PTEK HOLDINGS INC, 10-Q, 2000-05-15

PTEK HOLDINGS INC
10-Q, 2000-05-15
COMMUNICATIONS SERVICES, NEC

Previous: SCICLONE PHARMACEUTICALS INC, 10-Q, 2000-05-15

Next: SEMX CORP, 10-Q, 2000-05-15

<PAGE>

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, 2000

[ ] 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 10, 2000
----------------------------- ---------------------------
Common Stock, $0.01 par value 48,073,722 shares
<PAGE>

PTEK HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
Page
--------
<S> <C>
PART I FINANCIAL INFORMATION

Item 1 Financial Statements

Condensed Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999................................................... 3

Condensed Consolidated Statements of Operations
for the Three Months ended March 31, 2000 and 1999........................................... 4

Condensed Consolidated Statements of Cash Flows
for the Three Months ended March 31, 2000 and 1999........................................... 5

Notes to Condensed Consolidated Financial Statements......................................... 6

Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................... 14

Item 3 Quantitative and Qualitative Disclosures About Market Risk................................... 21

PART II OTHER INFORMATION

Item 1 Legal Proceedings............................................................................ 22

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.............................................................................................. 25

EXHIBIT INDEX
</TABLE>
2
<PAGE>

ITEM 1. FINANCIAL STATEMENTS

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
March 31, December 31,
2000 1999
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents......................................................................... $ 37,393 $ 15,366
Marketable securities........................................................................ 45,779 86,615
Accounts receivable, net..................................................................... 76,185 67,652
Prepaid expenses and other................................................................... 9,104 13,299
--------- ---------
Total current assets..................................................................... 168,461 182,932

PROPERTY AND EQUIPMENT, NET................................................................... 114,389 118,725

OTHER ASSETS
Strategic alliance contract, net............................................................. 7,036 8,036
Investments in associated companies, at cost................................................. 27,826 14,620
Intangibles, net............................................................................. 412,474 435,978
Other assets................................................................................. 13,912 10,190
--------- ---------
$ 744,098 $ 770,481
--------- ---------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable............................................................................. $ 28,011 $ 33,512
Deferred revenue............................................................................. 3,288 1,586
Accrued taxes................................................................................ 41,207 31,607
Accrued liabilities.......................................................................... 63,042 57,686
Deferred income taxes, net................................................................... - 15,426
Current maturities of long-term debt and capital lease obligations........................... 1,639 2,671
Accrued restructuring, merger costs and other special charges................................ 3,487 5,698
--------- ---------
Total current liabilities................................................................ 140,674 148,186
--------- ---------

LONG-TERM LIABILITIES
Convertible subordinated notes............................................................... 172,500 172,500
Long-term debt and capital lease obligations................................................. 4,180 4,454
Other accrued liabilities.................................................................... 6,441 7,419
Deferred income taxes, net................................................................... 9,428 15,702
--------- ---------
Total long-term liabilities.............................................................. 192,549 200,075
--------- ---------

COMMITMENTS AND CONTINGENCIES (Note 9)

SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized, 48,937,677 and
48,074,566 shares issued in 2000 and 1999, respectively, and 47,890,677 and
46,977,566 shares outstanding in 2000 and 1999, respectively............................... 488 481
Unrealized gain on marketable securities, available for sale................................. 26,445 50,774
Additional paid-in capital................................................................... 574,782 570,054
Treasury stock, at cost...................................................................... (9,133) (9,133)
Note receivable, shareholder................................................................. (1,047) (1,047)
Cumulative translation adjustment............................................................ 481 527
Accumulated deficit.......................................................................... (181,141) (189,436)
--------- ---------
Total shareholders' equity............................................................... 410,875 422,220
--------- ---------
$ 744,098 $ 770,481
========= =========
</TABLE>

Accompanying notes are integral to these condensed consolidated financial
statements.

3
<PAGE>

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>

2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
REVENUES.................................................................................. $115,713 $112,809
TELECOMMUNICATIONS COSTS.................................................................. 31,463 32,456
-------- --------
GROSS PROFIT.............................................................................. 84,250 80,353
DIRECT OPERATING COSTS.................................................................... 16,970 15,742
-------- --------
CONTRIBUTION MARGIN....................................................................... 67,280 64,611
OTHER OPERATING EXPENSES
Selling and marketing.................................................................... 23,643 24,124
General and administrative............................................................... 21,757 19,490
Research and development................................................................. 3,591 2,620
Depreciation............................................................................. 9,963 15,450
Amortization............................................................................. 25,760 23,717
-------- --------
Total operating expenses.............................................................. 84,714 85,401
-------- --------

OPERATING LOSS............................................................................ (17,434) (20,790)
-------- --------

OTHER INCOME (EXPENSE)
Interest, net............................................................................ (2,711) (5,596)
Gain on sale of marketable securities.................................................... 46,016 -
Other, net............................................................................... (416) (445)
-------- --------
Total other income (expense).......................................................... 42,889 (6,041)
-------- --------

INCOME/(LOSS) BEFORE INCOME TAXES......................................................... 25,455 (26,831)
INCOME TAX EXPENSE/(BENEFIT).............................................................. 17,160 (2,419)
-------- --------

NET INCOME/(LOSS)......................................................................... $ 8,295 $(24,412)
======== ========

BASIC NET INCOME/(LOSS) PER SHARE......................................................... $ 0.17 $ (0.53)
======== ========
DILUTED NET INCOME/(LOSS) PER SHARE....................................................... $ 0.17 $ (0.53)
======== ========

WEIGHTED AVERAGE SHARES OUTSTANDING

BASIC.................................................................................... 47,455 45,998
======== ========
DILUTED.................................................................................. 49,868 45,998
======== ========
</TABLE>
Accompanying notes are integral to these condensed consolidated
financial statements.

4
<PAGE>

PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS)

<TABLE>
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................................................ $ 8,295 $(24,412)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization............................................................ 35,723 39,167
Loss on disposal of property and equipment............................................... 415 -
Gain on sale of marketable securities.................................................... (46,016) -
Deferred income taxes.................................................................... 17,160 (3,022)
Payments for restructuring, merger costs and other special charges....................... (2,211) (412)
Income taxes paid........................................................................ (11,789) (524)
Changes in assets and liabilities:
Accounts receivable, net................................................................ (8,731) (2,024)
Prepaid expenses and other.............................................................. (450) (363)
Accounts payable and accrued expenses................................................... (10,779) 173
Deferred gain on legal settlement....................................................... 12,000 -
-------- --------
Total adjustments........................................................................ (14,678) 32,995
-------- --------
Net cash (used in) provided by operating activities...................................... (6,383) 8,583
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures..................................................................... (6,021) (10,623)
Redemption of marketable securities...................................................... 47,646 17,850
Payments made related to acquisitions.................................................... (495) (182)
Investments.............................................................................. (13,305) (1,000)
Other.................................................................................... (1,932) (1,527)
-------- --------

Net cash provided by investing activities............................................... 25,893 4,518
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES
Payments under borrowing arrangements.................................................... (653) (16,717)
Exercise of stock options................................................................ 3,487 273

Net cash provided by (used in) financing activities..................................... 2,834 (16,444)
-------- --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH................................................... (317) (210)
-------- --------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS........................................... 22,027 (3,553)
CASH AND EQUIVALENTS, beginning of period................................................. 15,366 19,226
-------- --------
CASH AND EQUIVALENTS, end of period....................................................... $ 37,393 $ 15,673
======== ========

Income taxes paid......................................................................... $ 11,789 $ 524
======== ========
Interest paid............................................................................. $ 5,225 $ 8,322
======== ========
</TABLE>

Accompanying notes are integral to these condensed consolidated
financial statements.

5
<PAGE>

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") 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 goodwill and other long-
lived assets and accruals for restructuring costs and employee benefits. 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, 1999.

2. ACCOUNTING CHANGES

Restatement

In February 2000, PTEK announced that as a result of discussions with the
Securities and Exchange Commission, PTEK was required to change its accounting
for certain costs incurred as part of its restructuring, merger costs and other
special charges. These changes primarily affect certain asset impairment charges
and contractual obligation charges taken as part of the restructuring charges
related to Voice-Tel and VoiceCom Systems. These changes are primarily to change
the timing of when costs are recognized in determining earnings and to
reclassify certain restructuring, merger costs and other special charges to
selling, general and administrative costs and depreciation costs. Accordingly,
the Company has restated its 1997 and 1998 annual financial statements and
related disclosures and its unaudited interim financial statements for 1999.

3. NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", SFAS
No. 133 establishes accounting and reporting standards for derivatives and
hedging. It requires that all derivatives be recognized as either assets or
liabilities at fair value and establishes specific criteria for the use of hedge
accounting. The Company's required adoption date is January 1, 2001. SFAS No.
133 is not to be applied retroactively to financial statements of prior periods.
The Company expects no material impact to its results of operations or financial
position upon adoption of SFAS No. 133.

4. NET INCOME (LOSS) PER SHARE

Net loss per share is computed in accordance with SFAS No. 128, "Earnings per
Share." For the three-month period ended March 31, 2000, the difference between
basic and diluted earnings per common share is the dilutive effect of employee
stock options totaling 2,412,556 shares. The diluted share base for the period
excluded the effect of convertible subordinated notes, as they were
antidilutive. Basic and diluted net loss per share are the same in the three
month period ended March 31, 1999 because both of the Company's potentially
dilutive securities, convertible subordinated notes and stock options, were
antidilutive.

5. COMPREHENSIVE INCOME

In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income 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 in 2000. In 1999, foreign currency translation was the only component of
comprehensive income. For the periods ended March 31, 2000 and 1999, total
comprehensive income/(loss) was approximately $34.7 million and $(26.2) million,
respectively.

6
<PAGE>

6. MARKETABLE SECURITIES, AVAILABLE FOR SALE

Marketable securities, available for sale at March 31, 2000 and December 31,
1999, are principally common stock investments carried at fair value and based
on quoted market prices, and mutual funds carried at amortized cost. Common
stock investments carried at fair value are primarily minority equity interests
in Healtheon/WebMD and S1. Healtheon/WebMD is a leading end-to-end Internet
healthcare company connecting physicians and consumers to the entire healthcare
industry. S1 Corporation is one of the leading global providers of innovative
Internet-based financial services solutions. Gross realized losses in the first
quarter of 2000 are related to management's assessment that the realizable value
of certain investments are permanently impaired.

The cost, gross unrealized gains, fair value, proceeds from sale and realized
gains and losses are as follows for the year ended December 31, 1999 and the
first quarter ended March 31, 2000 (in thousands):

Gross Proceeds Gross
Unrealized Fair From Realized
At March 31, 2000 - First Quarter Cost Gains Value Sale Gains/(Losses)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Healtheon/WebMD $ 596 $16,467 $17,063 $ 32,040 $ 31,646
S1 Corporation 1,623 26,533 28,156 15,606 14,989
Other equity securities 97 463 560 - (619)
-----------------------------------------------------------------------------
$2,316 $43,463 $45,779 $ 47,646 $ 46,016
-----------------------------------------------------------------------------

At December 31, 1999 - Full Year
Healtheon/WebMD $1,079 $49,242 $50,321 $154,427 $152,094
S1 Corporation 2,240 33,197 35,437 - -
Mutual Funds 141 - 141 20,633 -
Other equity securities 716 - 716 - -
-----------------------------------------------------------------------------
$4,176 $82,439 $86,615 $175,060 $152,094
-----------------------------------------------------------------------------
</TABLE>

In the first quarter of 2000, the Company sold approximately 600,000 shares of
its investment in Healtheon/WebMD and 125,000 shares of its investment in S1
Corporation, with proceeds less commissions of approximately $32.0 million and
$15.6 million, respectively. At March 31, 2000, the Company held 741,889 shares
of Healtheon/WebMD and 328,597 shares of S1 Corporation. The deferred tax
liability on unrealized gains related to these investments is approximately
$16.6 million at March 31, 2000.

7. ACQUISITIONS

Intellivoice Communications Inc. Acquisition

In August 1999, the Company acquired all remaining ownership interests it did
not already own in Intellivoice Communications, Inc. ("Intellivoice"), a company
engaged in developing Internet-enabled communications products. The Company
issued approximately 573,000 shares of its common stock and paid cash
consideration of approximately $1,365,000 in connection with this acquisition.
This transaction has been accounted for as a purchase. Excess purchase price
over fair value of net assets acquired of approximately $10.5 million has been
recorded as developed technology and is being amortized on a straight-line basis
over three years. The developed technology relates to work associated with Web-
based communications services.

Xpedite France, S.A. Acquisition

During the second quarter of 1999, the Company purchased all remaining ownership
interests it did not already own in an affiliated electronic document
distribution company located in France for approximately $19 million in cash and
liabilities assumed. The Company held an approximate 18% ownership interest in
the affiliate prior to this transaction which has been accounted for as a
purchase. Excess purchase price over fair value of net assets acquired of
approximately $18 million has been recorded as goodwill and is being amortized
on a straight-line basis over seven years.

The following unaudited pro forma consolidated results of operations for the
three month period ended March 31, 1999 assumes the acquisitions made by the
Company in 1999 which were accounted for as purchases occurred on January 1,
1999. Pro forma

7
<PAGE>

adjustments consist of amortization of intangible assets acquired and lost
interest income reflecting cash paid in the acquisitions (amounts in thousands).

Revenues $116,690
Net loss $(25,907)
Basic net loss per share $ (0.56)
Diluted net loss per share $ (0.56)

8. RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES

Decentralization of Company

In the third quarter of 1999, the Company recorded a charge of approximately
$8.2 million to restructure the administrative overhead of the corporate
headquarters, the sales force of the former EES group and certain operations of
the former EES and CES groups. The $8.2 million charge was comprised of $7.3
million of severance and exit costs, $0.7 million of lease termination costs and
$0.2 million of facility exit costs. Severance benefits have been provided for
the termination of 203 employees, primarily related to corporate administrative
functions and direct sales force and operations of under-performing operating
segments in the former EES and CES groups. 114 employees were severed from the
Voicecom operating segment, 61 employees were severed from the Xpedite operating
segment and 28 employees were severed from the Corporate headquarters. As of
December 31, 1999 all 203 employees were terminated. Anticipated annual savings
of approximately $13.1 million are expected from these terminations. Lease
termination and clean-up costs were provided for the exit of one operating site
in the Retail Calling Card Services operating segment.

The balance at December 31, 1999 and March 31, 2000 for severance represents the
remaining severance reserve for former corporate executive management and
various management in the former CES group that were terminated in 1999. In the
first quarter of 2000 cash severance payments made were $1.7 million. The
company expects to pay the remaining $2.2 million balance over the next six to
nine months.

Lease termination and clean-up costs of $82,000 were paid in the first quarter
of 2000 for the exit of one operating site in the Retail Calling Card Services
operating segment. No further payments are expected by management.

Reorganization of Company into EES and CES Business Segments

In the fourth quarter of 1998, PTEK recorded a charge of $11.4 million to
reorganize the Company into two business segments that focus on specific groups
of customers. These segments were named Emerging Enterprise Solutions ("EES")
and Corporate Enterprise Solutions ("CES"). EES focused on small office/home
office and multi-level marketing organizations, and CES focused on large
corporate accounts. This charge was comprised of $4.8 million of severance, $4.7
million of asset impairments, $0.4 million of contractual obligation costs and
$1.4 million of other costs, primarily to exit facilities and certain
activities.

As part of this reorganization, PTEK identified 59 employees to terminate.
These employees included administrative personnel from the Company's Cleveland
headquarters for the previous Voice-Tel and VoiceCom entities, personnel from
customer service centers from eight locations and executive management from the
acquired companies that were not part of previous restructuring plans. As of
December 31, 1998, all 59 employees were terminated. The balance at December 31,
1999 and March 31, 2000 represent the remaining severance reserve for former
executive management. In the first quarter of 2000 cash severance payments made
to eight former executives was $0.5 million. The company expects to pay the
remaining $1.3 million balance of severance over the next twenty-five months.

8
<PAGE>

Accrued costs for restructuring, merger costs and other special charges at
December 31, 1999 and March 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
Reorganization of Company into EES and CES Business Segments Accrued Costs at Accrued Costs at
December 31, Costs March 31,
1999 Incurred 2000
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Severance and exit costs $1,730 $ 476 $1,254
------------------------------------------------------------
Accrued restructuring, merger costs and other special charges $1,730 $ 476 $1,254
------------------------------------------------------------

Decentralization of Company Accrued Costs at Accrued Costs at
December 31, Costs March 31,
1999 Incurred 2000
- -----------------------------------------------------------------------------------------------------------------------------
Severance and exit costs $3,886 $1,653 $2,233
Other 82 82 -
------------------------------------------------------------
Accrued restructuring, merger costs and other special charges $3,968 $1,735 $2,233
------------------------------------------------------------

Consolidated Accrued Costs at Accrued Costs at
December 31, Costs March 31,
1999 Incurred 2000
- -----------------------------------------------------------------------------------------------------------------------------
Severance and exit costs $5,616 $2,129 $3,487
Other 82 82 -
------------------------------------------------------------
Accrued restructuring, merger costs and other special charges $5,698 $2,211 $3,487
------------------------------------------------------------
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

LITIGATION

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
franchisees and a subclass of former 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. We 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 purchase by the plaintiffs. The plaintiffs filed an
amended complaint on February 29, 2000, which the Company moved to dismiss on
April 14, 2000.

9
<PAGE>

reference, regarding the Company's acquisitions of Voice-Tel and VoiceCom, the
Company's roll-out of Orchestrate(R), the Company's relationship with customers
Amway Corporation and DigiTEC, 2000, Inc., and the Company's 800-based calling
card service. Plaintiffs allege causes of action against the Company for breach
of contract against all defendants for negligent misrepresentation, violations
of Sections 11 and 12(a)(2) of the Securities Act of 1933 and against the
individual Defendants for violation of Section 15 of the Securities Act.
Plaintiffs seek undisclosed damages together with pre- and post-judgment
interest, recission or recissory damages as to violation of Section 12(a)(2) of
the Securities Act, punitive damages, costs and attorneys' fees. The defendants'
motion to transfer venue to Georgia has been granted. The defendants' motion to
dismiss has been granted in part and denied in part. The Company filed an answer
on March 30, 2000.

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"). More specifically, 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.

In March 1999, Aspect Telecommunications, Inc. ("Aspect"), the purported current
owner of certain patents, filed suit against the Company and Premiere
Communications, Inc. ("PCI") alleging that they had violated claims in these
patents and requesting damages and injunctive relief. In the fourth quarter of
1999, the Company and PCI entered into a settlement agreement with Aspect, which
settled and disposed of Aspect's claims in this litigation. This settlement will
not have a material adverse effect on the Company's business, financial
condition or results of operations.

On June 11, 1999, the Company filed a complaint against MCI WorldCom in the
Superior Court of Fulton County for the State of Georgia. The Company
subsequently filed an amended complaint on June 18, 1999. The amended complaint
alleges that MCI WorldCom breached the Strategic Alliance Agreement dated
November 13, 1996, between the Company and MCI WorldCom by, inter alia, awarding
various contracts to vendors other than the company and to which the Company was
entitled either exclusive or preferential consideration. In addition to
injunctive relief, the Company seeks damages of not less than $10 million, per-
and post-judgment interest, cost and expenses of litigation, including
attorney's fees. On July 1, 1999 the court entered an order staying all
proceedings pending arbitration. In connection with that order, MCI WorldCom
agreed that it would not issue any requests for information, requests for
proposals or enter into any contracts with respect to the proposals challenged
by the Company. This matter was settled by the parties in April 2000.

A lawsuit was filed on November 1, 1999 by Donald H. Turner, a former officer of
the company, against the Company, Boland T. Jones and Jeffrey A. Allred in the
Superior Court of Fulton County, Georgia. Against the Company the plaintiff
alleges breach of contract and promissory estoppel relating to the termination
of his employment, and against all defendants the plaintiff alleges fraudulent
inducement relating to his hiring by the Company. The plaintiff seeks
compensatory damages of $875,000, forgiveness of a $100,000 loan, interest,
attorneys' fees and punitive damages in an unspecific amount.

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. 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. The Company has not been served with the summons
and complaint.

10
<PAGE>

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

10. SEGMENT REPORTING

The Company's reportable segments are strategic business segments that align the
Company into six decentralized areas of focus driven by product offering,
investment strategy and functional cost control. The Company realigned into this
decentralized operating and investing organization (opervesting) in the third
quarter of 1999 from the previous market segment focus of the EES and CES
business segments. The new business segments are called Voicecom (formerly of
both EES and CES), Xpedite(formerly of CES), Premiere Conferencing (formerly of
CES), Retail Calling Card Services (formerly of EES), PTEKVentures and
Corporate. Voicecom focuses on local and 800-based voice messaging services,
Internet enabled communications with its Orchestrate(R) product, along with
interactive voice response services, and wholesale communications platform
outsourcing solutions. Its customer base ranges from small office/home office to
multilevel marketing organizations to Fortune 1000 corporate accounts. Xpedite
focuses on store and forward fax, real time fax services and electronic
messaging through the Internet with its MessageReach/SM/ product and in the
Asia/Pacific region voice messaging. Xpedite's customers are primarily Fortune
1000 corporate accounts and governments. Premiere Conferencing focuses on
attended and unattended conferencing services primarily to Fortune 1000
customers. Retail Calling Card Services is a business segment that the Company
has decided to exit. It consists of the legacy Premiere WorldLink calling card
product which was primarily marketed through direct advertising and co-branding
relationships to single retail users. Discontinued operations treatment of this
business segment is not available as the Company will continue using the legacy
platform for its profitable wholesale line of business and its corporate calling
card bundled within its 800-based messaging offerings within the Voicecom
operating segment. PTEKVentures focuses on investments in companies in the
Internet with innovative service offerings that will enable these companies to
become industry leaders. Corporate focuses on being a holding company with
minimal headcount leaving the day to day operations of running the business at
the operating business segments. EBITDA before accrued settlement costs,
acquired research and development costs and restructuring, merger and other
special charges is management's primary measure of segment profit and loss.

11
<PAGE>

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

<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
--------------------------
<S> <C> <C>
Revenues
Xpedite $ 62.6 $ 58.2
Voicecom 30.9 31.0
Premiere Conferencing 15.8 12.5
Retail Calling Card Services 6.4 11.2
Eliminations - (0.1)
--------------------------
$115.7 $112.8
==========================

EBITDA
Xpedite $ 17.5 $ 16.2
Voicecom 4.6 5.4
Premiere Conferencing 2.4 1.7
Retail Calling Card Services 0.6 0.2
Corporate (6.1) (5.0)
PTEKVentures (0.7) -
Eliminations - (0.1)
--------------------------
$ 18.3 $ 18.4
==========================

March 31, December 31,
2000 1999
--------------------------
Identifiable assets
Xpedite $104.2 $101.4
Voicecom 74.4 69.5
Premiere Conferencing 33.6 30.0
Retail Calling Card Services 7.0 8.0
PTEKVentures 97.5 100.2
Corporate 427.4 461.4
--------------------------
$744.1 $770.5
==========================
</TABLE>

(1) Eliminations is primarily comprised of revenue eliminations from business
transacted between Xpedite and Premiere Conferencing.

(2) Intangible assets associated with acquisitions such as goodwill, customer
lists developed technology and assembled workforce are retained as identifiable
assets in the Corporate segment.

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

<TABLE>
<CAPTION>
Months Months
Ended Ended
March 31, March 31,
2000 1999
--------------------------
<S> <C> <C>
EBITDA $ 18.3 $ 18.4
Less depreciation (10.0) (15.5)
Less amortization (25.7) (23.7)
--------------------------
Operating Income (17.4) (20.8)
--------------------------

Less interest expense, net (2.7) (5.6)
Plus gain on sale of marketable equity securities 46.0 -
Plus other income (expense), net (0.4) (0.4)
--------------------------
Income (loss) before income taxes $ 25.5 $(26.8)
==========================
</TABLE>

12
<PAGE>

11. RELATED PARTY TRANSACTIONS

During the first quarter of 2000 the Compensation Committee of the Board of
Directors approved the amendment of notes receivable from certain executives
related to the restricted stock grants of Healtheon/WebMD and USA.NET in 1999.
The amendment will provide that the notes will be due and payable on December
31, 2006 and that one-seventh of the principal plus accrued interest on the
notes will be forgiven effective as of December 31, 2000, provided that the
executives are employees of the Company on that date. In addition, the unpaid
balance of each note will be forgiven in its entirety in the event of a change
in control of the Company or the termination of the executive's employment by
the Company without cause.

12. SUBSEQUENT EVENT

In April 2000, the Company and MCI WorldCom settled the Company's lawsuit which
alleged the breach of their strategic alliance agreement by MCI WorldCom. The
settlement resulted in the termination of the strategic alliance agreement with
MCI WorldCom. The Company expects to record a one-time gain before taxes in
connection with the settlement of approximately $4.5 million. The gain is
comprised of the net effect of consideration received by the Company of
approximately $12.0 million and the write-off of the strategic alliance
agreement's net book value and associated legal and other costs of approximately
$7.5 million.
13
<PAGE>

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") began operations in 1991 and the Company completed its initial
public offering in March 1996. The Company provides an array of innovative
solutions which are designed to simplify everyday communications of businesses
and individuals. The Company's services include voice and electronic messaging,
electronic document distribution, conferencing, calling card services and
Internet-based communications services. Through a series of acquisitions from
September 1996 through September 1999, the Company has assembled a suite of
communications services, an international private data network and points-of-
presence in regions covering North America, Asia/Pacific and Europe. The Company
has also invested in Internet companies that have developed their own innovative
service offerings that will enable these companies to become industry leaders.

The Company's reportable segments align the Company into six areas of focus that
are driven by product offering, investment strategy and functional cost control.
The Company was realigned into a decentralized organization in the third quarter
of 1999 from the previous market segment focus of the Emerging Enterprise
Solutions (EES) and Corporate Enterprise Solutions (CES) business segments. The
Company's realignment was a further refinement of the EES and CES business
segment organization previously established in the fourth quarter of 1998 and
positioned the Company as an operating and investing business. The Company has
focused its management on the various products within CES and EES through
further decentralization, bringing new management into the various new segments.
These six business segments are called Voicecom (formerly in both EES and CES),
Xpedite (formerly in CES), Premiere Conferencing (formerly in CES), Retail
Calling Card Services (formerly in EES), PTEKVentures and Corporate. Voicecom
focuses on local and 800-based voice messaging services, Internet-enabled
communications with its Orchestrate(R) product, along with interactive voice
response services and wholesale communications platform outsourcing solutions.
Its customer base ranges from small office/home office to multi-level marketing
organizations to Fortune 1000 corporate accounts. Xpedite focuses on store and
forward fax, real time fax services and electronic messaging services with its
MessageReach/SM/ product and in the Asia/Pacific region voice messaging.
Xpedite's customers are primarily Fortune 1000 corporate accounts and
governments. Premiere Conferencing focuses on attended and unattended
conferencing services, primarily to Fortune 1000 customers. Retail Calling Card
Services is a business segment whose operations the Company has decided to exit.
It consists of the Premiere WorldLink calling card product, which was primarily
marketed through direct response advertising and co-branding relationships to
single retail users. Discontinued operations treatment of this business segment
is not available as the Company will continue pursuing the wholesale and
corporate account distribution channels of this product, both of which operate
with positive EBITDA, as defined by the Company. PTEKVentures focuses on
investments in companies in the Internet with innovative service offerings that
will enable these companies to become industry leaders. Corporate focuses on
being a holding company with minimal headcount leaving the day to day operations
of running the business at the operating business segments. EBITDA before
accrued settlement costs, acquired research and development costs and
restructuring, merger and other special charges is management's primary measure
of segment profit and loss.

The Company has pursued its goal of becoming a provider of a suite of
telecommunications and Internet-enabled communications services both
domestically and internationally through various acquisitions from 1996 through
1999. Through these acquisitions, the Company has been able to assemble a
variety of product and service offerings, as described above. In 1996, the
Company acquired TeletT, which became the foundation for the Company's
Orchestrate(R) product offering. In 1999 the Company acquired Intellivoice
Communications, a company that was previously a consultant in developing the
next generation Orchestrate(R) product offering, Orchestrate(R) 2000. The
Orchestrate(R) product is offered under the Voicecom business segment. In 1997,
the Company acquired the franchise network of Voice-Tel, which provided local
access voice mail and voice messaging. The Company also acquired VoiceCom
Systems, Inc. in 1997, which provided 800-based corporate voice-mail and calling
card services. Both the Voice-Tel and VoiceCom Systems, Inc. acquisitions, as
well as the Orchestrate(R) product offering, provide the basis of the Voicecom
operating segment. In 1998, the Company acquired Xpedite, a provider of domestic
and international fax services. Also in 1998, the Company acquired the
international affiliates of Xpedite and other complementary international fax
service providers. These acquisitions, along with the Australian operations of
Voice-Tel, have formed the basis for the Xpedite operating segment. The Company
acquired ATS in 1998, which, along with the conferencing business from the
VoiceCom Systems, Inc. acquisition, forms the basis of the Premiere Conferencing
operating segment. During 1998 and 1999, the Company invested in Internet-based
companies that it believes will be leaders in their market niches in the
expanding Internet economy. The Company has formed the PTEKVenutures segment of
the Company with dedicated resources to develop and grow this segment.

The Company's revenues are based on usage in the Xpedite, Premiere Conferencing
and Retail Calling Card Services business segments and a mix of both usage and
monthly fixed fees in the VoiceCom business segment.

Telecommunications costs consist primarily of the cost of metered and fixed
telecommunications related costs incurred in providing the Company's services.

14
<PAGE>

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.

Direct sales 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.

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.

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.

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 the assets, 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, customer lists, developed technology and assembled
work force, and the MCI WorldCom strategic alliance agreement.

EBITDA before accrued settlement costs, acquired research and development costs
and restructuring, merger and other special charges is defined as net income
before taxes, other income (expense), depreciation, amortization, accrued
settlement costs, acquired research and development costs and restructuring,
merger costs and other special charges.

EBITDA before accrued settlement costs, acquired research and development costs
and restructuring, merger and other special charges is considered a key
management performance indicator of financial condition because it excludes the
effects of goodwill and intangible amortization 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
and the effect of one time cash or non-cash charges associated with cash flow
before payments for interest and taxes. EBITDA before accrued settlement costs,
acquired research and development costs and restructuring, merger and other
special charges 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.

The preparation of financial statements in conformity with generally accepted
accounting principles ("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.

15
<PAGE>

RESULTS OF OPERATIONS

The following table presents certain financial information about the Company's
operating segments for the periods presented (amounts in millions):

<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
--------------------------
<S> <C> <C>
Revenues
Xpedite $ 62.6 $ 58.2
Voicecom 30.9 31.0
Premiere Conferencing 15.8 12.5
Retail Calling Card Services 6.4 11.2
Eliminations - - (0.1)
--------------------------
$115.7 $112.8
==========================

ANALYSIS

The Company's financial statements reflect the results of operations of Xpedite
France, S.A. and Intellivoice Communications, Inc. from the date of their
respective acquisitions. These acquisitions have been accounted for under the
purchase method of accounting.

Consolidated revenues increased 2.6% to $115.7 million in the three months ended
March 31, 2000 as compared with the same period in 1999. On a segment basis this
increase was caused by the following:

. Xpedite experienced a 7.6% increase to $62.6 million compared with the same
period last year primarily related to its acquisition of Xpedite France, S.A.
in the second quarter of 1999.

. Voicecom experienced a 0.3% decrease to $30.9 million compared with the same
period last year. The relatively flat growth is indicative of the general
trend in the voice messaging product offering of this operating segment over
the last twelve months.

. Premiere Conferencing experienced a 26.4% increase to $15.8 million compared
with the same period last year. This growth has been indicative of the
quarter over quarter growth trend that this segment has experienced over the
last twelve months which is being driven from its unattended conferencing
product offering.

. Retail Calling Card Services experienced a 42.9% decrease to $6.4 million
compared with the same period last year. This decline has been indicative of
the quarter over quarter declines over the last twelve months as the Company
has not actively been acquiring customers in this operating segment. The
Company continues not to acquire customers in this segment as operations have
been discontinued since the third quarter of 1999. The Company is currently
pursuing the opportunity to sell this operating segment.

Consolidated gross profit margins were 72.8% and 71.2% for the three months
ended March 31, 2000 and 1999, respectively. Consolidated gross profit margins
benefited in 2000 from the discontinuance of the retail calling card operating
segment in the third quarter 1999. This operating segment has inherently lower
gross margins than the other operating segments and as it continues to be a
smaller percentage of the Company's operating revenues, gross margins have
benefited. In general, the Company has experienced favorable trends in per unit
telecommunications costs in each of its operating segments by aggressively

16
<PAGE>

leveraging increasing minute volumes to negotiate quantity discounts with
telecommunications carriers. Such costs have also been favorably affected by
general industry trends in which long distance transport and the cost of local
access services have decreased as a result of increased capacity and competition
among long distance and local exchange carriers.

Consolidated direct costs of operations increased to 14.7% of revenues in the
three months ended March 31, 2000 as compared with 14.0% for the same period of
1999. The increase in these costs is attributable primarily to increased
regulatory costs associated with the 800-Based telephony offerings in the
Voicecom operating segment and network support costsin developing Orchestrate(R)
2000.

Consolidated selling and marketing costs declined to 20.4% of revenues in the
three months ended March 31, 2000 from 21.4% of revenues in the same period in
1999. This decline is primarily driven by decreased direct sales force costs in
the Voicecom operating segment from the headcount reductions of 114 employees as
part of the third quarter 1999 restructuring efforts by the Company.

Research and development costs were 3.1% of revenues for the three months ended
March 31, 2000 compared with 2.3% of revenues for the same period in 1999. The
increase in these costs as a percentage of revenue is from increased development
efforts associated with the Voicecom operating segment's Orchestrate(R) 2000
development product.

General and administrative costs were 18.8% of revenues for the three months
ended March 31, 2000 compared with 17.3% of revenues for the same period in
1999. The increase in these costs as a percentage of revenues is from increased
support costs associated with the Voicecom operating segment's Orchestrate(R)
2000 development efforts. In addition, there were further decentralization and
exit costs related to the corporate segment associated with initiatives not
contemplated as part of the third quarter 1999 restructuring plan. Also,
contributing were costs associated with PTEKVentures which did not exist in the
first quarter 1999.

Depreciation was 8.6% of revenues for the three months ended March 31, 2000
compared with 13.7% of revenues for the same period in 1999. The decrease in
these costs as a percentage of revenues is attributable to decreases in
depreciation expense associated with the assets in the Company's enhanced
calling card platform, local voice messaging network and legacy fax delivery
network. Portions of these assets' depreciable lives were decreased in the
fourth quarter of 1998 to fifteen months from five to seven years and were fully
depreciated by the end of 1999. The shortening of these assets' lives were
caused by management's decision to replace these assets by the end of 1999 with
more recent versions of technology either for Year 2000 or service delivery
reasons. Management has taken these assets out of operation by the end of 1999
according to plan.

Amortization was 22.3% of revenues for the three months ended March 31, 2000
compared with 21.0% for the same period in 1999. The increase in these costs as
a percentage of revenues is attributable to goodwill, customer lists and
developed technology intangibles from the acquisition of Xpedite France, S.A.
and Intellivoice Communications, Inc. in the second quarter and third quarter
1999, respectively. The lives assigned to these intangibles ranged from three
to seven years.

EBITDA was $18.3 million or 15.8% of revenue for the three months ended March
31, 2000 compared with $18.4 million or 16.3% of revenues for the same period in
1999. On a segment basis this change was caused by the following:

. Xpedite's EBITDA was $17.5 million or 28.0% of segment revenues for the three
months ended March 31, 2000, compared with $16.2 million or 27.8% of segment
revenues for the same period in 1999. This increase is primarily attributable
to the acquisition of Xpedite France, S.A. in the second quarter of 1999 and
reduced costs from third quarter 1999 restructuring efforts in Europe and
Asia/Pacific.

. Voicecom's EBITDA was $4.6 million or 14.9% of segment revenues for the three
months ended March 31, 2000, compared with $5.4 million or 17.4% of segment
revenues for the same period in 1999. This decrease is attributable to costs
associated with the development of the Orchestrate(R) 2000 operating platform
from the acquisition of Intellivoice Communications, Inc. in the third
quarter of 1999. Approximately $2 million of additional costs on a quarterly
basis have been incurred on these operating, development and support efforts.
Offsetting these costs in part are reduced operating costs associated with
this operating segment's restructuring efforts of its direct sales force as
part of the third quarter 1999 management restructuring plan.

. Premiere Conferencing's EBITDA was $2.4 million or 15.2% of segment revenues
for the three months ended March 31, 2000, compared to $1.7 million or 13.6%
of segment revenues for the same period in 1999. This increase is primarily
attributable to growth in this operating segment, unattended conferencing
business that it has been developing and growing over the past year.

17
<PAGE>

. Retail Calling Card Services EBITDA was $0.6 million or 9.4% of segment
revenues for the three months ended March 31, 2000, compared to $0.2 million
or 1.8% of segment revenues for the same period in 1999. This increase is
primarily attributable to reduction in headcount costs through attrition and
the absence of direct advertising costs to acquire new customers. Management
discontinued actively acquiring customers in the third quarter of 1999 and is
currently pursuing the opportunity to sell this operating segment.

. PTEKVentures EBITDA was $(0.7) million for the three months ended March 31,
2000. This segment was formed in the latter part of the fourth quarter of
1999. Costs associated with this segment are personnel costs, professional
and legal costs and travel costs associated with acquiring new investments or
exploring strategic initiatives.

. Corporate EBITDA was $(6.1) million for the three months ended March 31,
2000, compared to $(5.0) million for the same period in 1999. This increase
was attributable primarily to costs associated with the further
decentralization of functions at Corporate that were not considered as part
of the third quarter 1999 decentralization plan for which the Company took a
$8.2 million restructuring charge. Management does not expect further costs
associated with these efforts in 2000. Also contributing to the increase is
the amortization of approximately $300K of deferred compensation costs
associated with the second quarter restricted stock grants to certain
executives of the Company. These stock grants were related to 168,000 shares
of WebMD Series E Common Stock and 6,461 shares of WebMD Series F Preferred
Stock, and 70,692 shares of USA.NET Series C Preferred Stock. The vesting
period periods for these shares ranged from immediately upon grant to three
years, contingent on the executive being employed by the Company.

Net interest expense decreased to $2.7 million for the three months ended March
31, 2000 as compared with $5.6 million for the same period in 1999. Net interest
expense decreased in 2000 due to the absence of the Company's credit facility
with the Bank of New York that was paid off in the fourth quarter of 1999 from
the proceeds of the Company's partial sale of its holdings in Healtheon/WebMD
common stock. Average borrowings in the first quarter of 1999 on this credit
facility were approximately $110.5 million. Interest expense, net in the first
quarter of 2000 is primarily comprised of interest on the Company's convertible
subordinated notes of $172.5 million.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operations was $6.4 million in the first quarter of 2000 as
compared with net cash provided of $8.6 million in the first quarter of 1999.
Excluding payments made for restructuring, merger costs and other special
charges, net cash used in operations in the three months ended March 31, 2000
was $4.2 million as compared with cash provided of $9.0 million for the same
period in 1999. Operating cash flow declined in the first quarter 2000 primarily
as a result of increased use of cash for operating assets and liabilities driven
primarily by a decrease in the number of days outstanding in payables from
December 31, 1999 and an increase in the days sales outstanding in accounts
receivable. Also contributing to the decrease in operating cash flows was the
payment of approximately $11.8 million in income taxes associated primarily with
the gain on the sale of Healtheon/WebMD investments in the fourth quarter of
1999. The sale of these investments with the associated $152 million gain in
1999 utilized substantially all of the Company's domestic net operating loss
carryforwards causing the Company to be partially subject to income taxes for
the fiscal year ended December 31, 1999. These taxes were paid in the first
quarter of 2000. The Company anticipates future tax liabilities on subsequent
gains from the sale of its marketable securities. The Company also received a
$12 million deposit associated with the pending settlement of the lawsuit
against MCI WorldCom. At March 31, 2000 this settlement was not finalized and
the $12 million would be refundable if a final agreement could not be achieved.
In April of 2000, the Company reached a final settlement. See Note 12-Subsequent
Events.

Investing activities provided cash of approximately $25.9 million and $4.5
million in the three months ended March 31, 2000 and 1999, respectively. The
principal source of cash from investing activities in the first quarter of 2000
was the sale of Healtheon/WebMD and S1 Corporation stock owned by the Company.
The proceeds of $47.6 million were used primarily to invest in Internet based
companies in the PTEKVentures portfolio, pay income taxes from prior year's
sales of Healtheon/WebMD and to pay the semi-annual interest due on the
convertible subordinated notes. See note 6- "Marketable Securities Available For
Sale" for a further discussion of this investment activity. Capital expenditures
in the first quarter of 2000 were primarily to upgrade the Voicecom segment's
local based voice messaging network, increase capacity on Premiere
Conferencing's conference calling network, to develop the Orchestrate(R) 2000
platform, to improve Xpedite's fax delivery platform and to develop Xpedite's
MessageReach/SM/ Internet-based product offering. Investments in the first
quarter of 2000 of approximately $13.3 million related to activity at
PTEKVentures. These cash outlays were primarily additional investments in
companies that existed in the PTEKVentures investment portfolio at December 31,
1999 and investments in seven new Internet based companies. The principal source
of cash from investing activities in the first quarter of 1999 was primarily the
sale of municipal bond obligations and mutual funds. These redemptions were used
in part to provide capital for improvements to Xpedite's fax delivery platform
and Voicecom's local based voice messaging network.

18
<PAGE>

Cash inflows from financing activities in the first quarter of 2000 was
primarily from proceeds from employee stock option exercises. Cash outflows
from financing activities in the first quarter of 2000 is primarily debt
repayments on capital lease and note obligations associated with the Voice-Tel
acquisition and debt assumed from the Xpedite France, S.A. acquisition.
Significant cash outflows for financing activities in the first quarter of 1999
included a net reduction in borrowings, mainly repayments under the Company's
revolving loan facility, of approximately $16.7 million. This loan facility was
subsequently paid off in the fourth quarter of 1999 from proceeds from the
partial sale of the Company's investment in Healtheon/WebMD.

At March 31, 2000, 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, lease obligations commitments under its strategic alliances
with Healtheon/WebMD and Sun Microsystems and semi-annual interest on the
convertible subordinated debt. The Company is in compliance with all such
agreements at this date. The Company maintains a margin loan account with a
certain investment bank where it can borrow up to 45% and 50% of the Company's
holdings in Healtheon/WebMD and S-1 Corporation, respectively. Interest rates on
borrowings under this margin loan arrangement are based on the broker call rate.
At March 31, 2000, the Company had no borrowings outstanding on the margin loan
arrangement.

Management believes that cash and marketable securities, available for sale and
cash flows from operations should be sufficient to fund the Company's capital
expenditure requirements of its operating segments. At March 31, 2000,
approximately $11.3 million of cash and equivalents resided outside of the
United States compared to $10.0 million at December 31, 1999. The Company
routinely repatriates cash in excess of operating needs in certain countries
where the cost to repatriate does not exceed the economic benefits. 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, the cash flows from the operating segments and
other factors, the Company may engage in other capital transactions to fund the
investing needs of PTEKVentures and capital expenditures in the various
operating segments. 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

Decentralization of Company

Reorganization of Company into EES and CES Business Segments

19
<PAGE>

plans. As of December 31, 1998, all 59 employees were terminated. The balances
at December 31, 1999 and March 31, 2000 represent the remaining severance
reserve for former executive management. In the first quarter of 2000 cash
severance payments made to eight former executives was $0.5 million. The company
expects to pay the remaining $1.3 million balance of severance over the next
twenty-five months.

THE YEAR 2000 ISSUE

The term "Year 2000 issue" was a general term used to describe the various
problems that may result or have resulted from the improper processing of dates
and date-sensitive calculations by computers and other machinery as the Year
2000 was reached. The Company previously formed a Year 2000 Executive Committee
comprised of members of senior management and a Year 2000 Task Force comprised
of project leaders for each of the Company's operating subsidiaries and key
corporate functional areas. The Year 2000 Executive Committee and the Task Force
evaluated the Company's Year 2000 issue and took appropriate actions to ensure
that the Company experienced minimal disruption from the Year 2000 issue.

As of December 31, 1999, the Company had implemented its Year 2000 initiative.
To date, and with the January 1, 2000 and leap year date rollovers, the Company
has not experienced any material disruptions associated with the Year 2000 issue
and the Company's software applications, hardware platforms or suppliers and
vendors. The Company does not expect to experience any material disruptions
and/or material costs associated with the Year 2000 issue in the future.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting
standards for derivatives and hedging. It requires that all derivatives be
recognized as either assets or liabilities at fair value and establishes
specific criteria for the use of hedge accounting. The Company's required
adoption date is January 1, 2001. SFAS No. 133 is not to be applied
retroactively to financial statements of prior periods. The Company expects no
material adverse effect to its financial position upon adoption of SFAS No. 133.

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 which are inherently subject to
significant risks and uncertainties, many of which are beyond our control, and
reflect future business decisions which are subject to change. A variety of
factors could cause actual results to differ materially from those anticipated
in our forward-looking statements, including the following factors:

. Factors described from time to time in the Company's press releases,
reports and other filings made with the Securities and Exchange Commission;

. 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, including Orchestrate(R);

. Strategic investments in early stage companies, which are subject to
significant risks, may not be successful and returns on such strategic
investments, if any, may not match historical levels;

20
<PAGE>

. The value of our business may fluctuate because the value of some of our
strategic equity investments fluctuates;

. 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;

. Risks associated with interruption in our services due to the failure of
the platforms and network infrastructure utilized in providing our
services;

. Risks associated with expansion of our international operations;

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

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

. Changes in the securities markets may negatively impact us.

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.

All statements made herein regarding the Company's state of readiness with
respect to the Year 2000 issue constitute "Year 2000 readiness disclosures" made
pursuant to the Year 2000 Information and Readiness Disclosure Act, Public Law
No. 105-271.

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, 2000, 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, 1999, by $6.6 million.

Approximately 28.1% of the Company's sales and 19.7% of its operating costs and
expenses were transacted in foreign currencies for the three months ended March
31, 2000. As a result, fluctuations in exchange rates impact the amount of the
Company's reported sales and operating income. A hypothetical positive or
negative change of 10% in foreign currency exchange rates would positively or
negatively change revenue for the first quarter of 2000 by approximately $3.3
million and operating expenses for first quarter of 2000 by approximately $2.7
million. Historically, the Company's principal exposure has been related to
local currency operating costs and expenses in the United Kingdom and local
currency sales in Europe (principally the United Kingdom and Germany). The
Company has not used derivatives to manage foreign currency exchange risk and no
foreign currency exchange derivatives were outstanding at March 31, 2000.

21
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

A lawsuit was filed on November 4, 1998 against the Company, as well as
individual defendants Boland T. Jones, Patrick G. Jones, George W. Baker, Sr.,
Eduard J. Mayer and Raymond H. Pirtle, Jr. in the Southern District of New York.
Plaintiffs were 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, the Company's
roll-out of Orchestrate(R), the Company's relationship with customers Amway
Corporation and DigiTEC, 2000, Inc., and the Company's 800-based calling card
service. Plaintiffs allege causes of action against the Company for breach of
contract against all defendants for negligent misrepresentation, violations of
Sections 11 and 12(a)(2) of the Securities Act of 1933 and against the
individual Defendants for violation of Section 15 of the Securities Act.
Plaintiffs seek undisclosed damages together with pre- and post-judgment
interest, recission or recissory damages as to violation of Section 12(a)(2) of
the Securities Act, punitive damages, costs and attorneys' fees. The defendants'
motion to transfer venue to Georgia has been granted. The defendants' motion to
dismiss has been granted in part and denied in part. The Company filed an answer
on March 30, 2000.

22
<PAGE>

WorldCom breached the Strategic Alliance Agreement dated November 13, 1996,
between the Company and MCI WorldCom by, inter alia, awarding various contracts
to vendors other than the company and to which the Company was entitled either
exclusive or preferential consideration. In addition to injunctive relief, the
Company seeks damages of not less than $10 million, per-and post-judgment
interest, cost and expenses of litigation, including attorney's fees. On July 1,
1999 the court entered an order staying all proceedings pending arbitration. In
connection with that order, MCI WorldCom agreed that it would not issue any
requests for information, requests for proposals or enter into any contracts
with respect to the proposals challenged by the Company. This matter was settled
by the parties in April 2000.

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. 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. The Company has not been served with the summons
and complaint.

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

10.1 Employment Agreement dated January 1, 2000 by and between
American Teleconferencing Services, Ltd. and Theodore P.
Schrafft.

10.2 First Amendment to Sublease Agreement dated February 1, 2000 by
and between Premiere Communications, Inc. and Healtheon/WebMD
Corporation.

27.1 Financial Data Schedule for the Three Month Period Ended March
31, 2000.
23
<PAGE>

(b) Reports on Form 8-K:

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

<TABLE>
Date of Report Financial
(Date Filed) Items Reported Statements Filed

<S> <C> <C>
03/03/00 Item 5 - Announcing change in name and adjustment to None.
historical financial statements primarily in connection
with the Voice-Tel Enterprises, Inc. and VoiceCom
Systems, Inc. acquisitions.
</TABLE>
24
<PAGE>

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, 2000 PTEK HOLDINGS, INC.
Date
/s/ PATRICK G. JONES
--------------------------------------
Patrick G. Jones
Executive Vice President and Chief
Financial Officer (principal Financial
and Accounting Officer and duly
authorized signatory of the Registrant)
and Chief Legal Officer

25
<PAGE>

EXHIBIT INDEX

Exhibit
Number Exhibit Description

10.1 Employment Agreement dated January 1, 2000 by and between American
Teleconferencing Services, Ltd. and Theodore P. Schrafft.

10.2 First Amendment to Sublease Agreement dated February 1, 2000 by and
between Premiere Communications, Inc. and Healtheon/WebMD Corporation.

27.1 Financial Data Schedule for the Three Month Period Ended March 31, 2000.

<PAGE>

EXHIBIT 10.1
AMERICAN TELECONFERENCING SERVICES, LTD.
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is made and entered into by and between AMERICAN
TELECONFERENCING SERVICES, LTD. a Missouri corporation (the "Company"), and
THEODORE P. SCHRAFFT (the "Employee"), as of January 1, 2000 (the "Effective
Date").

BACKGROUND STATEMENT

The Company is engaged in the business of designing, developing, marketing,
selling and provisioning audio, video and data conferencing services (the
"Conferencing Business") within the United States and various countries around
the world. The Employee is currently an employee of the Company and has
substantial knowledge of the Company's business; the Company considers it to be
in its best interest to enter into this Agreement with the Employee; and the
Employee is willing to render such services to the Company in accordance with
the provisions of this Agreement.

THEREFORE, in consideration of and reliance upon the foregoing Background
Statement and the representations, warranties and covenants contained in this
Agreement, the Company and the Employee agree to the following:

TERMS

Section 1. Duties. The Company hereby employs the Employee as President
of the Company. The Employee will have the powers, duties and responsibilities
from time to time assigned to him by the President of Premiere Technologies,
Inc. ("Premiere"). The Employee will be the Chief Operating Officer of the
Company and his duties will include those normally associated with the Chief
Operating Officer of a corporation, including day-to-day management
responsibility for the operations of the Company, subject to the direction and
control of the President of Premiere. In the event of a Sale of the Company (as
defined below), the term "President of Premiere" will be replaced with "the
Company's Board of Directors." The Employee will devote substantially all of his
business time to faithfully and industriously perform his duties and promote the
business and best interests of the Company. The Employee's duties hereunder are
to be performed at Premiere's corporate offices located in Atlanta, Georgia;
provided, however, the Employee will be required to spend as much time as
necessary at the Company's corporate offices in Colorado Springs, Colorado and
its operations center in Lenexa, Kansas in order to carry out his duties
hereunder.

Section 2. Compensation.

Section 2.1. Base Salary. During the term of the Employee's employment
under this Agreement, the Company will pay the Employee an annual base salary of
$225,000.00, payable in accordance with the Company's payroll practices.
Effective as of
<PAGE>

the first pay period in April of each year during the term of this Agreement,
starting in April 2000, the Employee shall receive an increase in his base
salary equal to five percent (5%) of the previous year's base salary.

Section 2.2. Bonus Compensation. In addition to his base salary, the
Employee will be entitled to such annual bonus compensation as mutually agreed
upon in writing by the Company and the Employee. The Employee has been paid a
bonus of $67,000.00 for 1999.

Section 2.3. Special Bonus. In the event that all or substantially all
of the stock or assets of the Company are disposed of, through a sale, merger or
otherwise, on or before September 30, 2000 (a "Sale of the Company"), the
Employee will be entitled to a special bonus in the amount of $112,500.00, one-
half (1/2) of which will be payable by the Company within thirty (30) days after
the closing of such sale and one-half (1/2) of which will be payable within one
hundred eighty (180) days after the closing of such sale, or such shorter period
of time as agreed to by the Company and the Employee, provided that the second
one-half (1/2) of such special bonus shall not be paid to the Employee unless he
is an employee of the Company or one of its affiliates on the payment date,
unless he has been terminated by the Company without Cause (as defined below) or
the Employee has terminated his employment with Adequate Justification (as
defined below), in which case the special bonus shall be paid to the Employee
within thirty (30) days following the date of his termination.

Section 2.4. Employee Benefits. During the term of his employment under
this Agreement, the Employee will be entitled to participate in all employee
benefit programs, including pension and profit-sharing plans, and any medical,
health, dental, disability and other insurance programs generally available to
employees of the Company.

Section 2.5. Reimbursement of Expenses. The Company will reimburse the
Employee, in accordance with the Company's policies, for all reasonable expenses
incurred by the Employee in performing his duties hereunder.

Section 2.6. Vacation. The Employee will be entitled to three (3) weeks
paid vacation annually in accordance with the Company's policies.

Section 2.7. Automobile Allowance. During the term of his employment
under this Agreement, the Company will pay the Employee a monthly automobile
allowance of $1,000.00, payable in accordance with the Company's standard
payroll practices.

Section 3. Term of Employment. Subject to Section 4 hereof, the
Employee's initial term of employment under this Agreement will begin on the
Effective Date and will expire on December 31, 2003. The initial term of
employment will automatically renew for an additional one-year period upon the
foregoing expiration, and thereafter upon the expiration of any renewal term
provided by this Section 3, unless the Company or the

-2-
<PAGE>

Employee provides written notice to the other party at least ninety (90) days
prior to the expiration date that such party does not want this Agreement to
renew.

Section 4. Termination of Employment.

Section 4.1. Automatic Termination. The Employee's employment hereunder
will terminate automatically upon the death of the Employee.

Section 4.2. Termination by the Company.

(a) The Company may terminate the Employee's employment under this
Agreement for "Cause," which shall consist of any of the following: (i) the
commission by the Employee of a willful act (including, without limitation, a
dishonest or fraudulent act) or a grossly negligent act, or the willful or
grossly negligent omission to act by the Employee, which is intended to cause,
causes or is reasonably likely to cause material harm to the Company or any of
its subsidiaries (including harm to the business reputation of the Company or
any of its subsidiaries); (ii) the indictment of the Employee for the commission
or perpetration of any felony or any crime involving dishonesty, moral turpitude
or fraud; (iii) the breach by the Employee of any material term or covenant of
this Agreement and such breach is not cured, if it is susceptible to cure,
within thirty (30) days following receipt of notice from the Company setting
forth the allegations of Cause; or (iv) the failure of the Employee to devote
substantially all of his business time to the Company's business and affairs as
provided in Section 1 hereof.

(b) If the Company terminates the Employee's employment under this
Agreement without Cause either before a Sale of the Company, or more than
twenty-four (24) months after the Sale of the Company, the Employee will be
entitled to receive (i) severance pay equal to one hundred percent (100%) of the
Employee's annual base salary in effect on the date of termination (the
"Termination Date"), plus (ii) the cost of the Employee's COBRA coverage over
the twelve (12) month period following the Termination Date, both payable in
accordance with the Company's payroll practices over such 12-month period;
provided, that if the expiration date of this Agreement as provided in Section 3
hereof (the "Expiration Date") is less than twelve (12) months after the
Termination Date, then the Employee will be entitled to receive (A) severance
pay equal to a pro rata portion of the Employee's annual base salary in effect
on the Termination Date determined by multiplying such base salary by a fraction
equal to (y) the number of days between the Termination Date and the Expiration
Date divided by (z) 365, plus (B) the cost of the Employee's COBRA coverage over
the period starting on the Termination Date and ending on the Expiration Date,
both payable in accordance with the Company's payroll practices over the period
starting on the Termination Date and ending on the Expiration Date. Such COBRA
coverage shall be the same as was in effect on the Termination Date.

(c) If, during the twenty-four (24) month period following a Sale of
the Company, the Employee's employment with the Company is terminated (i) by the

-3-
<PAGE>

Employee with "Adequate Justification" or (ii) by the Company for any reason
other than Cause, the Employee will be entitled to receive (A) severance pay
equal to two hundred percent (200%) of the Employee's annual base salary in
effect on the Termination Date, plus (B) the cost of the Employee's COBRA
coverage over the twelve (12) month period following the Termination Date, both
payable in accordance with the Company's payroll practices over such 12-month
period. Such COBRA coverage shall be the same as was in effect on the
Termination Date. For purposes of this Agreement, "Adequate Justification" means
a material breach by the Company of this Agreement, including, without
limitation, a reduction in the Employee's base salary or bonus compensation, a
significant change to the Employee's title, powers, duties or responsibilities
(including, without limitation, his reporting relationships), or a significant
change in his working conditions (including, without limitation, the requirement
that he perform his duties at a corporate headquarters outside of the Atlanta,
Georgia area), or the failure by the Company to make any payments due to the
Employee hereunder, and such breach is not cured by the Company within thirty
(30) days following receipt of written notice from the Employee, which notice
specifies in reasonable detail the events which the Employee believes constitute
Adequate Justification.

Section 4.3. Termination by the Employee. The Employee may terminate
his employment under this Agreement by giving the Company at least thirty (30)
days prior written notice.

Section 4.4. Compensation Upon Termination. In the event the Company
terminates the Employee's employment hereunder for any reason other than Cause,
or if the Employee terminates his employment pursuant to Section 4.2(c) or 4.3,
the Company will pay to the Employee, in addition to any amounts payable
pursuant to Section 4.2, his accrued base salary through the termination date
and a pro rata portion of any bonus earned by the employee with respect to the
calendar year in which the termination occurs, which will be paid within a
reasonable period of time after the amount of his bonus is determined. In the
event the Company terminates the Employee's employment hereunder for Cause, the
Company will pay to the Employee his accrued base salary through the termination
date, but the Employee will not be entitled any bonus compensation with respect
to the calendar year in which termination occurs, including any bonus
compensation that has been earned but not paid as of the termination date.

Section 5. Restrictive Covenants.

Section 5.1. Prohibited Activities. During the Restricted Period (as
defined below), the Employee will not, directly or indirectly, for the
Employee's own account or for or on behalf of any other person or entity,
whether as an officer, director, employee, partner, principal, joint venturer,
consultant, investor, shareholder, independent contractor or otherwise:

(a) Noncompetition. Perform, within the United States, executive
management, sales or administrative services for or on behalf of any business or
other

-4-
<PAGE>

entity in competition with the Conferencing Business, it being expressly
acknowledged that the Employee has performed and will continue to perform
services on behalf of the Company throughout the United States.

(b) Nonsolicitation. Solicit business in competition with the
Conferencing Business, from any (i) customers of the Company who were customers
of the Company at the time of the termination of the Employee's employment, or
(ii) entities or individuals who were customers of the Company during the one
(1) year period preceding such termination with whom the Employee had any
contact (defined as direct or indirect influence over any goodwill generated
with such customer either through the Employee's communications with such
customer or by virtue of the Employee's status as a key employee of the
Company), or (iii) prospective customers of the Company who, within two (2)
years prior to such termination, had been solicited by the Company and where the
Employee supervised or participated in any way in such solicitation activities.

(c) Nonrecruitment. Solicit or induce, or attempt to solicit or
induce, any of the Company's employees, consultants, clients, customers,
vendors, suppliers or independent contractors to terminate their relationship
with the Company or to establish a relationship with a competitor of the
Company.

(d) Nondisparagement. Speak or act in any manner that is intended to,
or does in fact, damage the goodwill or the business or reputation of the
Company.

For purposes of this Agreement, the Restricted Period will be a period beginning
on the Effective Date and continuing for a period of one (1) year after the
termination or expiration of the Employee's employment hereunder, regardless of
the reason for such termination or expiration. The foregoing notwithstanding,
the Employee may own up to five percent (5%) of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, of any
corporation engaged in competition with the Company so long as the Employee does
not otherwise (i) participate in the management or operation of any such
business in such a manner as to be engaged in competition with the Company, or
(ii) violate any other provision of this Agreement. The Employee understands and
agrees that, by virtue of the Employee's position with the Company, the Employee
will have substantial access to and impact on the goodwill, confidential
information and other legitimate business interests of the Company, and
therefore will be in a position to have a substantial adverse impact on the
Company's business interests should the Employee engage in activities in
violation of the restrictive covenants of this Section 5.1. The Employee
acknowledges that the Company is materially relying upon the Employee's
compliance with the terms of this Section 5.1 and that the Employee's covenants
herein are material to the Company's ongoing operations. The Employee further
acknowledges that the Employee's adherence to the restrictive covenants set
forth in this Section 5.1 is also an important and substantial part of the
consideration that the Company is receiving under this Agreement, and agrees
that the restrictive covenants in this Section 5.1 are enforceable in all
respects. The Employee consents to the entry of injunctive relief to

-5-
<PAGE>

enforce such covenants, in addition to such other relief to which the Company
may be entitled by law.

Section 5.2. Trade Secrets.

(a) The Employee agrees to maintain in strict confidence, and not use
or disclose except pursuant to written instructions from the Company, any Trade
Secret (as defined below) of the Company, for so long as the pertinent data or
information remains a Trade Secret, provided that the obligation to protect the
confidentiality of any such information or data shall not be excused if such
information or data ceases to qualify as a Trade Secret as a result of the acts
or omissions of the Employee.

(b) The Employee agrees to maintain in strict confidence and, except
as necessary to perform his duties hereunder, not to use or disclose any
Confidential Business Information (as hereinafter defined) during his employment
hereunder and for a period of one (1) year thereafter.

(c) Upon termination of his employment, the Employee shall leave with
the Company all business records, contracts, calendars, telephone lists,
rolodexes, and other materials or business records relating to the Company, its
business or customers, including all physical and electronic copies thereof,
whether or not the Employee prepared such materials or records himself; provided
that the Employee shall have the right to retain any personal property
(including personal records) maintained at the Company's offices or otherwise.

(d) The Employee may disclose Trade Secrets or Confidential Business
Information pursuant to any order or legal process requiring him (in his legal
counsel's reasonable opinion) to do so, provided that the Employee shall first
have notified the Company in writing of the request or order to so disclose the
Trade Secrets or Confidential Business Information in sufficient time to allow
the Company to seek an appropriate protective order.

(e) "Trade Secret" shall mean any information, including, but not
limited to, technical or nontechnical data, a formula, a pattern, a compilation,
a program, a plan, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list of actual or potential
customers or suppliers which (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use, and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. "Confidential Business Information"
shall mean any nonpublic information of a competitively sensitive nature, other
than Trade Secrets, acquired by the Employee, directly or indirectly, in
connection with the Employee's employment, including (without limitation) oral
and written information concerning the Company's financial positions and results
of operations (revenues, margins, assets, net

-6-
<PAGE>

income, etc.)), annual and long-range business plans, marketing plans and
methods, account invoices, oral or written customer information, and personnel
information.

Section 5.3. Remedies. In the event the Employee violates or threatens
to violate the provisions of this Section 5, the parties acknowledge and agree
that damages at law will be an insufficient remedy and that the Company will be
entitled to equitable relief in addition to any other remedies or rights
available to the Company, and no bond or security will be required in connection
with such equitable relief.

Section 5.4. Counterclaims. The existence of any claim or cause of
action the Employee may have against the Company will not at any time constitute
a defense to the enforcement by the Company of the restrictions or rights
provided by this Section 5, but the failure to assert such claim or cause of
action shall not be deemed to be a waiver of such claim or cause of action.

Section 5.5. Company. For purposes of this Section 5, "Company" shall
include the Company and all of its direct and indirect subsidiaries, parents and
affiliates and any predecessors and successors of the Company.

Section 5.6. Modification. The Employee and the Company agree that they
will negotiate in good faith to amend this Agreement from time to time to modify
the terms of this Section 5, including the definition of the terms "Conferencing
Business," "Trade Secrets" and "Confidential Business Information," to reflect
changes in the Company's business and affairs so that the scope of the
limitations placed on the Employee's activities by this Section 5 accomplish the
parties' intent in relation to the then current facts and circumstances. Any
such amendment shall be effective only when embodied in a written document
signed by the Employee and the Company. This Section 5 shall survive any
termination of this Agreement.

Section 6. Ownership of Employee's Work

Section 6.1. Company Developments. The Employee hereby assigns to the
Company all of the Employee's right, title and interest (including, without
limitation, the right to file and prosecute applications for domestic and
foreign letters patent and to have issued such letters patent) in any and all
Company Developments. "Company Developments" means any Development that (a) is
conceived, completed or reduced to practice during the Employee's employment
with the Company solely or jointly by the Employee, or created wholly or in part
by the Employee, whether or not such Development is patentable, copyrightable or
susceptible to other forms of protection, and (b)(i) relates to the actual or
anticipated business, research or development of the Company, (ii) results from
any work the Employee does using any equipment, facilities, materials, trade
secrets or personnel of the Company, or (iii) is suggested by or results from
any task assigned to the Employee or work performed by the Employee for or on
behalf of the Company. "Development" means any idea, invention, discovery,

-7-
<PAGE>

improvement, innovation, design of a useful article (whether the design is
ornamental or otherwise), computer program and related documentation, and other
work of authorship.

Section 6.2. Works Made for Hire. The Employee acknowledges that all
writings and works of authorship, including, without limitation, works that
contain software program codes, that the Employee makes or conceives, alone or
with others, during the period of time the Employee is employed by the Company
and that relate in any way to the actual or then-prospective business of the
Company or its subsidiaries or affiliates are works made for hire and the
property of the Company, including, without limitation, copyrights on those
writings and works of authorship and the right to file and prosecute
applications for domestic and foreign letters patent and to have issued such
letters patent with respect to such writings and works of authorship.

Section 6.3. Copyrights. The Employee hereby assigns to the Company all
the Employee's right, title, and interest of any kind, and nature in and to all
copyrights, copyright licenses, and copyright interests of every kind and
nature, and any and all renewals and extensions thereof that may be secured
under all laws now or hereafter in force and any and all causes of action
heretofore accrued or which may hereafter accrue in the Employee's favor for
infringement of such copyrights, copyright licenses, and copyright interests
that the Employee makes or conceives, alone or with others, during the period of
time in which the Employee is employed by the Company, and that relate in any
way to the actual or then-prospective business of the Company or its
subsidiaries or affiliates, whether or not published, to the full extent of such
rights.

Section 7. Compliance With Other Agreements. The Employee represents and
warrants to the Company that he is free to enter this Agreement and that the
execution of this Agreement and the performance of his obligations under this
Agreement will not, as of the date of this Agreement or with the passage of
time, conflict with, cause a breach of or constitute a default under any
agreement to which the Employee is a party or may be bound.

Section 8. Severability. Every provision of this Agreement is intended
to be severable. If any provision or portion of a provision is illegal or
invalid, then the remainder of this Agreement will not be affected. Moreover,
any provision of this Agreement which is determined to be unreasonable,
arbitrary or against public policy will be modified as necessary so that it is
not unreasonable, arbitrary or against public policy.

Section 9. Waiver. A waiver by a party to this Agreement of any breach
of this Agreement by the other party will not operate or be construed as a
waiver of any other breach or a waiver of the same breach on a future occasion.
No delay or omission by either party to enforce any rights it may have under
this Agreement will operate or be construed as a waiver.

Section 10. Amendment. This Agreement may not be amended or modified
except by a writing signed by both parties.

-8-
<PAGE>

Section 11. Headings. The various headings contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit or
extend the scope or intent of any of the provisions of this Agreement.

Section 12. Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument.

Section 13. Number and Pronouns. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural will include
the singular and the plural and pronouns stated in the masculine, feminine or
neuter gender will include the masculine, feminine and neuter genders.

Section 14. Assignment; Binding Effect. Neither this Agreement nor any
right or interest hereunder shall be assignable by either the Employee or the
Company without the other party's prior written consent; provided, however, that
nothing in this Section 14 shall preclude (i) the Employee from designating a
beneficiary to receive any benefits payable hereunder upon his death, or (ii)
the executors, administrators or other legal representatives of the Employee or
his estate from assigning any rights hereunder to the person or persons entitled
thereto. Except as otherwise provided herein, this Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, administrators, executors, successors and assigns.

Section 15. Arbitration. Any dispute between the parties shall be
resolved through binding arbitration conducted by the American Arbitration
Association under the rules then in effect. The parties agree that any
arbitration proceeding shall be conducted in Atlanta, Georgia and hereby consent
to jurisdiction and venue there. The predominately nonprevailing party, as
determined by the arbitrator(s), shall pay the reasonable attorneys' fees and
other expenses of the predominately prevailing party in any such arbitration or
resulting litigation.

Section 16. Entire Agreement. With respect to its subject matter, this
Agreement constitutes the entire understanding of the parties superseding all
prior agreements, understandings, negotiations and discussions between them,
whether written or oral, and there are no other understandings, representations,
warranties or commitments with respect thereto except as embodied herein.

Section 17. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State of Georgia
without reference to conflicts of law.

Section 18. Notices. Any notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given and delivered when delivered in person, three (3) days after
being mailed postage prepaid by certified or registered mail with return receipt
requested, or when delivered by

-9-
<PAGE>

overnight delivery service to the recipient at the following address, or to such
other address as to which the other party subsequently shall have been notified
in writing by such recipient:

If to the Company:

American Teleconferencing Services, Ltd.
3399 Peachtree Road
The Lenox Building
Suite 600
Atlanta, GA 30326
Attention: Jeffrey A. Allred

With a copy to (which shall not constitute notice):

Premiere Technologies, Inc.
3399 Peachtree Road
The Lenox Building
Suite 600
Atlanta, GA 30326
Attn: Chief Legal Officer

If to the Employee:

Theodore P. Schrafft
570 Kearny Street
Alpharetta, GA 30022

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

AMERICAN TELECONFERENCING SERVICES, LTD

By: /s/ Patrick G. Jones
---------------------------------
Its: Executive Vice President
---------------------------------
EMPLOYEE
/s/ Theodore P. Schrafft
-------------------------------------
Theodore P. Schrafft

-10-

<PAGE>

EXHIBIT 10.2

FIRST AMENDMENT TO SUBLEASE AGREEMENT

THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (this "Amendment") is made as of
the 1st day of February, 2000, by and between PREMIERE COMMUNICATIONS, INC.
("Sublandlord"), and HEALTHEON/WEBMD CORPORATION, successor by merger to
Endeavor Technologies, Inc. ("Subtenant").

WITNESSETH

WHEREAS, Sublandlord, by Agreement of Lease dated March 3, 1997 (the
"Master Lease"), leased from Corporate Property Investors (the "Landlord") the
entire fourth (4th) floor comprising 20,838 rentable square feet (the
"Premises") along with additional space on other floors, in the building
commonly known as The Lenox Building, located at 3399 Peachtree Road, N.E.,
Atlanta, Georgia as more particularly described in the Master Lease and the
Sublease (as hereinafter defined).

WHEREAS, pursuant to that certain Sublease Agreement dated December 16,
1997, by and between Sublandlord and Subtenant (the "Sublease"), Subtenant
leased the Premises from Sublandlord;

WHEREAS, pursuant to Paragraph 1 of the Sublease, the term of the Sublease
is scheduled to expire on February 1, 2000;

WHEREAS, pursuant to Paragraph 21 of the Sublease, if Subtenant and
Sublandlord mutually agree and Landlord consents, Subtenant shall have the
option to renew the Sublease for one (1) additional one-year period under the
same terms and conditions as those of the Sublease, except that the Base Rent
(as defined in the Sublease) to be paid thereunder shall be adjusted upward by
the amount of increase under the Master Lease, if any;

WHEREAS, Subtenant desires to extend the Sublease term for one (1)
additional two-year term and Sublandlord has agreed to such renewal, subject to
the consent of the Landlord;

WHEREAS, Sublandlord and Subtenant desire to amend the Lease to provide for
the two-year extension pursuant to the terms and conditions as hereinafter set
forth.

NOW, THEREFORE, in consideration of the mutual promises of the parties and
the mutual benefits to be derived by the performances of the parties hereunder;
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

1. Recitals. The above recitals are true and correct.
--------

2. Extension of Sublease Term. The Sublease Term as defined in Paragraph 1
--------------------------
of the Sublease is hereby extended for one (1) two-year period (the "Extension
Term"), commencing on the expiration date of the Sublease (the "Extension
Commencement Date") and
<PAGE>

ending on February 1, 2002 (the "Extension Expiration Date"). As of the
Extension Commencement Date, the Sublease is hereby amended so that any
reference therein to the "Sublease Term" shall be a reference to the Extension
Term and any reference therein to the "Expiration Date" shall be a reference to
the Extension Expiration Date.

3. Base Rent. The Base Rent for the Premises shall increase from $21.00
---------
per rentable square foot to $22.00 per rentable square foot (per year) as of
April 1, 2001, as set forth in the Master Lease.

4. Landlord's Consent Required. This Amendment is expressly conditioned
---------------------------
upon the written consent of the Landlord. Upon execution of this Amendment,
Sublandlord will promptly request such written consent. If such consent has not
been received by Sublandlord within thirty (30) days from the date hereof, then,
at the option of either party, upon written notice to the other at any time
after such 30-day period, this Amendment and the underlying Sublease shall be
deemed canceled, null and void, and of no further force and effect, and neither
party shall have any claim of any kind or nature against the other provided such
notice is sent before the Landlord's written consent is delivered to
Sublandlord.

5. Subtenant Improvements. Subtenant accepts the Premiere in their "as-is"
----------------------
condition for the Extension Term. Notwithstanding the foregoing, provided
Subtenant is not then in default under the Sublease, Sublandlord will install
new building standard carpet in the elevator lobby. Sublandlord's obligation to
install the carpet shall be subject to Landlord's approval.

6. Tenant's Estoppel. Subtenant certifies to Sublandlord that:
-----------------

a. the Sublease is presently in full force and effect and, as amended
and extended by this Amendment, represents the entire agreement between
Subtenant and Sublandlord with respect to the demised premises;

b. the Sublease has not been assigned and the demised premises have
not been sublet by Subtenant;

c. Subtenant intends to continue to occupy the demised premises on and
after the date of this Amendment;

d. To Subtenant's knowledge, Sublandlord is not in default under the
Sublease and no event has occurred which, with the giving of notice or passage
of time, or both, could result in a default by Sublandlord;

e. Subtenant has no existing defenses, offsets, liens, claims, or
credits against its payment obligations under the Sublease;

f. Subtenant has not received notice of violation of any federal,
state, county, or municipal laws, regulations, ordinances, orders, or directives
relating to the

2
<PAGE>

use or condition of the demised premises; and

g. No Hazardous Substances have been disposed, stored, or treated on
or about the demised premises by Subtenant.

7. Miscellaneous.
-------------
a. The Sublease shall continue in full force and effect in all other
respects not inconsistent with the express wording of this Amendment.

b. This Amendment may be executed in two or more of counterparts, each
of which shall constitute an original and all of which taken together shall
constitute one and the same instrument.

c. Captions and section headings appearing herein are included solely
for convenience of reference only and are not intended to affect the
interpretation of any provision of this Amendment.

d. This Amendment and the Sublease shall be governed by, and construed
in accordance with, the laws of the State of Georgia, without regard to
principles of conflict of laws.

e. Any term or provision of this Amendment or the Sublease which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Amendment or the Sublease or affecting the validity or enforceability of any of
the terms or provisions of this Amendment or the Sublease in any other
jurisdiction.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

3
<PAGE>

IN WITNESS WHEREOF, the Sublandlord and the Subtenant have executed this
First Amendment to Sublease Agreement as of the day and year first above
written.

SUBLANDLORD

PREMIERE COMMUNICATION, INC.,
a Florida corporation

By: /s/ Patrick G. Jones
-----------------------------------
Print name: Patrick G. Jones
---------------------------
Title: Executive Vice President
--------------------------------

SUBTENANT

HEALTHEON/WEBMD CORPORATION,
a Delaware corporation

By: /s/ Jack Nichols
-----------------------------------
Print name: Jack Nichols
---------------------------
Title: Vice President Asset Management
--------------------------------

4
<PAGE>

CONSENT OF LANDLORD

Corporate Property Investors, as Landlord under the Master Lease, hereby
consents to the within First Amendment to Sublease Agreement by and between
Premiere Communications, Inc. and Endeavor Technologies, Inc. extending the
Sublease by Endeavor Technologies, Inc. Corporate Property Investors further
acknowledges that any right to terminate the Master Lease by virtue of the
granting of this First Amendment to Sublease Agreement is hereby waived.

LANDLORD:

CORPORATE PROPERTY INVESTORS,
a Massachusetts business trust

By: /s/ Don Hession
-------------------------------
Print name: Don Hession
-----------------------
Title:
----------------------------

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 37,393
<SECURITIES> 45,779
<RECEIVABLES> 88,400
<ALLOWANCES> (12,215)
<INVENTORY> 0
<CURRENT-ASSETS> 168,461
<PP&E> 289,645
<DEPRECIATION> (175,256)
<TOTAL-ASSETS> 744,098
<CURRENT-LIABILITIES> 140,674
<BONDS> 172,500
0
0
<COMMON> 488
<OTHER-SE> 410,387
<TOTAL-LIABILITY-AND-EQUITY> 744,098
<SALES> 115,713
<TOTAL-REVENUES> 115,713
<CGS> 31,463
<TOTAL-COSTS> 48,433
<OTHER-EXPENSES> 84,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,711)
<INCOME-PRETAX> 25,455
<INCOME-TAX> 17,160
<INCOME-CONTINUING> 8,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,295
<EPS-BASIC> .175
<EPS-DILUTED> .166

</TABLE>