50,000 shares of the Company's Common Stock. In June
      of 1998, upon the execution of a processing agreement with a key customer,
      25,000 of the options vested, which resulted in the Company recording a
      non-cash charge of $418,000. The charge was based on a Black-Scholes
      option pricing model valuation of $16.73 per vested share using the
      following assumptions: risk-free rate of 5.6%, expected life of 4 years,
      and volatility rate of 56.4%. The remaining 25,000 options are to vest
      upon achievement of specific performance targets by key customers set
      forth in the agreement. Any shares acquired by the consultant under the
      terms of the agreement are subject to certain transfer restrictions. In
      accordance with the terms of a joint marketing agreement, a strategic
      partner has warrants to purchase up to 650,000 shares of the Company's
      Common Stock should the partner attain certain customer acquisition
      targets.

      In January 1997 the Board of Directors approved an amendment to the
      Company's 401(k) plan which authorized up to 1,000,000 shares of Common
      Stock for the Company's matching contribution. The Company issued 78,257
      shares in September 1997 and 74,981 shares in August 1998 out of treasury
      to fund its 401(k) match that had accrued during the years ended June 30,
      1997 and 1998, respectively.

      At June 30, 1996 certain stockholders had an option to sell up to 280,565
      shares of common stock to the company at $19.00 per share, which expired
      on September 30, 1996. Of the eligible shares, 276,469 were sold to the
      Company and were recorded as treasury stock.

16.   PREFERRED STOCK

      In January 1997, the Company's Board of Directors declared a dividend
      distribution of Preferred Share Purchase Rights to protect its
      stockholders in the event of an unsolicited attempt to acquire the
      Company. On February 14, 1997, the Rights were issued to the Company's
      stockholders of record, with an expiration date of 10 years. Until a
      person or group acquires 15% or more of the Company's Common Stock, the
      Rights will automatically trade with the shares of Common Stock. Only when
      a person or group has acquired 15% or more of the Company's Common Stock,
      will the Rights become exercisable and separate certificates issued. Prior
      to the acquisition by a person or group of beneficial ownership of 15% or
      more of the Company's Common Stock, the Rights are redeemable for $.001
      per Right at the option of the Board of Directors.



                                     13-38
<PAGE>   39

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

17.    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>

                            YEAR ENDED JUNE 30, 1997               YEAR ENDED JUNE 30, 1998              YEAR ENDED JUNE 30, 1999
                       ------------------------------------ ------------------------------------  ----------------------------------
                          LOSS         SHARES     PER-SHARE     LOSS        SHARES     PER-SHARE    INCOME      SHARES     PER-SHARE
                       (NUMERATOR)  (DENOMINATOR)  AMOUNT   (NUMERATOR)  (DENOMINATOR)   AMOUNT   (NUMERATOR) (DENOMINATOR)  AMOUNT
                       -----------  ------------- --------- -----------  ------------- ---------  ----------- ------------- --------
<S>                    <C>          <C>            <C>      <C>          <C>           <C>        <C>         <C>           <C>
Basic EPS............. $ (161,813)      46,988    $  (3.44)  $  (3,703)     55,087     $ (0.07)    $ 10,457       52,444     $ 0.20
                                                  ========                             =======                               ======
Effect of dilutive
   securities-options
   and warrants.......          -            -                       -           -                        -        4,085

                       -----------      ------               ----------     ------                 --------       ------
Diluted EPS........... $ (161,813)      46,988    $  (3.44)  $  (3,703)     55,087     $ (0.07)    $ 10,457       56,529     $ 0.18
                       ===========      ======    =========  ==========     ======     ========    ========       ======     ======
</TABLE>


      Anti-dilution provisions of SFAS 128 require consistency between diluted
      per-common-share amounts and basic per-common-share amounts in loss
      periods. The number of anti-dilutive equivalent shares excluded from the
      per share calculations are 1,218,000 and 1,725,000 for the years ended
      June 30, 1997 and 1998, respectively.

18.   SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                                     YEAR ENDED JUNE 30,
                                                             -------------------------------------
                                                                       (IN THOUSANDS)
                                                                1997         1998           1999
                                                             ---------     --------       --------
<S>                                                    <C>           <C>            <C>
      Interest paid......................................... $     585     $    632       $    618
                                                             =========     ========       ========
      Income taxes paid..................................... $   1,147     $  1,434       $  1,688
                                                             =========     ========       ========
      Supplemental disclosure of non-cash investing and
           financing activities:
           Capital lease additions and purchase of other
                long-term assets............................ $   1,914     $    650       $  3,379
                                                             =========     ========       ========
           Stock funding of 401(k) match.................... $       -     $      -       $    963
                                                             =========     ========       ========
           Purchase price of business acquisitions.......... $ 200,997     $  1,000       $ 19,100
           Less: Issuance of common stock and stock
                 options pursuant to acquisitions...........   177,188            -         18,000
                 Liabilities assumed........................     1,619          145            887
                 Net present value of future payment due....     9,610            -              -
                 Cash acquired in acquisitions..............     1,217            -             23
                                                             ---------     --------       --------
                     Net cash paid.......................... $  11,363     $    855       $    190
                                                             =========     ========       ========
</TABLE>

19.   BUSINESS SEGMENTS

      The Company operates in three business segments - Electronic Commerce,
      Software, and Investment Services. These reportable segments are strategic
      business units that offer different products and services. A further
      description of each business segment along with the Corporate services
      area follows:

      - Electronic Commerce - Electronic commerce includes electronic home
        banking, electronic billing, electronic bill payment and business
        payments. These services are primarily directed to financial
        institutions and businesses and their customers.

      - Software - Software services includes end-to-end software products for
        ACH processing, account reconciliation, wire transfer, mortgage loan
        origination and servicing, lease accounting and debt recovery. These
        products and services are primarily directed to financial institutions
        and large corporations.



                                     13-39
<PAGE>   40

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


    - Investment Services - Investment services includes investment portfolio
      management services and investment trading and reporting services. These
      products and services are primarily directed to institutional investment
      managers.

    - Corporate - Corporate services include human resources, legal, accounting
      and various other of the Company's unallocated overhead charges.

The accounting policies of the segments are the same as those described in Note
1 "Summary of Significant Accounting Policies". The Company evaluates
performance based on revenues and operating income (loss) of the respective
segments. No single customer accounted for 10% or more of consolidated revenues
for the years ended June 30, 1997, 1998 and 1999. Foreign sales for the periods
presented are insignificant. There are no intersegment sales.

The following sets forth certain financial information attributable to the
Company's business segments for the years ended June 30, 1997, 1998 and 1999 (in
thousands):

<TABLE>
<CAPTION>

                                                                         YEAR ENDED JUNE 30,
                                                                -------------------------------------
                                                                   1997          1998         1999
                                                                ---------     ---------     ---------
<S>                                                             <C>           <C>           <C>
Revenues:
     Electronic Commerce....................................    $  85,926     $ 137,972     $ 169,443
     Software...............................................       68,113        66,143        41,384
     Investment Services....................................       22,406        29,749        39,304
                                                                ---------     ---------     ---------
               Total........................................    $ 176,445     $ 233,864     $ 250,131
                                                                =========     =========     =========
Operating income (loss):
     Electronic Commerce- including charge for acquired
       in-process research and development of  $140,000
       in 1997..............................................    $(160,195)    $ (39,423)    $  (5,490)
     Software- including charge for acquired in-process
      research and development of $719 in 1998..............        4,324        48,854        18,083
    Investment Services- including charge for acquired
      in-process research and development of $2,201 in 1999         2,171         5,040         5,892
    Corporate...............................................      (21,449)      (21,647)      (22,218)
                                                                ---------     ---------     ---------
               Total........................................    $(175,149)    $  (7,176)    $  (3,733)
                                                                =========     =========     =========
Identifiable assets:
     Electronic Commerce....................................    $  59,265     $  70,192     $  80,223
     Software...............................................       61,701        39,346        34,194
     Investment Services....................................       23,187        21,187        49,098
     Corporate..............................................       79,683       119,387        89,246
                                                                ---------     ---------     ---------
               Total........................................    $ 223,836     $ 250,112     $ 252,761
                                                                =========     =========     =========
Capital expenditures:
     Electronic Commerce....................................    $   3,182     $  19,532     $   9,258
     Software...............................................        1,171         2,197         1,189
     Investment Services....................................        1,973           895         4,764
     Corporate..............................................        2,788         5,315        25,233
                                                                ---------     ---------     ---------
               Total........................................    $   9,114     $  27,939     $  40,444
                                                                =========     =========     =========

Depreciation and amortization:
     Electronic Commerce....................................    $   2,094     $   9,964     $  14,214
     Software...............................................       10,501         6,051         2,069
     Investment Services....................................        4,379         4,558         5,336
     Corporate..............................................        7,945         4,426         3,011
                                                                ---------     ---------     ---------
               Total........................................    $  24,919     $  24,999     $  24,630
                                                                =========     =========     =========
</TABLE>


                                     13-40
<PAGE>   41

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

20.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

      The following quarterly financial information for the years ended June 30,
      1998 and 1999 includes all adjustments necessary for a fair presentation
      of quarterly results of operations: (In thousands except per share data):

<TABLE>
<CAPTION>
                                                                           QUARTER ENDED
                                                 --------------------------------------------------------------
                                                 SEPTEMBER 30       DECEMBER 31      MARCH 31         JUNE 30
                                                 ------------       -----------      --------        ---------
<S>                                               <C>                <C>             <C>             <C>
FISCAL 1998
Total revenue..............................       $   52,087         $  56,515       $ 61,750        $  63,512
Income (loss) from operations..............           17,187            (2,771)       (29,223)           7,731
Net income (loss)..........................            9,771            (1,692)       (17,540)           5,758
Basic earnings per share:
     Net income (loss) per common share....       $     0.17         $   (0.03)      $  (0.32)       $    0.10
                                                 ============       ===========      ========        =========
     Equivalent number of shares...........           56,703            55,028         55,281           55,376
                                                 ============       ===========      ========        =========
Diluted earnings per share:
     Net income (loss) per common share....       $     0.17         $   (0.03)      $  (0.32)       $    0.10
                                                 ============       ===========      ========        =========
     Equivalent number of shares...........           56,920            55,028         55,281           55,735
                                                 ============       ===========      ========        =========

FISCAL 1999
Total revenue..............................       $   56,814         $  59,605       $ 62,960         $ 70,752
Income (loss) from operations..............           (3,462)           (1,408)           349              788
Net income (loss)..........................           (1,468)           11,375           (308)             858
Basic earnings per share:
     Net income (loss) per common share....       $    (0.03)        $    0.22       $  (0.01)        $   0.02
                                                 ============       ===========      ========        =========
     Equivalent number of shares...........           55,510            51,326         51,218           51,695
                                                 ============       ===========      ========        =========
Diluted earnings per share:
     Net income (loss) per common share....       $    (0.03)        $    0.22       $  (0.01)        $   0.02
                                                 ============       ===========      ========        =========
     Equivalent number of shares...........           55,510            52,553         51,218           56,839
                                                 ============       ===========      ========        =========
</TABLE>


      The sum of the quarterly income (loss) per share does not equal the
      year-to-date income (loss) per share for the respective fiscal periods,
      due to changes in the number of shares outstanding at each quarter-end.





      Significant Fourth Quarter Transactions - During the week of April 26,
      1999, the Company experienced a system error that led users of its
      electronic billing and payment services to experience intermittent
      problems accessing and using the system. As a result of this situation,
      the Company incurred charges of $2,681,000, of which $800,000 is reflected
      as a reduction in processing and servicing revenue and $1,881,000 as sales
      and marketing expense in the Company's Consolidated Statements of
      Operations for the year ended June 30, 1999.

      During the fourth quarter of 1999, the Company incurred $890,000 of costs
      associated with a recalled secondary offering of stock. The costs are
      reflected in general and administrative expense in the Consolidated
      Statements of Operations for the year ended June 30, 1999.



                                     13-41
<PAGE>   42

                 CHECKFREE HOLDINGS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      In the fourth quarter of 1998 the Company recorded adjustments to reduce
      its 401(k) match accrual by $2.4 million and its management incentive
      bonus accrual by $1.7 million. Both incentive amounts had been provided
      for ratably over the year in anticipation of achievement of financial
      results that would have resulted in distribution of the amounts accrued in
      accordance with related plan provisions.

21.   COMMITMENTS

      In June 1999, the Company entered into a five-year agreement for software
      to be used in conjunction with its electronic commerce business. The
      software is to be licensed in incremental units over the term of the
      agreement to coincide with the growth of the Company's business. Total
      commitments under the agreement amount to $10 million over the five-year
      term.


                                     13-42