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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        For The Year Ended June 30, 2001

                         Commission File Number: 0-26802

                              CHECKFREE CORPORATION

             (Exact name of Registrant as specified in its charter)

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

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

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

Securities registered pursuant to
Section 12(b) of the Act:                    None

Securities registered pursuant to
Section 12(g) of the Act:                    Common Stock, $.01 par value
                                             Preferred Stock Purchase Rights

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of our Common Stock held by our
non-affiliates was approximately $1,050,442,170 on September 14, 2001.

         There were 87,154,357 shares of our Common Stock outstanding on
September 14, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of our Annual Report to Stockholders for the fiscal year ended
June 30, 2001 are incorporated by reference in Part II.

         Portions of our Proxy Statement for the 2001 Annual Meeting of
Stockholders are incorporated by reference in Part III.


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                                TABLE OF CONTENTS
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<TABLE>
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                                     PART I
<S>                                                                                                 <C>
Item 1 Business...................................................................................   3

Item 2. Properties................................................................................  33

Item 3. Legal Proceedings.........................................................................  33

Item 4. Submission of Matters to a Vote of Security Holders.......................................  33


                                     PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.................  34

Item 6. Selected Financial Data...................................................................  34

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation......  34

Item 7A. Quantitative and Qualitative Disclosures About Market Risk...............................  35

Item 8. Financial Statements and Supplementary Data...............................................  35

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......  35


                                    PART III

Item 10. Directors and Executive Officers of the Registrant........................................ 36

Item 11. Executive Compensation.................................................................... 36

Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 36

Item 13. Certain Relationships and Related Transactions............................................ 36


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... 37

Signatures......................................................................................... 42
</TABLE>

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                                     PART I

ITEM 1. BUSINESS.

     All references to "we," "us," "our," "CheckFree" or the "Company" in this
Annual Report on Form 10-K mean CheckFree Corporation and all entities owned or
controlled by CheckFree Corporation, except where it is made clear that the term
only means the parent company.

OVERVIEW

     We are the leading provider of electronic billing and payment services. We
operate our business through three independent but inter-related divisions:

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


     Our Electronic Commerce business provides services that allow consumers to:

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

     We provide electronic billing and payment services for over 5.2 million
consumers as of June 30, 2001. Our services reach hundreds of sources, either
directly or through reseller relationships, including:

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

     We have developed contracts with over 1,100 merchants nationwide that
allows us to remit approximately 64% of all of our bill payments electronically.
We processed over 22 million transactions for the month of June 2001 and, for
the year ended June 30, 2001, we processed over 231 million transactions.

     In March 1997, we introduced electronic billing -- "E-Bill" -- which
enables merchants to deliver billing as well as marketing materials
interactively to their customers over the Internet. In March 2001, we introduced
the latest version of our electronic billing and payment products, "WebPay for
Consumers" (or WebPay 3.2), which provides consumers with the ability to receive
and pay e-bills over e-mail and to exchange money with each other using e-mail
"invitations" to send or receive money. As of June 30, 2001, we have 173 billers
in production and are delivering nearly 500,000 electronic bills monthly.
Additional biller content became available in the fourth quarter of fiscal 2001
through our ability to deliver bills scraped from biller-direct sites, which
added six national credit card bills to the 173 bills available through
traditional electronic and billing payment services.

     When a customer instructs us to pay a bill, we have the ability to process
the payment either by electronic funds transfer, by paper check, or by draft
drawn on the customer's account. Our patented bill payment processing system in
Norcross, Georgia determines the preferred method of payment based on a credit
analysis of the customer, assessing the customer's payment history, the amount
of the bill to be paid and other relevant factors. If the results of the credit
analysis are favorable, we will assume the risk of collection of the funds from
the customer's account, and if we have an electronic connection to the merchant,
the remittance will be sent electronically, otherwise, it will be sent by check.
If the results are not favorable, the remittance will be sent to the merchant by
a draft drawn directly on the customer's checking account. In an electronic
remittance,

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the funds are transmitted electronically to the merchant with the customer's
account number included as an addenda record. For a paper draft, the customer's
name, address, and account number are printed on the face of the check. In
addition, our processing system is able to aggregate multiple electronic and
paper remittances due to merchants. Thus, if multiple payments are going to the
same merchant on the same day, we may send one check for the sum of these
payments and include a remittance statement that provides the customers' names,
addresses, account numbers, and payment amounts. Our strategy is to drive
operational efficiency and improve profitability by increasing the percentage of
transactions we process electronically. Since June 1998, we have increased our
electronic payments ratio from 32% of total payments processed electronically to
approximately 64% by June 2001.

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

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

     Our financial planning software applications include:

     -    retirement and estate planning modules;
     -    cash flow, tax and education planning modules;
     -    asset allocation module; and
     -    investment manager performance database system.

Our fee-based money manager clients are typically sponsors or managers of wrap
money management products or traditional money managers, managing investments of
institutions and high net worth individuals. Our portfolios under management
have grown to over 1.1 million as of June 30, 2001.

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

     -    i-Solutions.

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

     -    Electronic Funds Transfer.

               Through our Paperless Entry Processing System Plus software, we
          offer an online, real-time system providing an operational interface
          for originating and receiving payments

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

     -    Reconciliation.

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

     -    Other.

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

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

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

ELECTRONIC COMMERCE INDUSTRY BACKGROUND

     The majority of today's consumer bill payments are completed using
traditional paper-based methods. According to the Gartner Group, of the
estimated 17 billion consumer bills produced each year, 81% are paid by paper
check, 12% are paid by electronic means and 7% by other means. Many traditional
financial transactions, however, can now be completed electronically due to the
emergence of new communications, computing and security technologies. Many
financial institutions and businesses have invested in these technologies and
are creating the infrastructure for recording, reporting and executing
electronic transactions. We believe the broad impact of the Internet will
increase the use of electronic methods to execute financial transactions.

     Persistence of Traditional Financial Transaction Processes

          Many traditional methods of completing financial transactions still
     persist, including:

     -    Paper Checks.

               It is estimated that 65 billion checks were written in the United
          States in 1998. The use of checks imposes significant costs on
          financial institutions, businesses and their customers. These costs
          include the writing, mailing, recording and manual processing of
          checks.

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     -    Paper Billing.

               It is estimated that over 17 billion paper bills are produced
          each year, with the cost of submitting a paper bill, including
          printing, postage and billing inserts, as high as $3.00 per bill.

     -    Conventional Banking.

               Many financial transactions are conducted in person at banks.
          Banks incur substantial expenses in providing personnel and physical
          locations, while bank customers incur transportation costs and
          personal inconvenience when traveling to a bank facility. Over 90% of
          the 80 million banking households in the United States are still
          conducting most of their financial transactions using conventional
          banking methods.

     -    Business to Business Payments.

               While consumers bear costs and inconvenience receiving and paying
          paper bills, businesses experience an even higher level of cost and
          inefficiency when receiving and paying paper bills. For businesses,
          issues like discounts for prompt payment, returns, allowances,
          disputed charges and other adjustments, as well as reconciliation to
          the business' own records, increase the costs of payment.

     The Internet's Role in Driving Electronic Commerce

     We believe the broad impact of the Internet is driving financial
institutions, businesses and consumers to adopt practices of electronic billing
and payment, banking and business-to-business payments. We expect that the
growth in these electronic commerce activities will increase the need for
services that support secure, reliable and cost-effective financial transactions
between and among these market participants. We believe the combination of the
following trends is driving adoption of electronic commerce:

     -    Expanding PC Ownership.

               Declining prices for personal computers and rapid growth in the
          number of computer-literate consumers are driving increased
          penetration of personal computers in U.S. homes.

     -    Increasing Internet Accessibility.

               Reduced communications costs, improved web browsers and faster
          connection speeds have made the Internet increasingly accessible to
          consumers and to businesses offering products and services on-line.
          International Data Corporation estimates that there were 52 million
          Internet users in the United States at the end of 1998 and that this
          figure will grow to 136 million by the end of 2002.

     -    Increasing Acceptance of Electronic Commerce.

               Consumers have grown increasingly comfortable with the security
          of electronic commerce and are willing to conduct large transactions
          on-line. International Data Corporation estimates that the total value
          of goods and services purchased over the Internet in the United States
          will increase from approximately $26 billion in 1998 to over $269
          billion in 2002.

     -    Emergence of New Industry Participants.

               New businesses have emerged which use the broad adoption of the
          Internet to compete with traditional businesses. Traditional financial
          institutions now compete with Internet-based banks, brokerages and
          other financial services companies. These companies

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          do not offer consumers the possibility of traditional, manual
          financial transactions and are driving further adoption of electronic
          commerce.

THE ELECTRONIC SOLUTION

     We believe that consumers will move their financial transactions from
traditional paper-based to electronic transactions if they have an
easy-to-access, easy-to-use, compelling, secure and cost-effective solution for
receiving and paying their bills electronically. We believe that, compared with
conventional paper-based transactions, electronic transactions cost much less to
complete, give rise to far fewer errors and generate far fewer subscriber
inquires. We believe that an electronic solution should allow consumers at their
access point of choice 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 also believe that these functionalities must be delivered on a platform
     that:

     -    is fully supported by end-to-end customer care;
     -    is available 24 hours a day, 7 days a week; and
     -    provides the highest level of security, availability and privacy.

     Over the past seventeen years, we have developed market leading expertise
and technological capability to provide electronic commerce solutions with these
functionalities.

THE CHECKFREE ADVANTAGE

     Our experience as a leading provider of electronic billing and payment and
banking services has facilitated the building of a state of the art
infrastructure. We have leveraged this infrastructure by developing a full suite
of electronic commerce services, all of which we offer in an integrated fashion
through multiple distribution channels.

     Infrastructure

     Our infrastructure allows consumers to receive and pay both conventional
and electronically presented bills and handle traditional banking transactions
electronically. The key components of our infrastructure are:

     -    Connectivity with Merchants.

               We have established electronic connectivity to over 1,100
          merchants, which allows us to remit 64% of all of our bill payments
          electronically. Electronic remittance may be accomplished at a lower
          cost than remittances using the traditional paper-based method. In
          addition, electronic remittance significantly reduces payment
          exceptions and related costs associated with customer care.

     -    Scalable Genesis Platform.

               Our Genesis platform, completed in 1998, is an internally
          developed data processing system created by our in-house engineers to
          process electronic billings and payments. The Genesis platform was
          designed to be scaled to handle more than 30 million consumers. We
          have made significant investments in processes and technologies
          supporting our Genesis platform to ensure that transactions are
          executed with the highest level of security, reliability and
          efficiency.

     -    Connectivity to Billers.

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               We believe that our ability to provide consumers with access to
          electronic bills will substantially spur adoption of the electronic
          solution. By targeting the largest billers in key industries and in
          selected population centers, we believe we can provide a significant
          number of bills to most consumers at their access point of choice. We
          have electronic bill distribution contracts with 271 billers. To
          encourage billers to utilize our services, we anticipate funding a
          portion of some billers' set-up costs.

     -    Experienced Customer Care Staff.


               We have approximately 1,040 trained, experienced customer care
          and merchant services staff that offer seamless end-to-end customer
          care. We believe that customer care that provides answers to all the
          questions that consumers may have about their transactions is a
          critical component of providing a compelling, easy-to-use solution
          that consumers will ultimately adopt.

     Distribution

     We believe that consumers are most attracted to an electronic solution that
enables them to receive and pay all of their bills at a single site. For many
consumers, the site they choose will be their financial institution's website,
while others will prefer Internet portals or sites operated by individual
merchants. Through contracts with hundreds of sources, we are able to distribute
our services to whichever access and aggregation site the consumer prefers.
Significant among these contracts are our agreements with:

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

OUR BUSINESS STRATEGY

     Our business strategy is to provide an expanding range of convenient,
secure and cost-effective electronic commerce services and related products to
financial institutions, Internet portals, businesses and their customers. We
have designed our services and products to take advantage of opportunities we
perceive in light of current trends and our fundamental strategy. The key
elements of our business strategy are to:

     -    Drive increased adoption of electronic commerce services by consumers.

               We believe that consumers will move their financial transactions
          from traditional paper-based methods to electronic transactions if
          they have an easy-to-access, easy-to-use, secure, compelling and
          cost-effective method for receiving and paying their bills
          electronically. Our strategy to drive adoption of our electronic
          services will focus on the following initiatives.

               We intend to use the broad adoption of the Internet by consumers
          to encourage the use of our web-based electronic commerce services by
          our financial institution and Internet portal customers. To further
          drive demand, we are also providing our services through Internet
          portals. This strategy should provide consumers with ready access to
          easy-to-use, cost-effective applications for receiving and paying
          their bills electronically. Part of our strategy to drive consumer
          adoption is working with Internet portals to offer our services to
          consumers on a free-trial basis. Initially, this strategy will result
          in foregone revenues, but we anticipate converting a majority of these
          new customers to fee-based services at the end of the trial period. As
          consumers continue to adopt electronic commerce services, financial


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          institutions and billers will see greater efficiencies from providing
          electronic billing and payment services to their customers.

               We are proposing new pricing structures to our financial
          institution customers to facilitate their offering electronic billing
          and payment to a broad spectrum of consumers. Our traditional
          financial institution pricing structure was based on subscriber fees,
          with an average cost to the financial institution of approximately $4
          per subscriber per month. Under the old pricing structure, the costs
          to our financial institution customers grew roughly proportionally to
          the number of subscribers added, regardless of activity. Our new
          pricing programs are negotiated individually with each customer and
          include a monthly fixed fee to the financial institution to cover our
          infrastructure costs which helps our financial institution customers
          more accurately predict the costs, a small monthly per subscriber fee
          and a new fee based on the number of transactions processed by the
          financial institution. We believe the new pricing structure should
          allow our financial institution customers to justify promoting the
          service through free trials and other offers.

               Additionally, we believe that financial institutions and Internet
          portals that offer electronic banking will experience increased
          customer retention, have a superior marketing channel and be able to
          offer enhanced customer service.

     -    Continue to distribute electronic commerce services through multiple
          channels.

               We maintain alliances with market-leading companies to achieve
          deeper market penetration and have begun an initiative to offer our
          electronic commerce services through Internet portals. To better reach
          smaller financial institutions, we have entered into distribution
          agreements with some independent firms that we believe can more
          efficiently address the needs of this industry segment. Additionally,
          by making services available to users of personal financial management
          software, like Quicken, Microsoft Money and Managing Your Money and of
          business management software, like QuickBooks, we expand public access
          to, and awareness of, our services.

     -    Focus on customer care and technical support.

               We believe that providing superior quality and accessible and
          reliable customer care is essential to establishing and maintaining
          successful relationships with our customers. We support and service
          customers through numerous activities, including technical and
          non-technical support, through help desk, e-mail and facsimile, as
          well as through service implementation and training. We are enhancing
          our support of our services through advanced Internet-based
          communications technologies that enable us to efficiently respond to
          billing and payment inquiries made by financial institutions, billers
          and their customers. In anticipation of greater adoption of our
          electronic commerce services, we are increasing the number of our
          customer care personnel and focusing on our efficiency in handling
          customer care inquiries. Additionally, we established a third
          operational center in Phoenix, Arizona to house customer care and
          check printing and distribution functions.

     -    Continue to improve operational efficiency and effectiveness.

               We believe that as our business grows and the number of
          transactions we process increases, we will be able to take advantage
          of operating efficiencies associated with increased volumes, thereby
          reducing our unit costs. In fiscal 2000, we began an internal program
          called the "sigma challenge" which ties employee performance
          evaluations and compensation to the achievement of process and system
          improvements. Sigma is a measure of quality typically used by
          manufacturing firms to minimize defects. The sigma challenge applies
          sigma measurements as a barometer of our performance on our key
          metrics of system availability and payment timeliness. Small changes
          in our performance drive significant sigma movements, focusing our
          attention on critical tasks and peak performance. The sigma challenge
          is designed to take our quality performance from 99.0%, or 3.8 sigma,
          where we

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          began our fiscal year 2000, to 99.9%, or 4.6 sigma, by the end of
          fiscal 2000. A 4.6 sigma is the quality standard set by the
          telecommunications industry for delivering their services to
          businesses and consumers or "dial-tone" quality. By the end of fiscal
          2000, we fell slightly below our goal by achieving a quality level of
          4.5 sigma. We achieved our goal by achieving 4.6 sigma in fiscal 2001
          and now we are working to maintain that level. We expect to derive
          further operational efficiency and effectiveness by increasing our
          electronic links with billers, enabling a larger percentage of our
          consumer transactions to be processed electronically.

     -    Drive new forms of electronic commerce services.

               Our electronic commerce services are currently applied to
          banking, billing and payment and brokerage transactions. We believe
          that new applications will be developed as a result of the growth in
          electronic commerce generally, and Internet-based commerce
          specifically. We intend to leverage our infrastructure and
          distribution to address the requirements of consumers and businesses
          in these new applications. For example, we plan to leverage our core
          payment and processing network to accomplish person-to-person and
          small business payments.

PRODUCTS AND SERVICES

     Electronic Commerce

     Our electronic commerce services are primarily targeted to consumers
through financial institutions and Internet portals. We believe that our
services offer significant benefits to financial institutions and Internet
portals, including an enhanced electronic relationship with their consumers
under which they can market other products and services and, for financial
institutions, a lower cost of providing traditional banking and bill payment
services. We are continually developing new electronic commerce services and
enhancing our existing services for each of our target markets.

     We have arrangements with hundreds of sources through which electronic
payment services are provided to their customers. The following financial
institutions are some of our largest customers of our electronic commerce
services, as determined by the number of subscribers:

-        Bank of America;                   -        Merrill Lynch & Co.;
-        Bank One;                          -        U.S. Postal Service;
-        Charles Schwab & Co.;              -        U.S. Bancorp;
-        Chase Manhattan Bank;              -        Wells Fargo; and
-        First Union;                       -        Yahoo.
-        KeyCorp;

This list of our customers is not exhaustive and may not fully represent our
customer base.

         Bill Payment and Banking. Our bill payment services enable financial
institution and Internet portal customers, as well as direct consumer
subscribers to pay bills electronically using a variety of devices like personal
computers and touch-tone telephones. Bills paid by consumers using our bill
payment services typically include credit card, monthly mortgage and utility
bills, but a cornerstone of our services is that we can facilitate electronic
payment by consumers to anyone, regardless of whether payment is ultimately made
through an electronic or traditional paper method. Consumers can use our
services to make any payment electronically from any checking account at any
financial institution in the United States. Recurring bills like mortgages can
be paid automatically and scheduled in advance, as specified by the consumer. As
of June 30, 2001, we had over 5.2 million consumers using our bill payment and
home banking services.

         We support home electronic banking services for financial institutions
and their customers. Among these are balance inquiries, fund transfers, customer
service, customer billing and marketing. Our service facilitates on-line
reconciliation to personal computer and web-based account registers, matching
cleared items with previously entered transactions.

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         Revenues are generated through contracts with individual financial
institutions. We historically negotiated with the financial institution an
implementation fee, a base monthly fee per customer account on the service
provided, and in some cases, a variable per transaction fee which may decrease
based on the volume of transactions. We recently announced the adoption of new
pricing programs that include a monthly fixed fee to the financial institution
to cover our infrastructure costs which helps our financial institution
customers more accurately predict the costs, a small monthly per subscriber fee
and a new fee based on the number of transactions processed. Contracts typically
have three to five year terms and generally provide for minimum fees if
transaction volumes are not met. We utilize direct sales and distribution
alliances to market to financial institutions and have the ability to customize
services for each institution.

         Billing and Payment. Our electronic billing and payment service permits
billers to deliver full-color electronic bills to their customers, together with
detailed information and electronic promotional inserts. We also offer the
opportunity to market interactively, and to use one-to-one marketing techniques.
The recipients can use the service to electronically make the payment. We are
marketing the service to be incorporated into our electronic banking and bill
payment services. We have entered into a variety of arrangements with financial
institutions, Internet portals and billers to provide these services and, in
some cases, will share revenue derived from billers with the financial
institutions and the Internet portals. In the near term, we will offer
free-trial periods for our electronic billing and payment services to accelerate
the rate of adoption of our services. We believe that billers could eventually
achieve substantial savings by utilizing our billing and payment service, but we
believe that an even stronger incentive for billers to present bills
electronically is the opportunity our system offers for more effective marketing
to customers.

         Business Payments. We facilitate electronic payments for businesses
through our offerings of business bill payment and banking and electronic
accounts receivable processing services. As we do for consumers, we enable
businesses to make payments to anyone. We employ a direct sales force to market
the service through banks and others. Our electronic accounts receivable
collections for businesses are provided to health and fitness and various other
industries, enabling these businesses to collect monthly fees through electronic
funds transfer or credit cards. Services are typically provided under contracts
for three years with automatic renewals. For providing collection services,
businesses pay us implementation fees, transaction fees and credit card discount
fees.

         Investment Services

         We offer portfolio management and information services for fee-based
money managers and financial planners within investment advisory firms,
brokerage firms, banks and insurance companies. Our fee-based money manager
clients are typically sponsors or managers of wrap money management products or
traditional money managers, who manage investments of institutions and high net
worth individuals.

         Our full range of portfolio management services provides our clients
with portfolio management tools, tax lot reporting, trade modeling, performance
measurement and reconciliation. Our information services and software allow
traditional money managers and consultants to allocate client assets, select and
benchmark performance of money managers and report on manager performance. Each
of these features allows our clients to avoid spending time on these functions
and focus on their key business.

         Revenues in our portfolio management services are generated through
multiple year agreements that provide for monthly revenue on a volume basis.
Revenue from our information services and software is typically generated
through annual agreements.

         Our integrated outsourced solution utilizes a Unix platform. The system
is highly scalable, making us the system of choice for firms managing a large
number of portfolios.

         Software

         We are a leading provider of electronic commerce and financial
applications software and services for businesses and financial institutions. We
design, market, license and support software products for automated
clearinghouse processing, reconciliation and regulatory compliance. In addition,
we offer software consulting and training services.

                                      -11-
<PAGE>   12

         Our financial application software revenues are derived primarily from
the sale of software licenses and software maintenance fees. Our software is
sold under perpetual licenses, and maintenance fees are received through
renewable agreements.

         Our software products provide systems that range from back office
operations to front-end interface with the clients of our customers.
Applications include automated clearinghouse origination and processing
reconciliation, regulatory compliance and safe deposit box accounting. While we
have no pending agreements to dispose of our remaining software businesses, we
do receive offers for them from time to time.

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

         Automated Clearinghouse. The automated clearinghouse network was
developed in the 1970s to permit the electronic transfer of funds, curtailing
the growth in the number of paper checks in circulation. The automated
clearinghouse network acts as the clearing facility for routing electronic funds
transfer entries between financial institutions. All automated clearinghouse
transfers are handled in a standard format established through the National
Automated Clearing House Association. More than 15,000 financial institutions
participate in the automated clearinghouse system. There are 31 automated
clearing houses, which geographically coincide with the twelve Federal Reserve
Banks, their branches and processing centers. Our electronic funds transfer
products are interrelated and may be used by either businesses or financial
institutions depending on the services they offer their customers and employees.

         We developed the Paperless Entry Processing System Plus, with 40 of the
top 50 originators utilizing the product to process approximately 70% of all
automated clearinghouse transactions nationally, it is the most widely used,
comprehensive automated clearinghouse processing system in the United States.
Paperless Entry Processing System Plus is an on-line, real-time system providing
an operational interface for originating and receiving electronic payments
through the automated clearinghouse.

         Reconciliation. Our reconciliation products allow users to verify and
compare their financial records, data and accounts against related information
derived from third party sources. RECON-PLUS provides United States banks,
international banks and corporate treasury operations with automated check and
non-check reconciliations in high volume, multi-location environments. These
systems are often tailored so that banks and multi-bank holding companies may
deliver reconciliation services meeting the specific needs of corporate
customers. Those reconciliation products are also designed for non-banking
corporations that perform account reconciliation in-house as well as companies
with many branch locations. Services provided by our reconciliation products
include:

-        automated deposit verification;
-        consolidated bank account reconciliations and cash mobilization;
-        immediate and accurate funds availability data; and
-        improved cash control.

         In 1995, we introduced RECON-PLUS for Windows, a client/server based
reconciliation system. RECON-PLUS for Windows is most frequently used for
internal reconciliation by large businesses, financial service firms, and
utilities, including the reconciliation of debit and credit card transactions,
checks, automated teller machine transactions, automated clearinghouse transfers
and securities transactions.

         Our account reconciliation package is one of the most widely used
account reconciliation systems in the United States banking industry. The
account reconciliation package/service management system which was developed in
1995 to replace and augment the existing package, is a fully integrated on-line
and real time system that enables banks to immediately process their customer
transactions to produce accurate, timely reconciliations

                                      -12-
<PAGE>   13


while streamlining back-office processes. The account reconciliation
package/service management system also groups accounts across banks within bank
holding companies and allows banks to streamline their operations by reconciling
their intra-bank transactions.

         Other Software Products. We also offer software products and services
dealing with safe box accounting and compliance with government regulations.

         Licenses. We generally grant non-exclusive, non-transferable perpetual
licenses to use our application software at a single site. Our standard license
agreements contain provisions designed to prevent disclosure and unauthorized
use of our software. License fees vary according to a number of factors,
including the types and levels of services we provide. Multiple site licenses
are available for an additional fee. In our license agreements, we generally
warrant that our products will function in accordance with the specifications
set forth in our product documentation. A significant portion of the license fee
payable under our standard license agreement is due upon the delivery of the
product documentation and software to the customer, with the balance of the
license fee due upon installation. The standard license fee for most products
covers the installation of our software and maintenance for the first three to
twelve months.

         Maintenance and Support. Maintenance includes enhancements to our
software. Customers who obtain maintenance generally retain maintenance service
from year to year. To complement customer support, we frequently participate in
user groups with our customers. These groups exchange ideas and techniques for
using our products and provide a forum for customers to make suggestions for
product acquisition, development and enhancement.

COMPETITION

         Electronic Commerce

         We face significant competition in all of our customer markets. First,
we need to switch billers and consumers from paper bills sent by mail and paid
by check to electronic bill presentment and payment. Second, a number of banks
have developed, and others may in the future develop, electronic billing and
payment services in-house. J.P. Morgan Chase, First Union Corporation and Wells
Fargo & Co. are partners in a venture called Spectrum that plans to allow
individuals and businesses to receive and pay bills electronically. To the best
of our knowledge, Spectrum has done limited electronic presentment of bills, and
is developing a "pay anyone" capability in conjunction with Metavante, a
division of Marshall and Ilsley Bank Inc. Metavante competes directly with us in
providing pay anyone solutions to financial services organizations and has
recently completed two acquisitions in an effort to strengthen their competitive
position. Mastercard International also offers online bill presentment to enable
people to receive and pay bills over the Internet. A number of other relatively
small companies also compete with us in electronic bill payment. In addition, we
face competition from competitors offering billing and payment services
utilizing scan and pay technology. These "scan and pay" companies offer a
service whereby a consumer's bill is received by the company, scanned to create
an electronic image of the bill, and electronically delivered to the consumer
who can elect to pay that bill either by writing a paper check or through an
electronic transfer of funds. We believe that our competitors, however, will
need to make substantial progress to able to offer electronic commerce services
comparable to the services we currently offer to our customers through multiple
distribution channels.

         Because the electronic commerce industry is expected to grow
substantially in the coming years, we anticipate continued strong competition,
but we believe that the increased attention and credibility this competition
will bring to the industry may broaden the market and increase the percentage of
financial transactions which are effected by electronic means.

         Investment Services

         Competition for portfolio services includes two main segments. We
compete with providers of portfolio accounting software like Advent Software,
and we also compete with service bureau providers like SunGard Portfolio
Solutions and Financial Models Company.

                                      -13-
<PAGE>   14


         Software

         The computer application software industry is highly competitive. In
the electronic statement creation and financial applications software markets,
we compete directly or indirectly with a number of firms, including large
diversified computer software service companies and independent suppliers of
software products. We believe that there is at least one direct competitor for
most of our software products, but no competitor competes with us in all of our
software product areas.

         Our product lines also have numerous competitors. The RECON-PLUS
product competes with Chesapeake, Driscoll and Geac. Our PEP+ products compete
with Transaction Systems Architects, Inc. CheckFree i-Solutions' electronic
statement and billing creation software products compete primarily with edocs,
Inc, and Avolent Software.

         We believe that the major factors affecting customer decisions in our
market, in addition to price, are product availability, flexibility, the
comprehensiveness of offered products, and the availability and quality of
product maintenance, customer support and training. Our ability to compete
successfully also requires that we continue to develop and maintain software
products and respond to regulatory change and technological advances. We believe
that we currently compete favorably in the marketplace with respect to these
criteria. See "Business -- Business Risks (Competitive pressures we face may
have a material adverse effect on us)."

         In addition, CheckFree i-Solutions (formerly BlueGill) is expanding
into international markets where we may discover new local competitors that have
the advantages of existing relationships with customers, local technical support
staff, and local language support.

SALES, MARKETING AND DISTRIBUTION

         Our sales, marketing and distribution efforts are designed to maximize
access to potential customers. We market and support our services both directly
and indirectly through a direct sales and technical sales support force of over
220 employees and, to achieve deeper market penetration, through select
distribution alliances with companies which are involved in our target customer
markets. In order to foster a better understanding of the needs of our larger
bank customers, and to help us respond to identified needs, we employ a number
of account managers assigned to specific banks. We solicit billers for our
electronic billing and payment services through a regionally assigned sales
force.

         In the electronic commerce segment, we offer our services and related
products to the nation's largest financial institutions directly through our
sales force, and market to smaller institutions through strategic alliances with
companies like EDS, Fiserv, Alltel and Equifax. We currently offer substantially
all of our services and related products only to the domestic marketplace.

         We also offer our electronic commerce services through Internet
portals. We believe that these Internet portals will enhance and speed up the
rate of adoption of electronic commerce services by consumers. Part of this
strategy contemplates working with Internet portals to offer our services to
consumers on a free-trial basis. Initially, this strategy will result in
foregone revenue, but we anticipate converting a majority of these new customers
to fee-based services at the end of the trial period. Additionally, the
distribution of electronic home banking and electronic consumer and business
billing and payment services is widened though inclusion or access through
front-end personal financial management software, like Quicken, Microsoft Money
and Managing Your Money.

         We market investment services through our direct sales force. We
generate new customers through direct solicitation, user groups and
advertisements. We also participate in trade shows and sponsor industry seminars
for distribution alliances.

         We market financial application software products through our direct
sales force and through indirect sales through Alltel banking services.
Salespersons have specific product responsibility and receive support from
technical personnel as needed. We generate new customers through direct
solicitations, user groups, advertisements, direct mail campaigns and strategic
alliances. We also participate in trade shows and sponsor industry technology
seminars for prospective customers. Existing customers are often candidates for
sales of additional products or for

                                      -14-

<PAGE>   15



enhancements to products they have already purchased.

         An element of our strategy is the creation and maintenance of
distribution alliances that maximize access to potential customers for our
electronic commerce services and related products. We believe that these
alliances enable us to offer services and related products to a larger customer
base than can be reached through stand-alone marketing efforts. We seek
distribution alliances with companies who have maximum penetration and leading
reputations for quality with our target customers. To date, we have entered into
or are negotiating distribution alliances with several companies, including
AT&T, Alltel, EDS, Fiserv, Five Paces, and Home Financial Network. We also have
arrangements with SunGard for RECON-PLUS for Windows.

         One of the ramifications of this strategy is that we do not, for the
most part, have a direct relationship with the end-users of our products. See
"Business -- Business Risks (We rely on third parties to distribute our
electronic commerce services, which may not result in widespread adoption)."

CUSTOMER CARE AND TECHNICAL SUPPORT

         The provision of high quality customer care, technical support and
operations is an integral component of our strategy in each business segment. To
meet customers' needs most efficiently, our customer care staff is organized
into vertical teams that support each of our business segments. These teams,
however, share common resources, training and orientation to ensure cost
efficiency and consistency of quality standards and measures. From an
accessibility standpoint, all customer care teams provide service by phone,
e-mail and facsimile. Through advanced communications technology, we have a
virtual call center enabling incoming calls to be transparently routed to
various physical support sites as volume demands dictate. An important driver of
our profit margins is the percentage of transactions we complete electronically.
Experience has shown that the demand on customer care resources reduces
substantially as the percentage of electronic remittances grows. We have long
been a leader in electronic remittance, and our merchant systems group
continually establishes and maintains electronic links directly to the internal
systems of payees.

         The level and types of services we provide vary by customer market. The
customer care group, consisting of approximately 1,040 employees, supports
payment inquiry, customer service and technical support and interfaces with the
merchant systems group to improve posting efficiencies. Representatives in our
business customer care group are individually assigned to business customers in
order to provide high-level customer service and technical support. Our consumer
care group provides various levels of support that depend upon the customer's
requirements. This includes providing direct customer care on a private label
basis as well as research and support.

         In order to maintain the ability to provide quality customer service as
our subscriber base increases, we established a third operational center in
Phoenix, Arizona to house customer care, check printing and distribution
functions. This center, when fully staffed, will house up to 800 associates
focused on customer care services.

         To maintain our customer care standards, we employ extensive internal
monitoring systems and conduct ongoing customer surveys. The feedback from these
sources is used to identify areas of strength and opportunities for improvement
in customer care and to aid in adjusting resources to a level commensurate with
efficient response.

REMITTANCES

         Payment Systems. Across our various electronic commerce service
offerings, we utilize the Federal Reserve's Automated Clearing House for
electronic funds transfers, and the conventional paper check clearing systems
for settlement of payments by check or draft. Like other users of these payment
clearance systems, we access these systems through contractual arrangements with
processing banks. For access to conventional paper check clearing systems, we do
not need a special contractual relationship, except for contractual
relationships with the processing bank and its customers. These users are
subject to applicable federal and state laws and regulations, Federal Reserve
Bank operating letters, and the National Automated Clearing House Association
Operating Rules. There are risks typically faced by companies utilizing each of
these payment clearance systems, and we have our own set of operating procedures
and proprietary risk management systems and practices to mitigate credit-related
risks. See "Business -- Business Risks (The transactions we process expose us to
credit risks)" and "-- Business

                                      -15-
<PAGE>   16


Risks (Our business could become subject to increased government regulation,
which could make our business more expensive to operate)."

         Automated Clearinghouse. The automated clearinghouse is used by banks,
corporations and governmental entities for electronic settlement of
transactions, direct deposits of payroll and government benefits and payment of
bills like mortgages, utility payments and loans. We use the automated
clearinghouse to execute some of our customers' payment instructions. Like other
users of the automated clearinghouse, we bear credit risk resulting from
returned transactions caused by insufficient funds, stop payment orders, closed
accounts, frozen accounts, unauthorized use, disputes, theft or fraud. See
"Business -- Business Risks (The transactions we process expose us to credit
risks)" and "-- Business Risks (Our business could become subject to increased
government regulation, which could make our business more expensive to
operate)."

         Paper Drafts. We use conventional check clearance methods for paper
drafts to execute some customers' payment instructions. We bear no credit risk
with paper drafts written on a customer's checking account returned for
insufficient funds, stop payment orders, closed accounts or frozen accounts.
Nonetheless, we may bear other risks for theft or fraud associated with paper
drafts due to unauthorized use of our services. When a customer instructs us to
pay a bill, we have the ability to process the payment either by electronic
funds transfer or by paper draft, drawn on the customer's checking account, on
which the customer's pre-authorized signature is laser imprinted. We manage the
risk we assume by adjusting the mix of electronic and paper draft transactions
in individual cases and overall. Regardless of whether we use paper drafts or
electronic funds transfers, we retain all risks associated with transmission
errors when we are unable to have erroneously transmitted funds returned by an
unintended recipient.

         Other Clearance Systems. While we presently utilize the two principal
payment clearance systems, we intend to use other clearance systems like
automated teller machine networks to provide balance inquiry and fund transfers
functions, and other clearance systems that may develop in the future.

         Risk Mitigation. Our patented bill payment processing system determines
the preferred method of payment to balance processing costs, operational
efficiencies and risk of loss. We manage our risks associated with the use of
the various payment clearance systems through risk management systems, internal
controls and system security. We also maintain a reserve for these risks, which
reserve was $0.6 million at June 30, 2001, and we have not incurred losses in
excess of 0.93% of our revenues in any of the past five years. As further
protection against losses due to transmission errors, we maintain errors and
omissions insurance. See "Business -- Business Risks (The transactions we
process expose us to credit risks)" and "-- Business Risks (We may be unable to
protect our proprietary technology, permitting competitors to duplicate our
products and services)."

TECHNOLOGY

         Our historical approach to technology has been to utilize a combination
of hardware, networks, proprietary software and databases to solve our customer
needs and to meet the varying requirements of the electronic commerce market.

         Electronic Commerce. Our core technology capabilities were developed to
handle settlement services, merchant database services and on-line inquiry
services on a traditional mainframe system with direct communications to
businesses.

         We have implemented a logical, nationwide client-server system.
Consumer, business and financial institution customers all act as clients
communicating across dial-up telephone lines, private leased lines, various
types of networks or the Internet to our computing complex in Norcross, Georgia.
Within this complex, there is a wide variety of application servers that capture
transactions and route them to our back-end banking, billing and payment
applications for processing. The back-end applications are run on IBM
mainframes, Tandems or Unix servers.

         We have developed proprietary databases within our client-server
system, including a financial institution file that allows accurate editing and
origination of automated clearinghouse and paper transactions to financial
institutions. We have also developed a merchant information file consisting of
over 1 million companies that allows

                                      -16-
<PAGE>   17


accurate editing and initiation of payments to billers. These databases have
been constructed over the past 17 years as a result of our transaction
processing experience.

         Platform Integration: The Genesis Project. In 1998, we integrated the
existing legacy data processing sites and platforms operated in Columbus, Ohio,
Aurora, Illinois, and Austin, Texas, into our central processing site at our
headquarters in Norcross, Georgia. We completed the planned migrations of our
customers to the new Genesis platform from our Aurora, Illinois and Columbus,
Ohio platforms. We have designated this integration the Genesis Project. The
integration required extensive investment in hardware and in operating and
system software, extensive communications links and systems, as well as
redundancy, anomaly monitoring, and off-site backup and recovery. See "Business
-- Business Risks (We may experience breakdowns in our payment processing system
that could damage customer relations and expose us to liability)."

         In June 2001, we completed the migration of the customers acquired in
the TransPoint acquisition to the Genesis platform. Further, we have begun the
migration of customers acquired pursuant to the strategic agreement with Bank of
America to the Genesis platform and expect to complete that migration by
December 2001, with the migration of the Austin platform to follow in early
2002. We intend to operate two legacy platforms: the Austin, platform and Bank
of America's California platform, without substantial disruption until all of
our customers have been migrated to the Genesis platform.

         Redundancy and Back-up Systems. We believe that we have implemented
appropriate back-up and recovery procedures to ensure against any loss of data
on any platform. To maximize availability, we have redundant computer systems to
ensure that financial transaction requests can always be honored. Archival
storage is kept on site as well as off site in fireproof facilities. Diesel
generators provide power to the computing facilities in the event of a power
disruption.

         Our operations are dependent on our ability to protect our computer
equipment against damage from fire, earthquake, power loss, telecommunications
failure or similar event. Although we have contracted for the emergency
provision of an alternate site to aid in disaster recovery, this measure will
not eliminate the significant risk to our operations from a natural disaster or
system failure. Any damage or failure that causes interruptions in our
operations could have a material adverse effect on our business, operating
results and financial condition. Our property and business interruption
insurance may not be adequate to compensate us for all losses that may occur.
See "Business -- Business Risks (We may experience breakdowns in our payment
processing system that could damage customer relations and expose us to
liability)."

         Sigma Challenge. In fiscal 2000, we began an internal program called
the "sigma challenge" which ties employee performance evaluations and
compensation to the achievement of process and system improvements. Sigma is a
measure of quality typically used by manufacturing firms to minimize defects.
The sigma challenge applies sigma measurements as a barometer of our performance
on our key metrics of system availability and payment timeliness. Small changes
in our performance drive significant sigma movements, focusing our attention on
critical tasks and peak performance. The sigma challenge was designed to take
our quality performance from 99.0%, or 3.8 sigma, where we began our fiscal year
2000, to 99.9%, or 4.6 sigma, by the end of fiscal 2000. A 4.6 sigma is the
quality standard set by the telecommunications industry for delivering their
services to businesses and consumers or "dial-tone" quality. By the end of
fiscal 2000, we fell slightly below our goal by achieving a quality level of 4.5
sigma. We achieved our goal by achieving 4.6 sigma in fiscal 2001 and now we are
working to maintain that level.

         Financial Application Software. Our financial application suite of
software products offers a wide range of software addressing both end user
access and back room operational systems located in the customer data centers.
Every effort is taken to insure that each system is targeted for the appropriate
platform to optimize the characteristics of available technology with the
business requirements of each application and its market.

         Investment Services. Investment Services employs advanced technology
for its portfolio management services and utilizes IBM RS/6000's to process the
portfolio management software. Services are provided primarily as a service
bureau offering with the data center residing at our Chicago office. This data
center functions seven days a week, twenty-four hours a day. Clients can obtain
access from their personal computers either through a dedicated circuit or
through dial-up applications. The Chicago data center is the communication
center for more

                                      -17-
<PAGE>   18


than 160 dedicated links together with four concentration hub sites located in
New Jersey, New York, Boston and San Diego. Each of these hub sites supports the
concentration of local dedicated links plus dial-up access. In addition to the
dedicated private network, clients use frame relay services from several
companies to access services.

RESEARCH AND DEVELOPMENT

         We maintain a research and development group with a long-term
perspective of planning and developing new services and related products for the
electronic commerce, financial application software and investment services
markets. We have established the following guidelines for pursuing the
development of new services:

     -    distinctive benefits to customers;
     -    ability to establish a leadership position in the market served;
     -    sustainable technological advantages; and
     -    first to market.

         We believe that in the emerging electronic commerce market it will be
critical to rapidly develop, test and offer new services and enhancements. To
that end, our goal for the time period from conceptualization to commercial
availability of new services is less than one year. As of June 30, 2001, our
research and development group consisted of approximately 680 employees.
Additionally, we use independent third party software development contractors as
needed. We spent 8.4% of revenues during the fiscal year ended June 30, 1999,
11.5% of revenues during the fiscal year ended June 30, 2000 and 12.8% of
revenues during the fiscal year ended June 30, 2001 on research and development.
These research and development expenditures have been reduced for capitalized
software development costs of $1.3 million in the six-month transition period
ended June 30, 1996, none in the fiscal year ended June 30, 1997, $0.7 million
in the fiscal year ended June 30, 1998, $7.4 million in the fiscal year ended
June 30, 1999, $7.9 million for the fiscal year ended June 30, 2000 and $3.5
million for the fiscal year ended June 30, 2001. We anticipate that we will
continue to commit substantial resources to research and development activities
for the foreseeable future.

GOVERNMENT REGULATION

         We believe that we are not required to be licensed by the Office of the
Comptroller of the Currency, the Federal Reserve Board, or other federal or
state agencies that regulate or monitor banks or other types of providers of
electronic commerce services. The Office of the Comptroller of the Currency,
however, periodically audits us, since we are a supplier of products and
services to financial institutions. There can be no assurance that a federal or
state agency will not attempt to regulate us, which could impede our ability to
do business in the regulator's jurisdiction. A number of states have legislation
regulating or licensing check sellers, money transmitters or service providers
to banks, and we have registered under this legislation in specific instances.
We do not believe that any state or federal legislation of this type materially
affects us. In addition, through our processing agreements, we agree to comply
with the data, recordkeeping, processing, and other requirements of applicable
federal and state laws and regulations, Federal Reserve Bank operating letters,
and the National Automated Clearing House Association Operating Rules imposed on
our processing banks. We may be subject to audit or examination under any of
these requirements. Violations of these requirements could limit or further
restrict our access to the payment clearance systems or our ability to obtain
access to these systems from banks. Further, the Federal Reserve rules provide
that we can only access the Federal Reserve's automated clearinghouse through a
bank. If the Federal Reserve rules were to change to further restrict our access
to the automated clearinghouse or limit our ability to provide automated
clearinghouse transaction processing services, our business could be materially
adversely affected.

         In conducting various aspects of our business, we are subject to laws
and regulations relating to commercial transactions generally, like the Uniform
Commercial Code, and are also subject to the electronic funds transfer rules
embodied in Regulation E, promulgated by the Federal Reserve Board. The Federal
Reserve's Regulation E implements the Electronic Fund Transfer Act, which was
enacted in 1978. Regulation E protects consumers engaging in electronic
transfers, and sets forth the basic rights, liabilities, and responsibilities of
consumers who use electronic money transfer services and of financial
institutions that offer these services. For us, Regulation E sets forth
disclosure and investigative procedures. For consumers, Regulation E establishes
procedures and time periods for reporting unauthorized use of electronic money
transfer services and limitations on the consumer's liability if the

                                      -18-
<PAGE>   19

notification procedures are followed within prescribed periods. These
limitations on the consumer's liability may result in liability to us.

         Given the expansion of the electronic commerce market, it is possible
that the Federal Reserve might revise Regulation E or adopt new rules for
electronic funds transfer affecting users other than consumers. Congress has
held hearings on whether to regulate providers of services and transactions in
the electronic commerce market, and it is possible that Congress or individual
states could enact laws regulating the electronic commerce market. If enacted,
these laws, rules, and regulations could be imposed on our business and industry
and could have a material adverse effect on our business, operating results and
financial condition. See "Business -- Business Risks (Our business could become
subject to increased government regulation, which could make our business more
expensive to operate)."

PROPRIETARY RIGHTS

          We own the following federally registered trademarks and service
marks:
<TABLE>
<S>                                                                 <C>
-        BANK STREET(R)                                                 -        M-PLAN(R)
-        BLUEGILL Logo (Miscellaneous                                   -        M-PREPS(R)
         Design)(R)                                                     -        MPREPS(R)
-        CAPS CORPORATE AUTOMATED PAYMENTS SYSTEM(R)                    -        M-SEARCH(R)
-        CEC CENTER FOR ELECTRONIC COMMERCE and Design(R)               -        MSEARCH(R)
-        CHECKFREE(R)                                                   -        M-VEST(R)
-        CHECKFREE and Design(R)                                        -        MWATCH(R)
-        CHECKFREE (Stylized Letters)(R)                                -        M-WATCH(R)
-        CHECKFREE-BILL and Design(R)                                   -        NETWORK BANKER(R)
-        CHECKFREE EASY(R)                                              -        OMNI(R)
-        CHECKFREE ELECTRIC MONEY(R)                                    -        PAWWS(R)
-        CHECKFREE EXTRA(R)                                             -        PAWTRACKS(R)
-        CHECKFREE FREES YOU FROM                                       -        PEP+(R)
         CHECKS(R)                                                      -        PEP PAPERLESS ENTRY PROCESSING(R)
-        CHECKFREE MANAGER(R)                                           -        PODIUM(R)
-        CHECKFREE WALLET(R)                                            -        PTT(R)
-        CLUB HOOCH(R)                                                  -        SBA(R)
-        DECISION MANAGER(R)                                            -        SERVANTIS SYSTEMS(R)
-        INTEGRATED DECISION                                            -        STYLE ANALYSIS PLUS(R)
         MANAGER(R)                                                     -        THE WAY MONEY MOVES and Design(R)
-        M-VEST(R)                                                      -        TRANSPORT(R)
-        MOBIUS GROUP and Design(R)                                     -        TST(R)
-        MOBIUS(R)(Stylized)                                            -        VAULT(R)

</TABLE>

         We also own the following foreign service mark registrations in New
Zealand:

<TABLE>
<S>                                                                 <C>
-        CHEQUEFREE                                                     -        CHECKFREE
</TABLE>


         Additionally, the following trademark/service mark applications have
been filed in the United States:

<TABLE>
<S>                                                                 <C>
-        CHECKFREE E-BILL(SM)                                            -        CHECKFREE PAYANYONE PHONE SM
-        CHECKFREE E-CLUB (SM)                                           -        CHECKFREE PAYANYONE WIRELESSSM
-        CHECKFREE E-MONEY (SM)                                          -        KINGS OF WRAP SM
-        CHECKFREE I-BANKER(TM)                                          -        MARKET DIRECT SM
-        CHECKFREE I-BROKER(TM)                                          -        M-PLAN(TM)
-        CHECKFREE I-INSURANCE(TM)                                       -        MISSINGCUSTOMERSSM
-        CHECKFREE I-TELCO(TM)                                           -        MYBILLS.COMSM
-        CHECKFREE I-UTILITY(TM)                                         -        RCM SOLUTIONS SM
-        CHECKFREE PAYANYONE (SM)                                        -        VALID SM
-        CHECKFREE PAYANYONE WEB (SM)
</TABLE>

We have also applied to register the following mark internationally:

-        BLUEGILL Logo (Canada)



                                     -19-

<PAGE>   20





          We are also the owner of a multitude of domain name registrations,
including:


-        billdelivery.com                    -        missingcustomer.org
-        billercare.com                      -        missingcustomers.com
-        billme.com                          -        missingcustomers.net
-        check-free.com                      -        missingcustomers.org
-        checkfree.com                       -        mybills.com
-        checkfree-ecx.com                   -        mybills.net
-        checkfreeva.com                     -        mybills.org
-        custcare.com                        -        paybills.org
-        ficare.com                          -        paymybills.org
-        fortracs.com                        -        paythebill.com
-        getbills.com                        -        rcm2001.com
-        missingcustomer.com                 -        stockcontrol.com
-        missingcustomer.net                 -        cfree.com


          We regard our financial transaction services and related products like
our software as proprietary and rely on a combination of patent, copyright,
trademark and trade secret laws, employee and third party nondisclosure
agreements, and other intellectual property protection methods to protect our
services and related products. Although we believe our consumer financial
software to be proprietary, we do not depend on our software to compete, but
rather on our services to which the software provides access.

          We also copyright some of our programs and software documentation and
trademark some product names. Our management believes that these actions provide
appropriate legal protection for our intellectual property rights in our
software products. Furthermore, our management believes that the competitive
position for some of our products depends primarily on the technical competence
and creative ability of our personnel and that our business is not materially
dependent on copyright protection or trademarks See "Business -- Business Risks
(We may be unable to protect our proprietary technology, permitting competitors
to duplicate our products and services)."

          Our United States Letters Patent No. 5,383,113, issued on January 17,
1995, relates to our system and method for electronically providing services
including payment of bills and financial analysis. Incorporating the system
described in the patent, we can pay any bill from any checking account at any
financial institution in the United States on the consumer's behalf by selecting
a preferred means of payment from various options described above. See "Business
-- Payment Clearance Systems." Our patent expires on January 17, 2012. See
"Business -- Competition," "Business -- Business Risks (Competitive pressures we
face may have a material adverse effect on us)" and "Business -- Business Risks
(We may be unable to protect our proprietary technology, permitting competitors
to duplicate our products and services)."

          Existing intellectual property laws afford only limited protection,
and it may be possible for unauthorized third parties to copy our services and
related products or to reverse engineer or obtain and use information we regard
as proprietary. There can be no assurance that our competitors will not
independently develop services and related products that are substantially
equivalent or superior to ours. As the technology we use evolves, however, our
dependence upon the patented technology continues to decrease.

                                      -20-
<PAGE>   21

EMPLOYEES

         As of September 1, 2001, we employed approximately 3,300 full-time
employees, including approximately 1,080 in systems and research and
development, including software development, approximately 1,040 in customer
care, and approximately 1,180 in sales and marketing, administration, financial
control, corporate services, and human resources. We are not a party to any
collective bargaining agreement and are not aware of any efforts to unionize our
employees. We believe that our relations with our employees are good. We believe
our future success and growth will depend in large measure upon our ability to
attract and retain qualified technical, management, marketing, business
development and sales personnel.

BUSINESS RISKS

         We desire to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Many of the following
important factors discussed below have been discussed in our prior filings with
the Securities and Exchange Commission. In addition to the other information in
this report, readers should carefully consider that the following important
factors, among others, in some cases have affected, and in the future could
affect, our actual results and could cause our actual consolidated results of
operations for the fiscal year ended June 30, 2002, and beyond, to differ
materially from those expressed in any forward-looking statements made by us, or
on our behalf.

         During fiscal 2001, we closed the following transactions which, in some
cases have affected, and in the future could affect, our actual results and
could cause our actual consolidated results of operations for the fiscal year
ended June 30, 2002, and beyond, to differ materially from those expressed in
any forward-looking statements made by us, or on our behalf:

     -    on September 1, 2000, we consummated our acquisition of TransPoint, a
          joint venture among Microsoft Corporation, First Data Corporation,
          Citibank, N.A., and their subsidiaries, pursuant to a merger agreement
          originally executed on February 15, 2000, whereby Microsoft, First
          Data, and Citibank received 17,000,000 shares of our common stock; and

     -    on September 28, 2000 we consummated a strategic agreement with Bank
          of America, N.A., whereby Bank of America perceived 10,000,000
          restricted shares of our common stock and performance-based warrants
          for the right to acquire an additional 10,000,000 shares of our common
          stock.

RISKS RELATED TO OUR BUSINESS

THE MARKET FOR OUR ELECTRONIC COMMERCE SERVICES IS EVOLVING AND MAY NOT CONTINUE
TO DEVELOP OR GROW RAPIDLY ENOUGH FOR US TO REMAIN CONSISTENTLY PROFITABLE.

         If the number of electronic commerce transactions does not continue to
grow or if consumers or businesses do not continue to adopt our services, it
could have a material adverse effect on our business, financial condition and
results of operations. The electronic commerce market is still evolving and
currently growing at a rapid rate. We believe future growth in the electronic
commerce market will be driven by the cost, ease-of-use and quality of products
and services offered to consumers and businesses. In order to consistently
increase and maintain our profitability, consumers and businesses must continue
to adopt our services.

WE HAVE NOT OPERATED PROFITABLY IN THE PAST AND EXPECT TO EXPERIENCE NET LOSSES
IN THE FUTURE.

         We have not consistently operated profitably to date. Since our
inception, our accumulated losses have totaled approximately $689,455,000. We
incurred:

     -    a loss from operations of $3.7 million and net income of $10.5 million
          for the fiscal year ended June 30, 1999;

     -    a loss from operations of $43.4 million and a net loss of $32.3
          million for the fiscal year ended June 30, 2000; and

     -    a loss from operations of $464.7 million and a net loss of $363.1
          million for the fiscal year ended June 30, 2001.

                                     -21-
<PAGE>   22

         We anticipate having a net loss from operations in fiscal 2002 and may
experience net losses and may not be able to sustain or increase our
profitability in the future. For the fiscal year ended June 30, 2001, we
invested over $55.6 million in research and development and over $90.2 million,
including a one-time charge of $25.0 million related to our strategic agreement
with Bank of America, in sales and marketing. We intend to continue to make
significant investments in research and development and sales and marketing. If
the investment of our capital is not successful to grow our business, it will
have a material adverse effect on our business and financial condition, as well
as negatively impact your investment in our business and limit our ability to
pay dividends in the future to our stockholders.

OUR FUTURE PROFITABILITY DEPENDS ON UPON OUR ABILITY TO IMPLEMENT OUR STRATEGY
SUCCESSFULLY TO INCREASE ADOPTION OF ELECTRONIC BILLING AND PAYMENT METHODS.

         Our future profitability will depend, in part, on our ability to
implement our strategy successfully to increase adoption of electronic billing
and payment methods. Our strategy includes investment of time and money during
fiscal 2002 in programs designed to:

     -    drive consumer awareness of electronic billing and payment;
     -    encourage consumers to sign up for and use our electronic billing and
          payment services offered by our distribution partners;
     -    build our infrastructure to handle seamless processing of
          transactions;
     -    continue to develop state of the art, easy-to-use technology; and
     -    increase the number of billers whose bills we can present and pay
          electronically.

         If we do not successfully implement our strategy, revenue growth will
be minimal, and expenditures for these programs will not be justified.

         Our investment in these programs will have a negative impact on our
short-term profitability. Additionally, our failure to implement these programs
successfully or to increase substantially adoption of electronic commerce
billing and payment methods by consumers who pay for the services could have a
material adverse effect on our business, financial condition and results of
operations.

COMPETITIVE PRESSURES WE FACE MAY HAVE A MATERIAL ADVERSE EFFECT ON US.

         Electronic commerce is new and evolving rapidly, resulting in a dynamic
competitive environment. We face significant competition in our each of our
business units, Electronic Commerce, Investment Services and Software
businesses. Increased competition or other competitive pressures may result in
price reductions, reduced margins or loss of business, any of which could have a
material adverse effect on our business, financial condition and results of
operations. Further, we expect competition to persist, increase and intensify in
the future. First, we need to switch billers and consumers from paper bills sent
by mail and paid by check to electronic bill presentment and payment. Second, a
number of banks have developed, and others may in the future develop, electronic
billing and payment services in-house. J.P. Morgan Chase, First Union
Corporation and Wells Fargo & Co. are partners in a venture called Spectrum that
plans to allow individuals and businesses to receive and pay bills
electronically. To the best of our knowledge, Spectrum has done limited
electronic presentment of bills, and is developing a "pay anyone" capability in
conjunction with Metavante, a division of Marshall and Ilsley Bank Inc.
Metavante competes directly with us in providing pay anyone solutions to
financial services organizations and has recently completed two acquisitions in
an effort to strengthen their competitive position. Mastercard International
also offers online bill presentment to enable people to receive and pay bills
over the Internet. A number of other relatively small companies also compete
with us in electronic bill payment. In addition, we face competition from
competitors offering billing and payment services utilizing scan and pay
technology. These "scan and pay" companies offer a service whereby a consumer's
bill is received by the company, scanned to create an electronic image of the
bill, and electronically delivered to the consumer who can elect to pay that
bill either by writing a paper check or through an electronic transfer of funds
We cannot assure you that we will be able to compete effectively against
financial institutions, Spectrum, MasterCard, billers directly delivering bills
to their customers, scan and pay companies or other current and future
electronic commerce competitors.

                                      -22-
<PAGE>   23

         In addition, we cannot assure you that we will be able to compete
effectively against current and future competitors in the investment services
and software products markets. The markets for our investment services and
software products are also highly competitive. In Investment Services, our
competition comes primarily from providers of portfolio accounting software. In
Software, our competition comes from several different market segments,
including large diversified computer software and service companies and
independent suppliers of software products. Because there are relatively low
barriers to entry, we expect competition in the software market to increase
significantly in the future.

         Across all of our market segments, many of our current and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing, customer service and other resources, greater name
recognition and a larger installed base of customers than we do. As a result,
these competitors may be able to respond to new or emerging technologies and
changes in customer requirements faster and more effectively than we can, or to
devote greater resources to the development, promotion and sale of products than
we can. If these competitors were to acquire a significant market share, it
could have a material adverse effect on our business, financial condition and
results of operations.

SOME OF OUR CUSTOMERS MAY COMPETE AGAINST US THAT MAY RESULT IN A LOSS OF
REVENUE.

         From time to time, some of our customers may compete against us that
may have a material adverse effect on our revenues and results of operations.
For example, in June 1999, J.P. Morgan Chase, First Union Corporation and Wells
Fargo & Co. announced the formation of Spectrum that will allow individuals and
businesses to receive and pay bills electronically. Other of our significant
customers may in the future decide to compete against us and such competition
may have a material adverse affect on our business and financial results.

SECURITY AND PRIVACY BREACHES IN OUR ELECTRONIC TRANSACTIONS MAY DAMAGE CUSTOMER
RELATIONS AND INHIBIT OUR GROWTH.

         Any failures in our security and privacy measures could have a material
adverse effect on our business, financial condition and results of operations.
We electronically transfer large sums of money and personal information about
consumers, including bank account and credit card information, social security
numbers, and merchant account numbers. If we are unable to protect, or consumers
perceive that we are unable to protect, or consumers perceive that we are unable
to protect, the security and privacy of our electronic transactions, our growth
and the growth of the electronic commerce market in general could be materially
adversely affected. A security or privacy breach may:

     -    cause our customers to lose confidence in our services;
     -    deter consumers from using our services;
     -    harm our reputation;
     -    expose us to liability;
     -    increase our expenses from potential remediation costs; and
     -    decrease market acceptance of electronic commerce transactions.

         While we believe that we utilize proven applications designed for
premium data security and integrity to process electronic transactions, there
can be no assurance that our use of these applications will be sufficient to
address changing market conditions or the security and privacy concerns of
existing and potential subscribers.

WE RELY ON THIRD PARTIES TO DISTRIBUTE OUR ELECTRONIC COMMERCE SERVICES, WHICH
MAY NOT RESULT IN WIDESPREAD ADOPTION.

         We rely on our contracts with financial institutions, businesses,
billers, Internet portals and other third parties like Intuit Inc. to provide
branding for our electronic commerce services and to market our services to
their customers. None of these third parties accounted for more than 11% of our
total revenue for the year ended June 30, 2000 or for the year ended June 30,
2001. These contracts are an important source of the growth in demand for our
electronic commerce services. If any of these third parties abandon, curtail or
insufficiently increase its marketing efforts, it could have a material adverse
effect on our business, financial condition and results of operations.

                                      -23-
<PAGE>   24

CONSOLIDATION IN THE BANKING INDUSTRY MAY ADVERSELY AFFECT OUR ABILITY TO SELL
OUR ELECTRONIC COMMERCE SERVICES, INVESTMENT SERVICES AND SOFTWARE.

         Mergers, acquisitions and personnel changes at key financial
institutions have the potential adversely to affect our business, financial
condition and results of operations. Currently, the banking industry is
undergoing large-scale consolidation, causing the number of financial
institutions to decline. This consolidation could cause us to lose:

     -    current and potential customers;
     -    business opportunities, if combined financial institutions were to
          determine that it is more efficient to develop in-house home banking
          services similar to ours or offer our competitors' products or
          services; and
     -    revenue, if combined financial institutions were able to negotiate a
          greater volume discount for, or to discontinue the use of, our
          products and services.

WE ARE DEPENDENT UPON A SMALL NUMBER OF FINANCIAL INSTITUTION CUSTOMERS FOR A
SIGNIFICANT PERCENTAGE OF OUR SUBSCRIBERS.

         We rely on our contracts with three key financial institutions for a
substantial portion of our subscriber base and the volume of electronic
transactions that we process. As of June 30, 2001, these three financial
institutions accounted for approximately 2.6 million subscribers, or
approximately 50% of our total subscriber base. No single customer, however,
accounts for more than 11% of our revenues. The loss of the contract with any of
these key financial institutions or a significant decline in the number of
transactions processed through them could have a material adverse effect on our
business, financial condition and results of operations.

IF WE DO NOT SUCCESSFULLY RENEW OR RENEGOTIATE OUR AGREEMENTS WITH OUR
CUSTOMERS, OUR BUSINESS MAY SUFFER.

         Our agreements for electronic commerce services with financial
institutions generally provide for terms of three to five years. These
agreements are renegotiated from time to time when financial institutions
migrate from our PC-based platform to our web-based platform. If we are not able
to renew or renegotiate these agreements on favorable terms, it could have a
material adverse effect on our business, financial condition and results of
operations.

         The profitability of our Software business depends, to a substantial
degree, upon our software customers electing to periodically renew their
maintenance agreements. If a substantial number of our software customers
declined to renew these agreements, our revenues and profits in this business
segment would be materially adversely affected.

OUR FUTURE PROFITABILITY DEPENDS ON AN INCREASE IN THE PROPORTION OF
TRANSACTIONS WE PROCESS ELECTRONICALLY.

         If we are unable to increase the percentage of transactions that we
process electronically, our margins could decrease, which could have a material
adverse effect on our business, financial condition and results of operations.
We processed electronically 49% of our transactions for the year ended June 30,
1999, 58% of the transactions for the year ended June 30, 2000 and 64% of our
transactions for the year ended June 30, 2001. Our future profitability will
depend, in part, on our ability to increase the percentage of transactions we
process electronically. Compared with conventional paper-based transactions,
electronic transactions:

     -    cost much less to complete;
     -    give rise to far fewer errors, which are costly to resolve; and
     -    generate far fewer subscriber inquiries and, therefore, consume far
          fewer customer care resources.

THE TRANSACTIONS WE PROCESS EXPOSE US TO CREDIT RISKS.

         Any losses resulting from returned transactions, merchant fraud or
erroneous transmissions could result in liability to financial institutions,
merchants or subscribers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic and
conventional paper-based transactions we process expose us to credit risks.
These include risks arising from returned transactions caused by:


                                      -24-
<PAGE>   25


-        insufficient funds;                 -        closed accounts;
-        unauthorized use;                   -        theft;
-        stop payment orders;                -        frozen accounts; and
-        payment disputes;                   -        fraud.



         We are also exposed to credit risk from merchant fraud and erroneous
transmissions.

WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM THAT COULD DAMAGE
CUSTOMER RELATIONS AND EXPOSE US TO LIABILITY.

         A system outage or data loss could have a material adverse effect on
our business, financial condition and results of operations. To successfully
operate our business, we must be able to protect our payment processing and
other systems from interruption by events that are beyond our control. For
example, our system may be subject to loss of service interruptions caused by
hostile third parties similar to those experienced by many companies operating
Internet websites during February 2000 or other instances of deliberate system
sabotage. Other events that could cause system interruptions include:

-        fire;                             -     power loss;
-        natural disaster;                 -     telecommunications failure;
-        unauthorized entry; and           -     computer viruses.

         For the fiscal year ended June 30, 1999, we incurred a charge of $2.7
million due to problems accessing and using our system. Without the charge, our
loss from operations in our electronic commerce segment would have been $2.8
million compared to the actual $5.5 million we lost. These problems stemmed from
system errors we experienced in April 1999 due to system degradation issues in
connection with the migration of subscribers to our Genesis platform, which
resulted in consumers inability to connect with and transmit data to our
processing system. This system failure did not result in the loss of any
consumer data.

         Although we completed the initial migration of some of our subscribers
from our pre-existing data processing platforms to a new system that we call the
Genesis platform, we will continue to migrate subscribers from non-Genesis
platforms to the Genesis platform at the request of our other customers. Our
main processing facility is located in Norcross, Georgia, and we have other
processing facilities located in Ohio, Illinois and Texas. During the transition
from the pre-existing platforms to the Genesis platform, we may be exposed to
loss of data or unavailability of systems due to inadequate back-ups, reduced or
eliminated redundancy, or both. Although we regularly back-up our data logs
hourly and our overall system daily, as well as take other measures to protect
against data loss and system failures, there is still some risk that we may lose
critical data or experience system failures. We constantly review our usage and
capacity constraints. We have engineered our systems to ensure that we never
exceed 80% utilization of capacity at peak processing times. That means that, in
general, we average processing at 40% - 50% of capacity, with no peak time
consuming more than 80% of the system's resources. As a precautionary measure,
we have entered into disaster recovery agreements for the processing systems at
all our sites, and we conduct business resumption tests on a scheduled basis.
Our property and business interruption insurance may not be adequate to
compensate us for all losses or failures that may occur.

WE MAY EXPERIENCE SOFTWARE DEFECTS AND DEVELOPMENT DELAYS, DAMAGING CUSTOMER
RELATIONS, DECREASING OUR POTENTIAL PROFITABILITY AND EXPOSING US TO LIABILITY.

         Our electronic commerce services and our software products are based on
sophisticated software and computing systems which often encounter development
delays, and the underlying software may contain undetected errors or defects.
Defects in our software products and errors or delays in our processing of
electronic transactions could result in:

     -    additional development costs;
     -    diversion of technical and other resources from our other development
          efforts;
     -    loss of credibility with current or potential customers;

                                      -25-
<PAGE>   26

     -    harm to our reputation; or
     -    exposure to liability claims.

         In addition, we rely on technologies supplied to us by third parties
that may also contain undetected errors or defects that could have a material
adverse effect on our business, financial condition and results of operations.
Although we attempt to limit our potential liability for warranty claims through
disclaimers in our software documentation and limitation-of-liability provisions
in our license and customer agreements, we cannot assure you that these measures
will be successful in limiting our liability.

WE EXPERIENCE SEASONAL FLUCTUATIONS IN OUR NET SALES CAUSING OUR OPERATING
RESULTS TO FLUCTUATE.

         We have historically experienced seasonal fluctuations in our net
sales, and we expect to experience similar fluctuations in the future. If our
net sales are below the expectations of securities analysts and investors due to
seasonal fluctuations, our stock price could decrease unexpectedly. Our growth
in new electronic commerce subscribers is affected by seasonal factors like
holiday-based personal computer sales. These seasonal factors may impact our
operating results by concentrating subscriber acquisition and set-up costs,
which may not be immediately offset by revenue increases primarily due to
introductory service price discounts. Additionally, on-line interactive service
subscribers generally tend to be less active users during the summer months,
resulting in lower revenue during this period.

         Our software sales also have historically displayed seasonal
variability, with sales and earnings generally stronger in the quarters ended
December 31 and June 30 of each year and generally weaker in the quarters ended
September 30 and March 31 of each year. The seasonality in software sales is
due, in part, to calendar year-end buying patterns of financial institution
customers and our software sales compensation structure, which measures sales
performance at our June 30 fiscal year end.

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGE OR CHANGES IN INDUSTRY
STANDARDS, OUR SERVICES COULD BECOME OBSOLETE AND WE COULD LOSE OUR CUSTOMERS.

         If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing
product and service offerings, proprietary technology and systems may become
obsolete. Further, if we fail to adopt or develop new technologies or to adapt
our products and services to emerging industry standards, we may lose current
and future customers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic commerce
industry is changing rapidly. To remain competitive, we must continue to enhance
and improve the functionality and features of our products, services and
technologies. For example, we are currently migrating our products and services
from a PC-based platform to a web-based platform.

OUR INABILITY TO MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS.

         We have experienced rapid growth in our revenues, from $76.8 million in
the twelve months ended June 30, 1996 to $433.3 million in the fiscal year ended
June 30, 2001, and we intend to continue to grow our business significantly. To
support our growth plans, we will have to significantly expand our existing
management, operational, financial and human resources and management
information systems and controls. If we are not able to manage our growth
successfully, we will not grow as planned which could have a material adverse
effect on our business, financial condition and results of operations.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, PERMITTING COMPETITORS
TO DUPLICATE OUR PRODUCTS AND SERVICES.

         Our success and ability to compete is dependent, in part, upon our
proprietary technology, which includes our patent for our electronic billing and
payment processing system, our source code information for our software
products, and our operating technology. We rely primarily on patent, copyright,
trade secret and trademark laws to protect our technology. In addition, we have
been granted a patent for some features of our electronic billing and payment
processing system, which we believe provides some measure of security for our
technologies. If challenged, we cannot assure you that our patent will prove to
be valid or provide the protection that we need. Further, the source code for
our

                                      -26-
<PAGE>   27


proprietary software is protected both as a trade secret and as a copyrighted
work. We generally enter into confidentiality and assignment agreements with our
employees, consultants and vendors, and generally control access to and
distribution of our software, documentation and other proprietary information.

         Because our means of protecting our proprietary rights may not be
adequate, it may be possible for a third party to copy, reverse engineer or
otherwise obtain and use our technology without authorization. In addition, the
laws of some countries in which we sell our products do not protect software and
intellectual property rights to the same extent as the laws of the United
States. Unauthorized copying, use or reverse engineering of our products could
have a material adverse effect on our business, financial condition and results
of operations.

         A third party could also claim that our technology infringes its
proprietary rights. As the number of software products in our target markets
increases and the functionality of these products overlap, we believe that
software developers may increasingly face infringement claims. These claims,
even if without merit, can be time-consuming and expensive to defend. A third
party asserting infringement claims against us in the future may require us to
enter into costly royalty arrangements or litigation.

OUR BUSINESS COULD BECOME SUBJECT TO INCREASED GOVERNMENT REGULATION, WHICH
COULD MAKE OUR BUSINESS MORE EXPENSIVE TO OPERATE.

         We believe that we are not required to be licensed by the Office of the
Comptroller of the Currency, or OCC, the Federal Reserve Board or other federal
agencies that regulate or monitor banks or other types of providers of
electronic commerce services. A number of states have legislation regulating or
licensing check sellers, money transmitters or service providers to banks, and
we have registered under this legislation in specific instances. Because
electronic commerce in general, and most of our products and services in
particular, are so new, the application of many of these laws and regulations is
uncertain and difficult to interpret. The entities responsible for interpreting
and enforcing these laws and regulations could amend these laws or regulations
or issue new interpretations of existing laws or regulations. Any of these
changes could lead to increased operating costs and reduce the convenience and
functionality of our products or services, possibly resulting in reduced market
acceptance. It is also possible that new laws and regulations may be enacted
with respect to the Internet, including taxation of electronic commerce
activities. The adoption of any of these laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for our products
or services, increase our cost of doing business or could otherwise have a
material adverse effect on our business, financial condition and results of
operations.

         The Federal Reserve rules provide that we can only access the Federal
Reserve's automated clearinghouse through a bank. If the Federal Reserve rules
were to change to further restrict our access to the automated clearinghouse or
limit our ability to provide automated clearinghouse transaction processing
services, it could have a material adverse effect on our business, financial
condition and results of operations.

OUR QUARTERLY OPERATING RESULTS FLUCTUATE AND MAY NOT ACCURATELY PREDICT OUR
FUTURE PERFORMANCE.

         Our quarterly results of operations have varied significantly and
probably will continue to do so in the future as a result of a variety of
factors, many of which are outside our control. These factors include:

     -    changes in our pricing policies or those of our competitors;
     -    relative rates of acquisition of new customers;
     -    seasonal patterns;
     -    delays in the introduction of new or enhanced services, software and
          related products by us or our competitors or market acceptance of
          these products and services; and o other changes in operating
          expenses, personnel and general economic conditions.

         As a result, we believe that period-to-period comparisons of our
operating results are not necessarily meaningful, and you should not rely on
them as an indication of our future performance. In addition, our operating
results in a future quarter or quarters may fall below expectations of
securities analysts or investors and, as a result, the price of our common stock
may fluctuate.

RISKS RELATED TO OUR COMMON STOCK

                                      -27-
<PAGE>   28

OUR COMMON STOCK HAS BEEN VOLATILE SINCE DECEMBER 31, 2000.

         Since December 31, 2000, our stock price has been extremely volatile,
trading at a high of $57.25 per share and a low of $15.55 per share for the
period. The volatility in our stock price has been caused by:

     -    actual or anticipated fluctuations in our operating results;
     -    actual or anticipated fluctuations in our subscriber growth;
     -    announcements by us, our competitors or our customers;
     -    announcements of the introduction of new or enhanced products and
          services by us or our competitors;
     -    announcements of joint development efforts or corporate partnerships
          in the electronic commerce market;
     -    market conditions in the banking, telecommunications, technology and
          other emerging growth sectors;
     -    rumors relating to our competitors or us; and
     -    general market or economic conditions.

AVAILABILITY OF SIGNIFICANT AMOUNTS OF OUR COMMON STOCK FOR SALE IN THE FUTURE
COULD ADVERSELY AFFECT OUR STOCK PRICE.

         The availability for future sale of a substantial number of shares of
our common stock in the public market, or issuance of common stock upon the
exercise of stock options, warrants or conversion of the notes or otherwise
could adversely affect the market price for our common stock. As of September
14, 2001, we had outstanding 87,154,357 shares of our common stock, of which
55,786,564 shares of our issued and outstanding common stock were held by
nonaffiliates. The holders of the remaining 31,368,793 shares were entitled to
resell them only by a registration statement under the Securities Act of 1933 or
an applicable exemption from registration. As of September 1, 2001, we had an
additional 23,934,323 shares of our common stock available for future sale,
including:

     -    outstanding options to purchase 7,977,621 shares of our common stock,
          of which options for 2,901,689 shares were fully vested and
          exercisable at an average weighted exercise price of approximately
          $28.24 per share;
     -    issued warrants to purchase 12,450,000 shares of our common stock, of
          which warrants for 1,525,000 shares were fully vested and exercisable
          at a weighted exercise price of approximately $20.81 per share;
     -    up to 522,915 shares available for issuance under our Associate Stock
          Purchase Plan;
     -    up to 627,230 shares available for issuance under our 401(k) Plan; and
     -    up to 2,356,557 shares of our common stock issuable upon conversion of
          the notes.

         As of September 1, 2001, the following entities hold shares or warrants
to purchase shares of our common stock in the following amounts:

     -    Microsoft Corporation, which holds 8,567,250 shares;
     -    First Data Corporation, which holds 6,567,250 shares;
     -    The former members of Integrion Financial Network, L.L.C. collectively
          hold warrants to purchase up to 1,500,000 shares which are fully
          vested and exercisable;
     -    Bank One, which holds 250,000 shares and warrants to purchase
          1,000,000 shares and may be entitled to receive warrants to purchase
          up to 2,000,000 additional shares, none of which are vested or
          exercisable; and
     -    Bank of America, which holds 10,000,000 shares and warrants to
          purchase up to 10,000,000 shares, which warrants are not currently
          vested.

         Each of Bank One and Bank of America may be entitled to registration
rights. If Integrion, Bank One or Bank of America, by exercising their
registration rights, cause a large number of shares to be registered and sold in
the public market, these sales may have an adverse effect on the market price of
our common stock.

         We also agreed with Microsoft, First Data and Citibank to file a shelf
registration statement that would allow continuous resales of the shares that
they will receive on the closing date of the acquisition. Although Microsoft and
First Data are be limited in their ability to transfer their shares of our
common stock during the next

                                      -28-
<PAGE>   29


two years pursuant to stockholder agreements with us, they will be able to
transfer significant portions of their common stock in the future in both
registered and unregistered sales. Beginning on September 1, 2001, Microsoft,
First Data and Citibank may sell up to the greater of one percent of our average
weekly trading volume or one percent of our outstanding common stock in reliance
on registration exemptions. In addition, Microsoft and First Data are permitted
to a limited extent to engage in hedging transactions with respect to our common
stock. Sales of substantial amounts of our common stock by either Microsoft or
First Data, or the perception that these sales could occur, may adversely affect
prevailing market prices for our common stock.

         Beginning on September 28, 2001, Bank of America may be able to sell up
to the greater of one percent of our average weekly trading volume or one
percent of our outstanding common stock in reliance on registration exemptions.
Sales of substantial amounts of our common stock by Bank of America, or the
perception that these sales could occur, may adversely affect prevailing market
prices for our common stock.

ANTI-TAKEOVER PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAKE
ANY CHANGE IN CONTROL MORE DIFFICULT.

         Our certificate of incorporation and by-laws contain provisions that
may have the effect of delaying or preventing a change in control, may
discourage bids at a premium over the market price of our common stock and may
adversely affect the market price of our common stock and the voting and other
rights of the holders of our common stock. These provisions include:

     -    division of our board of directors into three classes serving
          staggered three-year terms;
     -    removal of our directors by the stockholders only for cause upon 80%
          stockholder approval;
     -    prohibiting our stockholders from calling a special meeting of
          stockholders;
     -    ability to issue additional shares of our common stock or preferred
          stock without stockholder approval;
     -    prohibiting our stockholders from unilaterally amending our
          certificate of incorporation or by-laws except with 80% stockholder
          approval; and
     -    advance notice requirements for raising business or making nominations
          at stockholders' meetings.

         We also have a stockholder rights plan that allows us to issue
preferred stock with rights senior to those of our common stock without any
further vote or action by our stockholders. The issuance of our preferred stock
under the stockholder rights plan could decrease the amount of earnings and
assets available for distribution to the holders of our common stock or could
adversely affect the rights and powers, including voting rights, of the holders
of our common stock. In some circumstances, the issuance of preferred stock
could have the effect of decreasing the market price of our common stock.

         We are also subject to provisions of the Delaware corporation law that,
in general, prohibit any business combination with a beneficial owner of 15% or
more of our common stock for five years unless the holder's acquisition of our
stock was approved in advance by our board of directors.

         In addition, both the commercial alliance agreement with Microsoft and
the marketing agreement with First Data, each of which we executed in connection
with the closing of the TransPoint acquisition, both allow the termination of
the agreement by Microsoft or First Data, as the case may be, under specific
change of control circumstances. If either Microsoft or First Data terminates
under these circumstances, we will lose a portion of the future revenue
guarantees under the applicable agreement. This potential termination event
could discourage third parties from acquiring us.

WE ARE SUBJECT TO SIGNIFICANT INFLUENCE BY SOME STOCKHOLDERS THAT MAY HAVE THE
EFFECT OF DELAYING OR PREVENTING A CHANGE IN CONTROL.

         At September 1, 2001, our directors, executive officers and principal
stockholders and their affiliates collectively owned approximately 36% of the
outstanding shares of our common stock. As a result, these stockholders are able
to exercise significant influence over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or
preventing a change in control.

                                     -29-
<PAGE>   30

RISKS OF OUR RECENT ACQUISITIONS.

WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE TRANSPOINT MERGERS AND
THE STRATEGIC AGREEMENT WITH BANK OF AMERICA.

         The success of the TransPoint mergers and the strategic agreement with
Bank of America will depend, in part, on our ability to realize the anticipated
growth opportunities and synergies from combining our business with the
TransPoint business and Bank of America's electronic billing and payment assets.
To realize the anticipated benefits of these combinations, our management team
must develop strategies and implement a business plan that will:

     -    effectively combine TransPoint's electronic billing and payment
          services with our services;
     -    effectively combine Bank of America's electronic billing and payment
          assets with our assets and services;
     -    successfully use the anticipated opportunities for cross-promotion and
          sales of the products and services of CheckFree, TransPoint and Bank
          of America;
     -    successfully retain and attract key employees of the combined company,
          including operating management and key technical personnel, during a
          period of transition and in light of the competitive employment
          market; and
     -    while integrating the combined company's operations, maintain adequate
          focus on our core businesses in order to take advantage of competitive
          opportunities and to respond to competitive challenges.

         If our management team is not able to develop strategies and implement
a business plan that achieves any these objectives, we may not realize the
anticipated benefits of the TransPoint and Bank of America acquisitions. In
particular, anticipated growth in revenue, earnings before interest, taxes,
depreciation, and amortization, or "EBITDA," and cash flow may not be realized,
which would have an adverse impact on us and the market price of our common
stock.

WE ARE REQUIRED TO AMORTIZE GOODWILL AND OTHER INTANGIBLE ASSETS THAT WILL CAUSE
OUR EARNINGS PER SHARE TO DECREASE.

         We accounted for the BlueGill and TransPoint mergers using the purchase
method, which has caused us, and will continue to cause us, to record charges to
our earnings that will decrease our earnings per share. In connection with the
BlueGill merger we carried a balance of goodwill and other intangible assets of
$164,143,002 as of June 30, 2001 and expect our resulting amortization expense
to be approximately $44,725,000 for the fiscal year ended June 30, 2002. In
connection with the TransPoint merger we carried a balance of goodwill and other
intangible assets of $1,239,779,544 as of June 30, 2001 and expect our resulting
amortization expense to be approximately $339,260,000 for the fiscal year ended
June 30, 2002.

         As a result of our purchase of the electronic billing and payment
assets of Bank of America we carried an intangible asset balance of $236,922,120
as of June 30, 2001 and expect our resulting amortization expense to be
approximately $29,830,000 for the fiscal year ended June 30, 2002.

         Additionally, because we issued shares of our common stock in
connection with both the merger agreements and the asset purchase agreement, and
since historically BlueGill and TransPoint have not been profitable, the
BlueGill and TransPoint mergers and related TransPoint commercial transactions
and the Bank of America asset purchase agreement may cause our earnings per
share to decrease. A drop in our earnings per share could have a negative impact
on the market price of our common stock. Analysts and investors carefully review
a company's earnings per share and often base investment decisions on a
company's earnings per share.

         In July 2001 the Financial Accounting Standards Board (FASB) issued FAS
142, "Goodwill and Other Intangible Assets." SFAS 142 changes the accounting for
goodwill and other intangible assets. Once adopted, goodwill will no longer be
subject to amortization over its estimated useful life but will be subject to at
least an annual assessment for impairment. Other intangible assets will continue
to be amortized over their estimated useful lives. SFAS becomes effective for us
on July 1, 2002. While we are still assessing the impact of all the statement
provisions on our financial position and results of operations, based on our
review to date we expect to have a

                                      -30-
<PAGE>   31


balance of goodwill of approximately $624,000,000 at June 30, 2002, which we
will no longer be required to amortize. This will result in a reduction of
goodwill amortization expense of approximately $200,000,000 per year for fiscal
years 2003, 2004 and 2005.

MICROSOFT, FIRST DATA, CITIBANK AND THE FORMER EMPLOYEES OF THE TRANSPOINT
BUSINESS MAY ENGAGE FREELY IN MANY ACTIVITIES THAT MAY BE COMPETITIVE WITH OUR
BUSINESS.

         In connection with the completion of the TransPoint mergers, we entered
into a commercial alliance agreement with Microsoft and a marketing agreement
with First Data. Both of these agreements contain limited covenants of the other
party not to compete with us. These covenants, however, contain exceptions that
could allow the other parties to engage in activities that could be competitive
with our future business. These competitive activities, or the perception by
investors that activities by Microsoft and First Data are competitive with our
business, could adversely affect our business and the market price of our common
stock. The TransPoint mergers did not create any obligation whatsoever on the
part of Citibank to refrain from any business activities which are competitive
with, or even hostile to, us. Although we would like to expand our business
relationship with Citibank, nothing in or about the merger should be interpreted
as increasing the likelihood that we will be successful in winning additional
business from Citibank, or in preventing Citibank from competing against us.

THE MARKETING AGREEMENT WITH FIRST DATA AND THE COMMERCIAL ALLIANCE AGREEMENT
WITH MICROSOFT WILL LIMIT THE FLEXIBILITY OF OUR MANAGEMENT.

         The marketing agreement we executed with First Data requires us to
purchase payment processing and other products from First Data under specified
circumstances, even if our management has other reasons for choosing a different
supplier. In addition, the commercial alliance agreement with Microsoft requires
the development of our products that are used with products made by Microsoft to
conform to specified standards. Accordingly, as a result of these agreements
with Microsoft and First Data, our management's flexibility to make business
decisions will be limited in various respects.

AS A RESULT OF THE BLUEGILL AND TRANSPOINT MERGERS, WE WILL HAVE AN INCREASED
INTERNATIONAL PRESENCE IN WHICH WE HAVE HAD LIMITED BUSINESS EXPERIENCE.

         Historically, we have not offered or sold our products and services
internationally. International operations are subject to many risks that are
difficult or impossible to predict or control, including the following:

     -    unexpected changes in laws and regulatory requirements;
     -    longer payment cycles;
     -    adverse economic or political changes;
     -    exchange rate risks associated with conversion of foreign currencies
          to United States dollars;
     -    potential trade restrictions;
     -    problems in collecting accounts receivables; and
     -    potentially adverse tax consequences.

         If we are unable to successfully adapt our business operations to these
additional risks and requirements, it could have a material adverse effect on
our business and financial condition.

ANTI-TAKEOVER PROVISIONS IN THE TRANSPOINT COMMERCIAL AGREEMENTS MAY MAKE A
CHANGE IN CONTROL OF OUR COMPANY MORE DIFFICULT.

         Both the commercial alliance agreement with Microsoft and the marketing
agreement with First Data allow the termination of the agreement by Microsoft or
First Data, as the case may be, under specific change of control circumstances.
If either Microsoft or First Data terminates under these circumstances, we will
lose a portion of the future revenue guarantees under the applicable agreement.
These potential termination events could discourage third parties from acquiring
us.

WE MAY NOT BE ABLE TO PROVIDE ELECTRONIC BILLING AND PAYMENT SERVICES TO THE
BANK OF AMERICA SUBSCRIBERS FOR THE FEES WE AGREED TO IN THE STRATEGIC AGREEMENT
WITH BANK OF AMERICA.

                                      -31-
<PAGE>   32

         The success of the strategic agreement with Bank of America will
depend, in part, on our ability to ultimately provide electronic billing and
payment services to the Bank of America subscribers at a cost to us that is less
than the fees we have agreed to receive. If we are unable to provide electronic
billing and payment services to the Bank of America subscribers profitably, the
strategic agreement will have a material adverse effect on our business,
financial condition and results of operations.

BANK OF AMERICA'S MARKETING EFFORTS MAY NOT BE SUCCESSFUL IN GENERATING
ADDITIONAL SUBSCRIBERS FOR OUR ELECTRONIC BILLING AND PAYMENT SERVICES.

         If Bank of America's marketing efforts to generate additional
subscribers are not successful, it could have a material adverse effect on our
business, financial condition and results of operations. In order to realize the
benefit of the strategic agreement with Bank of America and to consistently
increase and maintain our profitability, we must encourage the existing Bank of
America subscribers to actively utilize our billing and payment services, as
well as generate additional subscribers from the Bank of America base of
customers.

OUR ASSUMPTION OF CERTAIN LONG-TERM LEASEHOLD OBLIGATIONS COULD HAVE AN ADVERSE
IMPACT ON OUR RESULTS OF OPERATIONS.

         As part of the strategic agreement with Bank of America, we are
assuming certain of Bank of America's long-term leasehold obligations which, if
we are unable to use the leased premises efficiently in our business (or find a
third party to assume the leasehold obligations), could have a material adverse
effect on our profitability and results of operations.

OUR ABILITY TO SUCCEED IN TRANSITIONING BANK OF AMERICA'S BILLING AND PAYMENT
SERVICES FROM A LEGACY SYSTEM TO OUR SYSTEM IS DEPENDENT ON RETAINING QUALIFIED
BANK OF AMERICA EMPLOYEES KNOWLEDGEABLE IN THE OPERATION OF A LEGACY SYSTEM.

         The success of the strategic agreement with Bank of America is
dependent on our ability to retain qualified Bank of America employees with
experience operating Bank of America's billing and payment processing system.
Bank of America operates its electronic billing and payment services on a legacy
system that we expect to migrate to our processing systems. If we are unable to
retain the experienced Bank of America employees through the transition and
migration process, we will have to either divert our current employees from
other important work or incur a significant expense to hire people qualified to
operate a legacy system to assist us with the transition and migration process.
Competition for qualified employees is intense and employees qualified to
operate a legacy system are in short supply.

ITEM 2.  PROPERTIES.

         We lease the following office facilities:

-        approximately 229,000 square feet in Norcross, Georgia;
-        approximately 150,000 square feet in Dublin, Ohio;
-        approximately 100,000 square feet in Phoenix, Arizona;
-        approximately 77,706 square feet in Aurora, Illinois;
-        approximately 45,000 square feet in Houston, Texas;
-        approximately 33,000 square feet in Jersey City, New Jersey
-        approximately 32,000 square feet in Austin, Texas;
-        approximately 30,000 square feet in Ann Arbor, Michigan;
-        approximately 29,000 square feet in Waterloo, Ontario, Canada;
-        approximately 26,000 square feet in Owings Mills, Maryland;
-        approximately 26,000 square feet in San Francisco, California;
-        approximately 21,000 square feet in Newark, New Jersey;
-        approximately 15,000 square feet in Chicago, Illinois;
-        approximately 5,000 square feet in San Diego, California; and

                                      -32-
<PAGE>   33

-        approximately 2,000 square feet in Boston Massachusetts.

We own a 51,000 square foot conference center in Norcross, Georgia that includes
lodging, training, and fitness facilities for our customers and employees.
Although we own the building, it is on land that is leased through June 30,
2021. We believe that our facilities are adequate for current and near-term
growth and that additional space is available to provide for anticipated growth.

ITEM 3.  LEGAL PROCEEDINGS.

         There are no material legal proceedings pending against us.

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

          None.



                                      -33-
<PAGE>   34






                                     PART II

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

          Our common stock is traded on the Nasdaq National Market under the
symbol "CKFR." The following table sets forth the high and low sales prices of
our common stock for the periods indicated as reported by the Nasdaq National
Market.

<TABLE>
<CAPTION>
                                                              COMMON STOCK

                                                                 PRICE
                                                                 -----
FISCAL PERIOD                                            HIGH            LOW
-------------                                            ----            ---
<S>                                                     <C>           <C>
FISCAL 2000
First Quarter....................................        $ 44.25      $ 23.13
Second Quarter...................................        $107.50      $ 34.00
Third Quarter....................................        $125.63      $ 55.77
Fourth Quarter...................................        $ 70.75      $ 28.50

FISCAL 2001
First Quarter....................................        $ 70.88      $ 34.50
Second Quarter...................................        $ 62.50      $ 33.50
Third Quarter....................................        $ 57.25      $ 25.38
Fourth Quarter...................................        $ 43.15      $ 24.06

FISCAL 2002
First Quarter (through September 20, 2001)......         $ 39.68      $ 15.50
</TABLE>

         On September 20, 2001, the last reported bid price for our common stock
on the Nasdaq National Market was $16.99 per share. As of September 14, 2001,
there were approximately 688 holders of record of our common stock.

          We currently anticipate that all of our future earnings will be
retained for the development of our business and do not anticipate paying cash
dividends on our common stock for the foreseeable future. In addition, our line
of credit does not allow for the payment of cash dividends on our common stock.
Our board of directors will determine future dividend policy based on our
results of operations, financial condition, capital requirements and other
circumstances. During the last ten years, we have not paid cash dividends.

          During the past fiscal year, we have issued the following unregistered
securities shares of our common stock:

<TABLE>
<CAPTION>
                         TYPE OF        NUMBER           UNDERWRITER /                                     EXEMPTION
      DATE             SECURITIES       OF SHARES          PURCHASER               CONSIDERATION            CLAIMED
------------------    --------------    ----------    --------------------    ------------------------    ------------
<S>                 <C>                <C>           <C>                     <C>                          <C>
  September 28,       common stock      10,000,000      Bank of America        Certain electronic         Section 4(2)
      2000                                                                     billing and payment
                                                                                assets of Bank of
                                                                                     America
</TABLE>

ITEM 6.  SELECTED FINANCIAL DATA.

          The information required by this item is included under the caption
"SELECTED FINANCIAL DATA" in our Annual Report and is incorporated herein by
reference.

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

         The information required by this item is included under the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" in our Annual Report and is incorporated herein by reference.

                                      -34-
<PAGE>   35

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 on Form 10-K include certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 which are intended to be
covered by the safe harbors created thereby. Those statements include, but may
not be limited to, all statements regarding our and management's intent, belief
and expectations, such as statements concerning our future profitability and our
operating and growth strategy. Investors are cautioned that all forward-looking
statements involve risks and uncertainties including, without limitation, the
factors set forth under the caption "Business -- Business Risks" included
elsewhere in this Annual Report on Form 10-K 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
on Form 10-K 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 on Form 10-K are based on
information presently available to our management. We assume no obligation to
update any forward-looking statements.

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

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

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

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          Our consolidated balance sheets as of June 30, 2000 and 2001 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1999, 2000 and 2001 and the notes to the
financial statements, together with the independent auditors' report thereon
appear in our Annual Report and are incorporated herein by reference.

          Our Financial Statement Schedule and Independent Auditors' Report on
Financial Statement Schedule are included in response to Item 14 below.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

          None.

                                      -35-
<PAGE>   36


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          The information required by this item is included under the captions
"ELECTION OF DIRECTORS," "EXECUTIVE OFFICERS" and "SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE" in our Proxy Statement relating to our 2001
Annual Meeting of Stockholders to be held on November 7, 2001 and is
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

          The information required by this item is included under the captions
"INFORMATION CONCERNING THE BOARD OF DIRECTORS" and "EXECUTIVE COMPENSATION" in
our Proxy Statement and is incorporated herein by reference.

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

          The information required by this item is included under the captions
"OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS" and "OWNERSHIP
OF COMMON STOCK BY PRINCIPAL STOCKHOLDERS" in our Proxy Statement and is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is included under the captions
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION" in our Proxy Statement and is incorporated
herein by reference.



                                      -36-
<PAGE>   37


                                     PART IV

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

         (a)      The following documents are filed as part of this report:

                  (1) The following financial statements appearing in our 2001
Annual Report of Stockholders are incorporated herein by reference:

                  Independent Auditors' Report.

                  Consolidated Balance Sheets as of June 30, 2000 and 2001.

                  Consolidated Statements of Operations for each of the three
                  years in the period ended June 30, 2001.

                  Consolidated Statements of Stockholders' Equity for each of
                  the three years in the period ended June 30, 2001.

                  Consolidated Statements of Cash Flows for each of the three
                  years in the period ended June 30, 2001.

                  Notes to the Consolidated Financial Statements.

                  (2) The following financial statement schedule is included in
this Annual Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements contained in the Annual Report:

                  Schedule II -- Valuation and Qualifying Accounts.

                  Independent Auditors' Report on Financial Statement Schedule.

Schedules not listed above are omitted because of the absence of the conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.

                  (3)      Exhibits:

      EXHIBIT                                                     EXHIBIT
      NUMBER                                                    DESCRIPTION
      ------                                                    -----------

         2(a)     Agreement and Plan Merger and Contribution Agreement, dated as
                  of February 15, 2000, among Microsoft Corporation, First Data
                  Corporation, Citibank, N.A., MS II, LLC, First Data, L.L.C., H
                  & B Finance, Inc., First Data International Partner, Inc.,
                  MSFDC International, Inc., Citicorp Electronic Commerce, Inc.,
                  CheckFree Holdings Corporation, Chopper Merger Corporation,
                  and CheckFree Corporation (Reference is made to Exhibit 2(b)
                  of the Registration Statement on Form S-4 (333-32644) and
                  incorporated herein by reference.)

         2(b)     Amended and Restated Agreement and Plan of Merger, dated as of
                  July 7, 2000, among CheckFree Holdings Corporation, Microsoft
                  Corporation, First Data Corporation, Citibank, N.A., H&B
                  Finance, Inc., FDC International Partner, Inc., FDR Subsidiary
                  Corp., MS FDC International, Inc., Citi TransPoint Holdings
                  Inc., TransPoint Acquisition Corporation, Tank Acquisition
                  Corporation, Chopper Merger Corporation, CheckFree
                  Corporation, Microsoft II, LLC and First Data, L.L.C.
                  (Reference is made to Exhibit 2(c) of the Registration
                  Statement on Form S-4 (333-32644) and incorporated herein by
                  reference.)

                                      -37-
<PAGE>   38

       2(c)                Amended and Restated Strategic Alliance Master
                           Agreement, dated as of April 26, 2000, among
                           CheckFree Holdings Corporation, CheckFree Services
                           Corporation and Bank of America, N.A. (Reference is
                           made to Appendix A to the Company's Proxy Statement
                           for the Special Meeting of Stockholders held on
                           September 28, 2000, and incorporated herein by
                           reference).

       3(a)                Amended and Restated Certificate of Incorporation of
                           the Company. (Reference is made to Exhibit 4(e) to
                           the Registration Statement on Form S-8 (Registration
                           No. 333-50322), filed with the Securities and
                           Exchange Commission on November 20, 2000, and
                           incorporated herein by reference.)

       3(b)                Certificate of Ownership and Merger Merging CheckFree
                           Corporation into CheckFree Holdings Corporation.
                           (Reference is made to Exhibit 3(b) to the Company's
                           Form 10-K for the year ended June 30, 2000, filed
                           with the Securities and Exchange Commission on
                           September 26, 2000, and incorporated herein by
                           reference.)

       3(c)                By-Laws of the Company. (Reference is made to Exhibit
                           3(b) to the Current Report on Form 8-K, dated
                           December 22, 1997, filed with the Securities and
                           Exchange Commission on December 30, 1997, and
                           incorporated herein by reference.)

       3(d)                Form of Specimen Stock Certificate. (Reference is
                           made to Exhibit 3(d) to the Company's Form 10-K for
                           the year ended June 30, 2000, filed with the
                           Securities and Exchange Commission on September 26,
                           2000, and incorporated herein by reference.)

       4(a)                Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND
                           ELEVENTH of the Company's Restated Certificate of
                           Incorporation (contained in the Company's Restated
                           Certificate of Incorporation filed as Exhibit 3(a)
                           hereto) and Articles II, III, IV, VI and VIII of the
                           Company's By-Laws (contained in the Company's By-Laws
                           filed as Exhibit 3(b) hereto).

       4(b)                Rights Agreement, dated as of December 16, 1997, by
                           and between the Company and The Fifth Third Bank, as
                           Rights Agent. (Reference is made to Exhibit 4.1 to
                           Amendment No. 1 to Registration Statement on Form
                           8-A, filed with the Securities and Exchange
                           Commission on May 12, 1999, and incorporated herein
                           by reference.)

       10(a)               CheckFree Corporation Amended and Restated Associate
                           Stock Purchase Plan. (Reference is made to Exhibit
                           4(a) to Post-Effective Amendment No. 1 to Form S-8,
                           as amended (Registration No. 333-21795), filed with
                           the Securities and Exchange Commission on January 14,
                           1998, and incorporated herein by reference.)

       10(b)               CheckFree Corporation Amended and Restated 1995 Stock
                           Option Plan. (Reference is made to Exhibit 4(a) to
                           Post-Effective Amendment No. 1 to Form S-8, as
                           amended (Registration No. 33-98446), filed with the
                           Securities and Exchange Commission on January 9,
                           1998, and incorporated herein by reference.)

       10(c)               CheckFree Corporation Amended and Restated 1993 Stock
                           Option Plan. (Reference is made to Exhibit 4(a) to
                           Post-Effective Amendment No. 1 to Form S-8, as
                           amended (Registration No. 33-98442), filed with the
                           Securities and Exchange Commission on January 9,
                           1998, and incorporated herein by reference.)

       10(d)               CheckFree Corporation Amended and Restated 1983
                           Non-Statutory Stock Option Plan. (Reference is made
                           to Exhibit 4(a) to Post-Effective Amendment No. 1 to
                           Form S-8, as amended (Registration No. 33-98440),
                           filed with the Securities and Exchange Commission on
                           January 9, 1998, and incorporated herein by
                           reference.)

                                      -38-
<PAGE>   39

       10(e)               CheckFree Corporation Second Amended and Restated
                           1983 Incentive Stock Option Plan. (Reference is made
                           to Exhibit 4(a) to Post-Effective Amendment No. 1 to
                           Form S-8, as amended (Registration No. 33-98444),
                           filed with the Securities and Exchange Commission on
                           January 9, 1998, and incorporated herein by
                           reference.)

       10(f)               Form of Indemnification Agreement. (Reference is made
                           to Exhibit 10(a) to Registration Statement on Form
                           S-1, as amended (Registration No. 33-95738), filed
                           with the Securities and Exchange Commission on August
                           14, 1995, and incorporated herein by reference.)

       10(g)               Schedule identifying material details of
                           Indemnification Agreements substantially identical to
                           Exhibit 10(f). (Reference is made to Exhibit 10(g) to
                           the Company's Form 10-K for the year ended June 30,
                           1997, filed with the Securities and Exchange
                           Commission on September 26, 1997, and incorporated
                           herein by reference.)

       10(h)               Noncompete, Nondisclosure, and Assignment Agreement,
                           dated February 1, 1990, between Peter J. Kight and
                           the Company. (Reference is made to Exhibit 10(i) to
                           Registration Statement on Form S-1, as amended
                           (Registration No. 33-95738), filed with the
                           Securities and Exchange Commission on August 14,
                           1995, and incorporated herein by reference.)

       10(i)               Noncompete, Nondisclosure, and Assignment Agreement,
                           dated February 1, 1990, between Mark A. Johnson and
                           the Company. (Reference is made to Exhibit 10(j) to
                           Registration Statement on Form S-1, as amended
                           (Registration No. 33-95738), filed with the
                           Securities and Exchange Commission on August 14,
                           1995, and incorporated herein by reference.)

       10(j)               ACH Operations Agreement, dated April 1, 1994,
                           between the Company and Society National Bank.
                           (Reference is made to Exhibit 10(ii) to Registration
                           Statement on Form S-1, as amended (Registration No.
                           33-95738), filed with the Securities and Exchange
                           Commission on August 14, 1995, and incorporated
                           herein by reference.)

       10(k)               Merchant Processing Agreement, dated March 13, 1995,
                           between the Company and Society National Bank.
                           (Reference is made to Exhibit 10(jj) to Registration
                           Statement on Form S-1, as amended (Registration No.
                           33-95738), filed with the Securities and Exchange
                           Commission on August 14, 1995, and incorporated
                           herein by reference.)

       10(l)               Executive Employment Agreement between the Company
                           and Peter J. Kight. (Reference is made to Exhibit
                           10(z) to the Company's Form 10-K for the year ended
                           June 30, 1997, filed with the Securities and Exchange
                           Commission on September 26, 1997, and incorporated
                           herein by reference.)

       10(m)               Executive Employment Agreement between the Company
                           and Lynn D. Busing. (Reference is made to Exhibit
                           10(f) to the Form 10-Q for the quarter ended March
                           31, 1996, filed with the Securities and Exchange
                           Commission, and incorporated herein by reference.)

       10(n)               Agreement for ACH Services between the Company and
                           The Chase Manhattan Bank, N.A., dated as of July 1,
                           1996. (Reference is made to Exhibit 10(qqq) to the
                           Form 10-K for the transition period ended June 30,
                           1996, filed with the Securities and Exchange
                           Commission, and incorporated herein by reference.)

       10(o)               Loan and Security Agreement, dated as of May 13,
                           1997, among KeyBank National Association, the
                           Company, CheckFree Software Solutions, Inc.,
                           CheckFree Services Corporation, Security APL, Inc.,
                           Servantis Systems, Inc., and Servantis Services, Inc.
                           (Reference is made to Exhibit 10(ee) to the Company's
                           Form 10-K for the year ended

                                      -39-
<PAGE>   40


                           June 30, 1997, filed with the Securities and Exchange
                           Commission on September 26, 1997, and incorporated
                           herein by reference.)

       10(p)               First Amendment to Loan and Security Agreement by and
                           between KeyBank National Association, as Lender, and
                           CheckFree Corporation, as Borrower, dated as of
                           December 9, 1998. (Reference is made to Exhibit 10.1
                           to the Company's Form 10-Q for the quarter ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 17, 1999, and incorporated
                           herein by reference.)

       10(q)               CheckFree Corporation Incentive Compensation Plan.
                           (Reference is made to Exhibit 10(ff) to the Company's
                           Form 10-K for the year ended June 30, 1997, filed
                           with the Securities and Exchange Commission on
                           September 26, 1997, and incorporated herein by
                           reference.)

       10(r)               Form of Stockholder Agreement entered into between
                           the Company and each of Microsoft Corporation and
                           First Data Corporation. (Reference is made to Exhibit
                           10(ff) of the Company's Registration Statement on
                           Form S-4 (Registration No. 333-41098) filed with the
                           Securities and Exchange Commission on July 10, 2000
                           and incorporated herein by reference).**

       10(s)               Form of Registration Rights Agreement entered into
                           between the Company and each of Microsoft Corporation
                           and First Data Corporation. (Reference is made to
                           Exhibit 10(gg) of the Company's Registration
                           Statement on Form S-4 (Registration No. 333-41098)
                           filed with the Securities and Exchange Commission on
                           July 10, 2000 and incorporated herein by
                           reference).**

       10(t)               Form of Registration Rights Agreement entered into
                           between the Company and Citibank, N.A. (Reference is
                           made to Exhibit 10(hh) of the Company's Registration
                           Statement on Form S-4 (Registration No. 333-41098)
                           filed with the Securities and Exchange Commission on
                           July 10, 2000 and incorporated herein by
                           reference).**

       10(u)               Form of Commercial Alliance Agreement entered into
                           between the Company and Microsoft Corporation.
                           (Reference is made to Exhibit 10(ff) of the Company's
                           Amendment No. 1 to the Registration Statement on Form
                           S-4 (Registration No. 333-32644) filed with the
                           Securities and Exchange Commission on April 18, 2000
                           and incorporated herein by reference).**

       10(v)               Form of Marketing Agreement entered into between the
                           Company and First Data Corporation. (Reference is
                           made to Exhibit 10(gg) of the Company's Amendment No.
                           1 to the Registration Statement on Form S-4
                           (Registration No. 333-32644) filed with the
                           Securities and Exchange Commission on April 18, 2000
                           and incorporated herein by reference).**

       10(w)               Amendment No. 2 to the Rights Agreement, dated
                           September 30, 2000, between CheckFree Corporation and
                           the Fifth Third Bank, as Rights Agent. (Reference is
                           made to Exhibit 99 to Current Report on Form 8-K,
                           dated September 30, 2001, filed with the Securities
                           and Exchange Commission on October 3, 2000 and
                           incorporated herein by reference).

        10(x)              CheckFree Corporation Third Amended and Restated 1995
                           Stock Option Plan. (Reference is made to Exhibit 4(d)
                           to the Registration Statement on Form S-8
                           (Registration No. 333-50322), filed with the
                           Securities and Exchange Commission on November 20,
                           2000, and incorporated herein by reference.)

        13        *        Portions of the Annual Report to Stockholders for the
                           year ended June 30, 2001.

                                      -40-
<PAGE>   41

        21        *        Subsidiaries of the Company.

        23        *        Consent of Deloitte & Touche LLP.

        24        *        Power of Attorney.

        99        *        Financial Statement Schedule and Independent
                           Auditors' Report.

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

   * Filed with this report.

  ** Portions of this Exhibit have been given confidential treatment by the
     Securities and Exchange Commission.

         (b)      REPORTS ON FORM 8-K.

                  We filed no Current Reports on Form 8-K since March 31, 2001.

         (c)      EXHIBITS.

                  The exhibits to this report follow the Signature Page.

         (d)      FINANCIAL STATEMENT SCHEDULES.

                  The financial statement schedule and the independent auditors'
report thereon are included in Exhibit 99 to this Annual Report on Form 10-K.



                                      -41-
<PAGE>   42







                                   SIGNATURES

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

                                   CHECKFREE CORPORATION

Date: September 26, 2001           By:   /s/ DAVID E. MANGUM
                                      -----------------------------------------
                                         David E. Mangum, Executive Vice
                                         President and Chief Financial
                                         Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on our behalf and in
the capacities indicated on the 26th day of September, 2001.


<TABLE>
<CAPTION>

            Signature                                          Title
<S>                                          <C>
        *Peter J. Kight                      Chairman of the Board and Chief Executive Officer
----------------------------------------     (Principal Executive Officer)
         Peter J. Kight


        *David E. Mangum                     Executive Vice President and Chief
----------------------------------------     Financial Officer
         David E. Mangum                     (Principal Financial Officer)


        *Gary A. Luoma, Jr.                  Senior Vice President and Chief Accounting
----------------------------------------     Officer
         Gary A. Luoma, Jr.                  (Principal Accounting Officer)


        *William P. Boardman                 Director
---------------------------------------
         William P. Boardman

        *James D. Dixon                      Director
----------------------------------------
         James D. Dixon

        *Henry C. Duques                     Director
----------------------------------------
         Henry C. Duques

        *Mark A. Johnson                     Director
---------------------------------------
         Mark A. Johnson

        *Lewis C. Levin                      Director
---------------------------------------
         Lewis C. Levin

        *Eugene F. Quinn                     Director
---------------------------------------
         Eugene F. Quinn

        *Jeffrey M. Wilkins                  Director
---------------------------------------
         Jeffrey M. Wilkins

*By: /s/ Curtis A. Loveland
    -----------------------------------
         Curtis A. Loveland,
         Attorney-in-Fact
</TABLE>


                                      -42-