Edgar Filing: PTEK HOLDINGS INC

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, 2002.

[_] 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

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.)

3399 PEACHTREE ROAD NE
THE LENOX BUILDING, SUITE 600
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.

(1) Yes [X] No [_] (2) 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, 2002
----- ---------------------------
Common Stock, $0.01 par value 54,752,436 Shares

PTEK HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

Page
----

PART I FINANCIAL INFORMATION

Item 1 Financial Statements

Condensed Consolidated Balance Sheets

as of March 31, 2002 and December 31, 2001 ....................... 1

Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 2002 and 2001 ............... 2

Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2002 and 2001 ............... 3

Notes to Condensed Consolidated Financial Statements ............. 4

Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 13

Item 3 Quantitative and Qualitative Disclosures About Market Risk ....... 20

PART II OTHER INFORMATION

Item 1 Legal Proceedings ................................................ 20

Item 2 Changes in Securities ............................................ 23

Item 3 Defaults Upon Senior Securities .................................. 23

Item 4 Submission of Matters to a Vote of Security Holders .............. 23

Item 5 Other Information ................................................ 23

Item 6 Exhibits and Reports on Form 8-K ................................. 23

SIGNATURES ..................................................................... 24

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

March December
31, 2002 31, 2001
--------------------------
(Unaudited) (Audited)
--------------------------

ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................................... $ 40,753 $ 48,023
Marketable securities, available for sale ............................................... 770 1,477
Accounts receivable (less allowance of $6,739 and $8,278, respectively) ................. 62,147 58,613
Federal income tax receivable ........................................................... - 9,208
Prepaid expenses and other .............................................................. 7,389 7,982
Deferred income taxes, net .............................................................. 12,911 13,743
----------- ----------
Total current assets ................................................................. 123,970 139,046

PROPERTY AND EQUIPMENT, NET ................................................................ 65,943 91,349

OTHER ASSETS
Goodwill ................................................................................ 123,066 123,066
Intangibles, net ........................................................................ 18,090 21,880
Deferred income taxes, net .............................................................. 12,289 6,923
Other assets ............................................................................ 4,040 4,174
----------- ----------
$ 347,398 $ 386,438
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ........................................................................ $ 45,458 $ 56,862
Deferred revenue ........................................................................ 123 452
Accrued taxes ........................................................................... 13,714 16,031
Accrued liabilities ..................................................................... 28,814 42,733
Current maturities of long-term debt and capital lease obligations ...................... 3,042 6,124
Accrued restructuring, merger costs and other special charges ........................... 1,933 3,728
----------- ----------
Total current liabilities ............................................................ 93,084 125,930
----------- ----------

LONG-TERM LIABILITIES
Convertible subordinated notes .......................................................... 172,500 172,500
Long-term debt and capital lease obligations ............................................ 3,603 8,552
Other accrued liabilities ............................................................... 5,425 424
----------- ----------
Total long-term liabilities .......................................................... 181,528 181,476
----------- ----------

COMMITMENTS AND CONTINGENCIES (Note 9)

SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized, 57,673,561 and
56,984,575 shares issued at March 31, 2002 and December 31, 2001,
respectively, and 54,264,281 and 53,584,639 shares issued and outstanding
at March 31, 2002 and

December 31, 2001, respectively ....................................................... 576 569
Unrealized gain on marketable securities, available for sale ............................ 342 722
Additional paid-in capital .............................................................. 600,165 597,885
Unearned restricted stock compensation .................................................. (2,672) (3,860)
Treasury stock, at cost ................................................................. (15,535) (15,494)
Note receivable, shareholder ............................................................ (4,593) (4,593)
Cumulative translation adjustment ....................................................... (5,160) (5,775)
Accumulated deficit ..................................................................... (500,337) (490,422)
----------- ----------
Total shareholders' equity ........................................................... 72,786 79,032
----------- ----------
$ 347,398 $ 386,438
=========== ==========

Accompanying notes are integral to these condensed
consolidated financial statements.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(IN THOUSANDS, EXCEPT PER SHARE DATA)

2002 2001
-------------------------
(Unaudited)
-------------------------

REVENUES ....................................................................... $ 83,321 $ 82,334
TELECOMMUNICATIONS COSTS ....................................................... 16,801 20,256
--------- ---------
GROSS PROFIT ................................................................... 66,520 62,078
DIRECT OPERATING COSTS ......................................................... 13,080 11,958
--------- ---------
CONTRIBUTION MARGIN ............................................................ 53,440 50,120
OTHER OPERATING EXPENSES
Selling and marketing ....................................................... 22,269 18,767
General and administrative .................................................. 12,850 14,176
Research and development .................................................... 2,207 2,589
Depreciation ................................................................ 5,234 5,047
Amortization ................................................................ 3,791 22,350
Equity based compensation ................................................... 1,145 -
--------- ---------
Total operating expenses .................................................. 47,496 62,929
--------- ---------

OPERATING INCOME (LOSS) ........................................................ 5,944 (12,809)
--------- ---------

OTHER INCOME (EXPENSE)
Interest, net ............................................................... (2,882) (2,527)
Gain on sale of marketable securities ....................................... 789 1,604
Asset impairment and obligations- investments ............................... - (4,755)
Amortization of goodwill - equity investments ............................... - (1,612)
Other, net .................................................................. (30) (379)
--------- ---------
Total other income (expense) .............................................. (2,123) (7,669)
--------- ---------

INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ................... 3,821 (20,478)
INCOME TAX EXPENSE/(BENEFIT) ................................................... 1,741 (1,443)
--------- ---------

INCOME/(LOSS) FROM CONTINUING OPERATIONS ....................................... $ 2,080 $ (19,035)
--------- ---------

DISCONTINUED OPERATIONS ........................................................
Loss from operations of Voicecom (including loss on disposal of $12,625) .... (18,454) (4,858)
Income tax benefit .......................................................... (6,459) (342)
--------- ---------
Loss on discontinued operations ........................................... (11,995) (4,516)
--------- ---------

NET LOSS ....................................................................... $ (9,915) $ (23,551)
========= =========

BASIC AND DILUTED NET INCOME/(LOSS) PER SHARE ..................................
Continuing operations ....................................................... $ 0.04 $ (0.38)
Discontinued operations ..................................................... (0.23) (0.10)
--------- ---------
Net loss .................................................................. $ (0.19) $ (0.48)
========= =========

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic ....................................................................... 52,848 49,563
========= =========
Diluted ..................................................................... 55,361 49,563
========= =========

Accompanying notes are integral to these condensed
consolidated financial statements.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(IN THOUSANDS)

2002 2001
-------------------------
(Unaudited)
-------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................................................................. $ (9,915) $(23,551)
Adjustments to reconcile net loss to cash flows from operating activities:
Loss on discontinued operations .......................................................... 11,995 4,516
Depreciation ........................................................................... 5,234 5,047
Amortization ........................................................................... 3,791 22,350
Gain on sale of marketable securities .................................................. (789) (1,604)
Deferred income taxes .................................................................. 1,741 (1,443)
Loss on disposal of property and equipment ............................................. - 247
Payments for restructuring, merger costs and other special charges ..................... (1,039) (289)
Asset impairment - investments ......................................................... - 4,755
Amortization of goodwill - investments ................................................. - 1,612
Payments related to accrued legal settlements .......................................... - (863)
Equity based compensation .............................................................. 1,145 -
Changes in assets and liabilities:
Accounts receivable, net .............................................................. (9,568) (5,503)
Prepaid expenses and other receivables ................................................ 9,098 (1,445)
Accounts payable and accrued expenses ................................................. (22,571) 2,665
-------- --------
Total adjustments ........................................................................ (963) 30,045
-------- --------
Net cash (used in) provided by operating activities from continuing operations ........... (10,878) 6,494
Net cash provided by operating activities from discontinued operations ................... 164 610
-------- --------
Net cash (used in) provided by operating activities ...................................... (10,714) 7,104
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ...................................................................... (3,180) (7,790)
Proceeds from sale of discontinued operation .............................................. 7,248 -
Sale of marketable securities ............................................................. 875 1,804
Payments made for certain business assets ................................................. - (3,628)
Investments ............................................................................... - (3,525)
-------- --------
Net cash (used in) provided by investing activities from continuing operations ........... 4,943 (13,139)
Net cash (used in) provided by investing activities from discontinued operations ......... (155) (1,528)
-------- --------
Net cash (used in) provided by investing activities ...................................... 4,788 (14,667)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES
Payments under borrowing arrangements ..................................................... (670) (159)
Purchase of treasury stock, at cost ....................................................... (41) (1,277)
Exercise of stock options, net of tax withholding payments ................................ 22 61
-------- --------
Net cash (used in) financing activities from continuing operations ....................... (689) (1,375)
Net cash (used in) financing activities from discontinued operations ..................... (1,086) (342)
-------- --------
Net cash (used in) financing activities .................................................. (1,775) (1,717)
-------- --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................................................... 431 (871)
-------- --------

NET DECREASE IN CASH AND EQUIVALENTS ........................................................ (7,270) (10,151)
CASH AND EQUIVALENTS, beginning of period ................................................... 48,023 22,991
-------- --------
CASH AND EQUIVALENTS, end of period ......................................................... 40,753 $ 12,840
======== ========
--------------------------------------------------------------------------------------------------------------------------------

Supplemental Disclosure of Cash Flow Information: In February 2002, the Company
made a discretionary non-cash contribution of $1.6 million for the benefit of
its employees in common stock.

Accompanying notes are integral to these condensed consolidated
financial statements.

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, 2001.

2. 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, 2002 and December 31, 2001,
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. For the period ended March 31, 2001, the
Company's convertible subordinated notes and stock options are potentially
dilutive securities but these securities were antidilutive due to their net loss
and, therefore, are not included in the diluted per share calculation. The
Company's convertible subordinated notes, unvested restricted shares and stock
options are potentially dilutive securities during 2002. For the period ended
March 31, 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:

Shares
------------

Total weighted-average shares outstanding - Basic ................. 52,847,923
Add common stock equivalents:
Stock options ................................................. 1,674,222
Unvested restricted shares .................................... 838,736
------------
Total weighted-average shares outstanding - Diluted ............... 55,360,881
============

3. 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
owners. Foreign currency translation adjustments and unrealized gain on
available-for-sale marketable securities represent the Company's components of
other comprehensive income. For the three-month periods ended March 31, 2002 and
2001, total comprehensive loss was approximately $(9.7) million and $(26.0)
million, respectively (in thousands):

March 31, March 31,
2002 2001
-------------------------

Net loss .............................................................. $(9,915) $(23,551)
Translation adjustments ............................................... 615 (660)
Change in unrealized gain on marketable securities, net of tax ........ (380) (1,762)
------------------------
Comprehensive loss .................................................... $(9,680) $(25,973)
========================

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. EXCLUSION OF SFAS NO. 142 AMORTIZATION

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("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. The balance of
goodwill was $123.1 million as of March 31, 2002 and December 31, 2001. The
Company determined there was no impairment of these assets as of March 31, 2002.
Exclusive of SFAS No. 142 amortization, basic and diluted net income (loss) per
share for March 31, 2002 and 2001 would have been (in thousands, except per
share data):

For the three months ended
March 31,
2002 2001
----------------------------

Adjusted net loss:
Income/(loss) from continuing operations .......................... $ 2,080 $(19,035)
Add goodwill for Xpedite ...................................... - 14,340
Add goodwill for Premiere Conferencing ........................ - 1,914
-------- --------
Adjusted income/(loss) from continuing operations ............. $ 2,080 $ (2,780)
Add goodwill for Voicecom ..................................... - 756
Loss from discontinued operations ............................. (11,995) (4,516)
-------- --------
Adjusted net loss ............................................. $ (9,915) $ (6,540)
======== ========

Basic and diluted net loss per share:
Income/(loss) from continuing operations ...................... $ 0.04 $ (0.38)
Add goodwill for Xpedite ..................................... - 0.29
Add goodwill for Premiere Conferencing ....................... - 0.04
-------- --------
Adjusted income/(loss) from continuing operations ............. $ 0.04 (0.05)
Add goodwill for Voicecom ..................................... - 0.02
Loss from discontinued operations ............................. (0.23) (0.10)
-------- --------
Adjusted basic and diluted net loss per share ................. $ (0.19) $ (0.13)
======== ========

5. DISCONTINUED OPERATIONS

On March 26, 2002 the Company sold substantially all 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. The revenues and
pre-tax loss for the Voicecom operating segment for the three months ended March
31, 2002 and 2001 were (in millions:)

2002 2001
---- ----
Revenue ............................................................. $15.8 $26.0
Pre-tax loss ........................................................ (5.8) (4.9)

In connection with the sale, the Company terminated its credit agreement with
ABN AMRO Bank in all material respects.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES

Consolidated restructuring costs at December 31, 2001 and March 31,
2002 are as follows (in thousands):

Accrued Costs Accrued Costs
at December 31, at March 31,
Consolidated 2001 Payments 2002
------------ ----------------------------------------------

Accrued restructuring costs:
Severance and exit costs ........................................... $2,668 $1,545 $1,123
Contractual obligations ............................................ 888 245 643
Other ................................................................. 172 5 167
----------------------------------------------
Accrued restructuring, merger costs and other special charges ...... $3,728 $1,795 $1,933
==============================================

Realignment of Workforce and Facilities - Fourth Quarter 2001

Accrued costs for restructing charge taken in the fourth quarter of
2001 are as follows:

Accrued Costs Accrued Costs
at December 31, at March 31,
Realignment of Workforce and Facilities - Fourth Quarter 2001 2001 Payments 2002
------------------------------------------------------------- ----------------------------------------------

Accrued restructuring costs:
Severance and exit costs .......................................... $2,175 $1,103 $1,072
Contractual obligations ........................................... 241 45 196
Other ................................................................ - - -
----------------------------------------------
Accrued restructuring, merger costs and other special charges ..... $2,416 $1,148 $1,268
==============================================

Due to continued revenue declines not anticipated by management in both
the Voicecom and Xpedite operating segments in the second half of 2001, plans
for additional workforce cost reductions were established and personnel were
notified during the fourth quarter of 2001. Of the remaining restructuring
balance to be paid, the Company expects to incur approximately $1.3 million of
additional cash payments in the remainder of 2002 to satisfy this plan
obligation.

Realignment of Workforce and Facilities - Second Quarter 2001

Accrued Costs for restructuring taken in the second quarter of 2001 are
as follows (in thousands):

Accrued Costs Accrued Costs
at December 31, at March 31,
Realignment of Workforce and Facilities - Second Quarter 2001 2001 Payments 2002
--------------------------------------------------------------------------------------------------------------------------

Accrued restructuring costs:
Severance and exit costs .......................................... $ 405 $405 $ -
Contractual obligations ........................................... 647 212 435
Other ................................................................ 172 5 167
----------------------------------------------
Accrued restructuring, merger costs and other special charges ..... $1,224 $622 $602
==============================================

During the second quarter of 2001, management committed to a plan to
reduce annual operating expenses by approximately $13.7 million through the
elimination of certain operating activities in its Voicecom and Xpedite
operating segments, and at Corporate, and the corresponding reductions in
personnel costs relating to the Company's operations, sales and administration.
The remaining $0.6 million balance of cash payments are associated with
contractual obligations not expected to expire until December 31, 2003.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reorganization of Company into EES and CES Operating Segments

Accrued Costs Accrued Costs
at December 31, at March 31,
Reorganization of Company into EES and CES Operating Segments 2001 Payments 2002
------------------------------------------------------------- ----------------------------------------------

Accrued restructuring, merger costs and other special charges .......... $88 $25 $63
==============================================

In the fourth quarter of 1998, the Company recorded a charge of $11.4
million to reorganize the Company into two business segments that focused on
specific groups of customers. The balance of severance and exit costs at March
31, 2002 and December 31, 2001 represents a remaining severance reserve for a
former executive manager, all of which has been paid in 2002.

7. MARKETABLE SECURITIES, AVAILABLE FOR SALE

"Marketable securities, available for sale" at March 31, 2002 and
December 31, 2001, are principally common stock investments carried at fair
value based on quoted market prices and mutual funds carried at amortized cost.

During the three months ended March 31, 2002, the Company sold
investments with aggregate proceeds less commissions of approximately $875,000
and realized gains of approximately $789,000. At March 31, 2002, the Company
held investments in public companies with an aggregate market value of
approximately $770,000 and unrealized gains of approximately $342,000. The
deferred tax liability on unrealized gains related to these investments was
approximately $238,000 at March 31, 2002.

During the three months ended March 31, 2001, the Company sold
investments with aggregate proceeds less commissions of approximately $1.8
million and realized gains of approximately $1.6 million. At March 31, 2001, the
Company held investments in public companies with an aggregate market value of
approximately $3.6 million and unrealized gains of approximately $0.6 million.
The deferred tax liability on unrealized gains related to these investments was
approximately $347,000 at March 31, 2001.

8. EQUITY BASED COMPENSATION

Options exchanged for restricted shares

Due to declines in the Company's share price over the course of the
last several years, most of the employee and director option holders had options
with exercise prices in excess of the market price of Company stock. In order to
provide better performance incentives for employees and directors and to align
the employees' and directors' interests with those of the shareholders, 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 therefore 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 a share. To the
extent that restricted shares were received for unvested options exchanged, this
cost was deferred and included 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 will be recognized as equity based compensation
expense as these shares vest. Assuming all employees at March 31, 2002 will
remain employed by the Company through their vesting period, the equity based
compensation expense in future years resulting from the restricted shares issued
in the option exchange will be $0.7 million for the remainder of 2002, and $1.1
million in 2003 and $0.8 million in 2004. A one-year trading restriction applies
to all restricted shares between December 28, 2001 and December 28, 2002, with
limited exceptions. The equity based compensation expense related to these
shares recorded at March 31, 2002 was approximately $998,000.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In addition, approximately 890,000 options that were eligible to be
exchanged for restricted stock pursuant to the Offer to Purchase were not
tendered. These options will be subject to variable accounting until such
options are exercised, forfeited, or expire unexercised. These options have
exercise prices ranging from $5.32 to $29.25. At March 31, 2002 and December 31,
2001, no charge was recorded because the exercise price of each of the options
was greater than the average market value of the Company's common stock during
the quarter.

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 are restricted from
trading for a one-year period. The remaining restricted shares vest straight
line for expense recognition purposes through 2004 and the equity based
compensation expense resulting therefrom recorded for the period ended March 31,
2002 was approximately $147,000.

9. 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.

The Company and certain of its officers and directors have been named as
defendants in multiple shareholder class action lawsuits filed in the United
States District Court for the Northern District of Georgia. Plaintiffs seek to
represent a class of individuals (including a subclass of former Voice-Tel
Enterprises, Inc. ("Voice-Tel") franchisees and a subclass of former Xpedite
Systems, Inc. ("Xpedite") shareholders) who purchased or otherwise acquired the
Company's common stock from as early as February 11, 1997 through June 10, 1998.
Plaintiffs allege the Company admitted it had experienced difficulty in
achieving its anticipated revenue and earnings from voice messaging services due
to difficulties in consolidating and integrating its sales function. Plaintiffs
allege, among other things, violation of Sections 10(b), 14(a) and 20(a) of the
Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the Securities Act
of 1933. The Company filed a motion to dismiss this complaint on April 14, 1999.
On December 14, 1999, the court issued an order that dismissed the claims under
Sections 10(b) and 20 of the Exchange Act without prejudice, and dismissed the
claims under Section 12(a)(1) of the Securities Act with prejudice. The effect
of this order was to dismiss from this lawsuit all open-market purchases by the
plaintiffs. The plaintiffs filed an amended complaint on February 29, 2000. The
defendants filed a motion to dismiss on April 14, 2000, which was granted in
part and denied in part on December 8, 2000. The defendants filed an answer on
January 8, 2001. On January 22, 2002, the court ordered the parties to mediate.
The parties did so on February 8-9, 2002. Following the mediation, the parties
reached a proposed settlement of all claims, which has been preliminarily
approved by the court. A final fairness hearing on the proposed settlement
before the court is set for July 8, 2002. Under the terms of the proposed
settlement, the Company will contribute $3.075 million in cash and/or Company
common stock, as the Company elects, and the insurance carriers will contribute
$17.675 million, for a total settlement of $20.75 million, exclusive of
interest. The claims to be settled include all claims by the open market
purchasers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act"); all claims by the Xpedite subclass under Sections 10(b),
14(a), and 20(a) of the Exchange Act and Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 (the "Securities Act"); and, all claims by the Voice-Tel
subclass under Sections 10(b) and 20(a) of the Exchange Act and Sections
12(a)(2) and 15 of the Securities Act. The Company can make no assurances,
however, that the proposed settlement will receive final approval by the court.
In addition, the Company has the right to withdraw from the proposed settlement
if more than a pre-agreed number of class members choose to opt-out of the
settlement, and upon such withdrawal there is no minimum settlement amount.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. The parties are presently
conducting discovery.

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. The 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 $4.85 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, the
plaintiffs filed a statement of claim with the NASD against 12 named
respondents, including Xpedite (the "Nobis Respondents"). The 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, and April 9-19, 2002. The final hearing
sessions are scheduled for May 30-31, 2002.

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 the company 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 the Company are limited to plaintiff's
investment in Xpedite. Plaintiff's claims against Xpedite and the Company
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, and April 9-19, 2002. The final hearing
sessions are scheduled for May 30-31, 2002.

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Motion to Remand the case back to state court. By order dated March 28, 2001,
the court granted plaintiff's Motion to Remand and dismissed as moot the
Company's Motion to Compel Arbitration, or Alternatively to Transfer Venue, or
Alternatively to Dismiss the Compliant. By Order dated July 25, 2001, the state
court denied the Company's Motion to Compel Arbitration, or Alternatively to
Transfer Venue, or Alternatively to Dismiss the Complaint. Plaintiff recently
filed a Motion to Amend Petition to add three additional plaintiffs. That Motion
is presently pending before the Court. This case is in discovery and is set for
trial in January 2003.

On November 3, 2000, a complaint was filed by BGL Development, Inc. d/b/a
The Bristol Group in the United States District Court for the Southern District
of New York. Plaintiff alleges that it had a contract with Xpedite whereby
Xpedite would pay certain commissions for new customers that plaintiff brought
to Xpedite. Plaintiff claims back commissions are due and that they have not
been paid in breach of the contract. Plaintiff claims damages of not less than
$185,000. On November 20, 2000, the Company filed its answer and affirmative
defenses. On October 2, 2001, Xpedite filed a request with the court for leave
to file its Motion for Summary Judgment. Following a hearing on January 17,
2002, the Court denied Xpedite's motion. The trial was held on January 29-31,
2002 which resulted in a verdict for the Plaintiff in the amount of $103,000
plus prejudgment interest in the amount of $11,601. Xpedite is presently
evaluating its options with respect to an appeal.

On May 14, 2001, Voice-Tel filed two complaints against Quixtar, Inc. and
Alticor Inc., f/k/a Amway Corporation, and Amway Corporation, in the State Court
of Fulton County, Georgia, which were subsequently removed to the U.S. District
Court for the Northern District of Georgia. Voice-Tel alleged, among other
things, fraud in the inducement of a contract to market voice messaging services
and sought a declaratory judgment that contractual provisions which alleged
trade secrets and restrictions on competition were null and void. In response to
these lawsuits, Alticor and Quixtar asserted certain counterclaims for breach of
contract and to enjoin competitive behavior by PTEK and its affiliates. On
November 6, 2001, JOBA, Inc. ("JOBA"), a Voice-Tel franchisee, filed an
Application to Intervene in the Quixtar and Alticor lawsuits. In the Application
to Intervene, JOBA sought to file a complaint that would include, among other
things, claims against not only Quixtar and Alticor but also against Voice-Tel
for an alleged breach of a franchise agreement and other alleged agreements, and
against PTEK for alleged tortuous interference of contract. On December 3, 2001,
Voice-Tel filed its Brief in Opposition to the Application to Intervene. On
December 4, 2001, Voice-Tel filed a Motion for Partial Summary Judgment in the
Quixtar and Alticor lawsuits. On December 10, 2001, Voice-Tel filed a separate
complaint against 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. JOBA
subsequently dismissed its efforts to intervene in the Quixtar and Alticor
lawsuits, and on January 7, 2002, JOBA and Digital answered Voice-Tel's
complaint and asserted counterclaims for breach of franchise agreements and
tortious interference of contract against Voice-Tel, Premiere Communications,
Inc. ("PCI") and PTEK. In addition, on January 7, 2002, JOBA and Digital sought
to stay the proceedings and compel arbitration as to Digital. 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. Voice-Tel, PCI and PTEK also filed objections to the Motion to Stay
Proceedings as to Digital. On February 8, 2002, the court denied the
JOBA/Digital Motion to Stay Proceedings. In March 2002, Voice-Tel and JOBA and
Digital sought leave of court to file amended complaints and answers. On March
14, 2002, the parties to the Quixtar and Alticor lawsuits entered into a
settlement agreement resolving in full all claims asserted by each party against
the other. On April 10, 2002, the court clarified its February 8, 2002 Order,
holding that all claims against and on behalf of JOBA and Digital would proceed
in federal court except that non-trademark related contract claims arising out
of the Digital franchise agreement would proceed by arbitration. On April 17,
2002, the court granted in part and denied in part Voice-Tel's Motion to Amend.
Voice-Tel subsequently filed a Motion for Reconsideration of partial denial of
the Motion to Amend.

The Company filed a complaint against Qwest Communications Corporation
("Qwest") in the State Court of Fulton County, Georgia on June 1, 2001. The case
was subsequently removed to the U.S. District Court for the Northern District of
Georgia. This complaint alleges a breach of contract by Qwest to purchase voice
conferencing services. In response to PTEK's breach of contract claim, Qwest
asserted a counterclaim for alleged breach of a contract to purchase certain
software licenses. The Company filed a Motion for Partial Summary Judgment on
October 19, 2001. The parties are now engaged in negotiations directed at
resolution of all claims and counterclaims.

On January 30, 2002, a complaint was filed by 15 Lake Bellevue, LLC in the
Superior Court of King County, Washington. Plaintiff seeks to enforce a Lease
Guaranty Agreement entered into by the Company on behalf of Webforia, Inc. with
respect to a lease for commercial real estate located in Bellevue, King County,
Washington. The Company's potential liability under the Guaranty is limited to
the lesser of the lease obligations or $2,000,000, together with attorneys'
fees, interest and collection expenses. The Company filed an answer on April 12,
2002. This obligation is fully reserved for

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

on the Balance Sheet.

The Company is also involved in various other legal proceedings that 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.

The Company is guarantor on capital leases for approximately $6.3 million
that were transferred to Gores Technology Group through the sale of
substantially all the assets of the Voicecom operating segment.

10. SEGMENT REPORTING

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 range of enhanced, automated and
Web conferencing services for all forms of group communications activities,
primarily to Fortune 1000 customers. Xpedite offers a comprehensive suite of
value-added multimedia messaging services through its worldwide proprietary
messaging platforms. Xpedite's customers are primarily global Fortune 1000
companies. In addition, the Company had one other reportable segment, Voicecom,
which the Company exited through the sale of that segment effective March 26,
2002. Voicecom offered a suite of integrated communications solutions including
voice messaging, interactive voice response services and unified communications.
Adjusted EBITDA is management's primary measure of segment profit and loss.
Adjusted EBITDA is defined by the Company as operating income or loss before
depreciation, amortization and equity based compensation.

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

Three Months Three Months
Ended March 31, Ended March 31,
2002 2001
------------------------------------

Revenues:
Revenues from continuing operations:
Premiere Conferencing ............................. $ 33.3 $ 25.3
Xpedite ........................................... 50.0 57.0
------------------------------------
$ 83.3 $ 82.3
====================================
Revenues from discontinued operations:
Voicecom .......................................... 15.8 26.0
------------------------------------

Adjusted EBITDA:
Adjusted EBITDA from continuing operations:
Premiere Conferencing ............................. $ 8.8 $ 5.1
Xpedite ........................................... 10.6 13.9
Corporate ......................................... (3.3) (4.4)
------------------------------------
$ 16.1 $ 14.6
====================================
Adjusted EBITDA from discontinued operations:
Voicecom .......................................... $ (3.2) $ 1.0
------------------------------------

March 31, December 31,
2002 2001
-----------------------------

Identifiable Assets:
Premiere Conferencing ........................ $ 73.6 $ 69.0
Xpedite ...................................... 208.9 214.5
Voicecom ..................................... - 40.2
Corporate .................................... 64.9 62.7
-----------------------------
$ 347.4 $ 386.4
=============================

PTEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of Adjusted EBITDA to operating income (loss) and income
(loss) from continuing operations before income taxes is as follows (in
millions):

Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
--------------------------------------

Adjusted EBITDA ................................... $ 16.1 $ 14.6
Less: depreciation ................................ (5.2) (5.0)
Less: amortization ................................ (3.8) (22.4)
Less: equity based compensation ................... (1.2) -
--------------------------------------
Operating income (loss) ........................... 5.9 (12.8)
--------------------------------------
Less: interest expense, net ....................... (2.9) (2.5)
Plus: gain on sale of marketable securities ....... 0.8 1.6
Less: asset impairment - investments .............. - (4.8)
Less: amortization of goodwill - equity
investments .................................. - (1.6)
Plus: other income (expense), net ................. (0.0) (0.4)
--------------------------------------
Income (loss) from continuing operations before
income taxes ................................. $ 3.8 $(20.5)
======================================

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 communications
and data services, including conferencing (audio conference calling and
Web-based collaboration) and multimedia messaging (high-volume fax, e-mail,
wireless messaging and voice message delivery). 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 range of enhanced, automated and Web conferencing
services for all forms of group communications activities, primarily to Fortune
1000 customers. Xpedite offers a comprehensive suite of value-added multimedia
messaging services through its worldwide proprietary messaging platforms.
Xpedite's customers are primarily global Fortune 1000 companies. In addition,
the Company had one other reportable segment, Voicecom, which the Company exited
through the sale of that segment effective March 26, 2002. Voicecom offered a
suite of integrated communications solutions including voice messaging,
interactive voice response services and unified communications. Adjusted EBITDA
is management's primary measure of segment profit and loss.

The Company's revenues are based on usage in the Premiere Conferencing and
Xpedite business segments.

"Telecommunications costs" consist primarily of the cost of metered and
fixed telecommunications 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 telecommunications networks,
regulatory fees and non-telecommunications costs directly associated with
providing services.

"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 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 five
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 goodwill (for 2001
only), customer lists, developed technology and assembled work force, and are
amortized over periods generally ranging from three to seven years. Goodwill is
impaired based on specific valuations pursuant to SFAS 142, which became
effective January 1, 2002.

"Equity based compensation" relates primarily to restricted stock granted
to employees in exchange for options and restricted stock granted to certain
officers of PTEK and one of its operating units.

"Asset impairment and obligations - investments" includes the adjustment of
the carrying value of non-public investments accounted for under the cost or
equity method to current fair value and obligations incurred by the Company as a
result of these investments.

"Amortization of goodwill - equity investments" represents the amortization
of the excess of purchase price over the pro-rata net carrying value of
investments accounted for under the equity method of accounting. The equity
method of accounting for an investment is used when the Company exerts
significant management influence over the investee.

"Adjusted EBITDA" is defined by the Company as operating income or loss
before depreciation, amortization and equity based compensation. Adjusted EBITDA
is management's primary measure of segment profit and loss.

Adjusted EBITDA is considered a key financial management performance
indicator because it excludes the effects of goodwill and intangible
amortization and impairments attributable to acquisitions primarily acquired
using the Company's common stock, the effects of prior years' cash investing and
financing activities that affect current period profitability, the effects of
sales of marketable securities, the write down of assets, equity based
compensation, restructuring costs and net legal settlements and related
expenses. Adjusted EBITDA provides each segment's management team with a
consistent measurement tool for evaluating the operating profit of the business
before investing activities, taxes and special charges. Adjusted EBITDA may not
be comparable to similarly titled measures presented by other companies and
could be misleading unless all companies and analysts calculate them in the same
manner. Adjusted EBITDA is not a standard accounting term as defined by
generally accepted accounting principles in the United States ("GAAP").

The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and 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 consolidated financial
statements 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 Three Months Ended
March 31, 2002 March 31, 2001
---------------------------------------

Revenues:
Revenues from continuing operations:
Premiere Conferencing ............................ $33.3 $25.3
Xpedite .......................................... 50.0 57.0
---------------------------------------
$83.3 $82.3
=======================================
Revenues from discontinued operations:
Voicecom ......................................... 15.8 26.0
---------------------------------------

Adjusted EBITDA:
Adjusted EBITDA from continuing operations:
Premiere Conferencing ............................ $ 8.8 $ 5.1
Xpedite .......................................... 10.6 13.9
Corporate ........................................ (3.3) (4.4)
---------------------------------------
$16.1 $14.6
=======================================
Adjusted EBITDA from discontinued operations:
Voicecom ......................................... $(3.2) $ 1.0
---------------------------------------

ANALYSIS

Consolidated revenues increased 1.2% to $83.3 million in the three
months ended March 31, 2002 compared with $82.3 million in the same period in
2001. On a segment basis, the increases and/or decreases were caused by the
following factors:

. Premiere Conferencing experienced a 31.2% increase from $25.4
million to $33.3 million for the three months ended March 31, 2002
compared with the same period in 2001. The overall growth in
revenue at Premiere Conferencing resulted primarily from growth in
increased minutes in its unattended/automated conferencing product
offering, which has exhibited significant growth over the past two
years.

. Xpedite experienced a 12.3% decrease from $57.0 million to $50.0
million for the three months ended March 31, 2002 compared with the
same period in 2001. The decrease in revenue for the three-month
period is primarily attributable to the decline in price for its
largest product, broadcast fax.

Consolidated gross profit margins were 79.8% and 75.4% for the three months
ended March 31, 2002 and 2001, respectively, an improvement of 4.4%. Gross
profit margin for the Premiere Conferencing segment improved to 84.3% for the
three months ended March 31, 2002 from 81.0% for the comparable period in 2001.
Premiere Conferencing's margin improvement resulted from lower
telecommunications costs. Gross profit margins for the Xpedite segment improved
to 76.9% for the three months ended March 31, 2002 from 72.9% for the comparable
period in 2001. This improvement is primarily due to growth in revenue from its
higher margin products such as transactional fax, messageREACH and VoiceREACH.

Consolidated direct costs of operations were 15.7% of revenues for the
three months ended March 31, 2002 as compared with 14.5% for the same period of
2001. The increase in these costs as a percentage of revenue is attributable
primarily to the Premiere Conferencing operating segment, representing a higher
percentage of consolidated revenues. Direct costs of operations as a percentage
of revenue are higher at Premiere Conferencing than at PTEK's other operating
segments. At Premiere Conferencing, direct costs of operations as a percentage
of revenue declined to 25.7% for the three months ended March 31, 2002 as
compared with 29.7% for the same period of 2001, reflecting the growth in this
segment's high margin automated conferencing services relative to its total
revenue base. At Xpedite, direct costs of operations as a percentage of revenue
increased in the three months ended March 31, 2002 as compared to the same
period in 2001, from 7.8% to 9.0%, mainly attributable to Asia-Pacific
operations.

Consolidated selling and marketing costs increased to 26.7% of revenues for
the three months ended March 31, 2002 from 22.8% of revenues for the comparable
2001 period. This increase as a percentage of revenue is primarily attributable
to an increase in headcount at both Premiere Conferencing and Xpedite in
conjunction with the management focus on increased sales force. At Premiere
Conferencing, selling and marketing costs as a percentage of revenue grew from
19.1% for the three months ended March 31, 2001 to 20.9% for the comparable 2002
period, with a larger increase seen at Xpedite, from 24.0% of revenues for the
three months ended March 31, 2001 to 30.6% for the comparable 2002 period. In
conjunction with management's focus to increase the sales force, the growth is
also in part attributable to the continued increased sales and marketing
expenses associated with the new service offerings of Premiere Conferencing's
ReadyConference and Xpedite's messageREACH and voiceREACH, respectively.

Consolidated research and development costs were 2.7% of revenues for the
three months ended March 31, 2002 compared with 3.1% of revenues for the
comparable period in 2001. Overall, these costs decreased approximately $0.4
million from period to period. The decrease in these costs as a percentage of
revenue relates primarily to the reduction in headcount at Xpedite, reducing the
percentage of revenue from 3.7% for the three months ended March 31, 2001 to
3.4% of revenue for the three months ended March 31, 2002.

Consolidated general and administrative costs decreased to 15.4% of
revenues for the three months ended March 31, 2002 from 17.2% of revenues for
the same period in 2001. At Premiere Conferencing, general and administrative
costs decreased slightly as a percentage of revenue from 10.2% of revenue for
the three months ended March 31, 2001 to 9.7% of revenues for the comparable
period in 2002, with an increase in costs of approximately $0.7 million, driven
primarily by the continued year-over-year growth experienced in this operating
segment. At Xpedite, general and administrative costs decreased as a percentage
of revenue from 13.1% of revenue for the three months ended March 31, 2001 to
12.6% of revenues for the comparable period in 2000, driven primarily by the
reduction in back office personnel in this segment.

Consolidated depreciation expense was 6.3% of revenues for the three months
ended March 31, 2002 compared with 6.1% of revenues for the same period in 2001,
and these costs increased slightly by $0.2 million.

Consolidated amortization was 4.5% of revenues for the three months ended
March 31, 2002 compared with 27.1% for the comparable 2001 period. Overall,
these costs decreased significantly for the three months ended March 31, 2002
compared to the 2001 period as a result of the adoption of SFAS 142. This new
accounting pronouncement became effective January 1, 2002 and resulted in the
cessation of goodwill amortization, which approximated $17 million in the three
month period ended March 31, 2001. Amortization as a percentage of revenues for
the period ended March 31, 2001, exclusive of goodwill amortization, would have
been 6.5%. The remaining decrease in amortization expense for the three months
ended March 31, 2002, is a result of the asset impairment charges recorded in
the fourth quarter of 2001, which related mainly to customer lists and developed
technology at Xpedite.

Adjusted EBITDA was $16.1 million or 19.3% of revenues for the three months
ended March 31, 2002 compared with $14.6 million or 17.7% of revenues for the
comparable period in 2001. On a segment basis, the increases and/or decreases
were caused by the following factors:

. Adjusted EBITDA for the Premiere Conferencing operating segment was
$8.8 million or 26.5% of segment revenues for the three months ended
March 31, 2002, compared to $5.1 million or 20.0% of revenue for the
comparable 2001 period. The improvement in this operating segment's
Adjusted EBITDA is primarily driven by the continued growth in its
unattended/automated conferencing product offering and the impact of
lower telecommunications costs. The improvement in Adjusted EBITDA is
offset in part by costs associated with the increase in the sales
force to continue expansion into the middle market.

. Adjusted EBITDA for the Xpedite operating segment was $10.6 million or
21.2% of segment revenues for the three months ended March 31, 2002,
compared to $13.9 million or 24.4% of revenue for the comparable 2001
period. The decrease in Adjusted EBITDA for the three-month period can
be attributed in part to the increased costs of selling and marketing
and direct costs of operations as a percentage of revenue, as well as
decreased sales in the broadcast fax business. The decrease in
Adjusted EBITDA was offset in part by growth in Xpedite's higher
margin services, messageREACH and voiceREACH.

. Adjusted EBITDA for the Corporate operating segment was $(3.3) million
for the three months ended March 31, 2002, compared to $(4.4) million
for the comparable 2001 period. The improvement of $1.1 million can be
partially attributed to reduced expenses for salaries and related
benefits resulting from a reduction in headcount in the later half of
2001 and lower levels of spending for advertising and other
professional fees. Also contributing to the improvement was a
reduction in expenses associated with PtekVentures, a significant
portion of which was sold in the fourth quarter of 2001.

Net interest expense remained relatively flat at $2.9 million for the three
months ended March 31, 2002 compared to $2.5 million for the 2001 period.
Interest expense, net in the first quarter of 2001 is primarily comprised of
interest on the Company's convertible subordinated notes.

During the three months ended March 31, 2001, the Company determined that
certain of its investments in the PtekVentures portfolio were impaired and that
the impairment was not temporary. Accordingly, the Company recorded an
impairment charge of approximately $4.8 million, which is included in the
accompanying condensed consolidated statements of operations under "Asset
impairments and obligations-investments."

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 used in operating activities from continuing operations totaled
$10.9 million for the three months ended March 31, 2002, compared to cash
provided by continuing operations of $6.5 million for the comparable 2001
period. A majority of the cash used in operating activities from continuing
operations can be attributed to the significant payment efforts made in accounts
payable and accrued expenses in the first quarter of 2002 compared to an
increase in these balances in the comparable period in 2001, as well as the
increased accounts receivable balance at Premiere Conferencing at March 31,
2002. Also contributing to the decrease were additional payments associated with
restructuring, merger costs and other special charges.

Investing activities from continuing operations provided cash totaling $4.9
million for the three months ended March 31, 2002, compared to cash used in
investing activities from continuing operations totaling $13.1 million for the
same period in 2001. The principal source of cash from investing activities in
the first quarter of 2001 was the sale of Voicecom. See note 5- "Discontinued
Operations" for a further discussion. The proceeds from the sale of Voicecom
were partially offset by capital expenditures in the three months ended March
31, 2002 of approximately $3.2 million. The principal source of

cash from investing activities from continuing operations in the first quarter
of 2001 was the sale of investments. The primary uses of cash for investing
activities from continuing operations during the first quarter of 2001 included
capital expenditures, follow-on investment activity in the PtekVentures
investment portfolio, and payments made for certain revenue generating business
assets by the Xpedite operating segment.

Cash used in financing activities from continuing operations for the three
months ended March 31, 2002 totaled $0.7 million, compared with cash used in
financing activities from continuing operations of $1.4 million for the
comparable 2001 period. Cash outflows for financing activities in the first
quarter of 2001 were primarily debt repayments on note obligations associated
with a Premiere Conferencing equipment loan. The principal uses of cash for
financing activities from continuing operations during the first quarter of 2001
was the purchase of $1.3 million of treasury stock.

At March 31, 2002, the Company's principal commitments involve minimum
purchase requirements under supply agreements with telecommunications providers,
severance payments to former executive management under the Company's various
restructuring plans, capital lease obligations, commitments under its strategic
alliance with WebMD, and semi-annual interest on the Company's convertible
subordinated notes.

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 requirements of its operating units. As of
March 31, 2002, the Company had $40.8 million of cash and cash equivalents
compared to $48.0 million at December 31, 2001. At March 31, 2002, approximately
$9.6 million of cash and equivalents resided outside of the United States
compared to $14.5 million at December 31, 2001. 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.
Foreign exchange gains or losses on intercompany loans deemed temporary in
nature are recorded in the determination of net income. 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, PTEK 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.

RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES

Realignment of Workforce and Facilities - Fourth Quarter 2001

Accrued costs for restructuring charge taken in the fourth quarter of 2001
are as follows:

Accrued restructuring costs:
Severance and exit costs ............................................. $2,175 $1,103 $1,072
Contractual obligations .............................................. 241 45 196
Other ................................................................... - - -
--------------------------------------------
Accrued restructuring, merger costs and other special charges ........ $2,416 $1,148 $1,268
============================================

Due to continued revenue declines not anticipated by management in both the
Voicecom and Xpedite operating segments in the second half of 2001, plans for
additional workforce cost reductions were established and personnel were
notified during the fourth quarter of 2001. Of the remaining restructuring
balance to be paid, the Company expects to incur $1.3 million of additional cash
payments in the remainder of 2002 to satisfy this plan obligation.

Realignment of Workforce and Facilities - Second Quarter 2001

Accrued Costs for restructuring charge taken in the second quarter of 2001
are as follows (in thousands):

Accrued restructuring costs:
Severance and exit costs ............................................. $ 405 $ 405 $ -
Contractual obligations .............................................. 647 212 435
Other ................................................................... 172 5 167
---------------------------------------------
Accrued restructuring, merger costs and other special charges ........ $1,124 $ 622 $ 602
=============================================

During the second quarter of 2001, management committed to a plan to reduce
annual operating expenses by approximately $13.7 million through the elimination
of certain operating activities in its Voicecom and Xpedite operating segments,
and at Corporate, and the corresponding reductions in personnel costs relating
to the Company's operations, sales and administration. The remaining $0.6
million balance of cash payments is associated with severance costs, exit costs
and contractual obligations not expected to expire until December 31, 2003.

Reorganization of Company into EES and CES Operating Segments

Accrued restructuring, merger costs and other special charges ........... $88 $25 $63
=============================================

In the fourth quarter of 1998, the Company recorded a charge of $11.4
million to reorganize the Company into two operating segments that focused on
specific groups of customers. The balance of severance and exit costs at March
31, 2002 and December 31, 2001 and 2000 represents a remaining severance reserve
for a former executive manager, all of which has been paid in 2002.

SUBSEQUENT EVENTS

In connection with the shareholder class action lawsuits filed against the
Company and certain of its officers and directors in the United States District
Court for the Northern District of Georgia by plaintiffs seeking to represent a
class of individuals (including a subclass of former Voice-Tel Enterprises, Inc.
("Voice-Tel") franchisees and a subclass of former Xpedite Systems, Inc.
("Xpedite") shareholders) who purchased or otherwise acquired the Company's
common stock from as early as February 11, 1997 through June 10, 1998, the
parties have reached a proposed settlement of all claims, which was
preliminarily approved by the court on May 6, 2002. A final fairness hearing on
the proposed settlement before the court is set for July 8, 2002. Under the
terms of the proposed settlement, the Company will contribute $3.075 million in
cash and/or Company common stock, as the Company elects, and the insurance
carriers will contribute $17.675 million, for a total settlement of $20.75
million, exclusive of interest. The claims to be settled include all claims by
the open market purchasers under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934; all claims by the Xpedite subclass under Sections 10(b),
14(a), and 20(a) of the Securities Exchange Act of 1934 and Sections 11,
12(a)(2) and 15 of the Securities Act of 1933; and, all claims by the Voice-Tel
subclass under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Sections 12(a)(2) and 15 of the Securities Act of 1933. The Company can make
no assurances, however, that the proposed settlement will receive final approval
by the court. In addition, the Company has the right to withdraw from the
proposed settlement if more than a pre-agreed number of class members choose to
opt-out of the settlement, and upon such withdrawal there is no minimum
settlement amount. See also "Legal Proceedings."

FORWARD-LOOKING STATEMENTS

When used in this Form 10-Q 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 that are subject to change. A variety of
factors could cause actual results to differ materially from those anticipated
in our forward-looking statements, including the following factors:

. Competitive pressures among communications services providers,
including pricing pressures may increase significantly;

. Our ability to respond to rapid technological change, the development
of alternatives to our products and services and risk of obsolescence
of its 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 infringement claims;

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

. 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 jurisdictions in which we are doing business may be
less favorable than expected;

. Legislative or regulatory changes may adversely affect the business in
which we are engaged;

. Changes in the securities markets may negatively impact us;

. The failure of the purchaser to pay the liabilities assumed in the
sale of the Voicecom business unit; and

. Factors described from time to time in the Company's 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 and in documents
incorporated in this Form 10-Q 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. 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, 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, 2002, 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, 2002, by approximately $6.2 million.

Approximately 30.9% of the Company's revenues and 30.2% of its operating
costs and expenses were transacted in foreign currencies for the three-month
period ended March 31, 2002. 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, 2002 by approximately $2.6 million and
operating costs and expenses for the three-month period ended March 31, 2002 by
approximately $1.8 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, 2002.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

claims by the Voice-Tel subclass under Sections 10(b) and 20(a) of the Exchange
Act and Sections 12(a)(2) and 15 of the Securities Act. The Company can make no
assurances, however, that the proposed settlement will receive final approval by
the court. In addition, the Company has the right to withdraw from the proposed
settlement if more than a pre-agreed number of class members choose to opt-out
of the settlement, and upon such withdrawal there is no minimum settlement
amount.

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 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 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. The parties are presently conducting discovery.

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, and April 9-19, 2002. The final hearing sessions are scheduled for May
30-31, 2002.

On or about May 19, 2000, the Company was served with a Complaint filed by
Robert Cowan in the Circuit Court of Jackson County, Missouri, alleging claims
for breach of contract, fraudulent misrepresentation, negligent
misrepresentation, breach of duty of good faith and fair dealings, unjust
enrichment, and violation of Georgia and Missouri blue sky laws. Plaintiff's
claims arise out of the Company's acquisition of American Teleconferencing
Services, Ltd. ("ATS") in April 1998. Plaintiff was a shareholder of ATS who
received shares of PTEK stock in the transaction. The Company removed the case
to the United States District Court for the Western District of Missouri, and
filed a Motion to Compel Arbitration, or Alternatively to Transfer Venue, or
Alternatively to Dismiss the Complaint. Plaintiff has filed a Motion to Remand
the case back to state court. By order dated March 28, 2001, the court granted
plaintiff's Motion to Remand and dismissed as moot the Company's Motion to
Compel Arbitration, or Alternatively to Transfer Venue, or Alternatively to
Dismiss the Compliant. By Order dated July 25, 2001, the state court denied the
Company's Motion to Compel Arbitration, or Alternatively to Transfer Venue, or
Alternatively to Dismiss the Complaint. Plaintiff recently filed a Motion to
Amend Petition to add three additional plaintiffs. That Motion is presently
pending before the Court. This case is in discovery and is set for trial in
January 2003.

On November 3, 2000, a complaint was filed by BGL Development, Inc. d/b/a
The Bristol Group in the United States District Court for the Southern District
of New York. Plaintiff alleges that it had a contract with Xpedite whereby
Xpedite would pay certain commissions for new customers that plaintiff brought
to Xpedite. Plaintiff claims back commissions are due and that they have not
been paid in breach of the contract. Plaintiff claims damages of not less than
$185,000. On November 20, 2000, the Company filed its answer and affirmative
defenses. On October 2, 2001, Xpedite filed a request with the court for leave
to file its Motion for Summary Judgment. Following a hearing on January 17,
2002, the Court denied Xpedite's motion. The trial was held on January 29-31,
2002 which resulted in a verdict for the Plaintiff in the amount of $103,000
plus prejudgment interest in the amount of $11,601.00. Xpedite is presently
evaluating its options with respect to an appeal.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

3.3(a) Amendment No. 7 to the Amended and Restated Bylaws
of PTEK Holdings, Inc.

3.3(b) Amendment No. 8 to the Amended and Restated Bylaws
of PTEK Holdings, Inc.

(b) Reports on Form 8-K:

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

Entities For Which
Date of Report Financial
(Date Filed) Items Reported Statements Filed
------------ -------------- ----------------

04/10/02 Items 2 and 7 - Acquisitions or Disposition PTEK Holdings, Inc.
of Assets to announce the sale of the
Voicecom business unit and file supplemental
consolidated financial statements of PTEK
Holdings, Inc. (incorporated by reference).

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.

May 15, 2002 PTEK HOLDINGS, INC.
Date

/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)