<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

          ( ) 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 000-28467

                            Z-TEL TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

           Delaware                                          59-3501119
-------------------------------                   ------------------------------
(State of Other Jurisdiction of                           (I.R.S. Employer
  Incorporation or Organization)                        Identification Number)

                  601 SOUTH HARBOUR ISLAND BOULEVARD, SUITE 220
                              Tampa, Florida 33602
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (813) 273-6261
                         -------------------------------
              (Registrant's Telephone Number, Including Area Code)

         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  [ ]

         At May 11, 2001 the Registrant had outstanding 33,821,466 shares of
$.01 par value common stock.


<PAGE>   2

                              Z-TEL TECHNOLOGIES, INC.

                                      INDEX


<TABLE>
<S>                                                                        <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at March 31, 2001
                   and December 31, 2000                                     3

         Condensed Consolidated Statements of Operations for the
                  three months ended March 31, 2001 and 2000                 4

         Condensed Consolidated Statement of Changes in Stockholders'
                  Equity and Comprehensive Loss for the three
                  months ended March 31, 2001                                5

         Condensed Consolidated Statements of Cash Flows for the
                  three months ended March 31, 2001 and 2000                 6

         Notes to Condensed Consolidated Financial Statements                7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                              10

Item 3.  Quantitative and Qualitative Disclosures About Market Risk         16

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                  16

Item 2.  Changes in Securities and Use of Proceeds                          17

Item 6.  Exhibits and Reports on Form 8-K                                   17

SIGNATURES                                                                  21
</TABLE>



                                       2
<PAGE>   3

Z-Tel Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                        MARCH 31,        DECEMBER 31,
                                                                                           2001              2000
                                                                                       -----------       ------------
ASSETS                                                                                 (UNAUDITED)
<S>                                                                                    <C>               <C>
Current assets:
    Cash and cash equivalents, including restricted cash of $1,267                      $  31,587         $  46,650
    Accounts receivable, net of allowance for doubtful
        accounts of $12,570 and $9,026                                                     68,525            65,432
    Prepaid expenses and other current assets                                              11,852             7,159
                                                                                        ---------         ---------
      Total current assets                                                                111,964           119,241

Property and equipment, net                                                                63,387            59,200
Intangible assets, net                                                                     62,944            64,267
Other assets                                                                                4,475             3,753
                                                                                        ---------         ---------

        Total assets                                                                    $ 242,770         $ 246,461
                                                                                        =========         =========

LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
      STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued liabilities                                            $  57,770         $  44,693
    Deferred revenue                                                                        8,225             7,666
    Current portion of long-term debt and capital lease obligations                         8,175             7,637
                                                                                        ---------         ---------
      Total current liabilities                                                            74,170            59,996

Long-term debt and capital lease obligations                                               12,142            12,780
                                                                                        ---------         ---------

        Total liabilities                                                                  86,312            72,776
                                                                                        ---------         ---------

Mandatorily redeemable convertible preferred stock, $.01 par value; 50,000,000
      shares authorized; 8,854,914 issued and outstanding (aggregate liquidation
      value of approximately $110,055 and $84,585)                                         87,142            84,585
                                                                                        ---------         ---------

Commitments and contingencies (Notes 4 and 6)

Stockholders' equity:
    Common stock, $.01 par value; 150,000,000
        shares authorized; 34,110,788 and 34,033,910 shares issued;
        33,831,113 and 33,754,235 outstanding, respectively                                   341               340
    Notes receivable from stockholders                                                       (839)             (839)
    Unearned stock compensation                                                              (221)             (255)
    Additional paid-in capital                                                            225,081           227,304
    Accumulated deficit                                                                  (154,710)         (137,130)
    Accumulated other comprehensive loss                                                      (18)               (2)
    Treasury stock, 279,675 shares at cost                                                   (318)             (318)
                                                                                        ---------         ---------

      Total stockholders' equity                                                           69,316            89,100
                                                                                        ---------         ---------

        Total liabilities, mandatorily redeemable convertible preferred stock
             and stockholders' equity                                                   $ 242,770         $ 246,461
                                                                                        =========         =========
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



                                       3

<PAGE>   4

Z-Tel Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)

<TABLE>
<CAPTION>

                                                            THREE MONTHS ENDED
                                                                 MARCH 31,
                                                          2001                 2000
                                                     ---------------------------------
                                                                (UNAUDITED)
<S>                                                  <C>                  <C>
Revenues                                             $     75,044         $     13,976
                                                     ------------         ------------

Operating expenses:
    Network operations                                     43,302                9,830
    Sales and marketing                                    12,761                6,819
    Research and development                                2,367                1,299
    General and administrative                             30,203               10,461
    Depreciation and amortization                           6,041                2,088
                                                     ------------         ------------

      Total operating expenses                             94,674               30,497
                                                     ------------         ------------

      Operating loss                                      (19,630)             (16,521)
                                                     ------------         ------------

Nonoperating income (expense):
    Interest and other income                               2,918                1,286
    Interest and other expense                               (868)                (241)
                                                     ------------         ------------

      Total nonoperating income                             2,050                1,045
                                                     ------------         ------------

Net loss                                                  (17,580)             (15,476)

      Less mandatorily redeemable convertible
           preferred stock dividends and accretion         (2,544)                  --
                                                     ------------         ------------

Net loss attributable to common stockholders         $    (20,124)        $    (15,476)
                                                     ============         ============

Weighted average common shares outstanding             33,790,809           31,940,556
                                                     ============         ============

Basic and diluted net loss per share                 $       (.60)        $       (.48)
                                                     ============         ============
</TABLE>



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       4
<PAGE>   5


Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)


<TABLE>
<CAPTION>

                                              COMMON STOCK        NOTES
                                           -----------------   RECEIVABLE     UNEARNED    ADDITIONAL                   OTHER
                                                        PAR       FROM         STOCK       PAID-IN    ACCUMULATED  COMPREHENSIVE
                                             SHARES    VALUE  STOCKHOLDERS  COMPENSATION   CAPITAL      DEFICIT        LOSS
                                           ----------  -----  ------------  ------------  ----------  -----------  -------------
<S>                                        <C>         <C>    <C>           <C>           <C>         <C>          <C>
Balance, December 31, 2000                 33,754,235    340      (839)         (255)       227,304    (137,130)        (2)

Issuance of common stock for exercise
     of stock options                          49,378      1                                    117
Issuance of common stock for the
    purchase of software                       27,500     --                                    155
Vesting of stock options granted below
    intrinsic value                                                               34
Accelerated vesting of stock options                                                             49
Mandatorily redeemable convertible
    preferred dividends and stock
    accretion                                                                                (2,544)

Net loss                                                                                                (17,580)
Foreign currency translation adjustment                                                                                (16)



Comprehensive loss
                                           ----------  -----    ------        ------      ---------   ---------      -----
Balance, March 31, 2001                    33,831,113  $ 341    $ (839)       $ (221)     $ 225,081   $(154,710)     $ (18)
                                           ==========  =====    ======        ======      =========   =========      =====

<CAPTION>

                                                               TOTAL
                                             TREASURY      STOCKHOLDERS'
                                               STOCK           EQUITY
                                             --------     ----------------
<S>                                          <C>          <C>
Balance, December 31, 2000                     (318)            89,100

Issuance of common stock for exercise
     of stock options                                              118
Issuance of common stock for the
    purchase of software                                           155
Vesting of stock options granted below
    intrinsic value                                                 34
Accelerated vesting of stock options                                49
Mandatorily redeemable convertible
    dividends and preferred stock accretion                     (2,544)

Net loss                                                       (17,580)
Foreign currency translation adjustment                            (16)
                                                             ---------

Comprehensive loss                                             (17,596)
                                             ------          ---------
Balance, March 31, 2001                      $ (318)         $  69,316
                                             ======          =========
</TABLE>



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                       5
<PAGE>   6


Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                              MARCH 31,
                                                                         2001          2000
                                                                      ----------     ---------
                                                                             (UNAUDITED)
<S>                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                              $ (17,580)     $ (15,476)
                                                                      ---------      ---------
Adjustments to reconcile net loss to net cash used in
      operating activities:
    Depreciation and amortization                                         6,041          2,088
    Provision for bad debts                                               4,309            652
    Expense charged for granting of stock options                            83             --
      Increase in accounts receivable                                    (7,402)        (9,375)
      Increase in prepaid expenses and other current assets                (628)          (840)
      Increase in other assets                                           (5,087)          (229)
      Increase in accounts payable and accrued liabilities               13,077          2,203
      Increase in deferred revenue                                          559          1,128
      Other                                                                  78            (43)
                                                                      ---------      ---------
        Total adjustments                                                11,030         (4,416)
                                                                      ---------      ---------
        Net cash used in operating activities                            (6,550)       (19,892)
                                                                      ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from note receivable                                             7             --
    Issuance of note receivable                                            (100)            --
    Purchases of property and equipment                                  (7,460)        (9,201)
    Purchase of securities                                                   --           (700)
                                                                      ---------      ---------
        Net cash used in investing activities                            (7,553)        (9,901)
                                                                      ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from exercise of stock options                                 118            382
    Proceeds from notes receivable                                                         366
    Payments on long-term debt obligations                               (1,078)       (14,099)
                                                                      ---------      ---------
        Net cash used in financing activities                              (960)       (13,351)
                                                                      ---------      ---------
Net decrease in cash and cash equivalents                               (15,063)       (43,144)
Cash and cash equivalents, beginning of period                           46,650        101,657
                                                                      ---------      ---------

Cash and cash equivalents, end of period                              $  31,587      $  58,513
                                                                      =========      =========
</TABLE>




THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



                                       6

<PAGE>   7


Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.       NATURE OF BUSINESS

         DESCRIPTION OF BUSINESS

         Z-Tel Technologies, Inc. and subsidiaries ("Z-Tel" or the "Company")
         incorporated in Delaware on January 15, 1998 as Olympus
         Telecommunications Group, Inc. In March 1998, Olympus
         Telecommunications Group, Inc. changed its name to Z-Tel Technologies,
         Inc. Z-Tel Technologies, Inc. is the parent Company. The Company has
         eight wholly owned subsidiaries: Z-Tel Communications, Inc., Z-Tel
         Business Networks, Inc., Z-Tel Holdings, Inc., Z-Tel Communications of
         Virginia, Inc., Z-Tel, Inc., Z-Tel Network Services, Inc., Z-Tel
         Investments, Inc., and Touch 1 Communications, Inc. and Subsidiaries.

         Z-Tel is an emerging provider of advanced, integrated
         telecommunications services targeted to residential subscribers. Z-Tel
         offers local and long distance telephone services in combination with
         enhanced communication features accessible through the telephone, the
         Internet and certain personal digital assistants. Z-Tel offers its
         Z-Line Home Edition service, at least on an initial test basis, in
         nineteen states. Z-Tel also provides long-distance telecommunications
         services to customers nationally.

2.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
         have been prepared by the Company in accordance with generally accepted
         accounting principles for interim financial information and are in the
         form prescribed by the Securities and Exchange Commission in
         instructions to Form 10-Q and Article 10 of Regulation S-X.
         Accordingly, they do not include all of the information and footnotes
         required by generally accepted accounting principles for complete
         financial statements. The interim unaudited financial statements should
         be read in conjunction with the audited financial statements of the
         Company as of and for the year ended December 31, 2000, included in the
         Company's Annual Report on Form 10-K. In the opinion of management, all
         adjustments considered necessary for a fair presentation have been
         included. Operating results for the three months ended March 31, 2001
         are not necessarily indicative of the results that may be expected for
         the year ending December 31, 2001.

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
         Company and its wholly owned subsidiaries. All intercompany accounts
         and transactions have been eliminated.

         NEW ACCOUNTING PRONOUNCEMENT

         Statement of Financial Account Standard ("SFAS") No. 140, "Accounting
         for Transfers and Servicing of Financial Assets and Extinguishments of
         Liabilities" will be applied prospectively for transfers of financial
         assets occurring after March 31, 2001. The SFAS replaces SFAS No. 125,
         "Accounting for Transfers and Servicing of Financial Assets and
         Extinguishments of Liabilities." SFAS No. 140 revises the standards for
         accounting for securitizations and other



                                       7
<PAGE>   8

Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         transfers of financial assets and collateral and requires certain
         disclosures, but it carries over most of SFAS No. 125's provisions
         without reconsideration.

         SFAS No. 140 provides accounting and reporting standards for transfers
         and servicing of financial assets and extinguishments of liabilities.
         Those standards are based on consistent application of a
         financial-components approach that focuses on control. Under that
         approach, after a transfer of financial assets, an entity recognizes
         the financial and service assets it controls and the liabilities it has
         incurred, derecognizes financial assets when control has been
         surrendered, and derecognizes liabilities when extinguished. This
         statement provides consistent standards for distinguishing transfers of
         financial assets that are sales from transfers that are secured
         borrowings. Management is addressing the impact that adoption will have
         on the Company's financial position and results of operations.

3.       ACCOUNTS RECEIVABLE AGREEMENT

         In July 2000, the Company entered into an accounts receivable agreement
         with RFC Capital Corporation, a division of Textron, Inc. ("RFC"),
         providing for the sale of certain of the Company's accounts receivable
         to RFC. RFC has agreed to purchase up to $25.0 million of the Company's
         accounts receivable, at any given time,  with provisions for a
         commitment of up to $50.0 million, at any given time, subject to
         successful syndication of the receivable program by RFC.

         In connection with the accounts receivable agreement described above,
         the Company sold approximately $31.5 million of receivables in the
         first quarter of 2001. Cash received from the sale was approximately
         $20.8 million and is included in cash flows from operating activities.
         At March 31, 2001, a net amount receivable relating to the sale of
         approximately $10.7 million is included in accounts receivable and the
         costs related to the agreement of approximately $0.1 million are
         included in interest and other expense.

4.       COMMITMENTS AND CONTINGENCIES

         The Company has disputed billings and access charges from certain
         inter-exchange carriers (IXCs) and incumbent local exchange carriers
         (ILECs). The Company contends the invoicing of billings and access
         charges received from certain IXCs and ILECs are not in accordance with
         the interconnection, service level, or tariff agreements entered
         between the Company and certain IXCs and ILECs. The Company has not
         paid for a portion of these disputes and management believes that the
         Company will prevail in these disputes. At March 31, 2001 the disputed
         amount calculated was approximately $12.4 million.

5.       COMPUTATION OF NET LOSS PER SHARE

         Basic net loss per share is computed by dividing net loss attributable
         to common stockholders by the weighted average number of common shares
         outstanding during the period. Diluted net loss per share assumes the
         exercise of common stock equivalents for which market price exceeds
         exercise price, less shares assumed purchased by the Company with
         related proceeds. Incremental shares of common stock equivalents are
         not included in the calculation


                                       8
<PAGE>   9

Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         of net loss per share as the inclusion of such equivalents would be
         anti-dilutive; therefore, for each of the periods presented basic and
         diluted net loss per share are the same.

         Net loss per share is calculated as follows:

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
                                                                                      MARCH 31,
                                                                             2001                 2000
                                                                         ------------         ------------
          <S>                                                            <C>                  <C>
          BASIC AND DILUTED NET LOSS PER SHARE:
              Net loss attributable to common stockholders:
                Net loss                                                 $    (17,580)        $    (15,476)
                Less mandatorily redeemable convertible
                     preferred stock dividends and accretion                   (2,544)                  --
                                                                         ------------         ------------

                  Net loss attributable to common stockholders           $    (20,124)        $    (15,476)
                                                                         ============         ============

              Weighted average common shares outstanding                   33,790,809           31,940,556
                                                                         ============         ============

              Basic and diluted net loss per share                       $      (0.60)        $      (0.48)
                                                                         ============         ============
</TABLE>


         For each of the periods presented, basic and diluted net loss per share
         are the same. Unexercised options to purchase 8,144,400 and 7,180,530
         shares of common stock, unexercised warrants to purchase 5,297,767 and
         637,332 shares of common stock, mandatorily redeemable convertible
         preferred stock convertible into 9,043,481 and 0 shares of common stock
         for the three months ended March 31, 2001 and 2000, respectively, which
         could potentially dilute basic earnings per share in the future, were
         not included in the computation of diluted net loss per share.

6.       LEGAL AND REGULATORY PROCEEDINGS

         On March 15, 2001, the Company filed a lawsuit against AT&T Corp.
         (AT&T). The Company alleged that AT&T has received originating and
         terminating access service from the Company and has unlawfully withheld
         access charges for such services. The Company currently seeks damages
         from AT&T in the amount of approximately $7.9 million, and has alleged
         the Company is entitled to late fees and interest on such amount and
         any future amounts, consequential damages, punitive damages, attorney's
         fees and costs. The Company also has asked the Court to enter an order
         directing AT&T to pay access charges to the Company in the future if
         AT&T continues to use its service. AT&T has filed an answer and
         counterclaims and has moved to stay the proceedings. The Company has
         filed a motion to dismiss AT&T's counterclaims and has opposed the
         motion to stay. The Court has not ruled on any of the pending motions.

         In the ordinary course of business, the Company is involved in legal
         proceedings that are generally incidental to its operations. In
         addition, from time to time, the Company is the subject of customer
         complaints filed with the state utility commissions of the states in
         which it operates or the FCC. Most complaints are handled informally.
         While there can be no


                                       9
<PAGE>   10

Z-TEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         assurance of the ultimate disposition of incidental legal proceedings
         or customer complaints, the Company does not believe their disposition
         will have a material adverse effect on the Company's consolidated
         results of operations or financial position.


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

You should read the following discussion together with the condensed
consolidated financial statements and related notes and other sections of this
Quarterly Report on Form 10-Q. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those projected in the forward-looking statements as a result of
certain factors. Factors that may affect our results of operations include, but
are not limited to, our limited operating history and cumulative losses,
uncertainty of customer demand, rapid expansion, potential software failures and
errors, potential network and interconnection failure, dependence on local
exchange carriers, dependence on third party vendors, dependence on key
personnel, uncertainty of government regulation, legal and regulatory
uncertainties, and competition. We disclaim any obligation to update information
contained in any forward-looking statement. In addition to these factors, other
factors that could affect the Company's financial results are described in the
Company's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 30, 2001.

OVERVIEW

We are an emerging provider of advanced, integrated telecommunications services
targeted primarily to residential subscribers. For management purposes, we are
organized into one reportable operating segment. We offer local and long
distance telephone services in combination with enhanced communication features
accessible through the telephone or the Internet. The nature of our business is
rapidly evolving, and we have a limited operating history. As a result, we
believe that period-to-period comparisons of our revenues and operating results,
including our network operations and other operating expenses as a percentage of
total revenue, are not meaningful and should not be relied upon as indicators of
future performance. We do not believe that our historical growth rates are
indicative of future results.

Z-Line Home Edition is our principal service offering. Z-Line Home Edition
includes low-priced local and long distance (1+) residential telephone services
using a customer's existing telephone number, bundled with enhanced features,
including caller identification, call forwarding, three-way calling, speed
calling, and remote access to long distance calling through our Z-Line Anywhere
access card service, the full functionality of the Z-Line Features and, for an
additional fee, Internet access. We offer Z-Line Home Edition service, at least
on an initial marketing basis, in nineteen states.

We intend to continue to pursue offering Z-Line Home Edition in additional
states as soon as favorable pricing and implementation rules are imposed in
those states. We have also developed other bundled combinations of our services
at varied price points in order to stimulate and expand customer interest in our
services. For example, we have begun to offer, in five states, a lower



                                       10
<PAGE>   11

price version of Z-Line Home Edition that includes fewer bundled long distance
minutes and features. Additional long distance minutes and features are being
offered separately for an additional monthly fee. We also have offered to all of
our Z-Line Home Edition subscribers the ability, through our member-to-member
program, to make unlimited long distance telephone calls to other Z-Line Home
Edition subscribers for an additional monthly fee.

Z-Line Anywhere is our access card service that allows a customer to make
long-distance calls using our network from any phone simply by dialing a local
access or toll-free 1-800 number. No change in phone service is required.
Subscribers of Z-Line Anywhere also receive the full functionality of our Z-Line
Features. Z-Line Anywhere customers are billed monthly in arrears, and the
associated revenue is recognized in the month of service. Z-Line Anywhere is
available nationwide, although we are not actively marketing the service.

Touch 1 Long Distance is our (1+) long distance product. Touch 1 Long Distance
is also available nationwide, although we are not actively marketing the
service.

We completed the acquisition of Touch 1 Communications, Inc. ("Touch 1"), on
April 14, 2000. The purchase price of Touch 1 consisted of 1.1 million shares of
our common stock and $9.0 million in cash. The acquisition was accounted for as
a purchase business combination. Touch 1 provides employees in sales,
provisioning, and customer service. This acquisition provided us with the
opportunity to further grow our back-office operations to provide capacity for
market entry into new states.

RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 2001 COMPARED TO QUARTER ENDED
MARCH 31, 2000

REVENUES. Revenues increased by $61.0 million to $75.0 million for the quarter
ended March 31, 2001, compared to $14.0 million for the same quarter in the
prior year. The increase is attributable to average Home Edition subscriber
lines of 360,000 for the quarter ended March 31, 2001, compared to 63,000 for
the same quarter in the prior year. The purchase of Touch 1 provided an
additional increase in revenue of $6.7 million from its existing 1+
long-distance offering for the quarter ended March 31, 2001. The following
tables outline the approximate number of subscriber lines for Z-Line Home
Edition, Z-Line Anywhere and Touch 1 (1+) long distance services as of the end
of the period:

<TABLE>
<CAPTION>
TYPE OF SERVICE                          March 31, 2001      March 31, 2000
<S>                                      <C>                 <C>
Z-Line Home Edition                         380,000             86,000

Z-Line Anywhere and Touch 1 (1+)
    Long Distance Services                  234,000              8,100
</TABLE>

NETWORK OPERATIONS. Network operations expense increased by $33.5 million to
$43.3 million for the quarter ended March 31, 2001, compared to $9.8 million for
the same quarter in the prior year. Our gross margin increased to 42.3% for the
quarter ended March 31, 2001, compared to 29.7% for the same period in the prior
year. The network operations expense



                                       11
<PAGE>   12
primarily consists of fixed and variable transmission expenses for
interconnection agreements with incumbent local exchange carriers (ILECs),
service level agreements with inter-exchange carriers (IXCs), and
transmission services based on tariff arrangements. The increase in network
operation expenses and improved margins is the result of our subscriber growth.

SALES AND MARKETING. Sales and marketing expense increased $6.0 million to $12.8
million for the quarter ended March 31, 2001, compared to $6.8 million for the
same quarter in the prior year. The sales and marketing expense primarily
consists of telemarketing, direct mail, brand awareness advertising, agent
commissions and salaries and benefits paid to employees engaged in sales
for the same quarter in the prior year and marketing activities.

The increase is attributable to an overall increase in sales, marketing, and
advertising activities. We had increased telemarketing in the first quarter of
2001 compared to the same quarter in the prior year because of offering service
to nineteen states in 2001 compared to three states for the same quarter in the
prior year. We increased the use of radio and billboard advertising in 2001,
especially in the states in which we recently introduced service. The radio and
billboard advertising, coupled with commissions from our various agent programs
contributed to the increase in our sales and marketing expense in 2001.

We are intensifying our focus on sales and marketing channels with lower
acquisition costs per subscriber for 2001. We have eliminated direct mail
campaigns that resulted in higher than anticipated acquisition and operating
costs. We also will be reducing our telemarketing hours through the closure of a
call center resulting in approximately 80 telemarketers and 12 support positions
being eliminated. We believe our roll-out of the member-to-member campaign to
all states in which we offer Z-Line Home Edition, coupled with the introduction
of our online sales channel and electronic agent program, should contribute to
lower acquisition costs during the next quarter and throughout 2001. We will
continue to build the overall awareness of our "Z" brand, and pursue alliances
and ventures with other companies.

RESEARCH AND DEVELOPMENT. Research and development expenses increased $1.1
million to $2.4 million for the quarter ended March 31, 2001, compared to $1.3
million for the same quarter in the prior year. Our research and development
expenses consist primarily of salaries and benefits paid to employees engaged in
research and development activities and outside third party development costs.
The increase in research and development is a result of increased employees in
this area at March 31, 2001 compared to the same quarter in 2000.

In accordance with generally accepted accounting principles, we have capitalized
$1.3 and $0.4 million of salary and related costs for research and development
relating to the development of internal use software, rather than expensing
these costs in research and development, at March 31, 2001 and 2000,
respectively.

We partnered with an outside consulting firm to establish an electronic gateway
to increase our provisioning and overall order processing efficiency. In
addition to assisting with improving operations, our


                                       12
<PAGE>   13

research and development team is working to develop speech recognition and other
new service offerings to provide consumers with more reasons to become and
remain our customers.

GENERAL AND ADMINISTRATIVE. General and administrative expense increased $19.7
million to $30.2 million for the quarter ended March 31, 2001, compared to $10.5
million for the same quarter in the prior year. Increases in employee salaries,
bad debt expense, billing and collection expense, occupancy costs, and
provisioning costs were necessary to support the growth we experienced.
Increases in subscriber lines have created increased support and operating
expense that have contributed to increased general and administrative expense in
2001.

The overall increase in general and administrative costs is a result of our
support of an average of 360,000 subscriber lines in the first quarter 2001
compared to an average of 63,000 subscriber lines for the same quarter in the
prior year. Additional employees for our back-office operation were required
during 2001 to support the nineteen states in which we now provide service. The
reduction in workforce resulting from implementing our electronic gateway during
the first quarter of 2001 contributed to some reduction in overall general and
administrative expense, however, the complete benefits of this reduction will
not be fully recognized until the second quarter of 2001.

The increase in bad debt expense during the first quarter of 2001 resulted from
supporting additional subscribers and a write-off of certain carrier access
related receivables. We continue to evaluate our operations for efficiencies and
the opportunity for any improvements in customer provisioning, billing, and
collection. We are evaluating our employee staffing requirements as they relate
to increased efficiency and expect to see reductions in the next quarter. We
expect our efforts will provide us with efficiencies that will provide an
overall reduced general and administrative cost per subscriber.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
$3.9 million to $6.0 million for the quarter ended March 31, 2001, compared to
$2.1 million for the same quarter in the prior year. The increase in
depreciation and amortization is primarily due to higher levels of fixed assets
and capitalized software, as well as intangible assets related to our purchase
of Touch 1 in April 2000.

INTEREST AND OTHER INCOME. Interest and other income increased $1.6 million to
$2.9 million for the quarter ended March 31, 2001, compared to $1.3 million for
the same quarter in the prior year. Interest and other income includes late fees
from subscriber and carrier receivables, interest earned from our cash balances
invested in interest bearing accounts and any gains from the sale of investments
or securities. The increase was primarily due to $2.5 million in late fees
charged on customer and carrier access related receivables. This increase was
partially offset by the lower interest earned on cash investments as a result of
lower cash balances for the quarter ended March 31, 2001 compared to the first
quarter of 2000.

INTEREST AND OTHER EXPENSE. Interest and other expense increased $0.7 million to
$0.9 million for the quarter ended March 31, 2001, compared to $0.2 million for
the same quarter in the prior year. Our interest expense is a result of the
interest charged on our capital lease and


                                       13
<PAGE>   14

other debt obligations. The increase in 2001 is from the assumption of debt from
the Touch 1 acquisition and certain expenses associated with the sale of our
accounts receivable.

INCOME TAX EXPENSE. No provision or benefit for federal or state income taxes
has been recorded due to the recording of a full valuation allowance against the
net deferred tax asset for the quarters ended March 31, 2001 and 2000.

NET LOSS. Our net loss increased $2.1 million to $17.6 million for the quarter
ended March 31, 2001, compared to $15.5 million in the same quarter in the prior
year. This increase was due primarily to the increases in expenses described
above.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Our net loss attributable to
common stockholders increased $4.6 million to $20.1 million for the quarter
ended March 31, 2001, compared to $15.5 million for the same quarter in the
prior year. This increase was due primarily to the increases in expenses
described above and the issuance of the Series D and E Preferred Stock. In
conjunction with the Series D and E Preferred we recorded $2.5 million of
non-cash charges relating to cumulative dividends and preferred stock accretion
during the first quarter of 2001.

EBITDA. Many securities analysts use the measure of earnings before deducting
interest, taxes, depreciation and amortization, also commonly referred to as
"EBITDA," as a way of evaluating our financial performance. EBITDA is not a
measure under generally accepted accounting principles, is not meant to be a
replacement for generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash
flows as a measure of liquidity. We have included EBITDA data because it is a
measure commonly used in the telecommunications industry and is presented to
assist in understanding our operating results. Our negative EBITDA decreased
$0.8 million to $13.6 million for the quarter ended March 31, 2001, compared to
$14.4 million for the first quarter of 2000. We expect to achieve positive
EBITDA on a monthly basis sometime during the second half of 2001. We believe
the attainment of positive EBITDA will primarily arise from our strategic growth
which is focused on improved operating efficiencies and lowered subscriber
acquisition costs.

LIQUIDITY AND CAPITAL RESOURCES The competitive local telecommunications service
business is traditionally considered to be a capital intensive business owing to
the significant investments required in fiber optic communication networks and
the co-location of switches and transmission equipment in incumbent local
exchange carriers' central offices. Although we will continue our capital
expenditures, we do not expect the growth of our business will require the
levels of capital investment in fiber optics and switches that existed in
historical telecommunications facilities-based models. Instead, we will devote
significant amounts of our capital resources to continued operations, software
development and marketing efforts that we have designed to achieve penetration
of our target markets.

We have incurred accumulated losses since our inception as a result of
developing our business, research and development, building and maintaining
network infrastructure and technology, sales and promotion of our services, and
administrative expenditures. At March 31, 2001, we had an accumulated deficit of
$154.7 million and $31.6 million in cash and cash equivalents. We have


                                       14
<PAGE>   15

funded our expenditures primarily through operating revenues, private securities
offerings, a sale-leaseback credit facility, a receivables sale agreement, and
an initial public offering that raised net proceeds of $109.1 million.

On February 14, 2000, we paid $14.4 million to extinguish the outstanding CMB
Capital, LLC capital lease obligation and purchase the related assets. This was
the repayment of transactions involving the sale-leaseback of various furniture
and equipment payable over four years from the date of the transactions. This
transaction accounted for a $1.6 million increase in the carrying value of our
assets, resulting from the payments made to terminate the lease and the carrying
value of our capital lease obligation. This $1.6 million was added to the value
of the assets purchased and is depreciated over the estimated remaining useful
lives in accordance with FASB Interpretation No. 26, Accounting for Purchase of
a Leased Asset by the Lessee during the Term of the Lease, an interpretation of
FASB Statement No. 13.

Net cash used in operating activities improved by $13.3 million to $6.6 million
for the quarter ended March 31, 2001 compared to $19.9 million for the same
quarter in the prior year. The improvement resulted from increased cash
collections on our receivables and slower payment of accounts payable.

Included in our net cash used in operating activities for the quarter ended
March 31, 2001 was the sale of $31.5 million of receivables for proceeds of
$20.8 million. At March 31, 2001, a net amount receivable relating to the sale
of $10.7 million is included in accounts receivable and the cost relating to the
agreement of $0.1 million are included in interest and other expense.

We had payments on long-term debt and capital lease obligations totaling $1.1
million for the quarter ended March 31, 2001. These payments primarily relate to
the debt we assumed in the Touch 1 acquisition. Our payments for the first
quarter of 2001 are substantially less than the $14.4 million paid for the same
quarter in the prior year due to the extinguishment of our sale-leaseback
facility.

Our capital expenditures for the quarter ended March 31, 2001 were $7.5 million
compared to $9.2 in the same quarter of the prior year. During 2000 our efforts
were directed toward enhancing our network and billing infrastructure. Our
focus in 2001 has been to conserve capital and focus on profitability.

Our ongoing capital requirements will depend on several factors, including
market acceptance of our services, the amount of resources we devote to
investments in our networks, facilities, build-out of additional enterprise
management centers, services development and brand promotions, the resources we
devote to sales and marketing of our services, and other factors. As growth
dictates, we expect to make strategic investments in technology and our network
architecture in the future.

Our debt is primarily fixed rate related party that is primarily payable in
monthly installments through 2004. We paid a $3.0 million balloon payment due on
a loan in May 2001. We will make investments in sales and marketing to build our
overall "Z" brand and build awareness about


                                       15
<PAGE>   16

our member-to-member service and lower priced service offerings in an attempt to
attract new customers. We will focus on what we expect to be more efficient
marketing channels such as our on-line agent program and expect to lower
acquisition costs per subscriber.

In the quarter ended March 31, 2001 we eliminated approximately 20% of our
workforce through a formal reduction in force, a hiring freeze, and normal
attrition. During the second quarter of 2001, we will examine the possibility of
further reductions, consistent with our goals of slower growth and our strategic
focus on profitability. We expect the above and other factors to result in the
achievement of positive EBITDA on a monthly basis during the second half of 2001
and positive cash flow from operations sometime thereafter. We believe that we
have sufficient funding to execute our current business plan; however, any
acceleration or change to the business plan may require additional equity or
debt financing which may not be available on attractive terms, or at all, or may
be dilutive.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We currently have instruments sensitive to market risk relating to exposure to
changing interest rates and market prices. We do not enter into financial
instruments for trading or speculative purposes and do not currently utilize
derivative financial instruments. Our operations are conducted primarily in the
United States and as such are not subject to material foreign currency exchange
rate risk.

The fair value of our investment portfolio or related income and our long-term
debt obligations would not be significantly impacted by either a 100 basis point
increase or decrease in interest rates due mainly to the short-term or fixed
nature of these types of items.


Part II - Other Information

ITEM 1.  LEGAL PROCEEDINGS

1.       Case Number 1:01CV00551; Z-Tel Communications, Inc. v AT&T Corp.; in
         the United States District Court for the District of Columbia.

         On March 15, 2001, we filed the captioned suit. In that suit, we have
alleged that AT&T has received originating and terminating access service from
us and has unlawfully withheld access charges for such services from us. We seek
damages from AT&T in the current amount of approximately $7.9 million, and have
alleged we are entitled to late fees and interest on such amount and any future
amounts, consequential damages, punitive damages, attorney's fees and costs. We
also have asked the Court to enter an order directing AT&T to pay access charges
to us in the future if AT&T continues to use our services. AT&T has filed an
answer and counterclaims and has moved to stay the proceedings. We have filed a
motion to dismiss AT&T's counterclaims and have opposed the motion to stay. The
Court has not ruled on any of the pending motions.

2.       In March 2001, Z-Tel management informed John Hutchens, our senior vice
president-chief financial officer, that we had commenced a search that could
result in his possible replacement as chief financial officer. Mr. Hutchens  and
the company have been engaged since that time in discussions regarding severance
arrangements. Pending the outcome of these negotiations, Mr. Hutchens remains an
employee of the company, but is no longer performing the duties of chief
financial officer. The company is currently seeking a chief financial officer
and, in the interim, Dumas Garrett is serving as acting chief financial officer
of the company.


                                       16
<PAGE>   17

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

RECENT SALES OF UNREGISTERED SECURITIES

         On February 21, 2001, we issued 27,500 shares of our common stock,
$0.01 par value (the "Common Stock") to DiPub, Inc. ("DiPub") in connection with
our purchase of software from DiPub. We believe that this transaction is exempt
from registration based on Section 4(2) of the Securities Act of 1933 as a
transaction by an issuer not involving a public offering.


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

         (a)      Exhibits.

         The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
Exhibit
Number         Description
--------       -----------
<S>            <C>
2.1            Agreement and Plan of Merger dated April 10, 2000 by and among
               Z-Tel Technologies, Inc., Tiger Acquisition Subsidiary, Inc.,
               Touch 1 Communications, Inc., and certain shareholders of Touch 1
               Communications, Inc.(A)

3.1            Amended and Restated Certificate of Incorporation of Z-Tel, as
               amended(B)

3.2            Amended and Restated Bylaws of Z-Tel(C)

4.1            Form of Common Stock Certificate(C)

4.2            See Exhibits 3.1 and 3.2 of this Form 10-Q for provisions of the
               Amended and Restated Certificate of Incorporation, as amended,
               and the Bylaws of Z-Tel defining rights of security holders

4.3            Stock Purchase Agreement, dated July 6, 2000, by and between the
               Registrant and the various purchasers of the Registrant's Series
               D Convertible Preferred Stock(D)

4.4            Certificate of Designations, Preferences and Relative Rights,
               Qualifications, Limitations and Restrictions relating to the
               Registrant's Series D Convertible Preferred Stock(D)

4.5            Form of Registration Rights Agreement by and between the
               Registrant and each of the purchasers of the Registrant's Series
               D Convertible Preferred Stock(D)
</TABLE>



                                       17
<PAGE>   18

<TABLE>
<S>            <C>
4.6            Form of Warrant for the purchase of shares of common stock of the
               Registrant by each of the purchasers of the Registrant's Series D
               Convertible Preferred Stock(D)

4.7            Stock and Warrant Purchase Agreement, dated October 19, 2000, by
               and among the Registrant and The 1818 Fund III, L.P.(E)

4.8            Certificate of Designation of 8% Convertible Preferred Stock,
               Series E, Setting Forth the Powers, Preferences, Rights,
               Qualifications, Limitations and Restrictions of Such Series of
               Preferred Stock(E)

4.9            Registration Rights Agreement between and among the Registrant
               and The 1818 Fund III, L.P.(E)

4.10           Warrant for the purchase of shares of common stock of the
               Registrant by The 1818 Fund III, L.P.(E)

4.11           Certificate of Designation of Series F Junior Participating
               Preferred Stock(H)

4.12           Rights Agreement dated as of February 19, 2001 between Z-Tel
               Technologies, Inc. and American Stock Transfer & Trust Company,
               as Rights Agent(F)

10.1.1         Stockholders' Agreement dated October 8, 1999, between and among
               the Company, BA Capital Corporation, Sewanee Partners II, L.P.,
               Gramercy Z-Tel LLC and the other parties set forth therein(C)

10.1.2         Employment Agreement dated July 1998 between the Company and D.
               Gregory Smith(C)

10.1.3         Employment Agreement dated September 1999 between the Company and
               John Hutchens(C)

10.1.4         Employment Agreement dated August 1998 between the Company and
               Charles W. McDonough(C)

10.1.5         Employment Agreement dated August 1998 between the Company and J.
               Bryan Bunting(C)

10.1.6         Employment Agreement dated July 1998 between the Company and
               James A. Kitchen(C)

10.1.7         Investment Agreement dated March 15, 1999 between the Company and
               CMB Capital LLC(C)

10.2.1         1998 Equity Participation Plan(C)

10.2.2         2000 Equity Participation Plan(G)
</TABLE>



                                       18
<PAGE>   19


<TABLE>
<S>            <C>
10.3           Form of Employment Agreement for certain key Touch 1 employees,
               including James F. Corman, President of Touch 1(A)

10.4           Receivables Sales Agreement dated as of July 27, 2000 by and
               between Z-Tel Communications, Inc., as seller and subservicer,
               Touch 1 Communications, Inc., as seller and subservicer, and RFC
               Capital Corporation, as purchaser.(D)

10.5           Form of Indemnification Agreement for executive officers and
               directors of the Company(H)

10.6           Loan and Guaranty Agreement dated January 11, 2001 between the
               Company and James A. Kitchen(H)

10.7           Secured Promissory Note dated January 11, 2001 delivered by James
               A. Kitchen to the Company(H)

10.8           Pledge and Security Agreement dated January 11, 2001 between
               James A. Kitchen and the Company(H)

10.9           Promissory Note, dated September 10, 1999, between Touch 1
               Communications, Inc. and Corman Elegre Capital(H)

10.10          Promissory Note, dated May 11, 1999, between Touch 1
               Communications, Inc. and Corman Elegre Capital(H)

10.11          Promissory Note, dated September 10, 1999, from Touch 1
               Communications, Inc. and William F. Corman (First Revocable
               Trust)(H)

10.12          Promissory Note, dated September 10, 1999, from Touch 1
               Communications, Inc. and James F. Corman(H)
</TABLE>


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

(A)            Incorporated by reference to the correspondingly numbered exhibit
               to the Registrant's Current Report on Form 8-K filed April 28,
               2000.

(B)            Incorporated by reference to Exhibit 4.1 to the Registrant's
               Registration Statement on Form S-8, filed on July 18, 2000.

(C)            Incorporated by reference to the correspondingly numbered exhibit
               to the Registrant's Registration Statement on Form S-1 (File No.
               333-89063), originally filed October 14, 1999, as amended and as
               effective December 14, 1999.


                                       19
<PAGE>   20


(D)            Incorporated by reference to the correspondingly numbered
               exhibits to the Registrant's Quarterly Report on Form 10-Q for
               the quarterly period ending June 30, 2000, filed on August 14,
               2000.

(E)            Incorporated by reference to the correspondingly numbered
               exhibits to the Registrant's Quarterly Report on Form 10-Q for
               the quarterly period ending September 30, 2000, filed on November
               14, 2000.

(F)            Incorporated by reference to Exhibit 4.1 to the Registrant's Form
               8-A Registration Statement filed February 21, 2001.

(G)            Incorporated by reference to Appendix B to the Registrant's
               Preliminary Proxy Statement filed on April 14, 2000.

(H)            Incorporated by reference to the correspondingly numbered
               exhibits to the Registrant's Annual Report on Form 10-K for the
               annual period ending December 31, 2000, filed on March 30, 2001.


         (b)   Reports on Form 8-K.

         During the period covered by this report, we filed one Current Report
on Form 8-K on February 21, 2001, which Report reported our adoption of a
Stockholder Rights Plan pursuant to a Rights Agreement and declared a dividend
of Preferred Stock Purchase Rights in connection therewith.



                                       20
<PAGE>   21

                            Z-TEL TECHNOLOGIES, INC.
                                    SIGNATURE


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, Registrant's principal financial officer, thereunto duly
authorized.




                                        Z-TEL TECHNOLOGIES, INC.
                                        (Registrant)





Date:  May 14, 2001                     By: /s/  N. Dumas Garrett
                                            ------------------------------------
                                            N. Dumas Garrett
                                            Senior Vice President--Finance and
                                            Administration
                                            (Authorized officer of Registrant
                                            and principal financial officer)




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