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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)



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003.
|- | --------------------------------------------------------------------------------------------------------------------------------------



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: 0-27778



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PTEK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



GEORGIA

(State or other jurisdiction
of incorporation or organization)



59-3074176

(I.R.S. Employer Identification No.)



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3399 PEACHTREE ROAD NE

THE LENOX BUILDING, SUITE 700

ATLANTA, GEORGIA 30326

(Address of principal executive offices, including zip code)



(404) 262-8400

(Registrants telephone number including area code)



N/A

(Former name, former address and
former fiscal year,

if changed since last report)



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



Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈



Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|Class                         |  | Outstanding at May 13, 2003
|----------------------------- |  | ---------------------------
|Common Stock, $0.01 par value |  | 53,535,901 Shares          



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##### Table of Contents

AMENDMENT



Pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended, PTEK Holdings, Inc. hereby amends its Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2003 to respond to certain comments of the Securities and Exchange Commission (SEC) in connection with its review of our Registration Statement on Form S-3 filed on September 24, 2003.



For convenience and ease of reference we are filing this Quarterly Report in
its entirety. Unless otherwise stated, all information contained in this amendment is as of May 15, 2003, the filing date of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003. Accordingly, this Amendment No. 1 to the
Quarterly Report on Form 10-Q/A should be read in conjunction with our subsequent filings with the SEC.



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##### Table of Contents

PTEK HOLDINGS, INC. AND SUBSIDIARIES



INDEX TO FORM 10-Q/A



|              |  |                       |  |                                                                                                    |  | Page
|------------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|PART I        |  | FINANCIAL INFORMATION |  |                                                                                                   
|              |  |                       | 
|              |  | Item 1                |  | Financial Statements                                                                               |  |     
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                   |  | 1   
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002 |  | 2   
|              |  |                       | 
|              |  |                       |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |  | 3   
|              |  |                       | 
|              |  |                       |  | Notes to Condensed Consolidated Financial Statements                                               |  | 4   
|              |  |                       | 
|              |  | Item 2                |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |  | 14  
|              |  |                       | 
|              |  | Item 3                |  | Quantitative and Qualitative Disclosures About Market Risk                                         |  | 23  
|              |  |                       | 
|              |  | Item 4                |  | Controls and Procedures                                                                            |  | 23  
|              |  |                      
|PART II       |  | OTHER INFORMATION     |  |                                                                                                   
|              |  |                       | 
|              |  | Item 1                |  | Legal Proceedings                                                                                  |  | 24  
|              |  |                       | 
|              |  | Item 2                |  | Changes in Securities and Use of Proceeds                                                          |  | 26  
|              |  |                       | 
|              |  | Item 3                |  | Defaults Upon Senior Securities                                                                    |  | 26  
|              |  |                       | 
|              |  | Item 4                |  | Submission of Matters to a Vote of Security Holders                                                |  | 27  
|              |  |                       | 
|              |  | Item 5                |  | Other Information                                                                                  |  | 27  
|              |  |                       | 
|              |  | Item 6                |  | Exhibits and Reports on Form 8-K                                                                   |  | 27  
|              | 
|SIGNATURES    |  | 28                   
|              | 
|EXHIBIT INDEX |  | 29                   





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##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



PTEK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)



|                                                                                                                                                                                                                                                                               |  | March 31, 2003 |          |   | December31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | -------- | - | ---------------- | -
|                                                                                                                                                                                                                                                                               |  | (Unaudited)    |          |   | (Audited)        |  
|ASSETS                                                                                                                                                                                                                                                                         |  |                |          |   |                  |  
|CURRENT ASSETS                                                                                                                                                                                                                                                                 |  |                |          |   |                  |  
|Cash and cash equivalents                                                                                                                                                                                                                                                      |  | $              | 52,788   |   |                  | $
|Restricted cash, current                                                                                                                                                                                                                                                       |  |                | 1,250    |   |                  |  
|Marketable securities, available for sale                                                                                                                                                                                                                                      |  |                | 677      |   |                  |  
|Accounts receivable (less allowance of $7,386 and $7,074, respectively)                                                                                                                                                                                                        |  |                | 56,751   |   |                  |  
|Prepaid expenses and other                                                                                                                                                                                                                                                     |  |                | 8,889    |   |                  |  
|Deferred income taxes, net                                                                                                                                                                                                                                                     |  |                | 14,748   |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|Total current assets                                                                                                                                                                                                                                                           |  |                | 135,103  |   |                  |  
|                                                                                                                                                                                                                                                                               |  |               
|PROPERTY AND EQUIPMENT, NET                                                                                                                                                                                                                                                    |  |                | 61,932   |   |                  |  
|                                                                                                                                                                                                                                                                               |  |               
|OTHER ASSETS                                                                                                                                                                                                                                                                   |  |                |          |   |                  |  
|Goodwill                                                                                                                                                                                                                                                                       |  |                | 123,066  |   |                  |  
|Intangibles, net                                                                                                                                                                                                                                                               |  |                | 16,051   |   |                  |  
|Deferred income taxes, net                                                                                                                                                                                                                                                     |  |                | 5,420    |   |                  |  
|Notes receivable-employees                                                                                                                                                                                                                                                     |  |                | 2,005    |   |                  |  
|Restricted cash, non-current                                                                                                                                                                                                                                                   |  |                | 3,750    |   |                  |  
|Other assets                                                                                                                                                                                                                                                                   |  |                | 3,113    |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|                                                                                                                                                                                                                                                                               |  | $              | 350,440  |   |                  | $
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                                                                           |  |                |          |   |                  |  
|CURRENT LIABILITIES                                                                                                                                                                                                                                                            |  |                |          |   |                  |  
|Accounts payable                                                                                                                                                                                                                                                               |  | $              | 34,966   |   |                  | $
|Accrued taxes                                                                                                                                                                                                                                                                  |  |                | 8,658    |   |                  |  
|Accrued liabilities                                                                                                                                                                                                                                                            |  |                | 26,223   |   |                  |  
|Current maturities of long-term debt and capital lease obligations                                                                                                                                                                                                             |  |                | 4,494    |   |                  |  
|Accrued restructuring costs                                                                                                                                                                                                                                                    |  |                | 1,608    |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|Total current liabilities                                                                                                                                                                                                                                                      |  |                | 75,949   |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|LONG-TERM LIABILITIES                                                                                                                                                                                                                                                          |  |                |          |   |                  |  
|Convertible subordinated notes                                                                                                                                                                                                                                                 |  |                | 172,500  |   |                  |  
|Long-term debt and capital lease obligations                                                                                                                                                                                                                                   |  |                | 2,100    |   |                  |  
|Other accrued liabilities                                                                                                                                                                                                                                                      |  |                | 10,904   |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|Total long-term liabilities                                                                                                                                                                                                                                                    |  |                | 185,504  |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|                                                                                                                                                                                                                                                                               |  |               
|COMMITMENTS AND CONTINGENCIES (Note 7)                                                                                                                                                                                                                                         |  |                |          |   |                  |  
|                                                                                                                                                                                                                                                                               |  |               
|SHAREHOLDERS EQUITY                                                                                                                                                                                                                                                           |  |                |          |   |                  |  
|Common stock, $0.01 par value; 150,000,000 shares authorized, 58,789,975 and 58,733,628 shares issued at March 31, 2003 and
December 31, 2002, respectively, and 53,437,475 and 53,540,828 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |  |                | 588      |   |                  |  
|Unrealized gain on marketable securities, available for sale                                                                                                                                                                                                                   |  |                | 298      |   |                  |  
|Additional paid-in capital                                                                                                                                                                                                                                                     |  |                | 604,112  |   |                  |  
|Unearned restricted stock compensation                                                                                                                                                                                                                                         |  |                | (1,468   | ) |                  |  
|Treasury stock, at cost                                                                                                                                                                                                                                                        |  |                | (22,739  | ) |                  |  
|Note receivable, shareholder                                                                                                                                                                                                                                                   |  |                | (5,117   | ) |                  |  
|Cumulative translation adjustment                                                                                                                                                                                                                                              |  |                | (2,935   | ) |                  |  
|Accumulated deficit                                                                                                                                                                                                                                                            |  |                | (483,752 | ) |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|Total shareholders equity                                                                                                                                                                                                                                                     |  |                | 88,987   |   |                  |  
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  
|                                                                                                                                                                                                                                                                               |  | $              | 350,440  |   |                  | $
|                                                                                                                                                                                                                                                                               |  |                |          |   |                  |  



Accompanying notes are
integral to these condensed consolidated financial statements.



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##### Table of Contents

PTEK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE

THREE MONTHS ENDED MARCH 31, 2003 AND 2002

(IN THOUSANDS, EXCEPT PER SHARE DATA)



|                                                                                 |  | 2003        |        |   | 2002 |  
|-------------------------------------------------------------------------------- |  | ----------- | ------ | - | ---- | -
|                                                                                 |  | (Unaudited) |       
|REVENUES                                                                         |  | $           | 89,220 |   |      | $
|COST OF REVENUES (exclusive of depreciation shown separately below)              |  |             | 30,672 |   |      |  
|                                                                                 |  |             |        |   |      |  
|GROSS MARGIN                                                                     |  |             | 58,548 |   |      |  
|                                                                                 |  |             |        |   |      |  
|OTHER OPERATING EXPENSES                                                         |  |             |        |   |      |  
|Selling and marketing                                                            |  |             | 24,264 |   |      |  
|General and administrative                                                       |  |             | 13,496 |   |      |  
|Research and development                                                         |  |             | 2,004  |   |      |  
|Depreciation                                                                     |  |             | 5,533  |   |      |  
|Amortization                                                                     |  |             | 1,999  |   |      |  
|Equity based compensation                                                        |  |             | 584    |   |      |  
|                                                                                 |  |             |        |   |      |  
|Total operating expenses                                                         |  |             | 47,880 |   |      |  
|                                                                                 |  |             |        |   |      |  
|OPERATING INCOME                                                                 |  |             | 10,668 |   |      |  
|                                                                                 |  |             |        |   |      |  
|                                                                                 |  |            
|OTHER INCOME (EXPENSE)                                                           |  |             |        |   |      |  
|Interest, net                                                                    |  |             | (2,565 | ) |      |  
|Gain on sale of marketable securities                                            |  |             |       |   |      |  
|Other, net                                                                       |  |             | 281    |   |      |  
|                                                                                 |  |             |        |   |      |  
|Total other income (expense)                                                     |  |             | (2,284 | ) |      |  
|                                                                                 |  |             |        |   |      |  
|INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                            |  |             | 8,384  |   |      |  
|INCOME TAX EXPENSE                                                               |  |             | 3,605  |   |      |  
|                                                                                 |  |             |        |   |      |  
|INCOME FROM CONTINUING OPERATIONS                                                |  | $           | 4,779  |   |      | $
|                                                                                 |  |             |        |   |      |  
|                                                                                 |  |            
|DISCONTINUED OPERATIONS                                                          |  |             |        |   |      |  
|Loss from operations of Voicecom (including loss on disposal of $12,625 in 2002) |  |             |       |   |      |  
|Income tax benefit                                                               |  |             |       |   |      |  
|                                                                                 |  |             |        |   |      |  
|Loss on discontinued operations                                                  |  |             |       |   |      |  
|                                                                                 |  |             |        |   |      |  
|NET INCOME (LOSS)                                                                |  | $           | 4,779  |   |      | $
|                                                                                 |  |             |        |   |      |  
|                                                                                 |  |            
|BASIC AND DILUTED NET INCOME/(LOSS) PER SHARE                                    |  |             |        |   |      |  
|Continuing operations                                                            |  | $           | 0.09   |   |      | $
|Discontinued operations                                                          |  | $           |       |   |      | $
|                                                                                 |  |             |        |   |      |  
|Net income (loss)                                                                |  | $           | 0.09   |   |      | $
|                                                                                 |  |             |        |   |      |  
|WEIGHTED AVERAGE SHARES OUTSTANDING                                              |  |             |        |   |      |  
|Basic                                                                            |  |             | 52,711 |   |      |  
|                                                                                 |  |             |        |   |      |  
|Diluted                                                                          |  |             | 54,871 |   |      |  
|                                                                                 |  |             |        |   |      |  



Accompanying notes are
integral to these condensed consolidated financial statements.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE

THREE MONTHS ENDED MARCH 31, 2003 AND 2002

(IN THOUSANDS)



|                                                                               |  | 2003        |         |   | 2002 |  
|------------------------------------------------------------------------------ |  | ----------- | ------- | - | ---- | -
|                                                                               |  | (Unaudited) |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                           |  |             |         |   |      |  
|Net income (loss)                                                              |  | $           | 4,779   |   |      | $
|Adjustments to reconcile net loss to cash flows from operating activities:     |  |             |         |   |      |  
|Loss on discontinued operations                                                |  |             |        |   |      |  
|Depreciation                                                                   |  |             | 5,533   |   |      |  
|Amortization                                                                   |  |             | 1,999   |   |      |  
|Gain on sale of marketable securities                                          |  |             |        |   |      |  
|Deferred income taxes                                                          |  |             | 2,266   |   |      |  
|Payments for restructuring costs                                               |  |             | (290    | ) |      |  
|Equity based compensation                                                      |  |             | 584     |   |      |  
|Changes in assets and liabilities:                                             |  |             |         |   |      |  
|Accounts receivable, net                                                       |  |             | (4,841  | ) |      |  
|Prepaid expenses and other receivables                                         |  |             | (559    | ) |      |  
|Accounts payable and accrued expenses                                          |  |             | (9,101  | ) |      |  
|                                                                               |  |             |         |   |      |  
|Total adjustments                                                              |  |             | (4,409  | ) |      |  
|                                                                               |  |             |         |   |      |  
|Net cash provided by (used in) operating activities from continuing operations |  |             | 370     |   |      |  
|Net cash provided by operating activities from discontinued operations         |  |             |        |   |      |  
|                                                                               |  |             |         |   |      |  
|Net cash provided by (used in) operating activities                            |  |             | 370     |   |      |  
|                                                                               |  |             |         |   |      |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                           |  |             |         |   |      |  
|Capital expenditures                                                           |  |             | (2,723  | ) |      |  
|Proceeds from sale of discontinued operation                                   |  |             |        |   |      |  
|Sale of marketable securities                                                  |  |             |        |   |      |  
|Payments made for certain business assets                                      |  |             | (6,382  | ) |      |  
|Increase in restricted cash for acquisitions                                   |  |             | (5,000  | ) |      |  
|                                                                               |  |             |         |   |      |  
|Net cash (used in) provided by investing activities from continuing operations |  |             | (14,105 | ) |      |  
|Net cash used in investing activities from discontinued operations             |  |             |        |   |      |  
|                                                                               |  |             |         |   |      |  
|Net cash (used in) provided by investing activities                            |  |             | (14,105 | ) |      |  
|                                                                               |  |             |         |   |      |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                           |  |             |         |   |      |  
|Payments under borrowing arrangements                                          |  |             | (1,133  | ) |      |  
|Purchase of treasury stock, at cost                                            |  |             | (627    | ) |      |  
|Exercise of stock options, net of tax withholding payments                     |  |             | 91      |   |      |  
|                                                                               |  |             |         |   |      |  
|Net cash used in financing activities from continuing operations               |  |             | (1,669  | ) |      |  
|Net cash used in financing activities from discontinued operations             |  |             |        |   |      |  
|                                                                               |  |             |         |   |      |  
|Net cash used in financing activities                                          |  |             | (1,669  | ) |      |  
|                                                                               |  |             |         |   |      |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                        |  |             | (585    | ) |      |  
|                                                                               |  |             |         |   |      |  
|NET DECREASE IN CASH AND EQUIVALENTS                                           |  |             | (15,989 | ) |      |  
|CASH AND EQUIVALENTS, beginning of period                                      |  |             | 68,777  |   |      |  
|                                                                               |  |             |         |   |      |  
|CASH AND EQUIVALENTS, end of period                                            |  | $           | 52,788  |   |      | $
|                                                                               |  |             |         |   |      |  



Supplemental Disclosure of Cash Flow
Information: In February 2002, the Company made a discretionary non-cash contribution of $1.6 million in common stock to the Companys 401(k) Plan.



Accompanying notes are integral to these condensed consolidated financial statements.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. BASIS OF PRESENTATION



The accompanying unaudited interim condensed consolidated financial
statements have been prepared by management of PTEK Holdings, Inc. and its subsidiaries (collectively, the Company or PTEK) in accordance with rules and regulations of the Securities and Exchange Commission (SEC).
Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of management of the Company, all
adjustments (consisting only of normal recurring adjustments, except as disclosed herein) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include provisions for bad debts, carrying values and useful lives assigned to intangible and other long-lived
assets, and accrued liabilities. Actual results could differ from those estimates. These interim condensed consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December
31, 2002.



2. SIGNIFICANT ACCOUNTING POLICIES



Accounts Receivable



Included in accounts receivable at March 31, 2003 was earned but unbilled
revenue of approximately $3.8 million at Premiere Conferencing, which resulted from weekly cycle billing that was implemented during the third quarter of 2002. Earned but unbilled revenue is billed within thirty days.



Software Development Costs



Pursuant to the American Institute of Certified Public Accountants Statement
of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, costs incurred to develop significant enhancements to software features to be sold as part of services offerings
and costs incurred to implement a new billing system at Premiere Conferencing are being capitalized. For the three months ended March 31, 2003 and 2002, the Company capitalized approximately $0.5 million and $0.6 million, respectively. These
capitalized costs are being depreciated on a straight line basis over the estimated life of the related software, not to exceed three years. Depreciation expense recorded for phases completed in the three months ended March 31, 2003 and 2002 was
approximately $0.2 million and $0.0 million, respectively.



Equity Based
Compensation Plans



The Company accounts for stock
based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, no compensation expense
has been recognized for awards (other than restricted share awards) issued under the Companys stock based compensation plans where the exercise price of such award is equal to the market price of the underlying common stock at the date of
grant. The Company provides the additional disclosures required under Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock Based Compensation (SFAS No. 123), as amended by SFAS No. 148,
Accounting for Stock Based Compensation  Transition and Disclosure.



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PTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The Company has adopted the disclosure only provision of SFAS No. 123. Had compensation expense for
the Companys stock option grants described above been determined based on the fair value at the grant date for awards in the three months ended March 31, 2003 and 2002 consistent with the provisions of SFAS No. 123, the Companys net loss
and loss per share would have been increased to the pro forma amounts indicated below (in thousands, except per share data):



|                                                                                                                                   |  | Three Months EndedMarch 31, |      
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | -----
|                                                                                                                                   |  | 2003                        |      
|Net income (loss):                                                                                                                 |  |                             |      
|As reported                                                                                                                        |  | $                           | 4,779
|Add: stock-based employee compensation expense included in reporting net income, net of related tax effect                         |  |                             | 357  
|                                                                                                                                   |  |                             |      
|Deduct: total stock-based compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                             | (763 
|                                                                                                                                   |  |                             |      
|Pro forma                                                                                                                          |  | $                           | 4,373
|                                                                                                                                   |  |                             |      
|Basic net income (loss) per share:                                                                                                 |  |                             |      
|As reported                                                                                                                        |  | $                           | 0.09 
|Pro forma                                                                                                                          |  | $                           | 0.08 
|Diluted net income (loss) per share:                                                                                               |  |                             |      
|As reported                                                                                                                        |  | $                           | 0.09 
|Pro forma                                                                                                                          |  | $                           | 0.08 



Basic and Diluted Net Income
(Loss) per Share



Basic earnings per share is computed
by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding does not include any potentially dilutive
securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding at March 31, 2003 and December 31, 2002, are considered contingently returnable until the restrictions
lapse and will not be included in the basic net income (loss) per share calculation until the shares are vested. Diluted net income (loss) per share gives effect to all potentially dilutive securities. The Companys convertible subordinated
notes, unvested restricted shares and stock options are potentially dilutive securities during the three months ended March 31, 2003 and 2002, respectively. For the period ended March 31, 2003 and 2002, the difference between basic and diluted
weighted-average shares outstanding was the dilutive effect of stock options and the unvested restricted shares, computed as follows:



|                                                    |  | Three months endedMarch 31,
|--------------------------------------------------- |  | ---------------------------
|                                                    |  | 2003                       
|Total weighted-average shares outstanding  Basic   |  | 52,711,161                 
|Add common stock equivalents:                       |  |                            
|Stock options                                       |  | 1,199,408                  
|Unvested restricted shares                          |  | 960,613                    
|                                                    |  |                            
|Total weighted-average shares outstanding  Diluted |  | 54,871,182                 
|                                                    |  |                            



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PTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Comprehensive Income (Loss)



Comprehensive income (loss) represents the change in equity of a business during a period, except for investments by owners
and distributions to shareholders. Foreign currency translation adjustments and unrealized gain on available-for-sale marketable securities represent the Companys components of other comprehensive income. The following table shows total
comprehensive income (loss) for the three months ended March 31, 2003 and 2002:



|                                                               |  | March 31,2003 |       |   | March 31,2002 |  
|-------------------------------------------------------------- |  | ------------- | ----- | - | ------------- | -
|Net income (loss)                                              |  | $             | 4,779 |   |               | $
|Translation adjustments                                        |  |               | (125  | ) |               |  
|Change in unrealized gain on marketable securities, net of tax |  |               | 22    |   |               |  
|                                                               |  |               |       |   |               |  
|Comprehensive income (loss)                                    |  | $             | 4,676 |   |               | $
|                                                               |  |               |       |   |               |  



New Accounting Pronouncements



In January 2003, the Financial Accounting Standards
Board (FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin 51, Consolidated Financial Statements,
addresses consolidation by business enterprises of variable interest entities that possess certain characteristics. The interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the
assets, liabilities, and results of the activities of the variable interest entity must be included in the consolidated financial statements with those of the business enterprise. This interpretation applies immediately to variable interest entities
created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. We do not have any ownership in any variable interest entities as of March 31, 2003. We will apply the consolidation
requirement of the interpretation in future periods if we should own any interest in any variable interest entity.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based Compensation - Transition and Disclosure (SFAS No. 148)
which amends SFAS No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method of accounting for stock based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in interim financial
statements. See Equity Based Compensation Plans section of Note 2 Significant Accounting Policies for the additional annual disclosures made to comply with SFAS No. 148. As the Company does not intend to adopt the
provisions of SFAS No. 123, it does not expect the transition provisions of SFAS No. 148 to have a material effect on its results of operations or financial condition.



In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on issue 00-21, Revenue
Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple elements that are delivered at different points in time, defining criteria that must be met for
elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company does not expect that this pronouncement will have a material impact on its results of operations or financial condition.



In November 2002, the FASB issued FASB Interpretation No. 45 (FIN
45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB interpretation No. 34. The
disclosure provisions of the interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002. However, the provisions for initial recognition and measurement are effective on a prospective basis
for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantors year-end. See Note 5 Acquisitions and Dispositions.



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In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The principal difference between SFAS No. 146 and EITF 94-3 relates to SFAS No. 146
requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under
EITF 94-3, a liability for an exit cost as generally defined in EITF 94-3 was recognized at the date of an entitys commitment to an exit plan. The Company adopted SFAS No. 146 for the fiscal year beginning January 1, 2003.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). Among other things, this statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt
(SFAS No. 4), which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in Accounting
Principles Board Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, which requires gains
and losses on extinguishments of debt to be classified as income or loss from continuing operations, will now be applied. The Company adopted SFAS No. 146 for the fiscal year beginning January 1, 2003.



Exclusion of SFAS NO. 142 Amortization



Effective January 1, 2002, the Company adopted SFAS No. 142,
Accounting for Goodwill and Other Intangible Assets. It requires that goodwill and certain intangible assets will no longer be subject to amortization, but instead will be subject to a periodic impairment assessment by applying a fair
value based test based upon a two-step method. The first step is to identify potential goodwill impairment by comparing the estimated fair value of the reporting units to their carrying amounts. The second step measures the amount of the impairment
based upon a comparison of implied fair value of goodwill with its carrying amount. The balance of goodwill was $123.1 million as of March 31, 2003 and December 31, 2002.



3. RESTRUCTURING COSTS



Consolidated restructuring costs at December 31, 2002 and March 31, 2003 are as follows (in thousands):



|Consolidated                 |  | AccruedCosts atDecember 31,2002 |       | Payments |   | AccruedCosts atMarch 31,2003
|---------------------------- |  | ------------------------------- | ----- | -------- | - | ----------------------------
|Accrued restructuring costs: |  |                                 |       |          |   |                             
|Severance and exit costs     |  | $                               | 1,396 |          | $ | 284                         
|Contractual obligations      |  |                                 | 220   |          |   | 6                           
|Other                        |  |                                 | 282   |          |   |                            
|                             |  |                                 |       |          |   |                             
|Accrued restructuring costs  |  | $                               | 1,898 |          | $ | 290                         
|                             |  |                                 |       |          |   |                             



In the fourth quarter
of 2002, Xpedite and the Holding Company terminated employees pursuant to a plan to shrink headcount and reduce sales and administrative costs. During the first quarter of 2003, the Company paid approximately $0.3 million in severance and exit costs
related to this plan.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



4. MARKETABLE SECURITIES, AVAILABLE FOR SALE



Marketable securities, available for sale at March 31, 2003 and December 31, 2002, are principally common stock
investments carried at fair value based on quoted market prices and mutual funds carried at amortized cost. At March 31, 2003 and December 31, 2002, the Company held investments in public companies with an aggregate market value of approximately
$0.7 million and $0.6 million, respectively. During the three months ended March 31, 2002, the Company sold investments with aggregate proceeds less commissions of approximately $0.9 million and realized gains of approximately $0.8 million.



5. ACQUISITIONS AND DISPOSITIONS



Xpedite



On January 16, 2003, Xpedite acquired substantially all of the assets related to the U.S. based e-mail and facsimile
messaging business of Cable & Wireless USA, Inc. (C&W), and assumed certain liabilities, for a total purchase price of $11.4 million. The Company paid $6.0 million in cash at closing, $0.4 million in transaction fees and closing
costs, and will pay $5.0 million in 16 equal quarterly installments commencing with the quarter ended March 31, 2003, which is classified on the balance sheet as restricted cash. The Company followed SFAS No. 141, Business Combinations,
and approximately $1.1 million of the aggregate purchase price has been allocated to acquired property, plant and equipment, and approximately $10.3 million of the aggregate purchase price has been allocated to identifiable customer lists which are
being amortized over a five-year useful life.



Discontinued Operations



On March 26, 2002, the Company sold substantially all
the assets of the Voicecom operating segment, exclusive of its Australian operations, to an affiliate of Gores Technology Group, for a total purchase price of approximately $22.4 million, comprised of cash and the assumption of certain liabilities.
In connection with the sale, the Company terminated its credit agreement with ABN AMRO Bank in all material respects.



In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the transaction was accounted for as a
discontinued operation. The revenues and pre-tax loss for the Voicecom operating segment for the three months ended March 31, 2002 were approximately $15.8 million and $(5.8) million, respectively.



Of the Voicecom transferred liabilities, approximately $3.5 million
represents capital leases guaranteed by the Company as of March 31, 2003.



6. EQUITY BASED COMPENSATION



Options exchanged for
restricted shares



In the fourth quarter of 2001 the
Company offered an exchange program in which it granted one restricted share of common stock in exchange for every 2.5 options tendered. Approximately 6.0 million employee and director stock options were exchanged for approximately 2.4 million
shares of restricted stock on December 28, 2001, the date of the exchange. The restricted shares maintain the same vesting schedules as those of the original options exchanged, except that in the case of tendered options that were vested on the
exchange date, the restricted shares received in exchange therefor vested on the day after the exchange date. To the extent options were vested at the exchange date, the Company recognized equity based compensation expense determined by using the
closing price of the Companys common stock at December 28, 2001, which was $3.32 per share. To the extent that restricted shares were received for unvested options exchanged, this cost was deferred on the balance sheet under the caption
Unearned restricted share compensation. This value was also determined using the closing price of the Companys common stock at the date of the exchange. The unearned restricted share compensation is recognized as equity based
compensation expense as these shares vest. For the three months ended March 31, 2003 and 2002, equity based compensation expense of approximately $0.4 million and $1.0 million, respectively, was recognized.



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In addition, approximately 890,000 options that were eligible to be exchanged for restricted shares
pursuant to the exchange offer were not tendered. At March 31, 2003 the option count was approximately 612,000 due to the sale of Voicecom and other cancellations of these options. These options will be subject to variable accounting until such
options are exercised, are forfeited, or expire unexercised. These options have exercise prices ranging from $5.32 to $29.25. At March 31, 2003 and March 31, 2002, no charge was recorded because the exercise price of each of the options was greater
than the market value of the Companys common stock.



Restricted
shares issued to executive management



Certain members
of the executive management of the Company were awarded discretionary bonuses in the form of restricted shares in November 2001. The purpose of these discretionary bonuses was to better align executive managements performance with the
interests of the shareholders. Certain of these restricted shares vested immediately in 2001 and were restricted from trading for a one-year period. The cost associated with the remaining restricted shares is recognized straight line through 2004
and the equity based compensation expense recorded for each of the three months ended March 31, 2003 and 2002 was approximately $0.1 million.



7. COMMITMENTS AND CONTINGENCIES



The Company has several litigation matters pending, as described below, which it is defending vigorously. Due to the inherent uncertainties of the
litigation process and the judicial system, the Company is unable to predict the outcome of such litigation matters. If the outcome of one or more of such matters is adverse to the Company, it could have a material adverse effect on the
Companys business, financial condition and results of operations.



A lawsuit was filed on November 4, 1998 against the Company and certain of its officers and directors in the Southern District of New York. Plaintiffs are shareholders of Xpedite Systems, Inc. (Xpedite) who acquired common stock
of the Company as a result of the merger between the Company and Xpedite in February 1998. Plaintiffs allegations are based on the representations and warranties made by the Company in the prospectus and the registration statement related to
the merger, the merger agreement and other documents incorporated by reference, regarding the Companys acquisitions of Voice-Tel and VoiceCom Systems, the Companys roll-out of Orchestrate, the Companys relationship with customers
Amway Corporation and DigiTEC, 2000, and the Companys 800-based calling card service. Plaintiffs allege causes of action against the Company for breach of contract, against all defendants for negligent misrepresentation, violations of Sections
11 and 12(a)(2) of the Securities Act of 1933 and against the individual defendants for violation of Section 15 of the Securities Act. Plaintiffs seek undisclosed damages together with pre- and post-judgment interest, recission or recissory damages
as to violation of Section 12(a)(2) of the Securities Act, punitive damages, costs and attorneys fees. The defendants motion to transfer venue to Georgia has been granted. The defendants motion to dismiss has been granted in part
and denied in part. The defendants filed an answer on March 30, 2000. On January 22, 2002, the court ordered the parties to mediate. The parties did so on February 8, 2002. On October 17, 2002, the Defendants filed a Motion for Summary Judgment and
a Motion in Limine to exclude the testimony of the Plaintiffs expert. Both motions are pending.



On February 23, 1998, Rudolf R. Nobis and Constance Nobis filed a complaint in the Superior Court of Union County, New Jersey against 15 named defendants
including Xpedite and certain of its alleged current and former officers, directors, agents and representatives. The plaintiffs allege that the 15 named defendants and certain unidentified John Doe defendants engaged in wrongful
activities in connection with the management of the plaintiffs investments with Equitable Life Assurance Society of the United States and/or Equico Securities, Inc. (collectively Equitable). The complaint asserts wrongdoing in
connection with the plaintiffs investment in securities of Xpedite and in unrelated investments involving insurance-related products. The defendants include Equitable and certain of its current or former representatives. The allegations in the
complaint against Xpedite are limited to plaintiffs investment in Xpedite. Plaintiffs have alleged that two of the named defendants, allegedly



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



acting as officers, directors, agents or representatives of Xpedite, induced the plaintiffs to make certain investments in Xpedite but that the plaintiffs
failed to receive the benefits that they were promised. Plaintiffs allege that Xpedite knew or should have known of alleged wrongdoing on the part of other defendants. Plaintiffs seek an accounting of the corporate stock in Xpedite, compensatory
damages of approximately $4.9 million, plus $200,000 in lost investments, interest and/or dividends that have accrued and have not been paid, punitive damages in an unspecified amount, and for certain equitable relief, including a
request for Xpedite to issue 139,430 shares of common stock in the plaintiffs names, attorneys fees and costs and such other and further relief as the court deems just and equitable. This case has been dismissed without prejudice and
compelled to NASD arbitration, which has commenced. In August 2000, plaintiffs filed a statement of claim with the NASD against 12 named respondents, including Xpedite (the Nobis Respondents). Claimants allege that the 12 named
respondents engaged in wrongful activities in connection with the management of the claimants investments with Equitable. The statement of claim asserts wrongdoing in connection with the claimants investment in securities of Xpedite and
in unrelated investments involving insurance-related products. The allegations in the statement of claim against Xpedite are limited to claimants investment in Xpedite. Claimants seek, among other things, an accounting of the corporate stock
in Xpedite, compensatory damages of not less than $415,000, a fair conversion rate on stock options, losses on the investments, plus interest and all dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were
held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things,
held Xpedite, along with co-Respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to Claimant Constance Nobis for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002. The Panel also held Angrisani,
Erb, and CEA Financial jointly and severally liable to Xpedite for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and Request for
Judicial Intervention in New York State. That proceeding is pending. On April 7, 2003, the New Jersey Superior Court entered an Order for Judgment affirming the NASD Award. Plaintiffs filed a Motion for Reconsideration of the April 7, 2003 Order on
April 25, 2003, which is pending.



On September 3, 1999,
Elizabeth Tendler filed a complaint in the Superior Court of New Jersey Law Division, Union County, against 17 named defendants including PTEK and Xpedite, and various alleged current and former officers, directors, agents and representatives of
Xpedite. The plaintiff alleges that the defendants engaged in wrongful activities in connection with the management of the plaintiffs investments, including investments in Xpedite. The allegations against Xpedite and PTEK are limited to
plaintiffs investment in Xpedite. Plaintiffs claims against Xpedite and PTEK include breach of contract, breach of fiduciary duty, unjust enrichment, conversion, fraud, interference with economic advantage, liability for ultra vires
acts, violation of the New Jersey Consumer Fraud Act and violation of New Jersey RICO. Plaintiff seeks an accounting of the corporate stock of Xpedite, compensatory damages of approximately $1.3 million, accrued interest and/or dividends, a
constructive trust on the proceeds of the sale of any Xpedite or PTEK stock, shares of Xpedite and/or PTEK to satisfy defendants obligations to plaintiff, attorneys fees and costs, punitive and exemplary damages in an unspecified amount,
and treble damages. On February 25, 2000, Xpedite filed its answer, as well as cross claims and third party claims. This case has been dismissed without prejudice and compelled to NASD arbitration, which has commenced. In August 2000, a statement of
claim was also filed with the NASD against all but one of the Nobis Respondents making virtually the same allegations on behalf of claimant Elizabeth Tendler. Claimant seeks an accounting of the corporate stock in Xpedite, compensatory damages of
not less than $265,000, a fair conversion rate on stock options, losses on other investments, interest and/or unpaid dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001,
January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with
co-respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to claimant Elizabeth Tendler for $57,500, plus 9% simple interest from March 1, 1999 until September 9, 2002. The Panel also held Angrisani, Erb, and CEA Financial
jointly and severally liable to Xpedite for $57,500, plus 9% simple interest form March 1, 1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and Request for Judicial Intervention in
New York State. That proceeding is pending. On April 7, 2003, the New Jersey Superior Court entered an Order for Judgment affirming the NASD Award. Plaintiff filed a Motion for Reconsideration of the April 7, 2003 Order on April 25, 2003, which is
pending.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



On December 10, 2001, Voice-Tel Enterprises, Inc. (Voice-Tel) filed a Complaint against
Voice-Tel franchisees JOBA, Inc. (JOBA) and Digital Communication Services, Inc. (Digital) in the U.S. District Court for the Northern District of Georgia. The Complaint sought injunctive relief and a declaratory judgment
with respect to Voice-Tels right to terminate the franchise agreements with JOBA and Digital. On January 7, 2002, JOBA and Digital answered Voice-Tels Complaint and asserted counterclaims against Voice-Tel for alleged breach of franchise
agreements and other alleged franchise-related agreements. JOBA and Digital also asserted claims alleging tortious interference of contract against Premiere Communications, Inc. (PCI) and PTEK. On January 18, 2002, Voice-Tel, PCI and
PTEK filed responses and answers to the counterclaims and filed additional breach of contract and tort claims against JOBA and Digital. In March 2002, Voice-Tel and JOBA and Digital sought leave of court to file amended complaints and answers, which
the court granted as to JOBA and Digital and granted in part and denied in part as to Voice-Tel. The Digital Franchise Agreement contained a mandatory arbitration provision, which was not found in the JOBA Franchise Agreement. Therefore, on April
10, 2002, the federal court severed the Digital breach of franchise agreement claims and ordered them to be arbitrated. The Court ordered that all remaining claims, including but not limited to the breach of franchise agreement claims as to JOBA,
would remain in federal court. On July 10, 2002, JOBA and Digital moved to amend their Complaint to add claims for constructive termination of their franchises, which was subsequently denied by the court on September 11, 2002. On July 16, 2002,
Voicecom Telecommunications, LLC (Voicecom) was added as a party Plaintiff in the lawsuit against JOBA and Digital. With the exception of expert and damages testimony, discovery has now concluded and the parties are awaiting a trial date
contingent on the parties agreeing to submit all claims to arbitration. The parties have filed motions and cross motions for partial summary judgment, including responses thereto. A mediation of all claims between all parties was held on March 24,
2003, which failed to resolve any of the issues in litigation. On March 31, 2003, the federal court issued an Order granting in part and denying in part each of the parties Motions for Summary Judgment. As a result of the federal courts
rulings, Voice-Tel, PTEK and PCI contend the only remaining claims in federal court are alleged breach of franchise claims by and against Voice-Tel and JOBA, and the only claims to be arbitrated are breach of franchise agreement claims by and
against Voice-Tel and Digital. JOBA and Digital disagree with this characterization. Voice-Tel, PTEK and PCI have filed a motion to clarify the federal courts Order, and JOBA and Digital have filed a motion for reconsideration of the
courts Order as well as a cross-motion for clarification. The federal court will hold a hearing on these outstanding motions on June 4, 2003. The Digital arbitration had previously been scheduled for July 13, 2003; however, it is not clear at
this time if the arbitration will proceed in whole or in part on that date.



On March 25, 2003, EasyLink Services Corporation (EasyLink) filed an amended complaint against the Company, Xpedite and AT&T Corp. (AT&T), in the Superior Court of New Jersey, Chancery
Division: Middlesex County. EasyLinks complaint alleges, among other things, that the Company entered into an agreement to purchase a secured promissory note in the original principal amount of $10 million and 1,423,980 shares of
EasyLinks Class A common stock for the purpose of obtaining EasyLinks business by using the acquired securities to block a debt restructuring that EasyLink was allegedly pursuing with its creditors, including AT&T, and for other
improper motives. EasyLinks complaint alleges that it pursued such debt restructuring in reliance on its understanding that AT&T would participate in the restructuring on certain terms to which EasyLink and AT&T allegedly had agreed,
and that AT&T misled EasyLink as to its intentions with respect to such restructuring. The complaint further alleges that AT&T disclosed confidential information of EasyLink to the Company in violation of AT&Ts agreements with
EasyLink, and that such information was used by AT&T and the Company in furtherance of a joint scheme to force EasyLink out of the marketplace. EasyLinks complaint also alleges that employees of the Company and Xpedite have knowingly made
false statements to EasyLinks customers, investors and creditors regarding EasyLink and its financial stability. EasyLink claims that these various actions have impaired its ability to restructure its debt effectively and caused it to suffer
various other commercial losses. EasyLinks complaint seeks to (i) enjoin AT&T from selling the secured promissory note to the Company, improperly interfering with EasyLinks business and contracts and disclosing EasyLinks
confidential information without EasyLinks consent; (ii) compel AT&T to consummate EasyLinks proposed restructuring; (iii) enjoin the Company and Xpedite from making false statements to EasyLinks customers and creditors
regarding EasyLink and its financial position; (iv) enjoin the Company from contacting EasyLinks creditors and preventing the restructuring of EasyLinks debt; and (v) enjoin the Company and Xpedite from using EasyLinks confidential
information and contacting EasyLinks current and former employees to obtain such confidential information. EasyLinks complaint also seeks unspecified damages from AT&T and the Company. The Company and Xpedite intend to defend this
lawsuit and have filed a motion to dismiss the claims against them. A hearing on EasyLinks application for a preliminary injunction was



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held on May 1, 2003. The court adjourned the hearing without ruling and directed the parties to explore settlement. The hearing was reconvened on May 13,
2003. The court again adjourned the hearing without ruling and directed the parties to explore settlement. The hearing is scheduled to reconvene on May 22, 2003.



The Company is also involved in various other legal proceedings which the Company does not believe will have a material
adverse effect upon the Companys business, financial condition or results of operations, although no assurance can be given as to the ultimate outcome of any such proceedings.



8. SEGMENT REPORTING



PTEK is a global provider of business communications services, including conferencing (audio conferencing and Web-based collaboration) and multimedia
messaging (high-volume actionable communications, e-mail, wireless messaging, voice message delivery and fax). The Companys reportable segments align the Company into two operating segments based on product offering. These segments are
Premiere Conferencing and Xpedite. Premiere Conferencing offers a full suite of enhanced audio, automated audio and Web conferencing services for all forms of group communications activities. Xpedite offers a comprehensive suite of business services
that enable actionable two-way communications which allow corporations to better acquire and retain customers as well as automate their core business processes. In addition, the Company had one other reportable segment, Voicecom, which the Company
exited through a sale, exclusive of its Australian operations, effective March 26, 2002. Voicecom offered a suite of integrated communications solutions including voice messaging, interactive voice response services and unified communications.



Information concerning the operations in these reportable
segments is as follows (in millions):



|                                          |  | Three Months Ended March 31, 2003 |       |   | Three Months Ended March 31, 2002 |  
|----------------------------------------- |  | --------------------------------- | ----- | - | --------------------------------- | -
|Revenues:                                 |  |                                   |       |   |                                   |  
|Revenues from continuing operations:      |  |                                   |       |   |                                   |  
|Premiere Conferencing                     |  | $                                 | 36.6  |   |                                   | $
|Xpedite                                   |  |                                   | 52.7  |   |                                   |  
|Eliminations                              |  |                                   | (0.1  | ) |                                   |  
|                                          |  |                                   |       |   |                                   |  
|                                          |  | $                                 | 89.2  |   |                                   | $
|                                          |  |                                   |       |   |                                   |  
|Revenues from discontinued operations:    |  |                                   |       |   |                                   |  
|Voicecom                                  |  | $                                 |      |   |                                   | $
|                                          |  |                                   |       |   |                                   |  
|Income (loss) from continuing operations: |  |                                   |       |   |                                   |  
|Premiere Conferencing                     |  | $                                 | 3.9   |   |                                   | $
|Xpedite                                   |  |                                   | 4.5   |   |                                   |  
|Holding Company                           |  |                                   | (3.6  | ) |                                   |  
|                                          |  |                                   |       |   |                                   |  
|                                          |  | $                                 | 4.8   |   |                                   | $
|                                          |  |                                   |       |   |                                   |  
|Loss from discontinued operations:        |  |                                   |       |   |                                   |  
|Voicecom                                  |  | $                                 |      |   |                                   | $
|                                          |  |                                   |       |   |                                   |  
|Net income (loss):                        |  | $                                 | 4.8   |   |                                   | $
|                                          |  |                                   |       |   |                                   |  
|                                          |  |                                  
|                                          |  | March 31, 2003                    |       |   | December 31, 2002                 |  
|Identifiable Assets:                      |  |                                   |       |   |                                   |  
|Premiere Conferencing                     |  | $                                 | 77.5  |   |                                   | $
|Xpedite                                   |  |                                   | 209.0 |   |                                   |  
|Holding Company                           |  |                                   | 63.9  |   |                                   |  
|                                          |  |                                   |       |   |                                   |  
|                                          |  | $                                 | 350.4 |   |                                   | $
|                                          |  |                                   |       |   |                                   |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The following table presents selected financial information regarding the Companys geographic
regions for the periods presented (in millions):



|                                     |  | Three MonthsEnded March 31,
|------------------------------------ |  | ---------------------------
|                                     |  | 2003                       
|Revenues from continuing operations: |  |                            
|North America                        |  | $                          
|Europe                               |  |                            
|Asia Pacific                         |  |                            
|                                     |  |                            
|                                     |  | $                          
|                                     |  |                            



9. SUBSEQUENT EVENTS



The Board of Directors of the Company has authorized the
Companys management to repurchase the Companys 53/4% convertible subordinated notes due on July 1,
2004 (the Convertible Notes), in the open market or in privately negotiated transactions, at managements discretion. Between April 1 and May 12, 2003, the Company used existing cash to repurchase approximately $30 million in face
value of the Convertible Notes, resulting in a gain on the early extinguishment of debt of approximately $1.4 million before taxes.



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



OVERVIEW



PTEK Holdings, Inc., a Georgia corporation, and its subsidiaries (collectively the Company or PTEK), is a global provider of
business communications services, including conferencing (audio conferencing and Web-based collaboration) and multimedia messaging (high-volume actionable communications, including e-mail, wireless messaging, voice message delivery and fax). The
Companys reportable segments align the Company into two operating segments based on product offering. These segments are Premiere Conferencing and Xpedite. Premiere Conferencing offers a full suite of enhanced audio, automated audio and Web
conferencing services for all forms of group communications activities. Xpedite offers a comprehensive suite of business services that enable actionable two-way communications which allow companies to better acquire and retain customers as well as
automate their core business processes. In addition, the Company had one other reportable segment, Voicecom, which the Company exited through a sale, exclusive of its Australian operations, effective March 26, 2002. Voicecom offered a suite of
integrated communications solutions, including voice messaging, interactive voice response services and unified communications.



Revenues of the Company are recognized when persuasive evidence of an arrangement exists, services have been rendered, the price to the buyer is fixed or
determinable and collectibility is reasonably assured. Revenues consist of fixed monthly fees and usage fees generally based on per minute or transaction rates. Unbilled revenue consists of earned but unbilled revenue which results from the weekly
billing cycle that was implemented at Premiere Conferencing during the third quarter of 2002.



Cost of revenues includes telecommunication costs and direct operating costs exclusive of depreciation as defined below. Telecommunication costs consist primarily of the cost of metered and fixed
telecommunication related costs incurred in providing the Companys services. Direct operating costs consist primarily of salaries and wages, travel, consulting fees and facility costs associated with maintaining and operating the
Companys various revenue-generating platforms and telecommunication networks, regulatory fees and non-telecommunication costs directly associated with providing services and all costs associated with international hardware system sales.



Selling and marketing costs consist primarily of
salaries and wages, travel and entertainment, advertising, commissions and facility costs associated with the functions of selling or marketing the Companys services.



General and administrative costs consist primarily of salaries and wages associated with billing, customer
service, order processing, executive management and administrative functions that support the Companys operations. Bad debt expense associated with customer accounts is also included in this caption.



Research and development costs consist primarily of salaries and
wages, travel, consulting fees and facilities costs associated with developing product enhancements and new product development.



Depreciation and amortization includes depreciation of computer and telecommunications equipment, furniture and fixtures, office
equipment, leasehold improvements, capitalized software and amortization of intangible assets. The Company provides for depreciation using the straight-line method of depreciation over the estimated useful lives of property and equipment, generally
two to ten years, with the exception of leasehold improvements which are depreciated on a straight-line basis over the shorter of the term of the lease or the useful life of the assets. Intangible assets being amortized include customer lists and
developed technology. Intangible assets are amortized over the useful life of the asset generally ranging from three to seven years.



Equity based compensation relates primarily to restricted stock granted to employees in exchange for options, restricted stock granted to
certain officers of PTEK and one of its operating units. In addition, it includes the non-cash cost of stock options and restricted stock issued to consultants for services rendered.



Interest expense includes the interest costs associated with the Companys convertible subordinated notes,
term equipment loans and various capital lease obligations.



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Interest income includes interest earned on highly liquid investments with a maturity at date
of purchase of three months or less and interest on employee loans.



Gain on sale of marketable securities includes proceeds less commissions in excess of original cost on the sale of marketable securities available for sale. These marketable securities are traded on a national exchange with a
readily determinable market price.



The preparation of
financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates. The following discussion and analysis provides
information which management believes is relevant to an assessment and understanding of the Companys consolidated results of operations and financial condition. This discussion should be read in conjunction with the Companys consolidated
financial statements contained herein and notes thereto.



RESULTS OF
OPERATIONS



The following table presents selected
financial information regarding the Companys operating segments for the periods presented (amounts in millions):



|                                          |  | Three Months Ended |     
|----------------------------------------- |  | ------------------ | ----
|                                          |  | March 31, 2003     |     
|Revenues:                                 |  |                    |     
|Revenues from continuing operations:      |  |                    |     
|Premiere Conferencing                     |  | $                  | 36.6
|Xpedite                                   |  |                    | 52.7
|Eliminations                              |  |                    | (0.1
|                                          |  |                    |     
|                                          |  | $                  | 89.2
|                                          |  |                    |     
|Revenues from discontinued operations:    |  |                    |     
|Voicecom                                  |  | $                  |    
|                                          |  |                    |     
|Income (loss) from continuing operations: |  |                    |     
|Premiere Conferencing                     |  | $                  | 3.9 
|Xpedite                                   |  |                    | 4.5 
|Holding Company                           |  |                    | (3.6
|                                          |  |                    |     
|                                          |  | $                  | 4.8 
|                                          |  |                    |     
|Loss from discontinued operations:        |  |                    |     
|Voicecom                                  |  | $                  |    
|                                          |  |                    |     
|Net income (loss):                        |  | $                  | 4.8 
|                                          |  |                    |     



The following table
presents selected financial information regarding the Companys geographic regions for the periods presented (in millions):



|                                     |  | Three Months EndedMarch 31,
|------------------------------------ |  | ---------------------------
|                                     |  | 2003                       
|Revenues from continuing operations: |  |                            
|North America                        |  | $                          
|Europe                               |  |                            
|Asia Pacific                         |  |                            
|                                     |  |                            
|                                     |  | $                          
|                                     |  |                            



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ANALYSIS



Consolidated revenues increased 7.1% to $89.2 million for the three months ended March 31, 2003 compared with $83.3 million for the same period in 2002.
On a segment basis:



| |  | Premiere Conferencing revenue was 41.0% and 40.0% of consolidated revenues for the three months ended March 31, 2003 and 2002, respectively. Premiere Conferencing experienced a 9.8%
increase in revenue from $33.3 million to $36.6 million for the three months ended March 31, 2003 compared with the same period in 2002. The growth in revenue at Premiere Conferencing resulted primarily from an approximate 116.9% increase in
international revenue and, domestically, from growth in minutes for its ReadyConference® product.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Xpedite revenue was 59.0% and 60.0% of consolidated revenues for the three months ended March 31, 2003 and 2002, respectively. Xpedite experienced a 5.4% growth in revenue from
$50.0 million to $52.7 million for the three months ended March 31, 2003 compared with the same period in 2002. The growth resulted primarily from increased revenue from its messageREACH® and voiceREACHSMproducts, which grew an
aggregate of approximately 58.3% from the same period last year, the beneficial impact of foreign currency exchange rates and the additional customers acquired from C&W. This growth was mitigated by the continued decline in broadcast fax revenue
which has declined from approximately 66.7% to 61.3% of revenue for the three months ended March 31, 2003 compared to the same period in 2002.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Consolidated revenues on a geographic region basis increased in North America to $58.5 million from $57.6 million for the three months ended March 31,
2003 and 2002, respectively. As a percentage of consolidated revenues, North America revenues decreased 3.5% for the three month period ended March 31, 2003 over the comparable period in 2002. Consolidated revenues in Europe increased $2.7 million,
from $13.4 million to $16.1 million for the three month periods ended March 31, 2002 and 2003, respectively. As a percentage of consolidated revenues, European revenues increased 1.9% for the three month period ended March 31, 2003 over the
comparable period in 2002. Asia Pacific revenues also increased during the first quarter of 2003 by $2.3 million from $12.3 million for the three months ended March 31, 2002 to $14.6 million for comparable period in 2003. As a percentage of
consolidated revenues, Asia Pacific revenues increased 1.6% for the three month period ended March 31, 2003 over the comparable period in 2002. The Company experienced revenue growth in the European and Asia Pacific regions as a result of the
expansion of Premiere Conferencing within these regions, as discussed above, and organic growth at Xpedite.



Consolidated cost of revenues were $30.7 million or 34.4% of consolidated revenues and $29.9 million or 35.9% of consolidated revenues for the three
months ended March 31, 2003 and 2002, respectively. On a segment basis:



| |  | Premiere Conferencing cost of revenue increased to $14.6 million or 39.9% of segment revenue from $13.8 million or 41.5% of segment revenue for the three months ended March 31, 2003
and 2002, respectively. This decrease as a percentage of segment revenue resulted from a reduction in the average selling price per minute as the price per minute for both PremiereCall AuditoriumSMand ReadyConference declined and as revenue from the automated conferencing product, which carries a lower price per minute thanthe attended conferencing product, grew from approximately 68.1% to 74.2% of total segment revenue relative to the same period
last year. In addition, direct costs of operations as a percentage of segment revenue declined to 22.0% for the three months ended March 31, 2003 as compared with 25.7% for the same period of 2002, reflecting the growth in this segments
revenue from ReadyConference relative to its total revenue base.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Xpedite cost of revenue remained constant at $16.1 million while decreasing to 30.6% of segment revenue from 31.5% of segment revenue for the three months ended
March 31, 2003 and 2002, respectively. This decrease as a percentage of segment revenue was primarily due to growth in revenue from higher margin telecommunications products such as messageREACH and voiceREACH, which increased to an aggregate of
approximately 10.5% of segment revenue for the three months ended March 31, 2003 as compared with 5.5% for the same period in 2002. This decrease was offset by the increase in direct costs of operations
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | as a percentage of segment revenue to 10.1% for the three months ended March 31, 2003 as compared to 9.0% for the same period in 2002 due primarily to
approximately $0.7 million in additional costs connected with the transitioning of services associated with the C&W acquisition in January 2003 onto the Xpedite platform. The net impact of these movements resulted in costs remaining relatively
constant.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Consolidated gross margin
(revenues less cost of revenues) was $58.5 million or 65.6% of consolidated revenues and $53.4 million or 64.1% of consolidated revenues for the three months ended March 31, 2003 and 2002, respectively. Premiere Conferencings gross margin
increased to $22.0 million or 60.1% of segment revenue from $19.5 million or 58.5% of segment revenue for the three months ended March 31, 2003 as compared with the same period in 2002. Xpedites gross margin increased to $36.6 million or 69.4%
of segment revenue from $33.9 million or 67.9% of segment revenue for the three months ended March 31, 2003 as compared with the same period in 2002.



Consolidated selling and marketing costs increased to $24.3 million or 27.2% of consolidated revenues for the three months ended March 31, 2003 from $22.4
million or 26.7% of consolidated revenues for the comparable 2002 period. At Premiere Conferencing, selling and marketing costs grew from $7.0 million or 20.9% as a percentage of segment revenue for the three months ended March 31, 2002 to $8.7
million or 23.7% of segment revenue for the comparable 2003 period mainly as a result of increased headcount, commissions and costs associated with sales training and sales conferences. At Xpedite, selling and marketing costs as a percent of segment
revenue declined from 30.6% of segment revenue for the three months ended March 31, 2002 to 29.7% for the comparable 2003 period as costs remained relatively constant increasing $0.3 million from $15.3 million to $15.6 million despite the 2.7%
growth in revenue and the negative impact of the weaker dollar on expenses denominated in foreign currencies.



Consolidated research and development costs were $2.0 million or 2.2% of consolidated revenues for the three months ended March 31, 2003 compared with
$2.2 million or 2.7% of consolidated revenues for the comparable period in 2002. Overall, these costs decreased $0.2 million from period to period. The decrease in costs resulted from managements directive to be more selective in its research
and development projects, expending resources only on projects with a high probability of economic benefit.



Consolidated general and administrative costs increased $0.6 million to $13.5 million for the first quarter of 2003 from $12.9 million for the first
quarter of 2002, although decreasing slightly to 15.2% of consolidated revenues for the three months ended March 31, 2003 from 15.4% of consolidated revenues for the same period in 2002. At Premiere Conferencing, general and administrative costs
decreased from 9.7% of segment revenue for the three months ended March 31, 2002 to 9.1% of segment revenue for the comparable period in 2003, driven by continued revenue growth from ReadyConference which requires little incremental increase in back
office support. These costs remained relatively constant at Premiere Conferencing increasing $0.1 million to $3.3 million for the three months ended March 31, 2003 from $3.2 million in the comparable period in 2002. At Xpedite, general and
administrative costs increased from $6.3 million or 12.6% of segment revenue for the three months ended March 31, 2002 to $7.5 million or 14.3% of segment revenue for the comparable period in 2003, driven by increases in corporate allocations, bad
debt expense and salaries. At the Holding Company, general and administrative costs decreased $0.6 million from $3.3 million for the three months ended March 31, 2002 to $2.7 million for the comparable period in 2003 driven by increased allocations
to the operating segments and reductions in employee costs.



Consolidated depreciation expense was $5.5 million or 6.2% of consolidated revenues for the three months ended March 31, 2003 compared with $5.2 million or 6.3% of consolidated revenues for the same period in 2002. Absolute costs increased
slightly by $0.3 million.



Consolidated amortization was $2.0
million or 2.2% of consolidated revenues for the three months ended March 31, 2003 compared with $3.8 million or 4.5% of consolidated revenues for the comparable 2002 period. The decrease in amortization expense for the three months ended March 31,
2003, was primarily the result of the asset impairment charges recorded in the fourth quarter of 2002, which related mainly to Xpedite customer lists and an asset becoming fully amortized during the first quarter of 2003.



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Net interest expense remained relatively flat at $2.6 million for the three months ended March 31, 2003
compared to $2.9 million for the 2002 period. Interest expense, net in the first quarter of 2003 is primarily comprised of interest on the Companys convertible subordinated notes and interest income resulting from employee loans.



DISCONTINUED OPERATIONS



On March 26, 2002, the Company sold substantially all of the assets of the
Voicecom operating segment, exclusive of its Australian operations, to Gores Technology Group, for a total purchase price of approximately $22.4 million, comprised of cash and the assumption of certain liabilities. In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the transaction was accounted for as a discontinued operation. In connection with the sale, the Company terminated its credit agreement with ABN AMRO Bank in all material
respects.



LIQUIDITY AND CAPITAL RESOURCES



Net cash provided by operating activities from continuing operations totaled
approximately $0.4 million for the three months ended March 31, 2003, compared to cash used in continuing operations of approximately $10.9 million for the comparable 2002 period. The balance sheet movement in the first quarter of 2003 was mainly
attributable to growth in accounts receivable of approximately $4.8 million due to growth in revenue and reductions in accounts payable and accrued liabilities associated with payments for bond interest, settlement of a lawsuit that was previously
accrued, the 401(k) match in cash, and a significant payment to a telco vendor. A majority of the cash used in operating activities from continuing operations during the three months ended March 31, 2002 was attributed to the significant payments
made in accounts payable and accrued expenses as well as the increased accounts receivable balance at Premiere Conferencing.



Investing activities from continuing operations used cash totaling approximately $14.1 million for the three months ended March 31, 2003, compared to cash
provided by investing activities from continuing operations totaling $4.9 million for the same period in 2002. The principal uses of cash from investing activities in the first quarter of 2003 include payments made for the acquisition of C&W,
approximately $6.4 million, an increase in restricted cash for the deferred payments related to this acquisition, $5.0 million, and capital expenditures in the three months ended March 31, 2003 of approximately $2.7 million. The principal source of
cash from investing activities in the first quarter of 2002 was the sale of Voicecom. The approximately $7.2 million of proceeds from the sale of Voicecom were partially offset by capital expenditures of approximately $3.2 million.



Cash used in financing activities from continuing operations for the three
months ended March 31, 2003 totaled $1.7 million, compared with cash used in financing activities from continuing operations of $0.7 million for the comparable 2002 period. Cash outflows for financing activities in the first quarter of 2003 and 2002
were primarily debt repayments on note obligations associated with Premiere Conferencing equipment loans of approximately $1.1 million and $0.7 million, respectively. In addition, the Company purchased treasury stock for approximately $0.6 million
during the first quarter of 2003.



Management believes that
cash and cash equivalents, marketable securities available for sale, and cash flows from operations should be sufficient to fund the Companys capital expenditure needs and contractual commitments of its operating units for at least the next 12
months. As of March 31, 2003, the Company had $52.8 million of cash and cash equivalents compared to $68.8 million at December 31, 2002. Cash balances residing outside of the United States at March 31, 2003 were $13.3 million compared to $10.3
million at December 31, 2002. Net working capital at March 31, 2003 was $59.2 million compared to $62.1 million at December 31, 2002. The Company routinely repatriates cash in excess of operating needs in certain countries where the cost to
repatriate does not exceed the economic benefits. Intercompany loans with foreign subsidiaries generally are considered by management to be permanently invested for the foreseeable future. Therefore, all foreign exchange gains and losses are
recorded in the cumulative translation adjustment account on the balance sheet. Based on potential cash positions of PTEK and potential conditions in the capital markets, management could require repayment of these loans despite the long-term
intention to hold them as permanent investments.



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Management regularly reviews the Companys capital structure and evaluates potential alternatives in
light of current conditions in the capital markets. Depending upon conditions in these markets, cash flows from the Companys operating segments and other factors, the Company may engage in other capital transactions. These capital transactions
include but are not limited to debt or equity issuances or credit facilities with banking institutions.



In July 1997, the Company issued $172.5 million of 53/4% convertible subordinated notes that mature on July 1, 2004 (the Convertible Notes). The Convertible Notes are convertible at the option of the holder into common stock at a conversion
price of $33 per share, through the date of maturity, subject to adjustment in certain events. Beginning in July 2000, the Convertible Notes were redeemable by the Company at a price equal to 103% of the conversion price, declining to 100% at
maturity with accrued interest. The annual interest commitment associated with these notes is $9.9 million and is paid semiannually on July 1 and January 1 of each year.



We cannot assure that we will generate sufficient cash flow to enable us to repay our indebtedness or to fund our other
liquidity needs. If we cannot generate sufficient cash flow in the future, we may need to refinance all or a portion of our indebtedness on or before maturity. We will continue to evaluate the most efficient use of our capital, and will likely seek
strategic alternatives for portions of our business or a refinancing arrangement to address the maturity of the Convertible Notes on July 1, 2004. Depending upon market conditions, these alternatives may include purchasing, refinancing or otherwise
retiring a portion of the Convertible Notes in the open market. Certain refinancing alternatives may have a significant impact on the Companys working capital and liquidity ratios. Management believes that the Company will generate adequate
operating cash flows for capital expenditure needs and contractual commitments for at least the next 12 months.



SUBSEQUENT EVENTS



The Board of Directors of the Company has authorized the Companys management to repurchase the Convertible Notes, in the open market or in privately
negotiated transactions, at managements discretion. Between April 1 and May 12, 2003, the Company used existing cash to repurchase approximately $30 million in face value of the Convertible Notes, resulting in a gain on the early
extinguishment of debt of approximately $1.4 million before taxes.



At March 31, 2003, the Companys principal commitments involve minimum purchase requirements under supply agreements with telecommunications providers, capital lease obligations, operating lease obligations and semi-annual interest on
the Convertible Notes.



RESTRUCTURING COSTS



Consolidated restructuring costs at December 31, 2002 and March 31, 2003 are
as follows (in thousands):



|Consolidated                 |  | AccruedCosts atDecember 31,2002 |       | Payments |   | AccruedCosts atMarch 31,2003
|---------------------------- |  | ------------------------------- | ----- | -------- | - | ----------------------------
|Accrued restructuring costs: |  |                                 |       |          |   |                             
|Severance and exit costs     |  | $                               | 1,396 |          | $ | 284                         
|Contractual obligations      |  |                                 | 220   |          |   | 6                           
|Other                        |  |                                 | 282   |          |   |                            
|                             |  |                                 |       |          |   |                             
|Accrued restructuring costs  |  | $                               | 1,898 |          | $ | 290                         
|                             |  |                                 |       |          |   |                             



In the fourth quarter
of 2002, Xpedite and the Holding Company terminated employees pursuant to a plan to shrink headcount and reduce sales and administration costs. During the first quarter of 2003, the Company paid approximately $0.3 million in severance and exit costs
related to this plan.



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ACQUISITION



On January 16, 2003, Xpedite acquired substantially all of the assets related to the U.S. based e-mail and facsimile messaging business of C&W, and
assumed certain liabilities, for a total purchase price of $11.4 million. The Company paid $6.0 million in cash at closing, $0.4 million in transaction fees and closing costs, and will pay $5.0 million in 16 equal quarterly installments commencing
with the quarter ended March 31, 2003, which is classified on the balance sheet as restricted cash. The Company follows SFAS No. 141, Business Combinations, and approximately $1.1 million of the aggregate purchase price has been
allocated to acquired property, plant and equipment, and approximately $10.3 million of the aggregate purchase price has been allocated to identifiable customer lists which are being amortized over a five-year useful life.



CRITICAL ACCOUNTING POLICIES



Managements Discussion and Analysis of Financial Condition and
Results of Operations are based upon the Companys consolidated condensed financial statements and the notes thereto, which have been prepared in accordance with GAAP. The preparation of the consolidated condensed financial statements
require the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. The Company has reviewed the accounting policies used in
reporting its financial results on a regular basis. Management has reviewed these critical accounting policies and related disclosures with the Companys Audit Committee. The Company has identified the policies below as critical to its business
operations and the understanding of its financial condition and results of operations:



| |  | Revenue recognition
| | - | -------------------



| |  | Allowance for uncollectible accounts receivable
| | - | -----------------------------------------------



| |  | Goodwill and other intangible assets
| | - | ------------------------------------



| |  | Income taxes
| | - | ------------



| |  | Investments
| | - | -----------



| |  | Restructuring costs
| | - | -------------------



| |  | Legal contingencies
| | - | -------------------



For a detailed discussion on the application of these accounting policies, see Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations, in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2002.



NEW ACCOUNTING PRONOUNCEMENTS



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities. This interpretation of Accounting Research Bulletin 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities that possess certain
characteristics. The interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity must be included in
the consolidated financial statements with those of the business enterprise. This interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an
interest after that date. We do not have any ownership in any variable interest entities as of March 31, 2003. We will apply the consolidation requirement of the interpretation in future periods if we should own any interest in any variable interest
entity.



In December 2002, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 148, Accounting for Stock Based Compensation - Transition and Disclosure (SFAS No. 148) which amends SFAS No. 123. SFAS No. 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for stock based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock based employee
compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect



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in interim financial statements. See Equity Based Compensation Plans section of Note 2 Significant Accounting Policies for the
additional annual disclosures made to comply with SFAS No. 148. As the Company does not intend to adopt the provisions of SFAS No. 123, it does not expect the transition provisions of SFAS No. 148 to have a material effect on its results of
operations or financial condition.



In November 2002, the
Emerging Issues Task Force (EITF) reached a consensus on issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple
elements that are delivered at different points in tine, defining criteria that must be met for elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the
element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company does not expect that this pronouncement will have a material impact on its
results of operations or financial condition.



In November
2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements
No. 5, 57, and 107 and rescission of FASB interpretation No. 34. The disclosure provisions of the interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002. However, the provisions for
initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantors year-end. See Note 5 Acquisitions and Dispositions.



In June 2002, the FASB issued SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities (SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-3). The principal difference between SFAS No. 146 and EITF
94-3 relates to SFAS No. 146 requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF 94-3, a liability for an exit cost as generally defined in EITF 94-3 was recognized at the date of an entitys commitment to an exit plan. The Company adopted SFAS No. 146 for the fiscal year beginning January
1, 2003.



In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). Among other things, this statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt (SFAS No. 4), which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the
criteria in Accounting Principles Board Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, which requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations, will now be applied. The Company adopted SFAS No. 146 for the fiscal year beginning January 1, 2003.



FORWARD LOOKING STATEMENTS



When used in this Form 10-Q/A and elsewhere by management or PTEK from time
to time, the words believes, anticipates, expects, will may, should, intends, plans, estimates, predicts, potential,
continue and similar expressions are intended to identify forward-looking statements concerning our operations, economic performance and financial condition. These include, but are not limited to, forward-looking statements about our
business strategy and means to implement the strategy, our objectives, the amount of future capital expenditures, the likelihood of our success in developing and introducing new products and services and expanding our business, and the timing of the
introduction of new and modified products and services. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements are based on
a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, many of which are beyond our control, and reflect future business decisions which are subject to change. A variety of factors could cause
actual results to differ materially



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from those anticipated in PTEKs forward-looking statements, including the following factors, which are updated through the date of filing of this Form
10-Q/A:



| |  | Our ability to respond to rapid technological change, the development of alternatives to our products and services and the risk of obsolescence of our products, services and
technology;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market acceptance of new products and services;
| | - | -----------------------------------------------



| |  | Our ability to manage our growth;
| | - | ---------------------------------



| |  | Costs or difficulties related to the integration of businesses and technologies, if any, acquired or that may be acquired by us may be greater than expected;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Expected cost savings from past or future mergers and acquisitions may not be fully realized or realized within the expected time frame;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| |  | Revenues following past or future mergers and acquisitions may be lower than expected;
| | - | --------------------------------------------------------------------------------------



| |  | Operating costs or customer loss and business disruption following past or future mergers and acquisitions may be greater than expected;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| |  | The success of our strategic relationships, including the amount of business generated and the viability of the strategic partners, may not meet expectations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Possible adverse results of pending or future litigation or adverse results of current or future infringements claims;
| | - | ----------------------------------------------------------------------------------------------------------------------



| |  | Our ability to service or repay all or a portion of our convertible notes issued to the public, a portion of which mature on July 1, 2004 and the remainder of which mature on August
15, 2008;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The failure of the purchaser to pay the liabilities assumed in, or incurred after, the sale of the Voicecom business unit;
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | Our services may be interrupted due to failure of the platforms and network infrastructure utilized in providing our services;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | Our services may be interrupted and our costs may increase due to the filing by MCI and Global Crossing for protection under Chapter 11 of the United States Bankruptcy Code and
MCIs notice of rejection of some (if not all) of our telecommunication service agreements;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Competitive pressures among communications services providers, including pricing pressures, may increase significantly, particularly after the emergence of MCI and Global Crossing
from protection under Chapter 11 of the United States Bankruptcy Code;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Domestic and international terrorist activity, war and political instability may adversely affect the level of services utilized by our customers and the ability of those customers
to pay for services utilized;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Risks associated with expansion of our international operations;
| | - | ----------------------------------------------------------------



| |  | General economic or business conditions, internationally, nationally or in the local jurisdiction in which we are doing business, may be less favorable than expected;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Legislative or regulatory changes, such as the recent Federal Communications Commissions revisions to the rules interpreting the Telephone Consumer Protection Act of 1991, may
adversely affect the businesses in which we are engaged;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Changes in the securities markets may negatively impact us;
| | - | -----------------------------------------------------------



| |  | Increased leverage in the future may harm our financial condition and results of operations;
| | - | --------------------------------------------------------------------------------------------



| |  | Our dependence on our subsidiaries for cash flow may negatively affect our business and our ability to pay amounts due under our indebtedness;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Risk Factors filed as Exhibit 99.1 to our Current Report on Form 8-K dated December 19, 2003; and
| | - | -----------------------------------------------------------------------------------------------------



| |  | Factors described from time to time in our press releases, reports and other filings made with the Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



PTEK cautions that these factors are not exclusive. Consequently, all of the
forward-looking statements made in this Form 10-Q/A and in other documents filed with the Securities and Exchange Commission are qualified by these cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Form 10-Q/A. PTEK takes on no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of
this Form 10-Q/A, or the date of the statement, if a different date.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates. The Company manages its exposure to these market
risks through its regular operating and financing activities. Derivative instruments are not currently used and, if utilized, are employed as risk management tools and not for trading purposes.



At March 31, 2003, no derivative financial instruments were outstanding to
hedge interest rate risk. A hypothetical immediate 10% increase in interest rates would decrease the fair value of the Companys fixed rate convertible subordinated notes outstanding at March 31, 2003, by approximately $16.0 million.



Approximately 34.5% of the Companys revenues and 33.3%
of its operating costs and expenses were transacted in foreign currencies for the three-month period ended March 31, 2003. As a result, fluctuations in exchange rates impact the amount of the Companys reported sales and operating income when
translated into U.S. dollars. A hypothetical positive or negative change of 10% in foreign currency exchange rates would positively or negatively change revenue for the three-month period ended March 31, 2003 by approximately $3.1 million and
operating costs and expenses for the three-month period ended March 31, 2003 by approximately $2.5 million. The Company has not used derivatives to manage foreign currency exchange translation risk and no foreign currency exchange derivatives were
outstanding at March 31, 2003.



ITEM 4. CONTROLS AND PROCEDURES



The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures as of March 31, 2003.
Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective, as of March 31, 2003, to provide reasonable assurance that the
information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and
forms.



There have been no changes in the Companys
internal control over financial reporting during the quarter ended March 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



The
Company has several litigation matters pending, as described below, which it is defending vigorously. Due to the inherent uncertainties of the litigation process and the judicial system, the Company is unable to predict the outcome of such
litigation matters. If the outcome of one or more of such matters is adverse to the Company, it could have a material adverse effect on the Companys business, financial condition and results of operations.



A lawsuit was filed on November 4, 1998 against the Company and certain of
its officers and directors in the Southern District of New York. Plaintiffs are shareholders of Xpedite Systems, Inc. (Xpedite) who acquired common stock of the Company as a result of the merger between the Company and Xpedite in
February 1998. Plaintiffs allegations are based on the representations and warranties made by the Company in the prospectus and the registration statement related to the merger, the merger agreement and other documents incorporated by
reference, regarding the Companys acquisitions of Voice-Tel and VoiceCom Systems, the Companys roll-out of Orchestrate, the Companys relationship with customers Amway Corporation and DigiTEC, 2000, and the Companys 800-based
calling card service. Plaintiffs allege causes of action against the Company for breach of contract, against all defendants for negligent misrepresentation, violations of Sections 11 and 12(a)(2) of the Securities Act of 1933 and against the
individual defendants for violation of Section 15 of the Securities Act. Plaintiffs seek undisclosed damages together with pre- and post-judgment interest, recission or recissory damages as to violation of Section 12(a)(2) of the Securities Act,
punitive damages, costs and attorneys fees. The defendants motion to transfer venue to Georgia has been granted. The defendants motion to dismiss has been granted in part and denied in part. The defendants filed an answer on March
30, 2000. On January 22, 2002, the court ordered the parties to mediate. The parties did so on February 8, 2002. On October 17, 2002, the Defendants filed a Motion for Summary Judgment and a Motion in Limine to exclude the testimony of the
Plaintiffs expert. Both motions are pending.



On February
23, 1998, Rudolf R. Nobis and Constance Nobis filed a complaint in the Superior Court of Union County, New Jersey against 15 named defendants including Xpedite and certain of its alleged current and former officers, directors, agents and
representatives. The plaintiffs allege that the 15 named defendants and certain unidentified John Doe defendants engaged in wrongful activities in connection with the management of the plaintiffs investments with Equitable Life
Assurance Society of the United States and/or Equico Securities, Inc. (collectively Equitable). The complaint asserts wrongdoing in connection with the plaintiffs investment in securities of Xpedite and in unrelated investments
involving insurance-related products. The defendants include Equitable and certain of its current or former representatives. The allegations in the complaint against Xpedite are limited to plaintiffs investment in Xpedite. Plaintiffs have
alleged that two of the named defendants, allegedly acting as officers, directors, agents or representatives of Xpedite, induced the plaintiffs to make certain investments in Xpedite but that the plaintiffs failed to receive the benefits that they
were promised. Plaintiffs allege that Xpedite knew or should have known of alleged wrongdoing on the part of other defendants. Plaintiffs seek an accounting of the corporate stock in Xpedite, compensatory damages of approximately $4.9 million, plus
$200,000 in lost investments, interest and/or dividends that have accrued and have not been paid, punitive damages in an unspecified amount, and for certain equitable relief, including a request for Xpedite to issue 139,430 shares of
common stock in the plaintiffs names, attorneys fees and costs and such other and further relief as the court deems just and equitable. This case has been dismissed without prejudice and compelled to NASD arbitration, which has
commenced. In August 2000, Plaintiffs filed a statement of claim with the NASD against 12 named respondents, including Xpedite (the Nobis Respondents). Claimants allege that the 12 named respondents engaged in wrongful activities in
connection with the management of the claimants investments with Equitable. The statement of claim asserts wrongdoing in connection with the claimants investment in securities of Xpedite and in unrelated investments involving
insurance-related products. The allegations in the statement of claim against Xpedite are limited to claimants investment in Xpedite. Claimants seek, among other things, an accounting of the corporate stock in Xpedite, compensatory damages of
not less than $415,000, a fair conversion rate on stock options, losses on the investments, plus interest and all dividends, punitive damages, attorneys fees and costs. Hearings before the NASD panel were held on November 27-29, 2001, January
22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among other things, held Xpedite, along with co-Respondents
Angrisani, Erb, and



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CEA Financial, jointly and severally liable to Claimant Constance Nobis for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002.
The Panel also held Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $50,000, plus 9% simple interest from January 1, 1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate
Arbitration Award, and Request for Judicial Intervention in New York State. That proceeding is pending. On April 7, 2003, the New Jersey Superior Court entered an Order for Judgment affirming the NASD Award. Plaintiffs filed a Motion for
Reconsideration of the April 7, 2003 Order on April 25, 2003, which is pending.



On September 3, 1999, Elizabeth Tendler filed a complaint in the Superior Court of New Jersey Law Division, Union County, against 17 named defendants including PTEK and Xpedite, and various alleged current and former
officers, directors, agents and representatives of Xpedite. The plaintiff alleges that the defendants engaged in wrongful activities in connection with the management of the plaintiffs investments, including investments in Xpedite. The
allegations against Xpedite and PTEK are limited to plaintiffs investment in Xpedite. Plaintiffs claims against Xpedite and PTEK include breach of contract, breach of fiduciary duty, unjust enrichment, conversion, fraud, interference
with economic advantage, liability for ultra vires acts, violation of the New Jersey Consumer Fraud Act and violation of New Jersey RICO. Plaintiff seeks an accounting of the corporate stock of Xpedite, compensatory damages of approximately $1.3
million, accrued interest and/or dividends, a constructive trust on the proceeds of the sale of any Xpedite or PTEK stock, shares of Xpedite and/or PTEK to satisfy defendants obligations to plaintiff, attorneys fees and costs, punitive
and exemplary damages in an unspecified amount, and treble damages. On February 25, 2000, Xpedite filed its answer, as well as cross claims and third party claims. This case has been dismissed without prejudice and compelled to NASD arbitration,
which has commenced. In August 2000, a statement of claim was also filed with the NASD against all but one of the Nobis Respondents making virtually the same allegations on behalf of claimant Elizabeth Tendler. Claimant seeks an accounting of the
corporate stock in Xpedite, compensatory damages of not less than $265,000, a fair conversion rate on stock options, losses on other investments, interest and/or unpaid dividends, punitive damages, attorneys fees and costs. Hearings before the
NASD panel were held on November 27-29, 2001, January 22-24, 2002, February 4-7, 2002, April 9-19, 2002, and May 30, 2002. On July 31, 2002, the NASD Panel issued its Award. The Award was subsequently amended on September 9, 2002. The Panel, among
other things, held Xpedite, along with co-respondents Angrisani, Erb, and CEA Financial, jointly and severally liable to claimant Elizabeth Tendler for $57,500, plus 9% simple interest from March 1, 1999 until September 9, 2002. The Panel also held
Angrisani, Erb, and CEA Financial jointly and severally liable to Xpedite for $57,500, plus 9% simple interest form March 1, 1999 until September 9, 2002. Xpedite has filed a Notice of Petition, Verified Petition to Vacate Arbitration Award, and
Request for Judicial Intervention in New York State. That proceeding is pending. On April 7, 2003, the New Jersey Superior Court entered an Order for Judgment affirming the NASD Award. Plaintiff filed a Motion for Reconsideration of the April 7,
2003 Order on April 25, 2003, which is pending.



On December
10, 2001, Voice-Tel Enterprises, Inc. (Voice-Tel) filed a Complaint against Voice-Tel franchisees JOBA, Inc. (JOBA) and Digital Communication Services, Inc. (Digital) in the U.S. District Court for the Northern
District of Georgia. The Complaint sought injunctive relief and a declaratory judgment with respect to Voice-Tels right to terminate the franchise agreements with JOBA and Digital. On January 7, 2002, JOBA and Digital answered Voice-Tels
Complaint and asserted counterclaims against Voice-Tel for alleged breach of franchise agreements and other alleged franchise-related agreements. JOBA and Digital also asserted claims alleging tortious interference of contract against Premiere
Communications, Inc. (PCI) and PTEK. On January 18, 2002, Voice-Tel, PCI and PTEK filed responses and answers to the counterclaims and filed additional breach of contract and tort claims against JOBA and Digital. In March 2002, Voice-Tel
and JOBA and Digital sought leave of court to file amended complaints and answers, which the court granted as to JOBA and Digital and granted in part and denied in part as to Voice-Tel. The Digital Franchise Agreement contained a mandatory
arbitration provision, which was not found in the JOBA Franchise Agreement. Therefore, on April 10, 2002, the federal court severed the Digital breach of franchise agreement claims and ordered them to be arbitrated. The Court ordered that all
remaining claims, including but not limited to the breach of franchise agreement claims as to JOBA, would remain in federal court. On July 10, 2002, JOBA and Digital moved to amend their Complaint to add claims for constructive termination of their
franchises, which was subsequently denied by the court on September 11, 2002. On July 16, 2002, Voicecom Telecommunications, LLC (Voicecom) was added as a party Plaintiff in the lawsuit against JOBA and Digital. With the exception of
expert and damages testimony, discovery has now concluded and the parties are awaiting a trial date contingent on the parties agreeing to submit all claims to arbitration. The parties have filed motions and cross motions for partial summary
judgment, including responses thereto. A mediation of all



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claims between all parties was held on March 24, 2003, which failed to resolve any of the issues in litigation. On March 31, 2003, the federal court issued
an Order granting in part and denying in part each of the parties Motions for Summary Judgment. As a result of the federal courts rulings, Voice-Tel, PTEK and PCI contend the only remaining claims in federal court are alleged breach of
franchise claims by and against Voice-Tel and JOBA, and the only claims to be arbitrated are breach of franchise agreement claims by and against Voice-Tel and Digital. JOBA and Digital disagree with this characterization. Voice-Tel, PTEK and PCI
have filed a motion to clarify the federal courts Order, and JOBA and Digital have filed a motion for reconsideration of the courts Order as well as a cross-motion for clarification. The federal court will hold a hearing on these
outstanding motions on June 4, 2003. The Digital arbitration had previously been scheduled for July 13, 2003; however, it is not clear at this time if the arbitration will proceed in whole or in part on that date.



On March 25, 2003, EasyLink Services Corporation (EasyLink) filed
an amended complaint against the Company, Xpedite and AT&T Corp. (AT&T), in the Superior Court of New Jersey, Chancery Division: Middlesex County. EasyLinks complaint alleges, among other things, that the Company entered
into an agreement to purchase a secured promissory note in the original principal amount of $10 million and 1,423,980 shares of EasyLinks Class A common stock for the purpose of obtaining EasyLinks business by using the acquired
securities to block a debt restructuring that EasyLink was allegedly pursuing with its creditors, including AT&T, and for other improper motives. EasyLinks complaint alleges that it pursued such debt restructuring in reliance on its
understanding that AT&T would participate in the restructuring on certain terms to which EasyLink and AT&T allegedly had agreed, and that AT&T misled EasyLink as to its intentions with respect to such restructuring. The complaint further
alleges that AT&T disclosed confidential information of EasyLink to the Company in violation of AT&Ts agreements with EasyLink, and that such information was used by AT&T and the Company in furtherance of a joint scheme to force
EasyLink out of the marketplace. EasyLinks complaint also alleges that employees of the Company and Xpedite have knowingly made false statements to EasyLinks customers, investors and creditors regarding EasyLink and its financial
stability. EasyLink claims that these various actions have impaired its ability to restructure its debt effectively and caused it to suffer various other commercial losses. EasyLinks complaint seeks to (i) enjoin AT&T from selling the
secured promissory note to the Company, improperly interfering with EasyLinks business and contracts and disclosing EasyLinks confidential information without EasyLinks consent; (ii) compel AT&T to consummate EasyLinks
proposed restructuring; (iii) enjoin the Company and Xpedite from making false statements to EasyLinks customers and creditors regarding EasyLink and its financial position; (iv) enjoin the Company from contacting EasyLinks creditors and
preventing the restructuring of EasyLinks debt; and (v) enjoin the Company and Xpedite from using EasyLinks confidential information and contacting EasyLinks current and former employees to obtain such confidential information.
EasyLinks complaint also seeks unspecified damages from AT&T and the Company. The Company and Xpedite intend to defend this lawsuit and have filed a motion to dismiss the claims against them. A hearing on EasyLinks application for a
preliminary injunction was held on May 1, 2003. The court adjourned the hearing without ruling and directed the parties to explore settlement. The hearing was reconvened on May 13, 2003. The court again adjourned the hearing without ruling and
directed the parties to explore settlement. The hearing is scheduled to reconvene on May 22, 2003.



The Company is also involved in various other legal proceedings which the Company does not believe will have a material adverse effect upon the
Companys business, financial condition or results of operations, although no assurance can be given as to the ultimate outcome of any such proceedings.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) | Exhibits
|--- | --------



|Exhibit Number |  | Exhibit Description                                                                                                                               
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|(b) | Reports on Form 8-K:
|--- | --------------------



The following report on Form 8-K was filed during the quarter for which this report is filed:



|Date of Report (Date Filed) |  | Items Reported                                                                                        |  | Entities For WhichFinancial Statements Filed
|--------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | --------------------------------------------
|01/15/03                    |  | Item 5  Other Events to announce the continuation of PTEK Holdings, Inc.s stock repurchase program. |  | None                                        



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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.



|Date: December 19, 2003 |  |  |  | PTEK HOLDINGS, INC.                                 
|----------------------- |  |  |  | ----------------------------------------------------
|                        |  | 
|                        |  |  |  | /s/ William E. Franklin                             
|                        |  |  |  | William E. Franklin                                 
|                        |  |  |  | Executive Vice President and Chief Financial Officer
|                        |  |  |  | (principal Financial and Accounting Officer and duly
|                        |  |  |  | authorized signatory of the Registrant)             



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EXHIBIT INDEX



|Exhibit Number |  | Exhibit Description                                                                                                                               
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



29