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



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FORM 10-Q/A
Amendment No. 1 to

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____
Commission File Number 0-30791

eFunds Corporation
(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 39-1506286                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |  |                                     
|                                                              
|                                                              
|                                                              
|                                                              
|Gainey Center II                                               |  |                                     
|8501 N. Scottsdale Road, Suite 300                             |  |                                     
|Scottsdale, Arizona                                            |  | 85253                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (480) 629-7700

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 such filing
requirements for the past 90 days.

|    |  |   |  |    |  | 
|--- |  | - |  | -- |  | 
|Yes |  | X |  | No |  | 

The number of shares outstanding of the registrants common stock, par value $.01 per share, at May 7, 2002 was 46,577,672.

This Form 10-Q/A is filed to amend the Form 10-Q for the quarter ended March 31, 2002 to include restated financial statements as discussed in Note 12 to the
condensed consolidated financial statements. For purposes of this 10-Q/A, and in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as
amended, the registrant has amended and restated in its entirety each item of its Quarterly Report on Form 10-Q which has been affected by the financial
statement restatement. In order to preserve the nature and character of the disclosure set forth in such items as of the original filing date of such Report,
this Form 10-Q/A does not otherwise modify the disclosures in that Report which were not affected by the restatement.

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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1: FINANCIAL STATEMENTS                                                                 
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II  OTHER INFORMATION  
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|                              | Index to Exhibits                                                                            
|EX-99.1                      
|EX-99.2                      
|EX-99.3                      
|EX-99.4                      



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1: FINANCIAL STATEMENTS

eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(As Restated  see Note 12)

|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |         |         |         | 
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                  |                                                                                                                                                               |                           |                                            |         | March 31, |         | December 31,
|(dollars in thousands)                            |                                                                                                                                                               | 2002                      |                                            | 2001   
|                                                  |                                                                                                                                                               |                           |                                            |        
|Current assets:                                   |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash and cash equivalents                                                                                                                                     |                           | $                                          | 104,322 |           |         | $            | 101,871 |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deposits subject to compensating balance arrangement                                                                                                          |                           |                                            | 2,448   |           |         |              | 2,448   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Restricted custodial cash                                                                                                                                     |                           |                                            | 3,839   |           |         |              | 1,124   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts receivable  net                                                                                                                                     |                           |                                            | 76,187  |           |         |              | 78,488  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred income taxes                                                                                                                                         |                           |                                            | 13,254  |           |         |              | 13,492  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Prepaid expenses and other current assets                                                                                                                     |                           |                                            | 15,705  |           |         |              | 14,364  |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               | Total current assets      |                                            |         | 215,755   |         |              |         | 211,787 |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|Property and equipment  net                      |                                                                                                                                                               |                           | 72,762                                     |         |           |         | 75,638       |        
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term investments                             |                                                                                                                                                               |                           | 2,728                                      |         |           |         | 2,747        |        
|                                                 
|                                                 
|                                                 
|                                                 
|Intangibles:                                      |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Goodwill  net                                                                                                                                                |                           |                                            | 93,899  |           |         |              | 87,151  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other intangible assets  net                                                                                                                                 |                           |                                            | 63,303  |           |         |              | 60,432  |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               |                           | Total intangibles  net                    |         |           | 157,202 |              |         |         | 147,583 | 
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  | Other non-current assets                                                                                                                                      |                           |                                            | 4,909   |           |         |              | 5,161   |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               | Total non-current assets  |                                            |         | 237,601   |         |              |         | 231,129 |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               |                           | Total assets                               |         | $         | 453,356 |              |         | $       | 442,916 | 
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|Current liabilities:                              |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts payable                                                                                                                                              |                           | $                                          | 29,943  |           |         | $            | 25,511  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued liabilities                                                                                                                                           |                           |                                            | 29,609  |           |         |              | 36,565  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued contract losses                                                                                                                                       |                           |                                            | 13,569  |           |         |              | 14,777  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred revenue                                                                                                                                              |                           |                                            | 20,003  |           |         |              | 14,377  |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Long-term debt due within one year                                                                                                                            |                           |                                            | 2,384   |           |         |              | 2,781   |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               | Total current liabilities |                                            |         | 95,508    |         |              |         | 94,011  |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|Long-term debt                                    |                                                                                                                                                               |                           | 2,138                                      |         |           |         | 2,529        |        
|                                                 
|                                                 
|                                                 
|                                                 
|Deferred income taxes                             |                                                                                                                                                               |                           | 7,323                                      |         |           |         | 7,313        |        
|                                                 
|                                                 
|                                                 
|                                                 
|Other long-term liabilities                       |                                                                                                                                                               |                           | 3,739                                      |         |           |         | 4,748        |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  | Total liabilities                                                                                                                                             |                           |                                            | 108,708 |           |         |              | 108,601 |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|Commitments and contingencies (Notes 4, 7 and 11) |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|Stockholders equity:                             |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Preferred stock $.01 par value; 100,000,000 shares authorized; no shares                                                                                      |                           |                                            |         |           |         |              |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issued and outstanding                                                                                                                                        |                           |                                            |        |           |         |              |        |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Common stock $.01 par value; authorized: 250,000,000 shares; issued and
outstanding: 46,561,487 shares at March 31, 2002 and 46,379,841 at
December 31, 2001) |                           |                                            | 466     |           |         |              | 464     |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Additional paid-in capital                                                                                                                                    |                           |                                            | 409,344 |           |         |              | 407,210 |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accumulated deficit                                                                                                                                           |                           |                                            | (62,523 | )         |         |              | (71,049 | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accumulated other comprehensive loss                                                                                                                          |                           |                                            | (2,639  | )         |         |              | (2,310  | )      
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               | Stockholders equity      |                                            |         | 344,648   |         |              |         | 334,315 |        
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        
|                                                  |                                                                                                                                                               |                           | Total liabilities and stockholders equity |         | $         | 453,356 |              |         | $       | 442,916 | 
|                                                  |                                                                                                                                                               |                           |                                            |         |           |         |              |        

See Notes to Condensed Consolidated Financial Statements

1



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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(As Restated  see Note 12)

|                                                            |                                                                   |                          |         |                              |         |   |         |        |         | 
|----------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------ | ------- | ---------------------------- | ------- | - | ------- | ------ | ------- | 
|                                                            |                                                                   |                          |         | Three Months Ended March 31,
|                                                            |                                                                   |                          |         |                             
|(dollars and shares in thousands, except per share amounts) |                                                                   | 2002                     |         | 2001                        
|                                                            |                                                                   |                          |         |                             
|Net revenue                                                 |                                                                   | $                        | 133,997 |                              |         | $ | 130,555 |       
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Operating expenses:                                         |                                                                   |                          |         |                              |         |   |         |       
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Processing, communication, and service costs                      |                          |         | 50,787                       |         |   |         | 48,860 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Employee costs                                                    |                          |         | 51,018                       |         |   |         | 51,671 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation and amortization                                     |                          |         | 9,542                        |         |   |         | 9,789  |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other operating costs                                             |                          |         | 10,192                       |         |   |         | 11,226 |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Restructuring and asset impairment charges                        |                          |         |                             |         |   |         | 3,200  |        
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|                                                            |                                                                   | Total operating expenses |         |                              | 121,539 |   |         |        | 124,746 | 
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Income from operations                                      |                                                                   |                          | 12,458  |                              |         |   | 5,809   |       
|                                                           
|                                                           
|                                                           
|                                                           
|Other income  net                                          |                                                                   |                          | 402     |                              |         |   | 545     |       
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Income before income taxes                                  |                                                                   |                          | 12,860  |                              |         |   | 6,354   |       
|                                                           
|                                                           
|                                                           
|                                                           
|Provision for income taxes                                  |                                                                   |                          | (4,334  | )                            |         |   | (2,610  | )     
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Net income                                                  |                                                                   | $                        | 8,526   |                              |         | $ | 3,744   |       
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|                                                            | Weighted average shares outstanding                               |                          |         | 46,473                       |         |   |         | 45,506 |        
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|                                                            | Weighted average shares and potential dilutive shares outstanding |                          |         | 47,806                       |         |   |         | 46,249 |        
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Net income per share  basic                                |                                                                   | $                        | 0.18    |                              |         | $ | 0.08    |       
|                                                            |                                                                   |                          |         |                              |         |   |         |       
|Net income per share  diluted                              |                                                                   | $                        | 0.18    |                              |         | $ | 0.08    |       
|                                                            |                                                                   |                          |         |                              |         |   |         |       

See Notes to Condensed Consolidated Financial Statements

2



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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(As Restated  see Note 12)

|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |        |       |         |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ---------------------------- | --------------------------------------------------- | ----- | ------------------ | ------- | ------ | ----- | ------- | ------ | -
|                                                     |                                                                                             |                                             |                              |                                                     |       | Three Months Ended
|                                                     |                                                                                             |                                             |                              |                                                     |       | March 31,         
|                                                     |                                                                                             |                                             |                              |                                                     |       |                   
|(dollars in thousands)                               |                                                                                             | 2002                                        |                              | 2001                                               
|                                                     |                                                                                             |                                             |                              |                                                    
|Cash flows from operating activities:                |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                                  |                                             | $                            | 8,526                                               |       |                    | $       | 3,744  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to net cash provided by (used in)
operating activities: |                                             |                              |                                                     |       |                    |         |        |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Depreciation                                |                              |                                                     | 4,843 |                    |         |        | 4,438 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Amortization of intangibles                 |                              |                                                     | 4,699 |                    |         |        | 5,351 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Loss on disposals of property and equipment |                              |                                                     | 106   |                    |         |        | 71    |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Deferred income taxes                       |                              |                                                     | 248   |                    |         |        | (66   | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Changes in assets and liabilities:          |                              |                                                     |       |                    |         |        |       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                             | Restricted custodial cash    |                                                     |       | (2,715             | )       |        |       | 884     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                             | Accounts receivable          |                                                     |       | 2,301              |         |        |       | (19,076 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                             | Accounts payable             |                                                     |       | 4,432              |         |        |       | 666     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                             | Accrued contract losses      |                                                     |       | (1,208             | )       |        |       | (785    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                             | Other assets and liabilities |                                                     |       | (3,340             | )       |        |       | 2,520   |       
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                     |                                                                                             |                                             |                              | Net cash provided by (used in) operating activities |       |                    | 17,892  |        |       |         | (2,253 | )
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|Cash flows from investing activities:                |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                                        |                                             |                              | (5,372                                              | )     |                    |         | (9,077 | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions                                                                                |                                             |                              | (11,444                                             | )     |                    |         |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                                       |                                             |                              | 26                                                  |       |                    |         |       |      
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                     |                                                                                             |                                             |                              | Net cash used in investing activities               |       |                    | (16,790 | )      |       |         | (9,077 | )
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|Cash flows from financing activities:                |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net borrowings (repayments) on line of credit                                               |                                             |                              |                                                    |       |                    |         | (5,303 | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments on long-term debt                                                                  |                                             |                              | (787                                                | )     |                    |         | (499   | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Release of loan guarantee collateral                                                        |                                             |                              |                                                    |       |                    |         | 8,500  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                                    |                                             |                              | 2,136                                               |       |                    |         | 374    |      
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                     |                                                                                             |                                             |                              | Net cash provided by financing activities           |       |                    | 1,349   |        |       |         | 3,072  |  
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|Net increase (decrease) in cash and cash equivalents |                                                                                             |                                             | 2,451                        |                                                     |       |                    | (8,258  | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                                                             |                                             | 101,871                      |                                                     |       |                    | 78,731  |       
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|Cash and cash equivalents at end of period           |                                                                                             | $                                           | 104,322                      |                                                     |       | $                  | 70,473  |       
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|Supplemental disclosures of cash flow information:   |                                                                                             |                                             |                              |                                                     |       |                    |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid for income taxes                                                                  |                                             | $                            | 1,612                                               |       |                    | $       | 311    |      
|                                                     |                                                                                             |                                             |                              |                                                     |       |                    |         |       

See Notes to Condensed Consolidated Financial Statements

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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1  The Company:
eFunds Corporation and its wholly-owned subsidiaries (the Company) provide
transaction processing, risk management and professional services to financial
institutions, retailers, electronic funds transfer networks, e-commerce
providers and government agencies. The Company has four operating segments:
electronic payments; automated teller machine (ATM) management services;
decision support and risk management; and professional services. The
electronic payments segment provides automated clearinghouse (ACH), point of
sale (POS), electronic funds transfer (EFT) and other processing services
across multiple financial networks and electronic benefit transfer (EBT)
services for government agencies. The ATM management services segment provides
ATM deployment, management and branding services. The decision support and
risk management segment provides risk management based data and other products
to financial institutions, retailers and other businesses that assist in
detecting fraud and assessing the risk of opening a new account or accepting a
check. The professional services segment provides EFT software sales, software
applications development, maintenance and installation, and business process
outsourcing services.

The Company was incorporated in Delaware in December 1984 and changed its name
from Deluxe Electronic Payment Systems, Inc. to eFunds Corporation in September
1999. Previously a wholly-owned subsidiary of Deluxe Corporation (Deluxe),
the Company completed its initial public offering (the IPO) in June 2000,
issuing 5.5 million shares of common stock at $13.00 per share for $64.5
million, net of offering expenses. In December 2000, Deluxe distributed all of
its remaining shares of the Companys common stock to its shareholders through
a spin-off transaction.

Note 2  Consolidation and Basis of Presentation:
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated. Investments in unconsolidated
affiliated companies, included in Long-term investments, are accounted for
under the cost method as of March 31, 2002. The consolidated financial
statements should be read in conjunction with the Companys 2001 Annual Report
on Form 10-K/A as filed with the Securities and Exchange Commission. In the
opinion of management, the accompanying financial information includes all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows for
the interim periods presented. The results of operations and cash flows for the
interim periods presented are not necessarily indicative of the results of any
future period.

Note 3  Accounting Change:
In January 2002, the Emerging Issues Task Force (EITF) issued EITF Issue No.
01-14, Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred (formerly EITF Abstracts, Topic No. D-103).
This EITF requires that reimbursements received for out-of-pocket expenses
should be classified as revenue and is effective for financial reporting
periods beginning after December 15, 2001. EITF Issue No. 01-14 requires that
financial statements for prior periods presented be reclassified to comply with
these provisions. The Company typically incurs telecommunications, network
customer fees, travel, maintenance and repair, and other transaction costs that
are billed to and reimbursed by customers. These reimbursements were
previously classified as a reduction in operating expenses. The effect of the
Companys adoption of EITF Issue No. 01-14 was an increase in net revenue and
operating expenses of $7.1 million and $6.1 million for the quarters ended
March 31, 2002 and 2001, respectively, with no effect on the Companys
financial position or net income.

Note 4  Acquisitions:
On January 31, 2002, the Company purchased substantially all of the ATM-related
assets of Hanco Systems, Inc. (Hanco), an independent ATM deployment and
management company. The results of Hancos operations have been included in the
consolidated financial statements since that date. Hanco managed a network of
approximately 2,500 ATMs in 30 states.

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The total purchase price of the assets was approximately $11.4 million in cash.
The following table summarizes the estimated fair value of assets acquired at
the date of acquisition.

|                       |                       |                     |       |        | 
|---------------------- | --------------------- | ------------------- | ----- | ------ | 
|(dollars in thousands) |                       | At January 31, 2002
|                       |                       |                    
|Current Assets         |                       | $                   | 427   |       
|                      
|                      
|                      
|                      
|Property and equipment |                       |                     | 22    |       
|                      
|                      
|                      
|                      
|Intangible assets      |                       |                     | 4,333 |       
|                      
|                      
|                      
|                      
|Goodwill               |                       |                     | 6,662 |       
|                       |                       |                     |       |       
|                       | Total assets acquired |                     | $     | 11,444 | 
|                       |                       |                     |       |       

In March 2000, the Company paid cash of $20.0 million for an approximate 24%
interest in Access Cash International L.L.C., a Delaware limited liability
company (ACI). ACI was the second largest independent provider of ATM services
in the United States. ACI provided turnkey ATM deployment solutions, including
ATM sales and management activities, as well as branding and advertising
services. The Company accounted for this initial investment under the equity
method of accounting, which requires that an investor record its share of the
losses attributable to its ownership interest. Accordingly, the Companys
results of operations for the period from January 1, 2001 to September 30, 2001
include its 24% share of the results of operations of ACI. The difference of
$20.0 million between the amount of the investment and the underlying equity in
the net assets of ACI was being amortized over 15 years and included in other
income-net. Effective October 1, 2001, the Company acquired the remaining
approximately 76% equity interest in ACI. The final acquisition has been
accounted for as a purchase in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations. As a
result of the acquisition of the remaining equity interest in ACI, the Company
consolidated ACIs results of operations with its own, as ACI was a
wholly-owned subsidiary from the date of acquisition forward.

The purchase price (Purchase Price) of the remaining 76% of ACI was $44.6
million, of which approximately $40.3 million was paid in cash on or prior to
the closing date of the acquisition. Payment of the balance of approximately
$4.3 million is subject to the satisfaction of certain post-closing conditions.
If these conditions are resolved such that the Company is required to pay any
portion of the balance of the Purchase Price, such payments will be accounted
for as an increase in goodwill. The Purchase Price was determined by
negotiation between the parties and resulted in the recognition of goodwill as
that price exceeded the estimated fair values of identifiable assets and
liabilities and intangible assets with finite useful lives.

The following table summarizes the unaudited pro forma results of operations of
the Company as though the acquisitions of Hanco and ACI had occurred at the
beginning of each period presented:

|                                                 |         |      |                         |      |  |   |         |      | 
|------------------------------------------------ | ------- | ---- | ----------------------- | ---- |  | - | ------- | ---- | 
|                                                 |         |      | Quarter Ended March 31,
|                                                 |         |      |                        
|(dollars in thousands, except per share amounts) |         | 2002 |                         | 2001
|                                                 |         |      |                         |     
|Revenue                                          |         | $    | 135,714                 |      |  | $ | 134,422 |     
|                                                
|                                                
|                                                
|                                                
|Net income                                       |         |      | 8,544                   |      |  |   | 2,823   |     
|                                                
|                                                
|                                                
|                                                
|Net income per share:                            |         |      |                         |      |  |   |         |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Basic   |      |                         | 0.18 |  |   |         | 0.06 | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Diluted |      |                         | 0.18 |  |   |         | 0.06 | 

Note 5  Goodwill and Other Intangible Assets:
Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Intangible Assets (SFAS 142) which was issued by the Financial Accounting
Standards Board in June 2001. SFAS No. 142 prohibits the amortization of goodwill
and intangible assets with indefinite useful lives. Upon the adoption of SFAS
142, the Company stopped amortizing the goodwill it recorded in connection with
business combinations. The following table reconciles the net income and
earnings per share the Company reported for the three months ended March 31,
2001 to exclude the amortization expense, net of taxes, related to goodwill
that is no longer being amortized:

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|                                                            |  |                    |       |      |  |   |       | 
|----------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                                            |  | Three Months Ended
|                                                            |  | March 31,         
|                                                            |  |                   
|                                                            |  | 2002               |       | 2001
|(dollars in thousands, except per share amounts)            |  |                    |       |     
|Reported net income                                         |  | $                  | 8,526 |      |  | $ | 3,744 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Pro forma adjustment for purchased
goodwill amortization    |  |                    |      |      |  |   | 977   | 
|                                                           
|                                                           
|                                                           
|                                                           
|Pro forma adjustment for ACI equity
investment amortization |  |                    |      |      |  |   | 206   | 
|                                                           
|                                                           
|                                                           
|                                                           
|Adjusted net income                                         |  |                    | 8,526 |      |  |   | 4,927 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Adjusted basic earnings per share                           |  |                    | 0.18  |      |  |   | 0.11  | 
|                                                           
|                                                           
|                                                           
|                                                           
|Adjusted diluted earnings per share                         |  |                    | 0.18  |      |  |   | 0.11  | 

Other intangible assets, both acquired and developed, subject to amortization
were as follows:

|                   |  |              |  |          |        |                |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 
|------------------ |  | ------------ |  | -------- | ------ | -------------- | ------- | ----------------- | ------- | ------- | ------- | ------------ | ------ | ----------- | ------ | - | ------ | - | ------- | - | ------- | - | ------- | - | ------ | - | ------ | 
|                   |  |              |  |          |        | March 31, 2002 |         | December 31, 2001
|                   |  |              |  |          |        |                |         |                  
|                   |  | Amortization |  | Gross    |        |                |         |                   |         |         |         |              |        | Gross       |        |   |        |   |         |   |         |  
|                   |  | Period       |  | Carrying |        | Accumulated    |         |                   |         |         |         | Carrying     |        | Accumulated |        |   |        |  
|(dollars in        |  | In Years     |  | Amounts  |        | Amortization   |         | Net               |         | Amounts |         | Amortization |        | Net        
|thousands)         |  |              |  |          |        |                |         |                   |         |         |         |              |        |            
|Software           |  | 3 to 5       |  | $        | 67,497 |                |         | $                 | (32,539 | )       |         | $            | 34,958 |             |        | $ | 65,079 |   |         | $ | (29,427 | ) |         | $ | 35,652 |  
|                  
|                  
|                  
|                  
|Customer
contracts |  | 15 to 25     |  |          | 15,826 |                |         |                   | (390    | )       |         |              | 15,436 |             |        |   | 11,693 |   |         |   | (195    | ) |         |   | 11,498 |  
|                  
|                  
|                  
|                  
|Other              |  | 3 to 5       |  |          | 72,650 |                |         |                   | (59,741 | )       |         |              | 12,909 |             |        |   | 71,768 |   |         |   | (58,486 | ) |         |   | 13,282 |  
|                   |  |              |  |          |        |                |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 
|                   |  |              |  |          |        | $              | 155,973 |                   |         | $       | (92,670 | )            |        | $           | 63,303 |   |        | $ | 148,540 |   |         | $ | (88,108 | ) |        | $ | 60,432 | 
|                   |  |              |  |          |        |                |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 

For the three months ended March 31, 2002 and 2001, amortization expense for
intangible assets was $4.7 million and $5.4 million, respectively. The
estimated future annual amortization expense for other intangible assets held
at March 31, 2002 is $16 million, $12 million, $7 million, $4 million and $2
million for the years 2003, 2004, 2005, 2006 and 2007, respectively.

SFAS No. 142 requires that a transitional impairment test be performed on goodwill
balances in existence at the date of its adoption. The Company is required to
complete the first step of this impairment test by June 30, 2002 by assessing
whether the fair values of the component groups net assets are sufficient to
support the recorded values of goodwill and intangible assets. The Company has
performed a preliminary assessment of the goodwill and intangible assets
recorded as of December 31, 2001 and believes that, based upon the results of
this assessment, its goodwill and other intangible assets are not impaired.
The Company will finalize this assessment prior to June 30, 2002.

Note 6  Accrued Liabilities:

Accrued Contract Losses

The Company has historically incurred losses related to its government services
business and has established a reserve to provide for expected losses on
existing long-term service contracts. Charges to the Companys loss reserve are
reflected as a reduction of operating expenses in the Companys consolidated
statement of operations and were as follows:

|                        |  |                         |        |      |  |   |        |  
|----------------------- |  | ----------------------- | ------ | ---- |  | - | ------ | -
|                        |  | Quarter Ended March 31,
|                        |  |                        
|                        |  | 2002                    |        | 2001
|(dollars in thousands)  |  |                         |        |     
|Beginning Balance       |  | $                       | 14,777 |      |  | $ | 22,247 |  
|                       
|                       
|                       
|                       
|Charges to loss reserve |  |                         | (1,208 | )    |  |   | (785   | )
|                        |  |                         |        |      |  |   |        |  
|Ending Balance          |  | $                       | 13,569 |      |  | $ | 21,462 |  
|                        |  |                         |        |      |  |   |        |  

Deluxe has agreed to indemnify the Company for certain future losses arising
from litigation based on the conduct of the government services business prior
to the IPO as well as incremental future losses on contracts of the government
services segment which were in a loss position at April 30, 2000 to the extent
such losses exceed the estimates underlying the Companys $29.2 million loss
reserve balance at April 30, 2000. The Company plans to record any amounts
received from Deluxe under the indemnification agreement as a reduction of
expense when, and

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if, any additional contract or litigation losses are
recognized. Deluxes total indemnification obligations to the Company are
limited to $14.6 million. No such indemnification obligations have arisen
through March 31, 2002.

Accrued Restructuring Costs

During the first quarter of 2001, restructuring accruals of $3.2 million were
recorded relating to the planned closure of the Companys operations in
Bothell, Washington. The restructuring charges, which include lease costs and
employee severance and related costs, are reflected in operating expenses in
the consolidated statement of operations for the quarter ended March 31, 2001.

The following table summarizes the change in the Companys restructuring
accruals for the quarter ended March 31, 2002:

|                           |  |           |    |        |  |   |       |  
|-------------------------- |  | --------- | -- | ------ |  | - | ----- | -
|                           |  | Number of |    |        |  |  
|                           |  | employees |    |        |  |  
|                           |  | affected  |    | Amount
|(dollars in thousands)     |  |           |    |       
|Balance, December 31, 2001 |  |           | 74 |        |  | $ | 2,408 |  
|                          
|                          
|                          
|                          
|Severance paid             |  |           | 31 |        |  |   | (452  | )
|                          
|                          
|                          
|                          
|Adjustments                |  |           |   |        |  |   |      |  
|                           |  |           |    |        |  |   |       |  
|Balance, March 31, 2002    |  |           | 43 |        |  | $ | 1,956 |  
|                           |  |           |    |        |  |   |       |  

Note 7  Long-term Debt and Credit Facilities:

Long-term debt consists principally of capital lease obligations related to
equipment. Long-term debt was as follows:

|                                |       |      |           |       |              |   |        |       | 
|------------------------------- | ----- | ---- | --------- | ----- | ------------ | - | ------ | ----- | 
|                                |       |      | March 31, |       | December 31,
|                                |       | 2002 |           | 2001 
|(dollars in thousands)          |       |      |           |      
|Capital leases and other        |       | $    | 4,522     |       |              | $ | 5,310  |      
|                               
|                               
|                               
|                               
|Less amount due within one year |       |      | (2,384    | )     |              |   | (2,781 | )    
|                                |       |      |           |       |              |   |        |      
|                                | Total |      | $         | 2,138 |              |   | $      | 2,529 | 
|                                |       |      |           |       |              |   |        |      

The capital lease obligations bear interest at rates ranging from 6.1% to 35.9%
and are due through the year 2004.

In September 2001, the Company obtained a revolving credit facility in the
amount of $20.0 million to replace a facility that was due to expire. This new
facility will mature in September 2002. The lender has issued an irrevocable
letter of credit in the amount of $1.0 million to guarantee the Companys
performance under a government services contract, resulting in a borrowing
capacity of $19.0 million. Loans under this facility will bear interest at the
applicable prime rate or the LIBOR rate plus a margin determined by reference
to the Companys leverage ratio. The facility is guaranteed by certain of the
Companys subsidiaries and requires the Company to comply with certain
financial and non-financial covenants. The Company is currently in compliance
with all of these requirements. The Company has not borrowed any funds under
this facility through March 31, 2002.

Note 8  Net Income Per Share:

Net income per share  basic is computed by dividing net income by the weighted
average number of shares outstanding. Net income per share  diluted is
computed by dividing net income by the weighted average number of shares
outstanding and, if dilutive, the weighted average number of potentially
dilutive common shares outstanding. Potentially dilutive common shares are
shares issuable upon the exercise of outstanding in the money stock option
agreements. The Company uses the treasury stock method to calculate diluted
weighted average shares outstanding. This method assumes that the Company uses
the proceeds received from the hypothetical exercise of dilutive stock options
to repurchase shares at the average market price per share during the period.

7



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##### Table of Contents



The following table reflects the calculation of basic and diluted net income
per share:

|                                                                        |                                                           |      |               |        |  |  |   |        | 
|----------------------------------------------------------------------- | --------------------------------------------------------- | ---- | ------------- | ------ |  |  | - | ------ | 
|                                                                        |                                                           |      | Quarter Ended
|                                                                        |                                                           |      | March 31,    
|                                                                        |                                                           |      |              
|                                                                        |                                                           | 2002 |               | 2001  
|(dollars and shares outstanding in thousands, except per share amounts) |                                                           |      |               |       
|Net income per share  basic:                                           |                                                           |      |               |        |  |  |   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Net income                                                |      | $             | 8,526  |  |  | $ | 3,744  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Weighted average shares outstanding                       |      |               | 46,473 |  |  |   | 45,506 | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 
|                                                                        | Net income per share  basic                              |      | $             | 0.18   |  |  | $ | 0.08   | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income per share  diluted:                                         |                                                           |      |               |        |  |  |   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Net income                                                |      | $             | 8,526  |  |  | $ | 3,744  | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Weighted average shares outstanding                       |      |               | 46,473 |  |  |   | 45,506 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Dilutive impact of stock options and stock purchase plans |      |               | 1,333  |  |  |   | 743    | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 
|                                                                        | Weighted average shares and dilutive shares outstanding   |      |               | 47,806 |  |  |   | 46,249 | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 
|                                                                        | Net income per share  diluted                            |      | $             | 0.18   |  |  | $ | 0.08   | 
|                                                                        |                                                           |      |               |        |  |  |   |        | 

Note 9  Comprehensive Income:

The Companys total comprehensive income for the quarters ended March 31, 2002
and 2001 was $8.2 million and $3.4 million, respectively. The Companys total
comprehensive income consists of net income and foreign currency translation
adjustments.

Note 10  Business Segments:

As a result of restructuring, integration initiatives and its ATM acquisition
strategy, the Company has reorganized its segments to consolidate government
services with its previous electronic payments segment. In addition, new
segments consisting of ATM management services, decision support and risk
management, and professional services have been separately identified. The
Company reports segment information consistent with the way management
internally disaggregates its operations to assess performance and to allocate
resources. The electronic payments segment includes ACH, POS, EFT and other
processing services across multiple financial networks, and EBT services for
government agencies. The ATM management services segment consists of ATM
deployment, management and branding services. The decision support and risk
management segment provides risk management based data and other products to
financial institutions, retailers and other businesses to assist them in
detecting fraud and assessing the risk of opening a new account or accepting a
check. The professional services segment provides EFT software sales, software
applications development, maintenance and installation, and business process
outsourcing services. The segment information presented below for the three
months ended March 31, 2001 has been restated for comparative purposes to
reflect the Companys current segments.

The accounting policies of the segments are the same as those applied to the
Company on a consolidated basis. For internal reporting purposes, the Company
groups costs based upon managerial control. The majority of these managed cost
groups may be directly assigned to a reportable segment. For cost groups
supporting more than one reportable segment, the costs are assigned based upon
the product line or project benefited. The Company does not allocate expenses
that benefit all segments and are corporate or administrative in nature. These
costs include, but are not limited to, legal, accounting, human resources, risk
management, and executive expenses. Net special items consist of a $3.2
million special charge in the quarter ended March 31, 2001 related to the
closure of the Companys Bothell, Washington operations.

8



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##### Table of Contents



Information concerning operations in these reportable segments of business is
as follows:

|                       |  |                              |        |            |  |            |        |              |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         | 
|---------------------- |  | ---------------------------- | ------ | ---------- |  | ---------- | ------ | ------------ |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------- | 
|                       |  | Quarter Ended March 31, 2002
|                       |  |                             
|                       |  |                              |        |            |  |            |        |              |  | Decision  |        |              |  |       |        |  |  |   |         |   |  |  
|                       |  |                              |        |            |  | ATM        |        | Support and  |  |           |        |              |  |       |        |  |  |   |         |  
|                       |  | Electronic                   |        | Management |  | Risk       |        | Professional |  |           |        |              |  | Total
|                       |  | Payments                     |        | Services   |  | Management |        | Services     |  | Corporate |        | Consolidated
|(dollars in thousands) |  |                              |        |            |  |            |        |              |  |           |        |             
|Net revenue            |  | $                            | 46,507 |            |  | $          | 20,640 |              |  | $         | 37,325 |              |  | $     | 29,525 |  |  | $ |        |   |  | $ | 133,997 | 
|                      
|                      
|                      
|                      
|Operating expenses     |  |                              | 34,124 |            |  |            | 19,254 |              |  |           | 29,108 |              |  |       | 18,879 |  |  |   | 20,174  |   |  |   | 121,539 | 
|                      
|                      
|                      
|                      
|Operating income       |  |                              | 12,383 |            |  |            | 1,386  |              |  |           | 8,217  |              |  |       | 10,646 |  |  |   | (20,174 | ) |  |   | 12,458  | 

|                                                                      |  |                              |        |            |  |            |        |              |  |           |        |              |  |       |        |  |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------- |  | ---------------------------- | ------ | ---------- |  | ---------- | ------ | ------------ |  | --------- | ------ | ------------ |  | ----- | ------ |  |  | - | ------- | - |  | - | ------- | -
|                                                                      |  | Quarter Ended March 31, 2001
|                                                                      |  |                             
|                                                                      |  |                              |        |            |  |            |        |              |  |           |        |              |  |       |        |  |  |   |         |   |  |  
|                                                                      |  |                              |        |            |  |            |        | Decision     |  |           |        |              |  |       |        |  |  |   |         |  
|                                                                      |  |                              |        |            |  | ATM        |        | Support and  |  |           |        |              |  |       |        |  |  |   |         |  
|                                                                      |  | Electronic                   |        | Management |  | Risk       |        | Professional |  |           |        |              |  | Total
|                                                                      |  | Payments                     |        | Services   |  | Management |        | Services     |  | Corporate |        | Consolidated
|(dollars in thousands)                                                |  |                              |        |            |  |            |        |              |  |           |        |             
|Net revenue                                                           |  | $                            | 45,197 |            |  | $          | 16,580 |              |  | $         | 37,389 |              |  | $     | 31,389 |  |  | $ |        |   |  | $ | 130,555 |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Operating expenses before
restructuring and asset impairment charges  |  |                              | 33,499 |            |  |            | 16,562 |              |  |           | 27,458 |              |  |       | 20,222 |  |  |   | 23,805  |   |  |   | 121,546 |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Operating income excluding
restructuring and asset impairment charges |  |                              | 11,698 |            |  |            | 18     |              |  |           | 9,931  |              |  |       | 11,167 |  |  |   | (23,805 | ) |  |   | 9,009   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Net special items                                                     |  |                              |       |            |  |            |       |              |  |           | (3,200 | )            |  |       |       |  |  |   |        |   |  |   | (3,200  | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Operating income including
restructuring and asset impairment charges |  |                              | 11,698 |            |  |            | 18     |              |  |           | 6,731  |              |  |       | 11,167 |  |  |   | (23,805 | ) |  |   | 5,809   |  

The Company has not disclosed assets by segment as this information is not
reviewed by the chief operating decision maker, is not produced internally and
it is not practicable to prepare it.

Revenue is attributed to geographic areas based on the location of the assets
producing the revenue. The Companys operations by geographic area are as
follows:

|                        |                    |      |                         |         |                        |      |         |         |  |   |           |        |              |   |        |        | 
|----------------------- | ------------------ | ---- | ----------------------- | ------- | ---------------------- | ---- | ------- | ------- |  | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                        |                    |      | Total Net Revenue       |         |                        |      |         |         |  |   |          
|                        |                    |      | Quarter Ended March 31, |         | Property and Equipment
|                        |                    |      |                         |         |                       
|                        |                    |      |                         |         |                        |      |         |         |  |   | March 31, |        | December 31,
|                        |                    | 2002 |                         | 2001    |                        | 2002 |         | 2001   
|(dollars in thousands)  |                    |      |                         |         |                        |      |         |        
|United States           |                    | $    | 121,372                 |         |                        | $    | 119,783 |         |  | $ | 62,263    |        |              | $ | 64,687 |       
|                       
|                       
|                       
|                       
|United Kingdom          |                    |      | 4,751                   |         |                        |      | 5,091   |         |  |   | 1,591     |        |              |   | 1,736  |       
|                       
|                       
|                       
|                       
|India                   |                    |      | 6,000                   |         |                        |      | 5,681   |         |  |   | 8,586     |        |              |   | 8,950  |       
|                       
|                       
|                       
|                       
|Other foreign countries |                    |      | 1,874                   |         |                        |      |        |         |  |   | 322       |        |              |   | 265    |       
|                        |                    |      |                         |         |                        |      |         |         |  |   |           |        |              |   |        |       
|                        | Total consolidated |      | $                       | 133,997 |                        |      | $       | 130,555 |  |   | $         | 72,762 |              |   | $      | 75,638 | 
|                        |                    |      |                         |         |                        |      |         |         |  |   |           |        |              |   |        |       

Note 11  Commitments and Contingencies:

In connection with the Companys government services, collection and ATM
placement activities, the Company posts surety bonds with state agencies
guaranteeing its performance of certain obligations related to the relevant
contracts or state requirements. The aggregate amount of such bonds outstanding
at March 31, 2002 was $7.9 million.

The Company has guaranteed certain equipment lease payments for its Canadian
customers of ACI totaling $2.0 million as of March 31, 2002. Through March 31,
2002, the Company has been required to make payments of $59,000 pursuant to
these guarantees.

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In December 2001, the Company entered into a subscription agreement to acquire
a 15% interest in Webtel Pty. Ltd., an Australian corporation (Webtel).
Pursuant to the subscription agreement, the Company invested $1.3 million in
Webtel in 2001 and has committed to invest an additional $0.8 million upon the
satisfaction of certain conditions specified in the subscription agreement.

The Company has approximately $1.5 million in time deposits, denominated in
Indian rupees, primarily for securing letters of credit issued in the ordinary
course of business by its India operations. At March 31, 2002, the aggregate
amount of such outstanding letters of credit was approximately $0.1 million.

An Indian bank has issued an advance guarantee on behalf of the Company to
secure its performance under a customer contract. The guarantee is secured by a
time deposit of $0.9 million.

The Company operates a call center in Mumbai, India under a customer contract.
The customer receives credits toward a right to purchase, after December 31,
2002, a minority interest in, or sole ownership of, certain assets used by the
Company in performing call center operations for the customer as well as
transition assistance. The customers right to acquire ownership rights in the
assets is determined by a formula that is driven primarily by revenue. As of
March 31, 2002, the customer was entitled to acquire less than a 5% ownership
interest. This call center generated revenue of $4.3 million and $3.7 million
for the three months ended March 31, 2002 and 2001, respectively, and $16.5
million during the entire year of 2001.

On March 8, 2002, the Company received a letter from a Staff Accountant at the
Central Regional Office of the Securities and Exchange Commission (the SEC)
stating that the SEC is conducting an inquiry of the Company and requesting the
Companys voluntary assistance in connection with the provision of certain
documents relating to its 2001 financial results and certain transactions
between the Company and ACI, among other things. The letter from the SEC
states that the inquiry is non-public and that it should not be construed as an
indication that the SEC believes any violation of law has occurred. The Company
intends to cooperate fully with the SEC in resolving this matter.

Note 12  Restatement:

Subsequent to the issuance of the Companys consolidated financial statements
for the year ended December 31, 2001 and in response to questions
raised in connection with an internal audit of certain significant
vendor contracts, the Company conducted an investigation of
certain significant transactions reflected in the Companys
financial statements during 2000 and 2001. As a result of this
investigation, the Companys
management determined that the historical accounting treatment that
had been afforded to (i) certain data purchase agreements with Experian Information Systems
(Experian) and Acxiom Corporation (Acxiom), (ii) certain tax contingencies
related to the Companys India based operations, (iii) certain software licenses sold by the Companys
subsidiary in the United Kingdom and, (iv) tax benefits associated with stock option
exercises in 2001, should be revised. The revisions are discussed below:

Experian:

In June 2000, the Company and Experian executed a Data Purchase Agreement (the
2000 Agreement), which expired June 30, 2001. The Company recognized $3
million of revenue from a data file sale related to the 2000 Agreement in the
second quarter of 2000, and minimum royalties of $1.5 million and $0.5 million
were recorded as revenue in the first and second quarters of 2001,
respectively. In June 2001, the Company and Experian executed a new Data
Purchase Agreement (the 2001 Agreement), which expires in March 2003. The
Company recognized $3 million of revenues from a data file sale related to the
2001 Agreement in the second quarter of 2001. In July 2001, the Company also
entered into a Data Access/Use Agreement with Experian. The Company recorded
revenue of $0.2 million in the third quarter of 2001 related to the Data
Access/Use Agreement.

Management has subsequently determined that the 2001 Agreement and the Data
Access/Use Agreement should be viewed as interrelated and in substance one
agreement that became effective in July 2001. Management has also determined
that sufficient objective evidence of fair value does not exist to support
separate accounting for the various elements of the 2000 and 2001 Agreements.
As a result, management determined that these transactions should be treated as
service arrangements for which revenue should be recognized ratably over the
service periods and that revenue recognition should not commence until the last
essential element of the arrangements was delivered, which was October 2000 for
the 2000 Agreement and August 2001 for the 2001 Agreement. This

10



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treatment results in recognition of the $5 million of total fees related to the
2000 Agreement ratably over the remaining term of that agreement, commencing
October 2000, and recognition of the $3.2 million of total fees related to the
2001 Agreement ratably over the remaining term of that agreement, commencing
August 2001.

Acxiom:

During the period from March 2001 through June 2001, the Company and Acxiom
negotiated and executed agreements (Vendor Agreements) related to three
primary arrangements under which the Company purchased outsourcing and
data-related services from Acxiom that were being provided over terms extending
through March 2006. Also in June 2001, the Company and Acxiom executed a Data
Purchase Agreement under which the Company sold data files to Acxiom. Under
the terms of the Vendor Agreements, the Company was recognizing the cost of the
services as they were billed by Acxiom, and the Company recognized $3 million
in revenue from the data file sale under the Data Purchase Agreement in the
second quarter of 2001.

Management has subsequently determined that the Vendor Agreements and the Data
Purchase Agreement should be viewed as economically interrelated and treated as
a single agreement between the parties, and that the $3 million received from
Acxiom under the Data Purchase Agreement should be treated as a
reduction of expense associated with the Vendor Agreements over the remaining
term of those agreements rather than as an item of revenue. Management also
determined that the expenses related to the Vendor Agreements and one other
service contract, which contain fixed prices over their terms, should be
recorded on a ratable basis over the term of the related service periods.

Income Taxes:

Management has determined that the
liabilities associated with certain tax contingencies related to the
Companys India based operations were underestimated, resulting
in an understatement of income tax expense for federal income tax purposes of $0.8 million
and $0.2 million in 2001 and 2000, respectively.

United Kingdom  Software Licenses:

Management also determined that $1.0 million in software licenses sold by the
Companys subsidiary in the United Kingdom during 2001 had been incorrectly
recognized as revenue prior to obtaining a signed license agreement
which resulted in an overstatement of revenue of $0.2 million and $0.8 million
in the first and second quarters of 2001, respectively, and an
understatement of revenues of $0.9
million and $0.1 million, respectively, in the third and fourth quarters of
2001.

In addition, one other miscellaneous adjustment was made to recognize
$0.3 million of revenue ratably in the second and third quarters of 2000 that
had previously been recognized in the first quarter of 2000.

Exercise of stock options:

Management also determined that the Company had not accounted for $2.2 million
in tax benefits associated with the exercise of certain stock options in 2001,
which should have been recognized as an increase in additional paid-in capital
and a reduction in income taxes payable. This adjustment did not affect the
Statement of Operations for any period presented.

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As a result, the accompanying condensed consolidated financial statements as of
March 31, 2002 and for the three months ended March 31, 2002 and 2001 have been
restated from amounts previously reported to revise the accounting for these
transactions. A summary of the significant effects of the restatement
on the accompanying financial statements is as follows:

|                                          |  |                      |         |                         |  |          |         |             |  |   |         |  |  |   |         | 
|----------------------------------------- |  | -------------------- | ------- | ----------------------- |  | -------- | ------- | ----------- |  | - | ------- |  |  | - | ------- | 
|                                          |  | As of March 31, 2002 |         | As of December 31, 2001
|                                          |  |                      |         |                        
|                                          |  | As                   |         |                         |  |          |         | As          |  |   |         | 
|                                          |  | Previously           |         |                         |  |          |         | Previously  |  |   |         | 
|                                          |  | Reported             |         | As Restated             |  | Reported |         | As Restated
|(in thousands)                            |  |                      |         |                         |  |          |         |            
|Accounts receivable  net                 |  | $                    | 76,187  |                         |  | $        | 76,187  |             |  | $ | 79,444  |  |  | $ | 78,488  | 
|                                         
|                                         
|                                         
|                                         
|Deferred income taxes                     |  |                      | 10,899  |                         |  |          | 13,254  |             |  |   | 10,844  |  |  |   | 13,492  | 
|                                         
|                                         
|                                         
|                                         
|Prepaid expenses and other current assets |  |                      | 15,763  |                         |  |          | 15,705  |             |  |   | 14,444  |  |  |   | 14,364  | 
|                                         
|                                         
|                                         
|                                         
|Total current assets                      |  |                      | 213,458 |                         |  |          | 215,755 |             |  |   | 210,175 |  |  |   | 211,787 | 
|                                         
|                                         
|                                         
|                                         
|Total assets                              |  |                      | 451,059 |                         |  |          | 453,356 |             |  |   | 441,304 |  |  |   | 442,916 | 
|                                         
|                                         
|                                         
|                                         
|Accrued liabilities                       |  |                      | 28,980  |                         |  |          | 29,609  |             |  |   | 35,643  |  |  |   | 36,565  | 
|                                         
|                                         
|                                         
|                                         
|Deferred revenue                          |  |                      | 18,001  |                         |  |          | 20,003  |             |  |   | 12,831  |  |  |   | 14,377  | 
|                                         
|                                         
|                                         
|                                         
|Total current liabilities                 |  |                      | 92,877  |                         |  |          | 95,508  |             |  |   | 91,543  |  |  |   | 94,011  | 
|                                         
|                                         
|                                         
|                                         
|Other long-term liabilities               |  |                      | 1,865   |                         |  |          | 3,739   |             |  |   | 2,713   |  |  |   | 4,748   | 
|                                         
|                                         
|                                         
|                                         
|Total liabilities                         |  |                      | 104,203 |                         |  |          | 108,708 |             |  |   | 104,098 |  |  |   | 108,601 | 
|                                         
|                                         
|                                         
|                                         
|Additional paid-in capital                |  |                      | 407,127 |                         |  |          | 409,344 |             |  |   | 404,993 |  |  |   | 407,210 | 
|                                         
|                                         
|                                         
|                                         
|Total stockholders equity                |  |                      | 346,856 |                         |  |          | 344,648 |             |  |   | 337,206 |  |  |   | 334,315 | 

|                                             |  |                                 |         |             |  |          |         |             |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------- | ------- | ----------- |  | -------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                                             |  | For the Quarter Ended March 31,
|                                             |  |                                
|                                             |  | 2002                            |         | 2001       
|                                             |  |                                 |         |            
|                                             |  | As                              |         |             |  |          |         | As          |  |   |         |  
|                                             |  | Previously                      |         |             |  |          |         | Previously  |  |   |         |  
|                                             |  | Reported                        |         | As Restated |  | Reported |         | As Restated
|(in thousands, except per share data)        |  |                                 |         |             |  |          |         |            
|Net revenue                                  |  | $                               | 133,497 |             |  | $        | 133,997 |             |  | $ | 130,620 |   |  | $ | 130,555 |  
|                                            
|                                            
|                                            
|                                            
|Processing, communication, and service
costs |  |                                 | 51,263  |             |  |          | 50,787  |             |  |   | 48,694  |   |  |   | 48,860  |  
|                                            
|                                            
|                                            
|                                            
|Total operating expenses                     |  |                                 | 122,015 |             |  |          | 121,539 |             |  |   | 124,580 |   |  |   | 124,746 |  
|                                            
|                                            
|                                            
|                                            
|Income from operations                       |  |                                 | 11,482  |             |  |          | 12,458  |             |  |   | 6,040   |   |  |   | 5,809   |  
|                                            
|                                            
|                                            
|                                            
|Provisions for income taxes                  |  |                                 | (4,041  | )           |  |          | (4,334  | )           |  |   | (2,502  | ) |  |   | (2,610  | )
|                                            
|                                            
|                                            
|                                            
|Net income                                   |  |                                 | 7,843   |             |  |          | 8,526   |             |  |   | 4,083   |   |  |   | 3,744   |  
|                                            
|                                            
|                                            
|                                            
|Net income per share  basic                 |  | $                               | 0.17    |             |  | $        | 0.18    |             |  | $ | 0.09    |   |  | $ | 0.08    |  
|                                            
|                                            
|                                            
|                                            
|Net income per share  diluted               |  | $                               | 0.16    |             |  | $        | 0.18    |             |  | $ | 0.09    |   |  | $ | 0.08    |  

In October 2002, the staff of the
Securities and Exchange Commission requested additional information
from us related to, among other things, certain of the matters that
are the subject of this restatement.

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

As discussed in Note 12 to the condensed consolidated financial statements
included in Item 1, the condensed consolidated financial statements as of March
31, 2002 and for the three months ended March 31, 2002 and 2001 have been
restated. The following management discussion and analysis takes into account
the effects of the restatement.

The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the notes to those financial statements
included in this Quarterly Report on Form 10-Q/A and our 2001 Annual Report on
Form 10-K/A filed with the Securities & Exchange Commission.

Forward-Looking Statements

In addition to historical and pro forma information, this Quarterly Report
contains forward-looking statements as defined in the U.S. Private Securities
Litigation Reform Act of 1995. All forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from those described in the statements. The factors that could cause
actual results to differ include those discussed in Item 5 of this Quarterly
Report.

Overview

eFunds Corporation and its wholly-owned subsidiaries (the Company, we or
us) provide transaction processing, risk management and professional services
to financial institutions, retailers, electronic funds transfer networks,
e-commerce providers and government agencies. The Company has four operating
segments: electronic payments; automated teller machine (ATM) management
services; decision support and risk management; and professional services. The
electronic payments segment provides automated clearinghouse (ACH), point of
sale (POS) electronic funds transfer (EFT), and other processing services
across multiple financial networks and electronic benefits transfer (EBT)
services for government agencies. The ATM management services segment provides
ATM deployment, management and branding services. The decision support and risk
management segment provides risk management based data and other products to
financial institutions, retailers and other businesses that assist in detecting
fraud and assessing the risk of opening a new account or accepting a check. The
professional services segment provides EFT software sales, software
applications development, maintenance and installation, and business process
outsourcing services.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates and
judgments, including those related to revenue recognition, intangible assets,
accrued contract losses, bad debts, income taxes and stock-based compensation.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. The results of these
estimates form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

Revenue recognition  Our net revenues consist of transaction processing and
service fees, decision support fees, software licensing, maintenance and
support fees, government service fees, and information technology consulting
and business process management services fees. Our revenue recognition
policies for these various fees are as follows:

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| |  | Transaction processing and service fees are recognized in the period
that the service is performed. These services consist of processing
our customers electronic debit transactions through electronic funds
transfer networks and settling the funds with the financial
institutions involved in the transactions. Additionally, these
services include monitoring ATMs and point-of-sale devices to alert
our customers when potential problems occur. These fees are charged on
a per transaction basis, depending on the contractual arrangement with
the customer. We also receive fees paid by consumers utilizing ATM
machines owned or managed by us and fees paid by their banks for
interchange services. Government services fees are recognized in the
period services are provided based on monthly fees per benefits
recipient.                                                                                                                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Decision support fees are recognized as revenue in the period the
services are provided. Decision support services consist of new
account applicant and check verification screenings to manage the risk
associated with account openings and check acceptance. Decision
support fees are based on the number of inquiries against the
databases used for screening purposes or monthly fees based on the
aggregate dollar value of checks authorized by the retailer or other
similar measures, depending on the product and service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
| |  | Software and data license fees for standard products are recognized
when a license agreement has been signed, the license fee is fixed and
determinable, collectibility of the license fee is probable, delivery
has occurred and there are no uncertainties surrounding product
acceptance. If a license contains customer acceptance criteria for
which significant uncertainties exist, the revenue is recognized upon
the earlier of customer acceptance or the expiration of the acceptance
period. Certain software products include multiple modules and the
license fee charged to the customer is based on the modules licensed.
If a customer contract requires we deliver multiple elements, then
upfront fees are recognized as revenue if vendor specific objective
evidence of fair value exists for each of the undelivered elements. If
vendor specific objective evidence of fair value does not exist, then
the total fees of the arrangement are recognized over the term of the
related agreement based upon delivery of all essential elements.
| 
| |  | We also provide professional services consisting of information
technology consulting and business process management services.
Recognition of revenue from providing such services is generally
recognized under one of two methods, depending on contractual terms.
Under the time and materials method, which is relevant to nearly all
of our professional services contracts, revenue is based on a fee per
hour basis and is recognized as hours are completed. Under the fixed
contract method, a pre-set fee is agreed upon for a project, and
revenue is recognized proportionately to the percentage of completion
of the project. If the information technology consulting services
involve the significant customization of software that has been
licensed from us, the license fee is also recognized proportionately
to the percentage of completion of the project.                                                                                                                                                                                 
| 
| |  | Software maintenance and support revenue is recognized ratably over
the term of the contract, or as the services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

The process involved in evaluating the appropriateness of revenue recognition
involves judgments about vendor-specific objective evidence of fair value,
collectibility of fees, and projections of costs to complete projects for our
customers.

Intangible Assets  Our intangible assets consist primarily of goodwill,
capitalized software costs and acquired customer contracts. We capitalize the
cost of software developed or obtained for internal use once the preliminary
project stage has been completed, management commits to funding the project and
it is probable that the project will be completed and that the software will be
used to perform the function intended. Capitalized costs include only (1)
external direct costs of materials and services consumed in developing or
obtaining internal-use software, (2) payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use software project, and (3) interest costs incurred, when material,
while developing internal-use software. Capitalization of costs ceases when the
project is substantially complete and the software is ready for its intended
use.

We capitalize the cost of software developed for licensing and resale once
technological feasibility has been established. Costs incurred prior to
establishing technological feasibility are expensed as incurred. Technological
feasibility is established when we have completed all planning, designing,
coding and testing activities that are

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necessary to determine that a product can be produced to meet its design
specifications, including functions, features and technical performance
requirements. Capitalization of costs ceases when the product is available for
general release to customers. Such costs are amortized on a product-by-product
basis over no longer than five years. Software developed for resale is carried
at the lesser of amortized cost or net realizable value.

The process of evaluating goodwill and other intangible assets, including
capitalized software costs and customer contract costs, for impairment involves
judgments about market conditions and economic indicators, estimates of future
cash flows and assumptions about our strategic plans with regard to our
operations. To the extent additional information arises or our strategies
change, it is possible that our conclusions regarding the carrying value of our
intangible assets could change and materially affect our financial position or
results of operations.

Reserves and Allowances  We maintain a reserve for expected future losses on
certain electronic benefit transfer contracts. Our estimates of such losses are
based on a variety of assumptions including assumptions about future welfare
case levels, number of transactions per case and costs related to processing
transactions and support services. These assumptions are subject to significant
uncertainties and may differ substantially from our estimates. In the event
such differences arise, a revision to the loss contract reserve would be
required. Any such revision could have a material effect on our financial
position or results of operations.

We maintain an allowance for doubtful accounts for estimated losses resulting
from our customers failing to make required payments. We develop our estimate
of the allowance based on our experience with specific customers, our
understanding of their current economic circumstances and our own judgment as
to the likelihood of their ultimate payment. We also consider our collection
experience with the balance of our receivables portfolio and make estimates
regarding collectability based on trends in aging. If the financial condition
of our customers were to deteriorate, thereby impairing their ability to make
payments, additional allowances may be required.

Income Taxes  Accounting for income taxes requires significant judgments in
the development of estimates used in income tax calculations. Such judgments
would include, but would not be limited to, the likelihood the Company would
realize the benefits of net operating loss carry forwards, the adequacy of
valuation allowances, the rates used to measure transactions with foreign
subsidiaries and the development of valuation models used for measuring the
value of certain transactions. Further, our operations are governed by and
subject to government regulations in the United States and in foreign countries
in which we operate, including laws and regulations relating to taxation. The
judgments and estimates used are subject to challenge by domestic and foreign
taxing authorities. The Company recognizes tax liabilities at such time as they
are judged to be probable of being incurred and they can be reasonably
estimated. It is possible that either foreign or domestic taxing authorities
could challenge those judgments and estimates and draw conclusions that would
cause the Company to incur tax liabilities in excess of those currently
recorded.

We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. Although we have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
determine that we will be able to realize our deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the deferred tax asset
would increase income in the period any such determination was made. Likewise,
should we determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period any such determination was made.

We consider the undistributed earnings of our foreign subsidiaries to be
permanently invested and, accordingly, we have not provided for U.S. Federal,
state income or applicable foreign withholding taxes on those amounts. Upon any
distribution of those earnings in the form of dividends or otherwise, we would
be subject to both U.S. income taxes (subject to an adjustment for foreign tax
credits) and applicable withholding taxes payable to the foreign countries.
Determination of the amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with such a
hypothetical calculation.

15



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##### Table of Contents



Results of Operations 
Quarter Ended March 31, 2002 Compared to Quarter Ended
March 31, 2001

The following table presents, for the periods indicated, the relative
composition of net revenues and selected statements of operations data as a
percentage of net revenues:

|                           |                                             |                    |                          |      |                         |      |      |      |       |      | 
|-------------------------- | ------------------------------------------- | ------------------ | ------------------------ | ---- | ----------------------- | ---- | ---- | ---- | ----- | ---- | 
|                           |                                             |                    |                          |      | Quarter Ended March 31,
|                           |                                             |                    |                          |      |                        
|                           |                                             |                    |                          |      | 2002                    |      | 2001
|                           |                                             |                    |                          |      |                         |      |     
|Net revenue                |                                             |                    |                          |      |                         |      |      |     
|                          
|                          
|                          
|                          
|                           | Electronic payments                         |                    |                          | 34.7 | %                       |      |      | 34.6 | %    
|                          
|                          
|                          
|                          
|                           | ATM management services                     |                    |                          | 15.4 |                         |      |      | 12.7 |      
|                          
|                          
|                          
|                          
|                           | Decision support and risk management        |                    |                          | 27.9 |                         |      |      | 28.6 |      
|                          
|                          
|                          
|                          
|                           | Professional services                       |                    |                          | 22.0 |                         |      |      | 24.1 |      
|                           |                                             |                    |                          |      |                         |      |      |     
|                           |                                             | Total net revenues |                          |      | 100.0                   |      |      |      | 100.0 |     
|                           |                                             |                    |                          |      |                         |      |      |     
|Operating expenses         |                                             |                    |                          |      |                         |      |      |     
|                          
|                          
|                          
|                          
|                           | Processing, communication and service costs |                    |                          | 37.9 |                         |      |      | 37.4 |      
|                          
|                          
|                          
|                          
|                           | Employee costs                              |                    |                          | 38.1 |                         |      |      | 39.6 |      
|                          
|                          
|                          
|                          
|                           | Depreciation and amortization               |                    |                          | 7.1  |                         |      |      | 7.5  |      
|                          
|                          
|                          
|                          
|                           | Other operating expenses                    |                    |                          | 7.6  |                         |      |      | 8.6  |      
|                          
|                          
|                          
|                          
|                           | Restructuring and asset impairment charges  |                    |                          |     |                         |      |      | 2.4  |      
|                           |                                             |                    |                          |      |                         |      |      |     
|                           |                                             |                    | Total operating expenses |      |                         | 90.7 |      |      |       | 95.5 | 
|                           |                                             |                    |                          |      |                         |      |      |     
|Income from operations     |                                             |                    | 9.3                      |      |                         |      | 4.5  |     
|                           |                                             |                    |                          |      |                         |      |      |     
|Other income-net           |                                             |                    | 0.3                      |      |                         |      | 0.4  |     
|                           |                                             |                    |                          |      |                         |      |      |     
|Income before income taxes |                                             |                    | 9.6                      |      |                         |      | 4.9  |     
|                          
|                          
|                          
|                          
|Provision for income taxes |                                             |                    | (3.2                     | )    |                         |      | (2.0 | )   
|                           |                                             |                    |                          |      |                         |      |      |     
|Net income                 |                                             |                    | 6.4                      | %    |                         |      | 2.9  | %   
|                           |                                             |                    |                          |      |                         |      |      |     

Net revenue Net revenue increased $3.4 million, or 2.6%, to $134.0 million in
the first quarter of 2002 from $130.6 million in the first quarter of 2001.

Electronic payments net revenue increased $1.3 million, or 2.9%, to $46.5
million in the first quarter of 2002 from $45.2 million in the first quarter of
2001. Our EBT revenues increased due to the renewal of certain government
contracts at improved rates and an increased caseload volume. Excluding the
impact of EITF 01-14 (see Accounting Change in Note 3 to financial statements),
revenues from ACH, POS, EFT and other processing decreased slightly due to the
expected revenue declines associated with the STAR network we experienced
during the first quarter of 2002 as compared to the comparable period last
year. Transaction processing volumes, exclusive of transactions related to EBT
services and STAR, increased approximately 21% during the first quarter of 2002
compared to the same period in 2001 while revenues from these processing
services, increased by approximately 7.8% over the first quarter of last
year. The increase in processing revenues is not directly proportional to the
increase in processing volumes because processing activities with lower unit
prices increased substantially more than those processing activities with
higher unit prices.

Although we continue to pursue EBT contracts where we can obtain them on a
profitable basis, we expect to see a decline in the revenues of the government
services segment in 2002 if our Medicaid eligibility verification contract with
the state of New York is not renewed. This contract provided us $2.9 million
of revenue in the first quarter of 2002 and is scheduled to expire at the end
of October 2002. It is possible that we may receive further extensions of this
agreement, but we are unable to predict whether we in fact will receive any
such extensions. No other EBT contracts are scheduled to expire until the
fourth quarter of 2002 (at which time a contract that generated $1.8 million of
revenue in 2001 is scheduled to expire), although all of our government
services contracts are terminable by the contracting governmental entity at any
time.

ATM management services revenue increased $4.0 million, or 24.1%, to $20.6
million in the first quarter of 2002 from $16.6 million in the first quarter of
2001. The increase is primarily due to the acquisition of the ATM-related
assets of Hanco Systems, Inc., which contributed $3.2 million in new revenue
during the first quarter of 2002. Branding and equipment sales revenue also
increased in the first quarter of 2002 compared to the same quarter of the

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prior year as these activities did not contribute material amounts of revenues
in the first quarter of 2001. We currently manage a network of approximately
11,000 ATMs. We are actively seeking to acquire the ATM portfolios of other
independent ATM deployment and management companies.

Decision support and risk management revenue decreased $0.1 million, or 0.3%,
to $37.3 million in the first quarter of 2002 from $37.4 million in the first
quarter of the prior year. Revenues from SCAN(SM), our retail check
verification service, have declined primarily due to additional retail
bankruptcies of our customers. This decrease was offset by revenue growth in
our ChexSystems(SM) products in both volume and higher value product mix due to
a response by financial institutions to an expected mandate by the U.S.
government for better customer screening under the USA Patriot Act.

Revenues from professional services decreased $1.9 million, or 6.1%, to $29.5
million in the first quarter of 2002 from $31.4 million in the first quarter of
the prior year. Revenue from information technology services provided under our
contract with Deluxe declined from $12.5 million in the first quarter of 2001
to $10.3 million in the first quarter of 2002. If Deluxe fails to spend a
minimum of $43 million for software development services under our software
development and business process outsourcing agreement with it in any year, it
will be obligated to make payments to us based on a schedule in the contract
that is reflective of an estimate of our lost profits. Although Deluxe had
previously indicated to us that it expects to purchase software development
services from us in 2002 at approximately the $43 million level contemplated by
our outsourcing agreement with it, we currently anticipate that 2002 revenues
from software development activities performed pursuant to this agreement will
approximate $39 million. The provision of services by us under this software
development and business process outsourcing agreement is non-exclusive, and
Deluxe may contract with any third party for the provision of professional
services. Revenues from other information technology clients declined by $3.2
million in the first quarter of 2002 as compared to the same period for the
prior year as a result of our decision in 2001 to cease providing stand-alone
information technology development services. This decline in information
technology services activity was offset by increased software sales in the
first quarter of this year. The following table illustrates our revenue
generated from software sales:

|                       |  |                         |        |      |  |   |       | 
|---------------------- |  | ----------------------- | ------ | ---- |  | - | ----- | 
|                       |  | Quarter Ended March 31,
|                       |  |                        
|                       |  | 2002                    |        | 2001
|(dollars in thousands) |  |                         |        |     
|License fees           |  | $                       | 7,699  |      |  | $ | 2,854 | 
|                      
|                      
|                      
|                      
|Maintenance            |  |                         | 3,417  |      |  |   | 3,200 | 
|                      
|                      
|                      
|                      
|Software modifications |  |                         | 1,416  |      |  |   | 3,125 | 
|                       |  |                         |        |      |  |   |       | 
|                       |  | $                       | 12,532 |      |  | $ | 9,179 | 
|                       |  |                         |        |      |  |   |       | 

Business process management (BPM) revenues also declined in the first quarter
of 2002 as compared to the same period for the prior year due to a reduction in
services for Deluxe. Our agreement with Deluxe calls for us to provide Deluxe
with accounts receivable, accounts payable and other general accounting and
data entry services. Deluxes annual minimum spending target for these
services ranges from $8.1 million in 2000 to $4.2 million in 2004. The target
for 2002 is $6.4 million and revenues from these services were $1.2 million in
the first quarter of this year. The decline in revenues from Deluxe was offset
by increased revenue from other BPM customers and our call center activities.

Processing, communication and service costs This category includes cost of
processing, telecommunications, computer equipment and promotional services.
These costs increased $1.9 million, or 3.9%, to $50.8 million in the first
quarter of 2002 from $48.9 million in the same period of the prior year. As a
percentage of net revenue, processing, communication and service costs were
37.9% in the first quarter of 2002 compared to 37.4% for the same period of
2001. Telecommunications, third party processing charges and cost of equipment
sales have increased along with the increase in ATM processing and ATM
equipment sales. Currently, we provide the processing for approximately 5,100
of the 11,000 ATM machines in our network and we expect to complete the
transition of the processing for the remaining 4,800 of our U.S. ATMs to our
networks by the end of the year. Due to existing contractual commitments,
processing for the approximately 1,100 ATMs we have in Canada will not likely
be transitioned to our networks for a substantial period of time. Reimbursable
costs, the majority of which related to transaction processing, that are billed
to customers also increased in the first quarter of 2002 compared to the same
period of the prior year due to increased transaction volumes.

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Employee costs Expenditures in this category represent employee compensation
and related employee expenses, benefits and travel. These costs decreased $0.7
million, or 1.4%, to $51.0 million in the first quarter of 2002 from $51.7
million in the first quarter of 2001. As a percentage of net revenue, employee
costs were 38.1% in the first quarter of 2002, compared to 39.6% for the first
quarter of 2001. Although we had approximately 200 more employees in the first
quarter of 2002 than we did in the first quarter of 2001, due in part to the
addition of ACI employees, we experienced cost savings by re-deploying certain
development responsibilities to our India based operations and as a result of
initiatives begun in 2001 such as the consolidation of our data center
operations. Additionally, our travel expenditures were less in the first
quarter of 2002 compared to the same period of the prior year.

Depreciation and amortization These costs represent depreciation of
facilities and equipment, amortization of intangible assets, such as
capitalized software costs and customer contract costs, and, prior to
implementation of SFAS 142 in 2002, amortization of goodwill. Depreciation and
amortization decreased $0.3 million, or 3.1%, to $9.5 million in the first
quarter of 2002 from $9.8 million for the first quarter of 2001. As a
percentage of revenue, these costs were 7.1% in the first quarter of 2002 and
7.5% for the same period of the prior year. Approximately $1 million of
amortization of goodwill was recorded in the first quarter of 2001, whereas no
such amortization was recorded in 2002. This decrease was offset by more
depreciation of property and equipment, more amortization of internally
developed software, and amortization of customer contracts recorded in
connection with the purchase of ACI.

Other operating expenses Expenditures in this category include facility
costs, professional, consulting and temporary services, bad debt, and certain
administrative costs. Other operating expenses decreased $1.0 million, or
8.9%, to $10.2 million for the first quarter in 2002 compared to $11.2 million
for the same period of the prior year. As a percentage of revenue, these
expenses decreased to 7.6% in the first quarter of 2002 from 8.6% for the first
quarter in 2001. We experienced significant savings in consulting and
temporary services in the first quarter of 2002 as compared to the same period
of the prior year, due to a decreased reliance on contract labor. This savings
was offset slightly by an increase in facility rental costs due to the
expansion of our facilities in India and in Scottsdale, and by an increase in
insurance costs.

Income from operations Income from operations increased $6.7 million, or
115.5%, to $12.5 million in the first quarter of 2002 compared to $5.8 million
in the first quarter of 2001. As a percentage of net revenue, income from
operations was 9.3% for the first quarter in 2002 compared to 4.5% for the same
period of the prior year. Part of this increase is due to the $3.2 million
restructuring and asset impairment charge we recorded in the first quarter of 2001 for severance and lease
costs related to the closure of our operations in Bothell, Washington. There
were no similar charges for the first quarter of 2002. Also, in accordance
with SFAS No. 142, we stopped amortizing goodwill in the first quarter of 2002.
Goodwill amortization for the same period of the prior year was approximately
$1 million. Excluding the charge for the closure of Bothell operations and the
elimination of amortization of goodwill, income from operations increased
approximately $2.5 million, or approximately 25%. As a percentage of revenue,
income from operations, excluding special charges and goodwill amortization in
the first quarter of 2001, increased to 9.3% in the first quarter of 2002 from
7.7% in the same period of the prior year. The improvement is attributable to
our continued cost savings initiatives and a slightly higher percentage of
software sales during the first quarter of 2002 compared to the same period of
the prior year.

Other income-net Other income-net was $0.4 million during the first quarter
of 2002 compared to $0.5 million for the same period of the prior year.
Interest earned on cash and cash equivalents decreased $1.0 million to $0.3
million in the first quarter of 2002 compared to $1.3 million for the same
period of the prior year. The decrease was offset by a decrease of $0.2 million
in interest expense, $0.3 million in equity method amortization, and $0.4
million in other expenses, from the same period of the prior year.

Provision for income taxesThe provision for income taxes was $4.3 million
in the first quarter of 2002 compared to $2.6 million in the first quarter of
2001 resulting in effective tax rates of 33.7% and 41.1%, respectively. The
decrease in our effective tax rate is primarily a result of the
cessation of goodwill amortization beginning in 2002 which was
non-deductible for tax purposes and increased earnings by our
Indian subsidiary. Our Indian software development and business process
management operations qualify for tax incentives associated with businesses
that operate within designated geographic locations. Such incentives generally
provide us with exemptions from Indian income tax on certain business income
generated from these operations. As a result of a recent change in Indian tax
law, effective April 1, 2002 and through March 31, 2003, 10% of this previously
tax exempt income will be subject

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to Indian income tax at the rate of 35%. We do not expect that this change
will have a significant impact on our effective tax rate for 2002. The
remaining tax incentives phase out through March 2009.

Liquidity, Capital Resources, and Financial Condition

At March 31, 2002, net working capital was $120.2 million, compared to $117.8
million at December 31, 2001. Cash and cash equivalents, including cash in
ATMs of approximately $20 million, totaled $104.3 million at March 31, 2002, an
increase of $2.4 million from December 31, 2001. This cash was generated
primarily from operating activities. At March 31, 2002, we had $3.8 million of
restricted cash that we temporarily hold in custodial accounts on behalf of
clients.

Our operations and our capital expenditure requirements are financed primarily
through cash flow from operations. Short term liquidity needs and long term
capital expenditure requirements of approximately $40 million for 2002 will be
provided from cash and cash equivalents on hand and cash flow from operations.

We have a $20 million revolving credit facility with a bank. As of March 31,
2002 no loans were outstanding under this facility. From time to time we issue
letters of credit in the ordinary course of business under this facility. At
March 31, 2002 the aggregate value of such outstanding letters of credit
amounted to $1.0 million. Loans under this facility will bear interest at the
applicable prime rate or the LIBOR rate plus a margin determined by reference
to the Companys leverage ratio. The facility is guaranteed by certain of the
Companys subsidiaries and requires the Company to comply with certain
financial and non-financial covenants. The Company is currently in compliance
with these requirements.

We have additional outstanding commercial commitments consisting mainly of
guarantees for contract performance, that include letters of credit, bank
guarantees and performance bonds. As of March 31, 2002 and December 31, 2001,
our total obligation under these commercial commitments was $10.9 million and
$11.5 million, respectively, over a five-year term. As of December 31, 2001 our
contractual cash obligations for capital and operating leases and outsourcing
and maintenance obligations totaled $128.3 million through December 31, 2006.
Our contractual cash obligations had not materially changed from this amount at
March 31, 2002.

The following table sets forth a summary of our cash flow activity and should
be read in conjunction with our unaudited consolidated statements of cash
flows:

|                                                     |  |                         |         |      |  |   |        |  
|---------------------------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------ | -
|                                                     |  | Summary of Cash Flows  
|                                                     |  | Quarter Ended March 31,
|                                                     |  |                        
|                                                     |  | 2002                    |         | 2001
|(dollars in thousands)                               |  |                         |         |     
|Cash provided by (used in) operating activities      |  | $                       | 17,892  |      |  | $ | (2,253 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Cash used in investing activities                    |  |                         | (16,790 | )    |  |   | (9,077 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Cash provided by financing activities                |  |                         | 1,349   |      |  |   | 3,072  |  
|                                                     |  |                         |         |      |  |   |        |  
|Net increase (decrease) in cash and cash equivalents |  | $                       | 2,451   |      |  | $ | (8,258 | )
|                                                     |  |                         |         |      |  |   |        |  

Net cash flows from operating activities provided $17.9 million and used $2.3
million for the quarters ended March 31, 2002 and 2001, respectively. The
increase in operating cash flow compared to the same quarter last year resulted
from greater operating income and effective management of working capital
accounts. During the quarter ended March 31, 2002, accounts receivable
decreased by $2.3 million, whereas accounts receivable increased by $19.1
million for the same quarter of the prior year. The increase last year was due
to the growth of our Company and also because billings to Deluxe were shown as
receivables in 2001 as opposed to intercompany balances at December 31, 2000.

Our investing activities used cash of $16.8 million for the quarter ended March
31, 2002, compared to $9.1 million for the same quarter last year. We spent
$5.4 million to purchase systems, equipment and software in the first quarter
of 2002, compared to like capital expenditures of $9.1 million in the same
quarter last year. We also purchased substantially all of the ATM-related
assets of Hanco for $11.4 million in the first quarter of 2002.

Financing activities provided $1.3 million and $3.1 million in cash for the
quarters ended March 31, 2002 and 2001, respectively. During the quarter ended
March 31, 2002, we repaid $0.8 million of long-term debt and received $2.1
million from sales of common stock pursuant to exercise of stock options and
the employee stock purchase plan.

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During the same period of the prior year, we used cash to repay debt of $5.8
million and obtained $8.5 million from the release of a time deposit placed as
collateral for this debt.

Recent Developments

Acquisition of Samsar ATM Co., Inc.  During May 2002, we acquired all of the
outstanding stock of Samsar ATM Co., Inc. (Samsar), an independent ATM
deployment and management company for approximately $3.3 million in cash.
Samsar managed a network of approximately 1,000 ATMs located primarily in the
northwestern U.S. We are actively pursuing the acquisition of the ATM
portfolios of other independent ATM deployment and management companies.

Transactions with STAR  In 2001, Concord EFS acquired the STAR debit network,
formerly our largest transaction processing customer, and notified us that it
intended to terminate STARs processing agreement with us and perform the
processing for this network at its own data centers. As part of the transition
of this activity, STAR licensed our EFT software and contracted for the
long-term maintenance thereof and for professional services to assist in the
migration effort. The licenses to STAR represented our largest software
licensing transactions to date. The transition of the processing for the STAR
network to Concord EFS is currently scheduled to be completed by the fourth
quarter of 2002. Concord EFS will pay us fixed monthly fees for the transaction
processing we will perform for the STAR network during the transition period
and we expect to see the revenues from our relationship with STAR decline
substantially from historical levels in future periods. Including software
license and maintenance fees and fees for processing transactions for STAR and
other Concord affiliates, Concord EFS accounted for approximately $11.4 million
of net revenues during the quarter ended March 31, 2002, or approximately 9% of
our total net revenues in that quarter (excluding revenues derived from
reimbursed expenses), as compared to $9.9 million for the quarter ended March
31, 2001. We currently estimate that the total net revenues we will recognize
from our relationship with Concord EFS in 2002 will approximate $28 million,
compared to $56.2 million in 2001. Of this amount, approximately $16 million
relates to the provision of transaction processing services to the STAR network
during the transition period ($6 million of which was recognized during the
first quarter of 2002 and the balance of which will be recognized approximately
ratably over the second and third quarters). Approximately $4 million of the
2002 revenues relates to a software sale also recognized during the first
quarter. We do not expect the remaining revenues from Concord EFS affiliate
Primary Payment Systems, Inc. to be affected by the termination of STARs
processing agreement.

Government Services  We have recently been informed that we have been awarded
the prime EBT contracts for the states of Alabama and Missouri. The contract
with Alabama will commence in June 2002 and we believe the Missouri agreement
will commence in January 2003. When fully operational, these relationships are
expected to generate an aggregate of approximately $4.5 million in annual
incremental revenues over the amounts we received from these states in 2001 as
our role changes from subcontractor to prime contractor. We have also recently
been informed that Citibank has been awarded the EBT contract for the Western
States EBT Alliance (Arizona, Alaska, Colorado, Guam, Hawaii, Idaho and
Washington). We currently act as a subcontractor to Citibank for this alliance
and this relationship generated approximately $4.8 million in revenues in 2001.
We expect that, as a result of Citibank being awarded this EBT contract, our
role as a subcontractor will be discontinued. We do not presently anticipate
that this transition will have a material impact on our business in 2002 or
2003 as our significant contracts for this coalition will not begin to roll-off
until 2004.

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PART II  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following exhibits are filed as part of this report:

|            |  |                                       |  |                 
|----------- |  | ------------------------------------- |  | ----------------
|Exhibit No. |  | Description                           |  | Method of Filing
|            |  |                                       |  |                 
|99.1        |  | Certification by Thomas S. Liston     |  | Filed herewith  
|           
|           
|           
|           
|99.2        |  | Certification by Paul F. Walsh        |  | Filed herewith  
|           
|           
|           
|           
|99.3        |  | Written statement by Paul F. Walsh    |  | Filed herewith  
|           
|           
|           
|           
|99.4        |  | Written statement by Thomas S. Liston |  | Filed herewith  

*Incorporated by reference

(a) Reports on Form 8-K

The Company filed a report on Form 8-K on March 6, 2002. An exhibit to this
report contained the following financial statements:



| | - |  | Consolidated Balance Sheets of eFunds Corporation at December 31, 2001 and 2000                                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | Consolidated Statements of Operations of eFunds Corporation of the years ended December 31,
2001, 2000 and 1999                  
|
| | - |  | Consolidated Statements of Comprehensive Income (Loss) of eFunds Corporation for the
years ended December 31, 2001, 2000 and 1999
|
| | - |  | Consolidated Statements of Stockholders Equity of eFunds
Corporation at December 31, 2001, 2000 and 1999                        
|
| | - |  | Consolidated Statements of Cash Flows of eFunds Corporation for the
years ended December 31, 2001, 2000, and 1999                

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SIGNATURES

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

|                           |  |                                                                      
|-------------------------- |  | ---------------------------------------------------------------------
|                           |  | eFunds Corporation
(Registrant)                                      
|                          
|                          
|                          
|                          
|                           |  |                                                                      
|                          
|                          
|                          
|                          
|Date:   
November 29, 2002 |  | /s/ Paul F. Walsh

Paul F. Walsh
Chief Executive Officer and Chairman

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Index to Exhibits

|            |  |                                       |  |             |  | 
|----------- |  | ------------------------------------- |  | ----------- |  | 
|Exhibit No. |  | Description                           |  | Page Number
|            |  |                                       |  |            
|99.1        |  | Certification by Thomas S. Liston    
|           
|           
|           
|           
|99.2        |  | Certification by Paul F. Walsh       
|           
|           
|           
|           
|99.3        |  | Written statement by Paul F. Walsh   
|           
|           
|           
|           
|99.4        |  | Written statement by Thomas S. Liston

23