---

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 5

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

For the Quarterly Period Ended March 31, 2006

Commission file number 000-25959

|Goldleaf   Financial Solutions, Inc.                  
|------------------------------------------------------
|(f/k/a   Private Business, Inc.)                      
|(Exact name of registrant as specified in its charter)

|Tennessee                                                        |  | 62-1453841                          
|---------------------------------------------------------------- |  | ------------------------------------
|                                                                 |  |                                     
|(State or other jurisdiction of incorporation or   organization) |  | (I.R.S. Employer Identification No.)
|                                                                 |  |                                     
|9020 Overlook Blvd., Brentwood, Tennessee                        |  | 37027                               
|                                                                 |  |                                     
|(Address of principal executive offices)                         |  | (Zip Code)                          

(615) 221-8400
(Registrants telephone number, including area code)

Indicate by check
mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

|Yes
o | No
x
|----- | ----

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one.)

Large accelerated filer
oAccelerated filer
oNon-accelerated filer
x

Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).

|Yes
o | No
x
|----- | ----

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

|Class                      |  | Outstanding   as of March 9, 2007
|-------------------------- |  | ---------------------------------
|                           |  |                                  
|Common Stock, no par value |  | 17,030,628 shares                

---



GOLDLEAF FINANCIAL SOLUTIONS, INC.Form 10-Q/AAmendment No. 5For Quarter Ended March 31, 2006EXPLANATORY NOTE

Goldleaf Financial
Solutions, Inc. filed its Quarterly Report on Form 10-Q for the first quarter of
2006 with the SEC on May 15, 2006. On June 7, 2006, we filed Amendment
No. 1 to our Quarterly Report on Form 10-Q for the first quarter of 2006 to
conform the disclosure contained in the Quarterly Report on Form 10-Q to the
disclosure contained in Amendment No. 1 to our Form S-1 Registration
Statement filed June 6, 2006. On August 2, 2006 we filed with the SEC an
Amendment No. 2 to our Quarterly Report on Form 10-Q. On August 16,
2006, we filed Amendment No. 3 to our Quarterly Report on Form
10-Q.

As part of our
ongoing accounting controls and procedures, we recently determined that certain
operating expenses of our wholly-owned subsidiary, Goldleaf Technologies, Inc.,
in our consolidated statements of operations included in Amendment No. 1 to
our Quarterly Report on Form 10-Q/A for the three months ended March 31,
2006, should have been classified as cost of revenues. We filed Amendment
No. 4 to our Quarterly Report on Form 10-Q to reflect this reclassification
and to make our disclosure consistent with the disclosure in our amendments to
the Registration Statement. We note that while these changes reduce our
previously reported gross profit for the three months ended March 31, 2006,
they do not affect operating income, net loss or net loss per share.

During our year
year-end audit it was determined that all audit fees for audits of the
historical periods of KVI Capital and Goldleaf Technologies incurred in the
first, second, and third quarters of 2006 should be recorded as period costs
rather than capitalized as direct costs of the acquisitions.  To reflect
this adjustment, we are today filing an amendment to our Quarterly Report on
Form 10-Q/A for the three months ended March 31, 2006.  Accordingly, to
reflect this adjustment in the statements of operations for the three month
period, we are filing this Amendment No. 5 to our Quarterly Report for the three
months ended March 31, 2006.  The adjustment lowers our operating income by
$55,000 and increases our net loss available to common shareholders and diluted
loss per share by $34,000 and $0.01, respectively, for the three months ended
March 31, 2006.

Additionally, on August 8, 2006, the Company's Board of Directors approved a one for five reverse stock split which was affected on September 8, 2006. As a result, the Amendment No. 5 reflects this by adjuting all common share, options, warrants and per share amounts for all prior periods in the accompanying consolidated financial statements.

Amendment No. 5
to our Quarterly Report on Form 10-Q for the first quarter of 2006 amends only
the items listed below, and only to reflect the adjustment discussed above. With
respect to each item, we are amending the quarterly report to delete the
disclosure under that item contained in our Quarterly Report on Form 10-Q, as
amended, and to replace it in its entirety with the disclosure contained in this
amendment.

INDEX

|                                                                                                   |  | Page No.
|-------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                   |  |         
|Part I  Financial Information                                                                     |  |         
|                                                                                                   |  |         
|Item 1 Financial Statements                                                                        |  |         
|                                                                                                   |  |         
|Consolidated Balance Sheets Unaudited as of March 31,
2006 and Audited as of December 31, 2005     |  | F-1     
|                                                                                                   |  |         
|Unaudited Consolidated Statements of Operations for the Three
Months ended March 31, 2006 and 2005 |  | F-2     
|                                                                                                   |  |         
|Unaudited Consolidated Statements of Cash Flows for the Three
Months ended March 31, 2006 and 2005 |  | F-3     
|                                                                                                   |  |         
|Notes to Unaudited Consolidated Financial
Statements                                               |  | F-5     
|                                                                                                   |  |         
|Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations       |  | 1       
|                                                                                                   |  |         
|Part II  Other Information                                                                        |  |         
|                                                                                                   |  |         
|Item 6 Exhibits                                                                                    |  | 14      
|                                                                                                   |  |         
|Signatures                                                                                         |  | 15      
|EX-31.1 SECTION 302   CERTIFICATION OF CEO                                                         |  |         
|EX-31.2 SECTION 302 CERTIFICATION   OF CFO                                                         |  |         
|EX-32.1 SECTION 906   CERTIFICATION OF CEO                                                         |  |         
|EX-32.2 SECTION 906   CERTIFICATION OF CFO                                                         |  |         

Except for the
amended information, this Quarterly Report on Form 10-Q/A continues to speak as
of the date of the original filing or the subsequent amendment, as applicable,
and we have not updated the disclosures contained in this report to reflect
events that occurred at a later date unless otherwise noted.



Part I  Financial InformationItem 1  Financial Statements

GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS

|                                                                                                                                |  | March 31,   2006                  |        | December 31,   2005 |  
|------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------ | ------------------- | -
|                                                                                                                                |  |                                   |        |                     |  
|                                                                                                                                |  | Restated                          |        |                     |  
|                                                                                                                                |  | (Unaudited)                       |        | (Audited)           |  
|                                                                                                                                |  | (in thousands, except share data) |       
|Assets                                                                                                                          |  |                                   |        |                     |  
|Current Assets:                                                                                                                 |  |                                   |        |                     |  
|Cash and cash equivalents                                                                                                       |  | $                                 | 1,360  |                     | $
|Restricted cash                                                                                                                 |  |                                   | 10,336 |                     |  
|Accounts receivable trade, net of allowance for doubtful accounts of $304
and $206, respectively                               |  |                                   | 5,312  |                     |  
|Accounts receivable other                                                                                                      |  |                                   | 21     |                     |  
|Deferred tax assets                                                                                                             |  |                                   | 430    |                     |  
|Investment in direct financing leases                                                                                           |  |                                   | 1,931  |                     |  
|Prepaid and other current   assets                                                                                              |  |                                   | 1,753  |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total   current assets                                                                                                          |  |                                   | 21,143 |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Property and Equipment, Net                                                                                                     |  |                                   | 3,846  |                     |  
|Operating Lease Equipment,   Net                                                                                                |  |                                   | 155    |                     |  
|Other Assets:                                                                                                                   |  |                                   |        |                     |  
|Software development costs,   net                                                                                               |  |                                   | 1,992  |                     |  
|Deferred tax assets                                                                                                             |  |                                   | 2,723  |                     |  
|Investment in direct financing leases, net of current portion                                                                   |  |                                   | 4,080  |                     |  
|Intangible and other assets, net                                                                                                |  |                                   | 15,961 |                     |  
|Goodwill                                                                                                                        |  |                                   | 24,745 |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total other assets                                                                                                              |  |                                   | 49,501 |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total assets                                                                                                                    |  | $                                 | 74,645 |                     | $
|                                                                                                                                |  |                                   |        |                     |  
|Liabilities   and Stockholders Equity                                                                                          |  |                                   |        |                     |  
|Current Liabilities:                                                                                                            |  |                                   |        |                     |  
|Accounts payable                                                                                                                |  | $                                 | 3,805  |                     | $
|Accrued liabilities                                                                                                             |  |                                   | 2,640  |                     |  
|Dividends payable                                                                                                               |  |                                   | 1,052  |                     |  
|Deferred revenue                                                                                                                |  |                                   | 2,926  |                     |  
|Customer deposits                                                                                                               |  |                                   | 10,286 |                     |  
|Current portion of capital   lease obligations                                                                                  |  |                                   | 258    |                     |  
|Current portion of   non-recourse lease notes payable                                                                           |  |                                   | 2,061  |                     |  
|Note payable                                                                                                                    |  |                                   | 850    |                     |  
|Current portion of   long-term debt                                                                                             |  |                                   | 8,000  |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total current liabilities                                                                                                       |  |                                   | 31,878 |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Revolving Line of Credit                                                                                                        |  |                                   | 1,600  |                     |  
|Non-Recourse Lease Notes Payable, net of current portion                                                                        |  |                                   | 3,510  |                     |  
|Deferred Revenue                                                                                                                |  |                                   | 3,050  |                     |  
|Capital Lease Obligations,   net of current portion                                                                             |  |                                   | 1,257  |                     |  
|Other Non-Current   Liabilities                                                                                                 |  |                                   | 119    |                     |  
|Long-Term Debt, net of   current portion                                                                                        |  |                                   | 7,750  |                     |  
|Note Payable                                                                                                                    |  |                                   | 150    |                     |  
|Senior Subordinated   Long-Term Debt, net of unamortized discount of $1,491                                                     |  |                                   |       |                     |  
|Preferred Stock, Series C redeemable, no par value, 10,000 shares issued
and outstanding; net of unamortized discount of $1,416 |  |                                   | 8,584  |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total liabilities                                                                                                               |  |                                   | 57,898 |                     |  
|Commitments and   Contingencies                                                                                                 |  |                                   |        |                     |  
|Stockholders   Equity:                                                                                                         |  |                                   |        |                     |  
|Common stock, no par value; 100,000,000 shares authorized; shares issued and
outstanding, 3,162,290 and 3,097,891, respectively |  |                                   |       |                     |  
|Preferred Stock, 20,000,000   shares authorized:                                                                                |  |                                   |        |                     |  
|Series A non-convertible, no par value; 20,000 shares issued and
outstanding, respectively                                      |  |                                   | 6,209  |                     |  
|Series B convertible, no par value; 40,031 shares issued and
outstanding                                                        |  |                                   | 114    |                     |  
|Additional paid-in capital                                                                                                      |  |                                   | 7,625  |                     |  
|Retained earnings                                                                                                               |  |                                   | 2,799  |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total   Stockholders Equity                                                                                                    |  |                                   | 16,747 |                     |  
|                                                                                                                                |  |                                   |        |                     |  
|Total   Liabilities and Stockholders Equity                                                                                    |  | $                                 | 74,645 |                     | $
|                                                                                                                                |  |                                   |        |                     |  

The accompanying notes are an integral part of these consolidated financial statements.

F-1



GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS  UNAUDITED For the Three Months Ended
March 31, 2006 and 2005

|                                            |  | 2006                                    |        | 2005 |  
|------------------------------------------- |  | --------------------------------------- | ------ | ---- | -
|                                            |  |                                         |        |      |  
|                                            |  | (in thousands, except   per share data) |       
|                                            |  | Restated                                |        |      |  
|Revenues:                                   |  |                                         |        |      |  
|Financial institution service fees          |  | $                                       | 10,214 |      | $
|Retail inventory management services        |  |                                         | 2,095  |      |  
|Other products and services                 |  |                                         | 722    |      |  
|                                            |  |                                         |        |      |  
|Total   revenues                            |  |                                         | 13,031 |      |  
|                                            |  |                                         |        |      |  
|Cost of Revenues:                           |  |                                         |        |      |  
|Financial institution service fees          |  |                                         | 2,008  |      |  
|Retail inventory management services        |  |                                         | 247    |      |  
|                                            |  |                                         |        |      |  
|Gross profit                                |  |                                         | 10,776 |      |  
|Operating Expenses:                         |  |                                         |        |      |  
|General and administrative                  |  |                                         | 4,782  |      |  
|Selling and marketing                       |  |                                         | 4,929  |      |  
|Research and development                    |  |                                         | 131    |      |  
|Amortization                                |  |                                         | 463    |      |  
|Other operating (income) expense, net       |  |                                         | 109    |      |  
|                                            |  |                                         |        |      |  
|Total   operating expenses                  |  |                                         | 10,414 |      |  
|                                            |  |                                         |        |      |  
|Operating Income                            |  |                                         | 362    |      |  
|Interest Expense, Net                       |  |                                         | 655    |      |  
|                                            |  |                                         |        |      |  
|Income (loss) Before Income Taxes           |  |                                         | (293   | )    |  
|Income tax   provision (benefit)            |  |                                         | (112   | )    |  
|                                            |  |                                         |        |      |  
|Net Income (loss)                           |  |                                         | (181   | )    |  
|Preferred   stock dividends                 |  |                                         | 552    |      |  
|                                            |  |                                         |        |      |  
|Net Loss Available to Common Shareholders   |  | $                                       | (733   | )    | $
|                                            |  |                                         |        |      |  
|Loss Per Share:                             |  |                                         |        |      |  
|Basic                                       |  | $                                       | (0.23  | )    | $
|                                            |  |                                         |        |      |  
|Diluted                                     |  | $                                       | (0.23  | )    | $
|                                            |  |                                         |        |      |  
|Weighted Average Common Shares Outstanding: |  |                                         |        |      |  
|Basic                                       |  |                                         | 3,145  |      |  
|                                            |  |                                         |        |      |  
|Diluted                                     |  |                                         | 3,145  |      |  
|                                            |  |                                         |        |      |  

The accompanying notes are an integral part of these consolidated financial
statements.

F-2



GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS  UNAUDITED For the Three Months Ended
March 31, 2006 and 2005

|                                                                                         |  | 2006             |         | 2005 |  
|---------------------------------------------------------------------------------------- |  | ---------------- | ------- | ---- | -
|                                                                                         |  |                  |         |      |  
|                                                                                         |  | (in   thousands) |        
|                                                                                         |  | Restated         |         |      |  
|Cash Flows From Operating Activities:                                                    |  |                  |         |      |  
|Net income   (loss)                                                                      |  | $                | (181    | )    | $
|Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |  |                  |         |      |  
|Write-off of debt issuance costs                                                         |  |                  | 112     |      |  
|Depreciation and amortization                                                            |  |                  | 943     |      |  
|Depreciation on fixed assets under operating leases                                      |  |                  | 23      |      |  
|Deferred   taxes                                                                         |  |                  | (76     | )    |  
|Amortization of debt issuance costs and discount                                         |  |                  | 164     |      |  
|Stock option   compensation expense                                                      |  |                  | 160     |      |  
|Deferred   gain on land sale                                                             |  |                  | (4      | )    |  
|Loss on write-down or disposal of fixed assets and software development
costs            |  |                  | 32      |      |  
|Amortization of lease income and initial direct costs                                    |  |                  | (168    | )    |  
|Gain on sale   of leased equipment                                                       |  |                  | (28     | )    |  
|Gain on sale   of other assets                                                           |  |                  | (40     | )    |  
|Changes in   assets and liabilities:                                                     |  |                  |         |      |  
|Accounts   receivable                                                                    |  |                  | (107    | )    |  
|Prepaid and   other current assets                                                       |  |                  | 260     |      |  
|Accounts payable                                                                         |  |                  | 581     |      |  
|Accrued liabilities                                                                      |  |                  | (181    | )    |  
|Deferred revenue                                                                         |  |                  | 570     |      |  
|Other non-current liabilities                                                            |  |                  | 6       |      |  
|                                                                                         |  |                  |         |      |  
|Net cash   provided by operating activities                                              |  |                  | 2,066   |      |  
|                                                                                         |  |                  |         |      |  
|Cash Flows From Investing Activities:                                                    |  |                  |         |      |  
|Acquisition   of P.T.C. Banking assets                                                   |  |                  | (968    | )    |  
|Acquisition   of Goldleaf Technologies, Inc, net of cash acquired                        |  |                  | (16,396 | )    |  
|Investment   in direct financing leases                                                  |  |                  | (29     | )    |  
|Lease   receivables paid                                                                 |  |                  | 993     |      |  
|Proceeds   from lease terminations                                                       |  |                  | 27      |      |  
|Proceeds   received from sale of other assets                                            |  |                  | 62      |      |  
|Additions to property and equipment                                                      |  |                  | (170    | )    |  
|Additions to intangibles and other assets                                                |  |                  | (10     | )    |  
|Software   development costs                                                             |  |                  | (496    | )    |  
|Payments   received on notes receivable                                                  |  |                  | 14      |      |  
|                                                                                         |  |                  |         |      |  
|Net cash   used in investing activities                                                  |  |                  | (16,973 | )    |  
|                                                                                         |  |                  |         |      |  

The accompanying notes are an integral part of these consolidated financial statements.

F-3



GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS  UNAUDITED For the Three Months Ended
March 31, 2006 and 2005

|                                                                                                                              |  | 2006             |        | 2005 |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | ---- | -
|                                                                                                                              |  |                  |        |      |  
|                                                                                                                              |  | (in   thousands) |       
|                                                                                                                              |  | Restated         |        |      |  
|Cash Flows From Financing Activities:                                                                                         |  |                  |        |      |  
|Repayments on   long-term debt                                                                                                |  | $                | (250   | )    | $
|Repayments   on capital lease obligations                                                                                     |  |                  | (42    | )    |  
|Proceeds from amended and restated debt facility with Bank of America, net of
issuance cost of $425                           |  |                  | 15,575 |      |  
|Proceeds   from revolving line of credit, net                                                                                 |  |                  | 1,493  |      |  
|Repayments of non-recourse lease financing notes payable                                                                      |  |                  | (658   | )    |  
|Proceeds from non-recourse lease financing notes payable                                                                      |  |                  | 6      |      |  
|Proceeds   from exercise of employee stock options                                                                            |  |                  | 2      |      |  
|Stock issued   through employee stock purchase plan                                                                           |  |                  | 4      |      |  
|Payments of   preferred dividends declared                                                                                    |  |                  |       |      |  
|                                                                                                                              |  |                  |        |      |  
|Net cash   provided by (used in) financing activities                                                                         |  |                  | 16,130 |      |  
|                                                                                                                              |  |                  |        |      |  
|Net Change in Cash and Cash Equivalents                                                                                       |  |                  | 1,223  |      |  
|Cash and Cash Equivalents at beginning of year                                                                                |  |                  | 137    |      |  
|                                                                                                                              |  |                  |        |      |  
|Cash and Cash Equivalents at end of period                                                                                    |  | $                | 1,360  |      | $
|                                                                                                                              |  |                  |        |      |  
|Supplemental Cash Flow Information:                                                                                           |  |                  |        |      |  
|Cash   payments for income taxes during period                                                                                |  | $                | 58     |      | $
|                                                                                                                              |  |                  |        |      |  
|Cash   payments of interest during period                                                                                     |  | $                | 267    |      | $
|                                                                                                                              |  |                  |        |      |  
|Noncash Investing Activities:                                                                                                 |  |                  |        |      |  
|Issuance of 62,954 common shares as purchase consideration in the Goldleaf
Technologies, Inc. and P.T.C. Banking acquisitions |  | $                | 461    |      | $
|                                                                                                                              |  |                  |        |      |  
|Issuance of note payable to Goldleaf executive for signing bonus                                                              |  | $                | 1,000  |      | $
|                                                                                                                              |  |                  |        |      |  

The accompanying notes are an integral part of these consolidated financial statements.

F-4



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED

|A. | The Company
|-- | -----------

Goldleaf Financial
Solutions, Inc. (we or the Company) was formerly known
as Private Business, Inc. until its name changed effective May 4, 2006. The
Company is a provider of a suite of technology-based products and services that
help community financial institutions serve their customers, improve their
operational efficiencies, enhance their competitive position, increase their
profitability and help them satisfy regulatory requirements. We provide our
solutions primarily on an outsourced basis, which enables our clients to obtain
advanced products without having to incur substantial capital expense and hire
the skilled personnel required to develop, implement and update their internal
systems. In addition to the suite of solutions we offer to community financial
institutions, we also offer products and services to small
businesses.

|B. | Restatement of Historical Financial Statements
|-- | ----------------------------------------------

The Company has
restated its previously issued financial statements to correct for an error
related to audit fees incurred for historical audits of acquired
companies.

The Company was
required to complete audits of certain historical periods of both KVI Capital
and Goldleaf Technologies following its acquisitions of these entities. 
The audits were performed in the quarters ended March 31, 2006, June 30, 2006,
and September 30, 2006.  The Company capitalized these audit fees as direct
acquisition costs of the entities.  However, during the Companys
year-end audit, it was determined that these audit costs should be expensed as
incurred rather than capitalized as part of the direct costs of the
acquisitions.  Therefore, the Company has restated its consolidated
financial statements for the three months ended March 31, 2006 to properly
reflect these audit costs as a period expense.  The adjustment lowers the
Companys operating income by $55,000, increases the Companys net
loss available to common shareholders by $34,000, and increases our diluted loss
per share by $0.01 for the three months ended March 31, 2006.

The Company also
restated its previously issued financial statements for the three and six months
ended June 30, 2006 and the three and nine months ended September 30,
2006.

The following table
shows the effect of the restatement on the consolidated financial statements of
the Company for the three months ended March 31, 2006:

|                                          |  | March 31, 2006                        |       
|----------------------------------------- |  | ------------------------------------- | ------
|                                          |  |                                       |       
|                                          |  | As   Reported                         |       
|                                          |  |                                       |       
|                                          |  | (in thousands)                        |       
|Balance Sheet changes:                    |  |                                       |       
|Prepaid and other current assets          |  | $                                     | 1,732 
|Total current assets                      |  |                                       | 21,122
|Accrued liabilities                       |  |                                       | 2,585 
|Total current liabilities                 |  |                                       | 31,823
|Retained earnings                         |  | $                                     | 2,833 
|                                          |  |                                       |       
|                                          |  | Three   Months Ended   March 31, 2006 |       
|                                          |  |                                       |       
|Statement of Operations changes:          |  |                                       |       
|General and administrative                |  | $                                     | 4,727 
|Total operating expenses                  |  |                                       | 10,359
|Operating income                          |  |                                       | 417   
|Loss before income taxes                  |  |                                       | (238  
|Income tax benefit                        |  |                                       | (91   
|Net loss                                  |  |                                       | (147  
|Net loss available to common shareholders |  |                                       | (699  
|Diluted loss per share                    |  | $                                     | (0.20 

|C. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Basis
of Presentation

The accompanying
unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial reporting and in accordance with Rule 10-01 of
Regulation S-X.

F-5



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

In the opinion of
management, the unaudited interim financial statements contained in this report
reflect all adjustments, consisting of only normal recurring accruals, which are
necessary for a fair presentation of the financial position, and the results of
operations for the interim periods presented. The results of operations for any
interim period are not necessarily indicative of results for the full
year.

These consolidated
financial statements, footnote disclosures and other information should be read
in conjunction with the consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended
December 31, 2005.

Principles
of Consolidation

The accompanying
financial statements include the accounts of Goldleaf Financial Solutions, Inc.
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.

Our significant
accounting policies include revenue recognition, software development costs,
income taxes and acquisition accounting and accounting for long-lived assets,
intangibles assets and goodwill. Please refer to our critical accounting
policies as described in Part I, Item 2, Managements
Discussion and Analysis of Financial Condition and Results of Operations,
in this Quarterly Report on Form 10-Q and in our Annual Report on
Form 10-K for the year ended December 31, 2005 for a more detailed
description of these accounting policies.

Comprehensive
Income

The Company applies
the provisions of SFAS No. 130,Reporting Comprehensive Income.
SFAS No. 130 requires that the changes in the amounts of certain
items, including gains and losses on certain securities, be shown in the
financial statements as a component of comprehensive income. As of
March 31, 2006, there was no difference between total comprehensive income
and net loss.

Stock-Based
Compensation

On January 1,
2006, the Company adopted SFAS No. 123R,Share-Based Payment,
which replaces SFAS No. 123 and supersedes APB Opinion No. 25.
SFAS No. 123R requires the cost of employee services received in
exchange for equity instruments awarded or liabilities incurred to be recognized
in the financial statements. Under this method, compensation cost in the first
quarter of 2006 includes the portion vesting in the period for (1) all
share-based payments granted prior to, but not vested as of December 31,
2005, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, and (2) all share-based
payments granted subsequent to December 31, 2005, based on the grant date
fair value estimated using the Black-Scholes option pricing.

The Company has four
stock option plans; the 1994 Stock Option Plan, the 1999 Stock Option Plan, the
2004 Equity Incentive Plan, and the 2005 Long-Term Equity Incentive Plan.
Options under these plans include non-qualified and incentive stock options and
are issued to officers, key employees and directors of the Company. The Company
has reserved 1,640,709 new shares of common stock for these plans, under
which the options are typically granted at a minimum of 100% of the fair market
value of common stock on the date of the grant, expire 10 years from the
date of the grant and typically vest over a four-year service period as
determined by the board of directors. Certain options provide for accelerated
vesting if there is a change in control (as defined by the plans). The Company
also has approximately 169,697 shares of common stock reserved for the
issuance of options replacing the Towne options outstanding at the time of the
Towne merger.

Under the
Black-Scholes option-pricing model, the Company estimated volatility using its
historical share price performance over the expected life of the option. Results
of prior periods do not reflect any restated amounts, and the Company had no
cumulative effect adjustment upon adoption of SFAS No. 123R under the
modified prospective method. The Companys policy is to recognize
compensation cost for awards with only service conditions and a graded vesting
schedule on a straight-line basis over the requisite service period for the
entire award. Additionally, the Companys policy is to issue new shares of
common stock to satisfy stock option exercises or grants of restricted shares.
The Company has determined that it has two pools of employees for the purpose of
calculating the estimated compensation cost: executive officers pool and
non-executive officers pool. These two pools properly segregate our
employees that have similar historical exercise and forfeiture
behavior.

F-6



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

The adoption of
SFAS No. 123R decreased the Companys first quarter 2006 reported
operating income and increased the loss before income taxes by approximately
$160,000, increased the reported net loss by approximately $98,000 and increased
the reported basic and diluted net loss per share by $0.05 per share. The
expense, before income tax effect, is reflected proportionately in the general
and administrative expense, selling and marketing expense, and research and
development expense. The Companys adoption of SFAS No. 123R did
not affect operating income, income before income taxes, net income, cash flow
from operations, cash flow from financing activities, and basic and diluted net
income per share in the comparable first quarter of 2005.

The fair value of
each option award is estimated, on the date of grant using the Black-Scholes
option pricing model, which incorporates ranges of assumptions for inputs as
shown in the following table.

| |  | The expected volatility is estimated based on the historical volatility of the
Companys stock over the contractual life of the options and the
Companys expectations regarding stock volatility in the future.                                                                           
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                            
| |  | The Company uses historical data to estimate option exercise and employee
termination behavior within the valuation model; the expected life of options
granted is derived from historical Company experience and represents the period
of time the options are expected to be outstanding.
| |   |                                                                                                                                                                                                                                                                                            
| |  | The risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant for periods within the contractual life of the
option.                                                                                                                                

|                                |  | Quarter   Ended March 31, |          
|------------------------------- |  | ------------------------- | ---------
|                                |  |                           |          
|                                |  | 2006                      |          
|                                |  |                           |          
|Dividend   yield range          |  |                           | 0.0      
|Expected   volatility           |  |                           | 58       
|Risk-free   interest rate range |  |                           | 4.5      
|Expected   term (in years)      |  |                           | 6.2 years

As of March 31,
2006, there was $2.6 million of total unrecognized compensation cost
related to unvested share-based compensation arrangements. We expect to
recognize this cost over a weighted-average period of 3.6 years.

Below is a summary
of the Companys option activity as of March 31, 2006, and changes
during the quarter then ended:

|                                      |  | Number of Shares |           | Weighted Average
        Exercise Price |   | Remaining
        Contractual Life |  | Intrinsic
        Value |          
|------------------------------------- |  | ---------------- | --------- | --------------------------------------- | - | ---------------------------------- |  | ----------------------- | ---------
|                                      |  |                  |           |                                         |   |                                    |  |                         |          
|Balance of December 31, 2005          |  |                  | 1,072,659 |                                         | $ | 11.20                              |  |                         |          
|Granted                               |  |                  | 355,460   |                                         |   | 6.65                               |  |                         |          
|Exercised                             |  |                  | (560      | )                                       |   | 2.95                               |  |                         |          
|Canceled                              |  |                  | (18,935   | )                                       |   | 10.85                              |  |                         |          
|                                      |  |                  |           |                                         |   |                                    |  |                         |          
|Balance of March 31, 2006             |  |                  | 1,408,624 |                                         | $ | 9.70                               |  |                         | 8.4 years
|                                      |  |                  |           |                                         |   |                                    |  |                         |          
|Balance exercisable at March 31, 2006 |  |                  | 337,966   |                                         | $ | 18.90                              |  |                         | 7.4 years
|                                      |  |                  |           |                                         |   |                                    |  |                         |          

The weighted-average
grant date fair value of options granted during the quarter ended March 31,
2006 and 2005 was $3.95 and $8.25, respectively. The total fair value of stock
options that vested during the three months ended March 31, 2006 was
$84,956. The total intrinsic value of stock options exercised during the three
months ended March 31, 2006 was $3,162.

During the first
quarter of 2006, cash received from options exercised was $1,652, and the actual
tax benefit realized for the tax deductions from stock options exercised totaled
$0.

Prior to
January 1, 2006, the Company accounted for its stock-based compensation
plans under the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and did not utilize the fair value method.

F-7



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTSUNAUDITED(Continued)

The following table
illustrates the effect on net loss available to common shareholders and earnings
loss per share if the fair value based method had been applied to all
outstanding and unvested awards for the three-month period ended March 31,
2005.

|                                                                                                                                         |  | Three   Months Ended   March 31, 2005        |      
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | -----
|                                                                                                                                         |  |                                              |      
|                                                                                                                                         |  | (In   thousands,   except per share    data) |      
|Net loss   available to common shareholders, as reported                                                                                 |  | $                                            | (161 
|Add: Stock-based employee compensation expense included in reported net loss,
net of related tax effects                                 |  |                                              | 4    
|Add: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of related tax effects |  |                                              | 15   
|                                                                                                                                         |  |                                              |      
|Pro forma   net loss                                                                                                                     |  | $                                            | (142 
|                                                                                                                                         |  |                                              |      
|Loss per   share:                                                                                                                        |  |                                              |      
|Basic    as reported                                                                                                                    |  | $                                            | (0.06
|                                                                                                                                         |  |                                              |      
|Basic    pro forma                                                                                                                      |  | $                                            | (0.05
|                                                                                                                                         |  |                                              |      
|Diluted    as reported                                                                                                                  |  | $                                            | (0.06
|                                                                                                                                         |  |                                              |      
|Diluted    pro forma                                                                                                                    |  | $                                            | (0.05
|                                                                                                                                         |  |                                              |      

|D. | Reclassifications
|-- | -----------------

Historically, we
have reported our results of operations using the following revenue line items;
participation fees; software license; retail inventory management services;
insurance brokerage fees; and maintenance and other. Due to our recent
acquisitions, we believe that the presentation using revenue line items for
financial institution service fees, retail inventory management services and
other products and services, will be more useful to an understanding of our
operations. Also, we have added a cost of revenues category to capture direct
cost associated with the generation of our revenues. Therefore, we intend to
present our consolidated statement of operations in this manner on an ongoing
basis beginning with the consolidated unaudited financial statements included in
this Quarterly Report on Form 10-Q. Revenues for the three-month period
ended March 31, 2005 have been reclassified to reflect this
presentation.

Certain prior year
amounts have been reclassified to conform with current year
presentation.

F-8



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

|E. | Acquisitions
|-- | ------------

Assets
of P.T.C. Banking Systems, Inc.

On January 18,
2006, the Company executed an asset purchase agreement to acquire certain
operating assets and liabilities from P.T.C. Banking Systems, Inc.
(P.T.C.), in exchange for cash consideration of $948,836 and common
stock consideration of $61,000 (8,485 shares valued at $7.30). Simultaneous with
the execution of the asset purchase agreement, the Company entered into a
one-year employment agreement with the principal officer of P.T.C. The operating
results of P.T.C. were included with those of the Company beginning
January 18, 2006. The transaction was accounted for in accordance with
SFAS No. 141,Business Combinations. The preliminary purchase
price allocation is as follows:

(In thousands, except per share amounts)

|Purchase Price:                                        |  |   |       | 
|------------------------------------------------------ |  | - | ----- | 
|Cash                                                   |  | $ | 949   | 
|Common shares (8,485 shares valued at $7.30 per share) |  |   | 61    | 
|Direct costs   of acquisition                          |  |   | 19    | 
|                                                       |  |   |       | 
|Total   purchase price                                 |  | $ | 1,029 | 
|                                                       |  |   |       | 
|Value assigned to assets and liabilities:              |  |   |       | 
|Assets:                                                |  |   |       | 
|Current   assets                                       |  |   | 10    | 
|Property and   equipment                               |  |   | 38    | 
|Customer   list (estimated life of ten years)          |  |   | 150   | 
|Acquired   technology (estimated life of five years)   |  |   | 500   | 
|Trademarks/tradenames   (indefinite life)              |  |   | 50    | 
|Non-compete   (estimated life of three years)          |  |   | 75    | 
|Goodwill/unidentified   intangibles                    |  |   | 476   | 
|Liabilities:                                           |  |   |       | 
|Accounts   payable                                     |  |   | 10    | 
|Accrued   liabilities                                  |  |   | 10    | 
|Deferred   revenue                                     |  |   | 250   | 
|                                                       |  |   |       | 
|Total net   assets                                     |  | $ | 1,029 | 
|                                                       |  |   |       | 

The Company is
continuing to evaluate and value any identifiable intangible assets of P.T.C.
and expects to complete this analysis by June 30, 2006. The above
preliminary purchase price allocation may be adjusted based on the results of
this analysis.

F-9



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

Goldleaf
Technologies, Inc.

On January 31,
2006, the Company acquired 100% of the outstanding capital stock of Goldleaf
Technologies, Inc. (GTI) in exchange for cash consideration of
$16,785,121 and common stock consideration of $400,341 (54,468 shares valued at
$7.35 per share). Simultaneous of the execution of the merger agreement, the
Company entered into a two-year employment agreement with the chief executive
officer of GTI to become an executive vice president of the Company. The
operating results of GTI were included with those of the Company beginning
January 31, 2006. The transaction was accounted for in accordance with
SFAS No. 141,Business Combinations. The preliminary purchase
price allocation is as follows:

(In thousands except share amounts)

|Purchase Price:                                                          |  |   |        | 
|------------------------------------------------------------------------ |  | - | ------ | 
|Cash (includes $830,000 paid to executives considered as purchase
price) |  | $ | 17,615 | 
|Note payable   to executive                                              |  |   | 1,000  | 
|Common shares (54,468 shares valued at $7.35 per share)                  |  |   | 400    | 
|Direct acquisition costs                                                 |  |   | 186    | 
|                                                                         |  |   |        | 
|Total purchase price                                                     |  | $ | 19,201 | 
|                                                                         |  |   |        | 
|Value assigned to assets and liabilities:                                |  |   |        | 
|Assets:                                                                  |  |   |        | 
|Cash                                                                     |  | $ | 1,405  | 
|Restricted   cash                                                        |  |   | 11,258 | 
|Accounts   receivable                                                    |  |   | 560    | 
|Other   current assets                                                   |  |   | 156    | 
|Property and   equipment                                                 |  |   | 1,811  | 
|Deferred tax   asset                                                     |  |   | 1,250  | 
|Customer   list (estimated life of ten years)                            |  |   | 5,000  | 
|Acquired   technology (estimated life of seven years)                    |  |   | 2,000  | 
|Trademarks/tradenames   (indefinite life)                                |  |   | 1,000  | 
|Product   patents (estimated life of twenty years)                       |  |   | 2,000  | 
|Non-compete   (estimated life of three years)                            |  |   | 500    | 
|Goodwill/unidentified   intangibles                                      |  |   | 11,772 | 
|Liabilities:                                                             |  |   |        | 
|Accounts   payable                                                       |  |   | 738    | 
|Accrued   liabilities                                                    |  |   | 1,638  | 
|Customer   deposits                                                      |  |   | 11,258 | 
|Capital   lease obligations                                              |  |   | 1,557  | 
|Deferred   revenue                                                       |  |   | 4,320  | 
|                                                                         |  |   |        | 
|Total net   assets                                                       |  | $ | 19,201 | 
|                                                                         |  |   |        | 

The Company is
continuing to evaluate and value any identifiable intangible assets of GTI and
expects to complete this analysis by June 30, 2006. The above preliminary
purchase price allocation may be adjusted based on the results of this
analysis.

The acquisition of
GTI brings an additional three primary products from which its revenues are
generated; ACH Manager and Client, remote deposit and website design and
hosting. Below are the current revenue recognition policies for these
products.

F-10



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

ACH
Manager and Client (ACH) and Remote Deposit Revenue

The ACH and Remote
Deposit products are accounted for in accordance with EITF No. 00-21,Revenue Arrangements with Multiple Deliverables. These products are licensed
under automatically renewing agreements, which allow the licensees use of the
software for the term of the agreement (typically five years) and each renewal
period. Typically, there is an up-front fee, an annual or monthly maintenance
fee for each year of the contract, and per transaction fees for processing of
ACH and remote deposit transactions. The Company also offers training services
on a per training day basis if the customer requests training. The Company has
not established sufficient evidence of stand-alone value of the distinct
elements of the arrangement and therefore has deferred the up-front fees and is
amortizing the fees to revenue over the estimated life of the customer
relationship, which was estimated at six years for the ACH revenue stream and
five years for the remote deposit revenue stream, for the periods presented in
the accompanying financial statements. The annual maintenance fee covers phone
support and all unspecified software enhancements and upgrades. Annual
maintenance fees are deferred and recognized into income over the one-year life
of the maintenance agreement. Monthly maintenance fees are recognized on a
monthly basis as earned. The transaction fees are recognized monthly as the
transactions occur. Training is recognized when delivered based on the fair
value of the training services when delivered separately.

Website
Design and Hosting

The Company offers
financial institution website design services as well as hosting services for
the website once design is complete. The Company charges an up-front fee for the
design services and charges a monthly website hosting fee each month of the
contract, which is typically five years. Typically included in the monthly
hosting fee is a limited amount of website maintenance hours each month. Any
maintenance work exceeding the designated number of hours included in the
monthly hosting fee is billed at an agreed upon hourly rate as the services are
rendered. The Company accounts for the website design and hosting services in
accordance with EITF No. 00-21. The Company has not established objective
and reliable evidence of fair value of the undelivered elements (the hosting and
maintenance services) and therefore has deferred the up-front design fees and
amortizes the fees to revenue over the estimated life of the customer, which was
estimated at five years for the periods presented in the accompanying financial
statements. Monthly hosting and maintenance revenues are recognized on a monthly
basis as earned.

|F. | Debt
|-- | ----

On January 23,
2006, the Bank of America Credit Agreement was amended and restated in its
entirety (Amended and Restated Credit Facility). The Amended and
Restated Credit Facility is for an original principal amount of
$18.0 million, consisting of a $10.0 million term loan due
January 23, 2008, a $6.0 million term loan due July 23, 2006 and
a $2.0 million revolving credit facility due January 23, 2008. The
$10.0 million Term A Note has scheduled principal payments as
follows:

|March 31,   and June 30, 2006        |  | $ | 250,000/quarter | 
|------------------------------------ |  | - | --------------- | 
|September 30   and December 31, 2006 |  | $ | 500,000/quarter | 
|Thereafter   (until maturity)        |  | $ | 750,000/quarter | 

Interest on the term
notes and the revolving line of credit is due quarterly in arrears at LIBOR plus
3.0% or the lender base rate (as defined in the Amended and Restated Credit
Facility) as selected by the Company.

The
$6.0 million Term B Note is guaranteed by The Lightyear Fund, L.P. If we
are unable to repay the $6.0 million Term B loan by July 23, 2006 and
The Lightyear Fund, L.P. is required to repay the Term B loan on our behalf, we
are obligated to issue new Series D preferred shares to The Lightyear Fund,
L.P. The Series D preferred shares will carry a 10% per annum dividend
rate, will have a mandatory redemption date nine months from the date of
issuance, and will require the issuance of a warrant to purchase 13,209 shares
of common stock with an exercise price of $0.05 per share. We will also be
required to pay a closing fee equal to 3.75% of the amount The Lightyear Fund,
L.P. repays to Bank of America on our behalf.

Simultaneous with
the execution of the Amended and Restated Credit Facility, the Company and
Lightyear PBI Holdings, LLC (Lightyear) exchanged a
$10.0 million subordinated note that the Company had issued to Lightyear in
December 2005 (the Lightyear Note) for 10,000 shares of the
Companys Series C Preferred Stock. The Series C shares have a
stated redemption date of December 9, 2010 at $10.0 million and carry
a 10% annual dividend rate through June 8, 2007 and thereafter increasing
to 12% annually. In accordance with SFAS No. 150,Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity, the Series C preferred shares are included in the liability
section of our consolidated balance sheet, and dividends on the Series C
Preferred Stock are charged to interest expense as accrued. Further, the
originally recorded debt discount did not change as a result of the exchange,
and it will continue to be accrued to interest expense until the stated
redemption date. In connection with the exchange of the Lightyear Note for
Series C Preferred Stock, the warrants that were issued in December 2005 in
connection with the Lightyear Note were amended such that the exercise price of
such warrants can now be paid, at the option of their holder: (i) in cash
or by wire transfer, (ii) by the surrender of shares that would otherwise
be issuable upon exercise of the warrant that have a market price equal to the
aggregate exercise price, or (iii) through a redemption of shares of the
Companys Series C Preferred Stock having a liquidation value equal to
the aggregate exercise price. Under the terms of the amended warrant agreement
and amended warrants, in the event that the Company redeems any shares of
Series C Preferred Stock on or before June 23, 2007, the number of
shares issuable pursuant to the warrants will be reduced in accordance with a
formula set forth in the warrant agreement.

F-11



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

As a result of
entering into the Amended and Restated Credit Facility with Bank of America, the
Company recorded a one-time charge of $112,296 to write off the remaining
unamortized debt issuance costs from the prior debt facility.

On April 5,
2006, the Company further amended the Amended and Restated Credit Facility to
allow for two additional unsecured term loans. Term Loan C and Term Loan D were
executed on April 5, 2006 for $1.0 million and $750,000, respectively.
Both loans mature on September 30, 2006 and carry the same interest rates
as the other term loans described above.

The Bank of America
Credit Facility is secured by a pledge of all Company assets, imposes financial
covenants, and requirements and contains limitations on the Companys
ability to sell material assets, redeem capital stock and pay dividends, among
other actions. As of March 31, 2006, the Company was in compliance with all
such covenants as amended on May 8, 2006. The facility had an interest rate
of approximately 7.5% during the first quarter of 2006. Total interest expense
for this facility for the first quarter of 2006 was approximately
$219,000.

In conjunction with
the acquisition of GTI discussed in Note D, the Company issued two notes
payable to Paul McCulloch, the President of GTI, as a portion of the
consideration paid to him for executing an employment agreement with the
Company. The notes are for $850,000 (due June 15, 2006) and $150,000 (due
April 30, 2007), are unsecured and carry interest at prime rate as
published in The Wall Street Journal (7.5% at March 31, 2006).

|G. | Net Income Per Share
|-- | --------------------

Basic earnings per
share is computed by dividing net income available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of common and common equivalent
shares outstanding during the period, which includes the additional dilution
related to exercise of stock options and warrants as computed under the treasury
stock method and the conversion of the preferred stock under the if-converted
method.

The following table
represents information necessary to calculate earnings per share for the
three-month period ended March 31, 2006 and 2005:

|                                                              |  | Three   Months   Ended March 31, |      
|------------------------------------------------------------- |  | -------------------------------- | -----
|                                                              |  |                                  |      
|                                                              |  | 2006                             |      
|                                                              |  |                                  |      
|                                                              |  | (In thousands)                   |      
|Net loss   available to common shareholders                   |  | $                                | (733 
|                                                              |  |                                  |      
|Weighted   average common shares outstanding                  |  |                                  | 3,145
|Plus   additional shares from common stock equivalent shares: |  |                                  |      
|Options and   convertible preferred stock                     |  |                                  | 0    
|                                                              |  |                                  |      
|Diluted   weighted average common shares outstanding          |  |                                  | 3,145
|                                                              |  |                                  |      

For the three months
ended March 31, 2006 and 2005, approximately 5.3 million and
3.6 million employee stock options, warrants and the Series B
preferred shares were excluded from diluted earnings per share calculations, as
their effects were anti-dilutive.

|H. | Legal Proceedings
|-- | -----------------

We are not currently
a party to, and none of our material properties is currently subject to, any
material litigation other than routine litigation incidental to our
business.

|I. | Segment Information
|-- | -------------------

The Company accounts
for segment reporting under SFAS No. 131,Disclosures about
Segments of an Enterprise and Related Information.  Corporate overhead
costs and interest have not been allocated to income before taxes of the retail
inventory forecasting segment. Additionally, $1.5 million of goodwill
associated with the Companys August 2001 merger with Towne Services, Inc.
has been allocated to the retail inventory forecasting segment and is therefore
included in the segments total assets.

F-12



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

The following tables
summarize the financial information concerning the Companys reportable
segments as of and for the three months ended March 31, 2006 and
2005.

|                                                      |  | Three Months Ended March 31, 2006  |        | Three Months Ended March 31, 2005    |  
|----------------------------------------------------- |  | ---------------------------------- | ------ | ------------------------------------ | -
|                                                      |  |                                    |        |                                      |  
|                                                      |  | Financial Institution Service Fees |        | Retail Inventory Management Services |  
|                                                      |  |                                    |        |                                      |  
|                                                      |  | (In thousands)                     |       
|Revenues                                              |  | $                                  | 10,928 |                                      | $
|                                                      |  |                                    |        |                                      |  
|(Loss)   income before taxes                          |  |                                    | (693   | )                                    |  
|                                                      |  |                                    |        |                                      |  
|Assets                                                |  |                                    | 71,011 |                                      |  
|                                                      |  |                                    |        |                                      |  
|Total expenditures for additions to long-lived assets |  | $                                  | 664    |                                      | $
|                                                      |  |                                    |        |                                      |  

|J. | Stock Option Grants
|-- | -------------------

In conjunction with
the acquisition of GTI discussed in Note D above, the Company granted
355,460 common stock options at an exercise price of $6.65 per share.
These options were issued under the Companys 2005 Long-Term Incentive Plan
and vest one-fourth each year. The Company has calculated the estimated fair
value of these options in accordance with SFAS 123R using a volatility rate
of 58%, an expected dividend yield of 0.0%, a risk-free rate of return of 4.5%
and an expected life of 6.2 years. The estimated fair value of these
options, using the above assumptions, is $3.95 per share.

|K. | Supplemental Unaudited Pro Forma Financial Data
|-- | -----------------------------------------------

As described in
Note D, the Company acquired GTI in the first quarter of 2006. Furthermore,
the Company acquired KVI Capital, Inc. (KVI Capital) and Captiva
Solutions, LLC (Captiva) in the third and fourth quarters of 2005, respectively.
Below is unaudited pro forma consolidated statement of operations data of the
Company as if these businesses were acquired as of January 1, 2006
(GTI) and January 1, 2005 (GTI, KVI Capital, and Captiva),
respectively.

|                                                          |  | Unaudited Pro Forma Statement of Operations For The Three Months Ended
March 31, 2006 |       
|--------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------
|                                                          |  |                                                                                       |       
|                                                          |  |                                                                                       |       
|                                                          |  |                                                                                       |       
|                                                          |  | Goldleaf                                                                              |       
|                                                          |  |                                                                                       |       
|                                                          |  | (In   thousands, except per share data)                                               |       
|Revenues                                                  |  | $                                                                                     | 13,031
|                                                          |  |                                                                                       |       
|Operating   expenses                                      |  |                                                                                       | 12,669
|                                                          |  |                                                                                       |       
|Operating   income (loss)                                 |  |                                                                                       | 362   
|Interest   expense, net                                   |  |                                                                                       | 655   
|                                                          |  |                                                                                       |       
|Income (loss) before provision (benefit) for income taxes |  |                                                                                       | (293  
|                                                          |  |                                                                                       |       
|Income tax   benefit                                      |  |                                                                                       | (112  
|                                                          |  |                                                                                       |       
|Net loss                                                  |  |                                                                                       | (181  
|Preferred   dividends                                     |  |                                                                                       | 552   
|                                                          |  |                                                                                       |       
|Net loss   available to common shareholders               |  | $                                                                                     | (733  
|                                                          |  |                                                                                       |       
|Diluted   earnings (loss) per share                       |  | $                                                                                     | (0.23 
|                                                          |  |                                                                                       |       

F-13



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

|                                                        |  | Unaudited Pro Forma Statement of Operations For The Year Ended December
31, 2005 |       
|------------------------------------------------------- |  | -------------------------------------------------------------------------------- | ------
|                                                        |  |                                                                                  |       
|                                                        |  | Goldleaf                                                                         |       
|                                                        |  |                                                                                  |       
|                                                        |  |                                                                                  |       
|                                                        |  |                                                                                  |       
|                                                        |  | (In   thousands, except per share data)                                          |       
|Revenues                                                |  | $                                                                                | 38,351
|Operating expenses                                      |  |                                                                                  | 34,276
|                                                        |  |                                                                                  |       
|                                                        |  |                                                                                  |       
|                                                        |  |                                                                                  |       
|Operating income (loss)                                 |  |                                                                                  | 4,075 
|Interest expense, net                                   |  |                                                                                  | 381   
|                                                        |  |                                                                                  |       
|Total other expenses                                    |  |                                                                                  | 381   
|                                                        |  |                                                                                  |       
|Income (loss) before   provision for income taxes       |  |                                                                                  | 3,694 
|Provision   (benefit) for income taxes                  |  |                                                                                  | 1,359 
|                                                        |  |                                                                                  |       
|Net income (loss)                                       |  |                                                                                  | 2,335 
|Preferred stock dividends                               |  |                                                                                  | 2,160 
|                                                        |  |                                                                                  |       
|Net income (loss) attributable   to common shareholders |  |                                                                                  | 175   
|                                                        |  |                                                                                  |       
|Diluted earnings   (loss) per share                     |  | $                                                                                | 0.05  
|                                                        |  |                                                                                  |       

The 2006 Goldleaf
column above includes the results of GTI from its date of acquisition of
January 31, 2006. The 2005 Goldleaf columns above includes the results of
KVI Capital and Captiva from their dates of acquisition of August 1 and
December 9, 2005, respectively.

Pro forma
adjustments:

| | A. | To reduce revenues for GTI related to estimated deferred revenues that would not
have been realized had we acquired GTI as of January 1, 2006 and
January 1, 2005, respectively, and recorded the deferred service obligation
at its estimated fair value as of that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | B. | To increase amortization expense of new intangibles recorded as a result of the
acquisitions. For 2006, the pro forma amounts assume that the Company recorded
approximately $10.5 million of identified intangibles, consisting of
acquired technology ($2.0 million), customer lists ($5.0 million),
non-compete agreements ($500,000), tradenames and trademarks ($1.0 million)
and product patents ($2.0 million), and that the Company amortizes these
amounts over estimated useful lives of seven, ten, three, indefinite and
twenty years, respectively. For 2005, the pro forma amounts assume
that the Company recorded approximately $13.7 million of identified
intangibles, consisting of acquired technology ($2.8 million), customer
lists ($6.6 million), vendor program ($0.1 million), non-compete
agreements ($1.2 million), tradenames and trademarks ($1.0 million)
and product patents ($2.0 million), and that the Company amortizes these
amounts over estimated average useful lives of five, ten, seven, three,
indefinite, and twenty years, respectively.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | C. | To increase general and administrative costs for the increased salary of the
Companys new chief executive officer and executive officers of
KVI Capital and GTI based on the employment agreements executed as part of
these acquisitions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | D. | To increase interest expense for additional debt we acquired to fund the
purchase prices of KVI Capital, Captiva and GTI. The Company has estimated
interest expense assuming a weighted average interest rate for the two debt
instruments used to complete the transactions: the $10.0 million Lightyear
Series C redeemable preferred stock at 10% (as received in exchange for a
$10.0 million subordinated note we originally issued) and the
$18.0 million Bank of America credit facility. Therefore, the pro forma
interest expense was calculated using an interest rate of 7.5% (2006) and
8.3% (2005) and includes accretion of the debt discount (related to common
stock warrants issued to Lightyear in connection with the $10.0 million
financing) using the effective interest method.                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | E. | To record income tax effects of the pro forma adjustments at the
Companys effective rate of 39%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | F. | To reduce preferred dividends for the elimination of GTI dividends
($2.9 million in 2005). As a result of our acquisition of Goldleaf
Technologies, it no longer has a preferred stockholder. Therefore, on a pro
forma basis, no preferred stock dividends would have existed in 2005 related to
Goldleaf Technologies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-14



GOLDLEAF FINANCIAL SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSUNAUDITED(Continued)

The pro forma
statement of operations data for the year ended December 31, 2005 do not
include stock compensation expense for the new stock options issued in
conjunction with the Captiva and GTI acquisitions. The stock option grants
made on October 20, 2005 (related to Captiva) and January 31, 2006
(related to GTI) totaled approximately 920,000. Had these option grants been
issued as of January 1, 2005, the estimated fair value using the
Black-Scholes model would have been $7.05 and $8.05 per share, respectively.
Until January 1, 2006, the Company accounted for stock-based compensation
plans under the intrinsic value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and did not utilize the fair value method. If the
Company expensed options under SFAS No. 123, Accounting for
Stock-Based Compensation, during 2005 and if the Company had acquired Captiva
and GTI on January 1, 2005, an estimated additional $1.3 million of
compensation expense would have been expensed during the year ended
December 31, 2005. Beginning January 1, 2006, the Company began to
expense the remaining unvested fair value of all stock options, including those
issued as part of the GTI and Captiva transactions. The estimated annual
stock compensation expense for the stock options issued as part of these
acquisitions, using the actual calculated fair values of $3.70 and $4.15,
respectively, is approximately $464,000.

Captiva organized
and began operations on April 1, 2005. On June 1, 2005, Captiva
acquired all the operating assets of Total Bank Technology, LLC
(TBT). The year ended December 31, 2005 consists of the full
five months results of TBT (January 1  May 31, 2005
presented separately) prior to the acquisition by Captiva along with the results
of Captiva from April 1, 2005 through December 31, 2005, including the
results of TBT for the months of June through December 2005. Had Captiva been in
existence as of January 1, 2005, the 2005 results would have reflected
additional expenses for the management team and facilities expense of
Captiva.

The pro forma
financial data are presented for informational purposes. You should not rely on
the pro forma amounts as being indicative of the financial position or the
results of operations of the consolidated companies that would have actually
occurred had the acquisitions been effective during the periods presented or of
the future financial position or future results of operations of the
consolidated companies. You should read this information in conjunction with the
accompanying notes thereto and with the historical consolidated financial
statements and accompanying notes of the company included elsewhere in this
document.

|L. | Related Party Transaction
|-- | -------------------------

In conjunction with
the acquisition of GTI discussed in Note D, the Company issued two notes
payable to Paul McCulloch, the President of GTI, as a portion of the
consideration paid to him for executing an employment agreement with the
Company. The notes are for $850,000 (due June 15, 2006) and $150,000 (due
April 30, 2007), are unsecured and carry interest at prime rate as
published in The Wall Street Journal (7.5% at March 31, 2006). These notes
were classified as additional purchase price.

|M. | Subsequent Events
|-- | -----------------

On April 5,
2006, the Company entered into an amendment to its existing credit facility with
Bank of America. The amendment increased the total facility from
$18.0 million to $19.75 million through the issuance of two additional
term notes. Term Note C is for a total of $1.0 million and term
Note D is for a total of $750,000. Both of these notes are unsecured and
mature on September 30, 2006. Interest is payable quarterly at the
Companys option of LIBOR plus 3.0% or the lenders base
rate.

Under the terms of
the Bank of America credit facility, we are prohibited from declaring and paying
cash dividends on our preferred stock during the term of the facility. On
January 23, 2006, Lightyear agreed to accept PIK (paid in kind) dividends
consisting of preferred stock and warrants, in lieu of cash dividends on
(a) the Series A preferred stock through January 1, 2007 and
(b) the Series C preferred stock through January 1, 2008.
Accordingly, on April 1, 2006, we issued:

| |  | an additional 500 shares of Series A preferred stock to Lightyear in lieu
of $500,000 in cash dividends that became due on January 1, 2006 on the
Series A preferred stock;    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                
| |  | an additional 512.5 shares of Series A preferred stock to Lightyear in lieu
of $512,500 in cash dividends that became due on April 1, 2006 on the
Series A preferred stock; and
| |   |                                                                                                                                                                                
| |  | warrants to Lightyear that give Lightyear the right to purchase 153,409 shares
of our common stock at an exercise price of $6.60 per share.                                    

On August 8, 2006,
the Companys Board of Directors approved a one for five reverse stock
split which was effected on September 8, 2006.  As a result, all common
shares, options, warrants and per share amounts for all prior periods have been
adjusted to reflect this reverse split in the accompanying consolidated
historical financial statements.

F-15



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results
of Operations Three Months Ended March 31, 2006 and 2005
|------- | --------------------------------------------------------------------------------------------------------------------------------

Note Regarding Forward Looking Information

This report contains
forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements relate to future economic performance, plans and
objectives of management for future operations and projections of revenues and
other financial items that are based on the beliefs of our management, as well
as assumptions made by, and information currently available to, our management.
The words expect, estimate, anticipate,
believe, and similar expressions are intended to identify
forward-looking statements. We make forward-looking statements in Items 2 and 3
of Part I and in Item 1A of Part II of this report. Some of the
forward-looking statements relate to our intent, belief or expectations
regarding our strategies and plans for operations and growth. Other
forward-looking statements relate to trends affecting our financial condition
and results of operations and our anticipated capital needs and expenditures.
These statements involve risks, uncertainties and assumptions, including
industry and economic conditions, competition and other factors discussed in
this and our other filings with the SEC. These forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
actual results may differ materially from those that are anticipated in the
forward-looking statements. Other forward-looking statements relate to trends
affecting our financial condition and results of operations and our anticipated
capital needs and expenditures. See Part II, Item 1A, Risk
Factors below, for a description of some of the important factors that may
affect actual outcomes.

For these
forward-looking statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You should not place undue reliance on the forward-looking
statements, which speak only as of the date of this report. All subsequent
written and oral forward-looking statements attributable to us or any person
acting on our behalf is expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

Overview

We provide a suite
of technology-based products and services that help community financial
institutions compete more effectively with larger regional and national
financial institutions. We believe that community financial institutions, which
have traditionally competed on personalized service, are facing increasing
challenges to improve their operating efficiencies and grow their customer base.
These challenges include:

| |  | growing   competition with larger national and regional banks;                                                                          
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                         
| |  | the   emergence of non-traditional competitors;                                                                                         
| |   |                                                                                                                                         
| |  | the   compression of margins on traditional products;                                                                                   
| |   |                                                                                                                                         
| |  | the convergence of financial products into a single institution; and                                                                    
| |   |                                                                                                                                         
| |  | legislative changes accelerating the need for financial institutions to offer a
wider range of products and services to their customers.

We believe that
these competitive pressures are particularly acute for community financial
institutions, which lack the substantial capital and specialized personnel to
address their technology needs internally. Our solutions enable our clients to
focus on their core competencies while we help them meet their product and
technology needs. We provide our solutions primarily on an outsourced basis.

The financial
technology industry is currently characterized by significant acquisition
activity, the introduction of new product and service offerings for financial
institutions and an increased emphasis on security of customer data. We believe
that these trends will result in greater opportunities for providers of
financial technology.

1



Historically, we
have generated our revenues primarily from participation fees, software licenses
fees, maintenance fees and insurance brokerage fees derived from
BusinessManager, our accounts receivable financing solution, and from fees
associated with our retail inventory management services product. For the
quarter ended March 31, 2006, we derived approximately 53.0% of our
consolidated revenues from BusinessManager and approximately 16.1% of our
consolidated revenues from retail inventory management services. We expect to
continue to generate a substantial portion of our revenues from these sources
during the remainder of 2006 and for some period thereafter. In recent years,
our revenues from BusinessManager and retail inventory management services have
declined from year-to-year, and this trend may continue. Partly as a result of
the performance of our BusinessManager and retail inventory management services
businesses, in December 2005 we broadened our focus to providing a suite of
solutions primarily to community financial institutions. We accomplished this
shift in strategy by acquiring:

| |  | Captiva, which added core data processing as well as image and item
processing;                              
| | - | -------------------------------------------------------------------------------------------------------------
| |   |                                                                                                              
| |  | P.T.C.,   which added teller automation systems; and                                                         
| |   |                                                                                                              
| |  | Goldleaf Technologies, which added ACH processing, remote capture processing,
and website design and hosting.

We paid
approximately $29.0 million for these acquisitions and our earlier
acquisition of KVI Capital in July 2005, and we recorded goodwill totaling
approximately $17.5 million.

In addition to these
acquisitions, we further implemented our strategy by adding several new members
to our management team who have significant industry experience, including Lynn
Boggs, our new chief executive officer. We now offer products and services to
over 2,500 community financial institutions, which gives us an opportunity to
cross-sell our full range of products and services across our client
base.

Revenues

We generate revenue
from three main sources:

| |  | financial   institution service fees;      
| | - | -------------------------------------------
| |   |                                            
| |  | retail   inventory management services; and
| |   |                                            
| |  | other   products and services.             

Financial
Institution Service Fees

Financial
institution service fees include:

| |  | participation fees and insurance brokerage fees;        
| | - | --------------------------------------------------------
| |   |                                                         
| |  | core data   processing and image processing fees;       
| |   |                                                         
| |  | software   license and maintenance fees;                
| |   |                                                         
| |  | ACH   origination and processing fees;                  
| |   |                                                         
| |  | remote   capture and deposit processing fees;           
| |   |                                                         
| |  | leasing   revenues; and                                 
| |   |                                                         
| |  | financial   institution website design and hosting fees.

Participation
Fees, Insurance Brokerage Fees and Maintenance Fees from Our Accounts Receivable
Financing Solution. We derive revenue from two types of participation fees.
First, we earn a fee during the first 30 days after a client financial
institution implements our solution and purchases accounts receivable from its
small business customers. Second, we earn an ongoing participation fee from
subsequent purchases of accounts receivable by the client. Both types of fees
are based on a percentage of the accounts receivable that the client purchases
during each month, with the second type of fee being a smaller percentage of the
accounts receivable purchased.

Insurance brokerage
fees are derived from the sale of credit and fraud insurance products issued by
a third-party national insurance company. We earn fees based on a percentage of
the premium paid to the insurance company. We recognize these commission
revenues when our financial institution clients purchase the accounts receivable
covered by credit and fraud insurance policies.

Core Data
Processing and Image Processing Fees. We generate support and service fees
from implementation services, from ongoing support services to assist the client
in operating the systems and to enhance and update the software and from
providing outsourced core data processing services. We derive revenues from
outsourced item and core data processing services from monthly usage fees,
typically under multi-year contracts with our clients.

2



Software License
and Maintenance Fees. We derive software license fees from the sale of
software associated with our accounts receivable financing solutions and our
core data processing solution. Software license fees for our accounts receivable
financing solutions consist of two components: a license fee and a client
training and support fee. We receive these one-time fees on the initial
licensing of our program to a client financial institution. Our license
agreements have terms ranging from three to five years and are renewable for
subsequent terms. We generate annual software maintenance fees from our client
financial institutions starting on the first anniversary of the BusinessManager
license agreement and annually thereafter. We license our core data processing
product under standard license agreements that typically provide the client with
a non-exclusive, non-transferable right to use the software. We generate annual
software maintenance fees from our client financial institutions starting on the
first anniversary of the core data processing license agreement and annually
thereafter.

ACH Origination
and Processing, Remote Capture and Deposit Processing Fees. We license
these products via up-front fees to financial institutions at the time of
execution of the agreements, which are typically five-year contracts. We defer
these up-front fees and recognize them ratably over the estimated lives of the
customer relationship. We also generate monthly fees from each originator of ACH
transactions, and we receive fees for each ACH transaction that occurs each
month. We offer annual maintenance support to all of our financial institution
clients for a fee that is generally equal to 20% of the up-front
fees.

Leasing
Revenues. Subsequent to our acquisition of KVI Capital in August 2005, we
began to offer equipment leasing services to some of our clients. We have no
credit risk exposure for these leases. Our leases fall into two categories:
direct financing leases and operating leases. For direct financing leases, the
investment in direct financing leases caption consists of the sum of the minimum
lease payments due during the remaining term of the lease and unguaranteed
residual value of the leased asset. We record the difference between this sum
and the cost of the leased asset as unearned income. We amortize unearned income
over the lease term so as to produce a constant periodic rate of return on the
net investment in the lease. For leases classified as operating leases, we
record the leased asset at cost and depreciate the leased asset. We record lease
payments as rent income during the period earned.

Financial
Institution Website Design and Hosting Fees. We offer website design and
hosting services to financial institutions, although we do not host any
confidential bank data on our servers. The revenues we generate for these
services consist of up-front fees associated with the design and implementation
of each website and monthly hosting fees for hosting each website in our data
center.

Retail
Inventory Management Services

We generate retail
inventory management services revenue from fees we charge primarily for
providing inventory merchandising and forecasting information for specialty
retail stores and ancillary services related to these products. We use
proprietary software to process sales and inventory transactions and provide the
merchandising forecasting information.

Other Products
and Services

We generate revenues
from charges for our Free Checking direct mail program, sales of standard
business forms used in our BusinessManager program and statement rendering and
mailing.

Historically, we
have derived substantially all of our revenues from fees associated with our
accounts receivable financing solutions and retail inventory management
services. While we believe that our recent acquisitions and product
diversification will enable us to derive revenues from a broader mix of products
and services, we anticipate that revenues derived from our accounts receivable
solutions and inventory management services will continue to account for a
substantial portion of our revenues in 2006 and for a period
thereafter.

3



Results of Operations

The following table
provides, for the periods indicated, the percentage relationship of the
identified consolidated statement of operations items to total
revenues.

|                                      |  | Three   Months   Ended March 31, |      
|------------------------------------- |  | -------------------------------- | -----
|                                      |  |                                  |      
|                                      |  | 2005                             |      
|                                      |  |                                  |      
|Revenues:                             |  |                                  |      
|Financial institution service fees    |  |                                  | 75.7 
|Retail inventory management services  |  |                                  | 23.9 
|Other products and services           |  |                                  | 0.4  
|                                      |  |                                  |      
|Total revenues                        |  |                                  | 100.0
|Cost of   revenues:                   |  |                                  |      
|Financial institution service fees    |  |                                  | 5.9  
|Retail inventory management services  |  |                                  | 3.1  
|                                      |  |                                  |      
|Gross profit                          |  |                                  | 91.0 
|Operating   expenses:                 |  |                                  |      
|General and administrative            |  |                                  | 34.4 
|Selling and marketing                 |  |                                  | 47.5 
|Research and development              |  |                                  | 0.7  
|Amortization                          |  |                                  | 0.9  
|Other operating (income) expense, net |  |                                  | 0.0  
|                                      |  |                                  |      
|Total operating expenses              |  |                                  | 83.5 
|                                      |  |                                  |      
|Operating   income                    |  |                                  | 7.5  
|Interest   expense, net               |  |                                  | (0.8 
|Other income                          |  |                                  | 0.0  
|                                      |  |                                  |      
|Income   (loss) before income taxes   |  |                                  | 6.7  
|Income tax   provision (benefit)      |  |                                  | 2.7  
|                                      |  |                                  |      
|Net income   (loss)                   |  |                                  | 4.0  
|                                      |  |                                  |      

Historically, we
have reported our results of operations using the following line items:
participation fees; software license; retail inventory management services;
insurance brokerage fees; and maintenance and other. Due to our recent
acquisitions, we believe that the presentation set forth above, using line items
for financial institution service fees, retail inventory management services and
other products and services, will be more useful to an understanding of our
operations. Therefore, we intend to present our consolidated statement of
operations as set forth above on an ongoing basis.

Three
Months Ended March 31, 2006 Compared to Three Months Ended March 31,
2005

Total revenues for
the first quarter of 2006 increased 41.7% to $13.0 million compared to
$9.2 million for the comparable period of 2005.

Financial
Institution Service Fees. Financial institution service fees increased 46.8%
to $10.2 million for the three months ended March 31, 2006 compared to
$7.0 million for the three months ended March 31, 2005. The increase
is primarily attributable to revenues generated by the entities we acquired
during late 2005 and early 2006: KVI Capital, Captiva, P.T.C. and Goldleaf
Technologies. Revenues from these acquired businesses totaled $2.8 million
for the first quarter of 2006. The remaining increase relates to an increase in
customer deconversion fees and increases in Free Checking and MedCash Manager
revenues totaling approximately $288,000. As a percentage of total revenues,
financial institution service fees accounted for 78.4% for the three months
ended March 31, 2006 compared to 75.7% for the three months ended
March 31, 2005.

Retail Inventory
Management Services. Retail inventory management services revenues declined
4.9% to $2.1 million during the three months ended March 31, 2006 as
compared to $2.2 million for the three months ended March 31, 2005.
The decline is due to a reduction in point-of-sale support customers and a
decline in billing services provided by RMSA to its customers. As a percentage
of total revenues, retail inventory management services accounted for 16.1% for
the first quarter of 2006 compared to 23.9% in the first quarter of
2005.

4



Other Products
and Services. Revenues from other products and services increased
substantially to $722,000 for the three months ended March 31, 2006
compared to $37,000 for the three months ended March 31, 2005. Other
products and services include the sale of premium gifts associated with our Free
Checking product, and equipment sales associated with our remote capture and ACH
products. Approximately $685,000 of the increase is attributable to Free
Checking gifts totaling $333,000 and remote capture equipment sales totaling
$285,000. Revenues from other products and services accounted for 5.5% of total
revenues for the three months ended March 31, 2006 compared to 0.4% for the
three months ended March 31, 2005.

Cost of
Revenues  financial institution service fees. Cost of revenues
for financial institution services fees increased to $2.0 million for the
three months ended March 31, 2006 compared to $544,000 for the three months
ended March 31, 2005. This increase is primarily due to cost of sales of
$164,000, $154,000 and $777,000 associated with KVI Capital, Captiva and
Goldleaf Technologies, respectively. The remaining increase relates to increases
in Free Checking expenses of $287,000 and MedCash expenses of $99,000. As sales
of these products have increased in the first quarter of 2006, the costs
associated with these products have also increased. There were minimal costs
associated with these products during the first quarter of 2005. As a percentage
of total revenues, cost of sales for financial institution service fees
increased to 15.4% for the three months ended March 31, 2006 compared to
5.9% for the three months ended March 31, 2005.

Cost of
Revenues  retail inventory management services. Cost of revenues
related to retail inventory management services decreased 13.9% to $247,000 for
the three months ended March 31, 2006 compared to $287,000 for the three
months ended March 31, 2005. This decrease is due to a decline in salaries
and benefits expense related to our point-of-sale customer support department.
As a percentage of total revenues, cost of sales for retail inventory management
services decreased to 1.9% for the three months ended March 31, 2006
compared to 3.1% for the three months ended March 31, 2005.

General and
Administrative. General and administrative expenses increased 51.1% to
$4.8 million for the three months ended March 31, 2006 compared to
$3.2 million for the three months ended March 31, 2005. General and
administrative expenses include the cost of our executive, finance, human
resources, information and support services, administrative functions and
general operations. The increase is primarily due to the additional general and
administrative expenses of $526,000 and $642,000 associated with Goldleaf
Technologies and Captiva, respectively. The majority of these expenses are
salary and benefits for the non-sales employees of these entities. Also expensed
in the first quarter of 2006 is approximately $160,000 of non-cash stock
compensation expense as a result of our adoption of SFAS No. 123R,
which requires the estimated fair value of employee stock options to be expensed
over the service period. Additionally, $55,000 of audit fees related to the
required acquisition audit of Goldleaf Technologies were expensed during the
three months ended March 31, 2006. As a percentage of total revenue, general and
administrative expenses increased to 36.7% for the three months ended
March 31, 2006 compared to 34.4% for the three months ended March 31,
2005.

Selling and
Marketing. Selling and marketing expenses increased 12.9% to
$4.9 million for the three months ended March 31, 2006 compared to
$4.4 million for the three months ended March 31, 2005. Selling and
marketing expenses include cost of wages and commissions paid to our sales
force, travel costs of the sales force, recruiting for new sales and marketing
personnel and marketing fees associated with direct and telemarketing programs.
Selling and marketing expenses also include the cost of processing fees paid to
third parties related to the delivery of certain products and services. The
increase was primarily due to the acquisition of Goldleaf Technologies, which
contributed approximately $555,000 to this category. As a percentage of total
revenue, selling and marketing expenses were 37.8% and 47.5% for the three
months ended March 31, 2006 and March 31, 2005,
respectively.

Research and
Development. Research and development expenses increased to $131,000 for the
three months ended March 31, 2006 compared to $65,000 for the three months
ended March 31, 2005. Research and development expenses include the
non-capitalizable direct costs associated with developing new versions of our
software, as well as other software development projects that, in accordance
with GAAP, we do not capitalize. The increase was primarily due to research and
development activities for our remote capture and ACH products. These costs
totaled approximately $90,000 during the three months ended March 31, 2006.
As a percentage of total revenues, research and development expenses increased
to 1.0% for the three months ended March 31, 2006 compared to 0.7% for the
three months ended March 31, 2005.

Amortization.
Amortization expense increased to $463,000 for the three months ended
March 31, 2006 compared to $81,000 for the three months ended
March 31, 2005. These expenses include the cost of amortizing intangible
assets, including trademarks and software development costs, as well as
identified intangibles recorded from our August 2001 merger with Towne Services
and our acquisitions. The increase for the first three months of 2006 is due to
the acquisitions of KVI Capital, Captiva, P.T.C. and Goldleaf Technologies
during late 2005 and early 2006. The identifiable intangible assets recorded in
these acquisitions resulted in an increase of approximately $381,000 in total
amortization expense for the three months ended March 31, 2006.

Other Operating
(Income) Expense, Net. Other operating (income) expense, net for the three
months ended March 31, 2006 totaled $109,000. We had no other operating
expenses for the three months ended March 31, 2005. For the three months
ended March 31, 2006, other operating expenses included an approximate
$112,000 charge related to the write-off of debt issuance costs associated with
the debt facility before it was amended and restated in its entirety on
January 23, 2006.

5



Operating
Income. As a result of the above factors, our operating income decreased
47.8% to $362,000 for the three months ended March 31, 2006, compared to
operating income of $693,000 for the three months ended March 31, 2005. As
a percentage of total revenue, operating income was 3.2% for the three months
ended March 31, 2005.

Interest Expense,
Net. Interest expense, net increased to $655,000 for the three months ended
March 31, 2006 compared to $70,000 for the three months ended
March 31, 2005. The increase for the first three months of 2006 is
primarily due to a large increase in our total debt outstanding for the first
quarter of 2006 as compared to the first quarter of 2005. Our average debt
outstanding in the first quarter of 2006 was approximately $28.0 million
compared to approximately $3.4 million for the first quarter of 2005.
Interest rates have also increased from 2005 to 2006. Included in interest
expense during the first quarter of 2006 is the amortization of the debt
discount associated with our Series C preferred stock. For the first
quarter ended March 31, 2006 and 2005, interest expense includes
approximately $89,000 and $24,000 of debt issuance cost amortization,
respectively.

Income Tax
Provision (Benefit). We had an income tax benefit of approximately $112,000
for the three months ended March 31, 2006 compared to a provision of
$244,000 for the three months ended March 31, 2005. We expect our effective
tax rate to be approximately 39% in all future periods. As a percentage of
income before taxes, the income tax rate was approximately 39% for the first
quarter of 2006.

Critical Accounting Policies

Management has based
this discussion and analysis of financial condition and results of operations on
our consolidated financial statements. The preparation of these consolidated
financial statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the dates of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Management evaluates its critical accounting
policies and estimates on a periodic basis.

A critical
accounting policy is one that is both important to the understanding of
the companys financial condition and results of operations and requires
managements most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. Management believes the following accounting policies fit
this definition:

Revenue
Recognition

We recognize revenue
in accordance with SEC Staff Accounting Bulletin No. 104 and other related
generally accepted accounting principles. We recognize revenue when all of the
following conditions are satisfied: (1) there is persuasive evidence of an
arrangement; (2) the service has been provided to the customer;
(3) the amount of fees to be paid by the customer is fixed or determinable;
and (4) the collection of our fees is probable.

Financial
institution service fees. We earn two types of participation fees. Both
types of fees are based on a percentage of the receivables that a client
financial institution purchases from its small business customers during each
month. Participation fees are recognized as earned, which is based upon the
transaction dates of financial institution purchases from its small business
customers.

We recognize
insurance brokerage fee revenues when our financial institution clients purchase
the accounts receivable covered by credit and fraud insurance policies and earn
our fees based on a percentage of the premium paid to the insurance
company.

We generate
maintenance fees and other revenues from several ancillary products and services
that we provide to our client financial institutions ratably over a 12-month
period beginning on the first anniversary of the agreement with our
client.

For customers that
install our core data processing system at their location, we recognize revenues
from the installation and training for the system as we provide the installation
and training services. In addition, we charge an annual software maintenance
fee, which we recognize ratably over the year to which it relates.

We recognize core
data processing and image processing fees as we perform services for our
clients. We also generate revenues from the licensing of our core data
processing systems. We recognize revenue for licensing these systems in
accordance with Statement of Position 97-2, Software Revenue
Recognition. We recognize the software license after we have signed a
non-cancelable license agreement, have installed the products and have fulfilled
all significant obligations to the client under the agreement.

Our acquisition of
Goldleaf Technologies added three primary products from which we earn revenues:
ACH origination and processing; remote deposit; and website design and hosting.
We describe the current revenue recognition policies for these products
below.

6



We account for the
ACH and remote deposit products in accordance with the Financial Accounting
Standards Boards Emerging Issues Task Force (EITF)
No. 00-21,Revenue Arrangements with Multiple
Deliverables.  We license these products under automatically renewing
agreements, which allow our customers to use the software for the term of the
agreement, typically five years, and each renewal period. Typically, there is an
up-front fee, an annual or monthly maintenance fee for each year of the
contract, and per transaction fees for processing of ACH and remote deposit
transactions. We also offer training services on a per training day basis if the
customer requests training. Because we have not established sufficient evidence
of stand-alone value of the distinct elements of the arrangement, for the
periods presented in the accompanying financial statements we have deferred the
up-front fees and are amortizing them to revenue over the estimated life of the
customer relationship. We have estimated the lives of the customer relationship
at six years for the ACH revenue stream and five years for the remote deposit
revenue stream. The annual maintenance fee covers telephone support and all
unspecified software enhancements and upgrades. We defer annual maintenance fees
and recognize them into income over the one-year life of the maintenance
agreement. We recognize monthly maintenance fees on a monthly basis as earned
and recognize transaction fees monthly as the transactions occur. We recognize
training revenue when we deliver the training, based on the fair value of the
training services when delivered separately.

We offer financial
institution website design services as well as hosting services for the website
once design is complete. We charge an up-front fee for the design services and a
monthly website hosting fee each month of the contract, which is typically five
years. The monthly hosting fee typically includes a limited amount of website
maintenance hours each month. We bill for any maintenance work exceeding the
designated number of hours included in the monthly hosting fee at an agreed-to
hourly rate as the services are rendered. We account for the website design and
hosting services in accordance with EITF No. 00-21. Because we have not
established objective and reliable evidence of fair value of the undelivered
elementsthe hosting and maintenance serviceswe have deferred the
up-front design fees and amortize them to revenue over the estimated life of the
customer relationship. We have estimated the lives of the customer relationship
at five years for the periods presented in the accompanying financial
statements. We recognize monthly hosting and maintenance revenues on a monthly
basis as earned.

Software license
fees for our accounts receivable financing solution consist of two components: a
license fee and a client training and support fee. We receive these one-time
fees on the initial licensing of our program to a client financial institution.
Some agreements contain performance or deferred payment terms that must be met
for us to receive payment and recognize revenue. We recognize revenues from the
license fee once we have met the terms of the client agreement. We recognize the
client training and support fee ratably over a four-month service period after
activation of the license agreement.

Revenue recognition
rules for up-front fees are complex and require interpretation and judgment on
the part of management. Each of our products containing software elements,
including core data processing, ACH processing, remote capture processing,
accounts receivable financing and teller automation systems, requires the
establishment of vendor specific objective evidence, or VSOE, for each element
of the arrangement. Determining each element of an agreement and establishing
VSOE can be complex. If we modify our contract terms to an extent that changes
our VSOE conclusions, our revenue recognition practices could be materially
affected. Management completed a thorough analysis of the new client licenses
for accounts receivable financing we obtained in 2003 and 2004 and concluded
that we completed all services related to the up-front fees in approximately
four months. As a result, effective January 1, 2005, we changed the
estimated service period for recognition of the up-front license fee from a
twelve-month to a four-month revenue recognition period. This change in
assumptions resulted in an increase of approximately $115,000 in financial
institution service fees during the quarter ended March 31, 2005 and
increased financial institution service fees by $130,000 for the year ended
December 31, 2005. We believe that this practice most accurately portrays
the economic reality of the transactions.

We recognize leasing
revenues for both direct financing and operating leases. For direct financing
leases, the investment in direct financing leases caption consists of the sum of
the minimum lease payments due during the remaining term of the lease and
unguaranteed residual value of the leased asset. We record the difference
between the total above and the cost of the leased asset as unearned income. We
amortize unearned income over the lease term so as to produce a constant
periodic rate of return on the net investment in the lease. There is a
significant amount of judgment involved in estimated residual values of leased
assets at the inception of each lease. Management bases these estimates
primarily on historical experience; however, changes in the economy or product
obsolescence could adversely affect the residual values actually obtainable. We
monitor residual values quarterly to re-assess the recorded amounts. In the
event our assumptions change regarding the amounts expected to be realized, we
could incur substantial losses related to leased assets. For leases classified
as operating leases, we record the leased asset at cost and depreciate the
leased asset. We record lease payments as rent income during the period
earned.

Retail
Inventory Management Services

We recognize
revenues for our retail inventory management services as the transactions occur
and as we perform merchandising and forecasting services.

7



Other
Products and Services

Revenues from other
products and services consist of revenues from Free Checking, our direct mail
program, and revenues from the sale of business forms. We record revenues from
our Free Checking direct mail campaign as the customer of our client financial
institution opens a checking account and receives a premium gift. We also
receive a fee for each month that the checking account remains open through the
third anniversary of the date that the customer opened the account. We recognize
this revenue each month. We recognize revenues related to the business forms we
sell in the period that we ship them to the client financial
institution.

Software
Development Costs

We expense software
development costs incurred in the research and development of new software
products and enhancements to existing software products as we incur those
expenses until technological feasibility has been established. After that point,
we capitalize any additional costs in accordance with Statement of Financial
Accounting Standards SFAS No. 86,Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed.  In
addition, we capitalize the cost of internally used software when application
development begins in accordance with AICPA SOP No. 98-1,Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use, which
is generally the point when we have completed research and development, we have
established project feasibility, and management has approved a development plan.
Many of the costs capitalized for internally used software relate to upgrades or
enhancements of existing systems. If the development costs will result in
specific additional functionality of the existing system, we capitalize these
costs at the point that application development begins. We amortize capitalized
software development costs on a straight-line basis over their useful lives,
generally three years. The key assumptions and estimates for this accounting
policy relate to determining when we have achieved technological feasibility and
whether the project being undertaken is one that will be marketable or enhance
the marketability of an existing product for externally marketed software and
whether the project will result in additional functionality for internal use
software projects. Management consults monthly with all project managers to
ensure that management understands the scope and expected results of each
project to make a judgment on whether a particular project meets the
requirements outlined in the authoritative accounting literature described
above. There have been no significant changes in the critical assumptions
affecting software development costs during any of the reporting periods
presented in this quarterly report.

Income
Taxes

We account for
income taxes in accordance with SFAS No. 109,Accounting for Income
Taxes. SFAS No. 109 requires the asset and liability method,
meaning that deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the fiscal years in which those temporary
differences are expected to be recovered or settled. We evaluate our ability to
realize the deferred tax assets based on an assessment of the likelihood that we
will have sufficient taxable income in future years to realize the recorded
deferred tax assets. Deferred taxes for us primarily relate to NOLs, which
require considerable judgment regarding whether we will ultimately realize them.
For us, this judgment relies largely on whether we expect to have sufficient
taxable income in future years that will allow for full use of the NOLs we
record. The other key assumption affecting the amount of NOLs we record as a
deferred tax asset is the estimated restriction in usage due to Section 382
of the Internal Revenue Code. Section 382 is very complex, requiring
significant expertise and professional judgment to properly evaluate its effect
on our usable NOLs. We use an independent public accounting firm to assist with
this evaluation and believe that we have appropriately considered the
limitations required by Section 382 in arriving at the deferred tax asset
for NOLs. If our assumptions change, we could have significant increases in
income tax expense and reductions in deferred tax assets and operating cash
flows.

Fair
Value of Assets Acquired and Liabilities Assumed in Business
Combinations

Our business
combinations require us to estimate the fair value of the assets acquired and
liabilities assumed in accordance with SFAS No. 141,Accounting for
the Impairment or Disposal of Long-Lived Assets. In general, we determine
the fair values based upon information supplied by the management of the
acquired entities, which information we substantiate, and valuations using
standard valuation techniques. The valuations have been based primarily on
future cash flow projections for the acquired assets, discounted to present
value using a risk-adjusted discount rate. These future cash flow projections
are highly subjective, and changes in these projections could materially affect
the amounts calculated for intangible assets. In connection with our
acquisitions, we have recorded a significant amount of intangible assets. We are
amortizing these assets over their expected economic lives, generally ranging
from three to ten years.

8



Long-Lived
Assets, Intangible Assets and Goodwill

We assess the
impairment of identifiable intangibles and long-lived assets whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. Impairment is measured as the amount by which the carrying value of
the intangible asset exceeds its fair value. Factors we consider important that
could trigger an impairment review include the following:

| |  | significant underperformance relative to expected historical or projected future
operating results,              
| | - | -----------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                  
| |  | significant changes in the manner of our use of the acquired assets or the
strategy for our overall business, and
| |   |                                                                                                                  
| |  | significant   negative industry or economic trends.                                                              

We also perform an
annual impairment test of goodwill at December 31. We assess potential
impairment through a comparison of the fair value of each reporting unit versus
its carrying value. The estimated fair value of goodwill and intangible assets
is based on a number of factors including past operating results, budgets,
economic projections, market trends, product development cycles and estimated
future cash flows. Changes in these assumptions and estimates could cause a
material effect on our financial statements.

Liquidity and Capital Resources

The following table
sets forth the elements of our cash flow statement for the following
periods:

|                                                      |  | Three   Months Ended   March 31, |     
|----------------------------------------------------- |  | -------------------------------- | ----
|                                                      |  |                                  |     
|                                                      |  | 2005                             |     
|                                                      |  |                                  |     
|Net cash   provided by operating activities           |  | $                                | 408 
|Net cash   used in investing activities               |  |                                  | (219
|Net cash   provided by (used in) financing activities |  |                                  | (189

Cash
from Operating Activities

Cash provided by
operations for the quarter ended March 31, 2006 totaling $2.1 million
was attributable to our operating results plus non-cash depreciation and
amortization expense of $966,000 as well as a $1.1 million net increase in
working capital. The increase in working capital of $1.1 million was due
primarily to an increase in accounts payable of $581,000 and an increase in
deferred revenue of $570,000 during the quarter. For the quarter ended
March 31, 2005, cash provided by operations totaled $408,000. The increase
of $1.7 million in the first quarter of 2006 as compared to the first
quarter of 2005 is due primarily to an increase in working capital assets as of
March 31, 2006 of $1.1 million versus a decline of $724,000 in the
first quarter of 2005.

Cash
from Investing Activities

Cash used in
investing activities totaling $17.0 million consisted primarily of business
acquisitions, lease receivable payments, purchases of fixed assets and
capitalization of software development costs. Total capital expenditures,
including software development costs, totaled $676,000 for the quarter ended
March 31, 2006. Theses expenditures primarily related to the purchase of
computer equipment, computer software, software development services, furniture
and fixtures, and leasehold improvements. During the first quarter of 2006, we
used approximately $17.4 million to acquire the stock of Goldleaf
Technologies and operating assets of P.T.C. These leases were partially offset
by $993,000 in proceeds we received from payments on our direct finance leases.
As compared to the first quarter of 2005, total cash used in investing
activities was $219,000 consisting solely of purchases of fixed assets and
capitalization of software development costs.

Cash
from Financing Activities

Cash from financing
activities primarily relates to borrowings (paydowns) on our credit facilities,
the payment of preferred dividends, inflows from the sale of preferred stock and
new debt issuances. During the first quarter of 2006, net cash provided by
financing activities was $16.1 million and was attributable primarily to
new borrowings of $17.1 million from our amended and restated credit
facility with Bank of America, net of $355,000 in debt issuance costs. For the
first quarter of 2005, cash used in financing activities totaled $189,000,
consisting of debt repayments of $416,000, and preferred dividend payments of
$540,000, partially offset by $400,000 of proceeds from our line of credit and
$358,000 in proceeds from stock option exercises.

9



Analysis
of Changes in Working Capital

As of March 31,
2006, we had a working capital deficit of approximately $10.7 million
compared to working capital of approximately $2.2 million as of
December 31, 2005. The change in working capital resulted primarily from
the short-term nature of the Term B debt instrument and the current portion
of our long-term debt, as well as increases in accounts payable of
$1.3 million, accrued liabilities of $1.1 million and deferred revenue
of $2.5 million. These increases were partially offset by increases in cash
of $1.2 million and accounts receivable of $539,000. All of these changes
were primarily the result of completing the Goldleaf Technologies acquisition on
January 31, 2006.

We believe that the
existing cash available, future operating cash flows and our amended and
restated credit facility will be sufficient to meet our working capital, debt
service and capital expenditure requirements for the next twelve months.
Furthermore, we expect to be in compliance with the financial covenants of our
new credit facility throughout 2006. There can be no assurance that we will have
sufficient cash flows to meet our obligations or that we will remain in
compliance with the new covenants. Non-compliance with these covenants could
have a material adverse effect on our operating and financial
results.

Obligations
and Commitments for Future Payments as of March 31, 2006

The following is a
schedule of our obligations and commitments for future payments as of
March 31, 2006:

|                                       |  |                  |        |                      | Payments Due by Period |            
|-------------------------------------- |  | ---------------- | ------ | -------------------- | ---------------------- | -----------
|                                       |  |                  |        |                      |                        |            
|Contractual   Obligations              |  | Total            |        | Less   Than   1 Year |                        | 1-2   Years
|                                       |  |                  |        |                      |                        |            
|                                       |  | (In   thousands) |       
|Revolving   line of credit             |  | $                | 1,600  |                      | $                      |           
|Short-term   debt                      |  |                  | 6,000  |                      |                        | 6,000      
|Capital   lease obligations(1)         |  |                  | 1,515  |                      |                        | 258        
|Long-term   debt(2)                    |  |                  | 9,750  |                      |                        | 2,000      
|Operating   leases                     |  |                  | 8,063  |                      |                        | 2,278      
|Note payable                           |  |                  | 1,000  |                      |                        | 850        
|Series C   redeemable preferred stock  |  |                  | 10,000 |                      |                        |           
|                                       |  |                  |        |                      |                        |            
|Total   contractual cash obligations   |  | $                | 37,928 |                      | $                      | 11,386     
|                                       |  |                  |        |                      |                        |            
|Standby   letters of credit commitment |  | $                | 400    |                      | $                      | 400        
|                                       |  |                  |        |                      |                        |            

|   
|---
|(1)
|   
|(2)

In the future, we
may acquire businesses or products that are complementary to our business,
although we cannot be certain that we will make any acquisitions. The need for
cash to finance additional working capital or to make acquisitions may cause us
to seek additional equity or debt financing. We cannot be certain that financing
will be available on terms acceptable to us or at all, or that our need for
higher levels of working capital will not have a material adverse effect on our
business, financial condition or results of operations.

10



Debt
Outstanding as of March 31, 2006

As of March 31,
2006, we have debt in the amounts and as described in the following table (with
dollars in thousands):

|Long-term   debt(1):                                                                                                      |  |   |       |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------- |  | - | ----- |  | - | ------ | 
|Secured Bank of America term loan due January 23, 2008, with installment
payments due before that date                    |  | $ | 7,750 |  |   |        | 
|Revolving line of credit (Bank of America) due January 23, 2008                                                           |  |   | 1,600 |  |   |        | 
|Capital lease obligations                                                                                                 |  |   | 1,257 |  |   |        | 
|Unsecured note to executive officer Paul McCulloch, for portion of signing
bonus, due April 30, 2007                      |  |   | 150   |  |   |        | 
|Redeemable Series C preferred stock, net of discount of $1,416                                                            |  |   | 8,584 |  |   |        | 
|                                                                                                                          |  |   |       |  |   |        | 
|Total long-term debt                                                                                                      |  |   |       |  | $ | 19,341 | 
|                                                                                                                          |  |   |       |  |   |        | 
|Short-term   debt(1):                                                                                                     |  |   |       |  |   |        | 
|Bank of America facility term loan due July 23, 2006                                                                      |  | $ | 6,000 |  |   |        | 
|Current portion of Secured Bank of America term loan due January 23, 2008,
with installment payments due before that date |  |   | 2,000 |  |   |        | 
|Current portion of capital lease obligations                                                                              |  |   | 258   |  |   |        | 
|Unsecured note to executive officer Paul McCulloch, for portion of signing
bonus, due June 15, 2006                       |  |   | 850   |  |   |        | 
|                                                                                                                          |  |   |       |  |   |        | 
|Total short-term debt                                                                                                     |  |   |       |  | $ | 9,108  | 
|                                                                                                                          |  |   |       |  |   |        | 
|Total debt                                                                                                                |  |   |       |  | $ | 28,449 | 
|                                                                                                                          |  |   |       |  |   |        | 

|   
|---
|(1)

In connection with
our acquisition of Goldleaf Technologies on January 31, 2006, we assumed
certain capital lease obligations of Goldleaf Technologies. The capital leases
are primarily for computer hardware equipment at Goldleaf Technologies
data centers. For a more detailed description of the capital lease obligations,
please refer to note 6 of the notes to consolidated financial statements of
Goldleaf Technologies, Inc. included in the financial statements in this
quarterly report.

On April 5,
2006, we borrowed an additional $1.75 million under our credit facility,
which increased our cash by the same amount. As of April 21, 2006, we have
approximately $2.2 million of cash and cash equivalents, and we have
borrowed $19.1 million under the Bank of America facility. The above
description of our debt does not include the Series C preferred stock,
which is classified as redeemable preferred stock because we are obligated to
redeem it on December 9, 2010 for $10.0 million plus any accrued and
unpaid dividends.

Historical
Uses of Debt

As described below,
we have used the proceeds from borrowings for several purposes since January
2004. We entered into an $11.0 million credit facility with Bank of America
in January 2004 in conjunction with our sale of Series A preferred stock
and common stock warrants to Lightyear for net proceeds of $16.9 million.
We used the proceeds of the Bank of America facility for general corporate
purposes, including working capital.

In December 2005, in
connection with our acquisition of Captiva, we amended the Bank of America
credit facility to convert it to a $5.0 million revolving line of credit,
and we issued a $10.0 million unsecured senior subordinated note and common
stock warrants to Lightyear. We paid Lightyear a fee of $250,000 in connection
with this transaction and agreed to reimburse Lightyear for its legal fees up to
$100,000. As of December 31, 2005, no amount was outstanding under the Bank
of America credit facility. We were in compliance with all restrictive financial
and non-financial covenants contained in the Bank of America credit facility
throughout 2005.

On January 23,
2006, we entered into an amended and restated $18.0 million credit facility
with Bank of America. We used the proceeds of the facility on January 31,
2006 to buy Goldleaf Technologies. Simultaneously with the acquisition, we also
structured a signing bonus to Mr. McCulloch, then Goldleaf
Technologies chief executive officer, to include notes totaling
$1.0 million as described above.

11



Our Bank of America
credit facility contains financial covenants, including the maintenance of
financial ratios and limits on capital expenditures. We are required to maintain
on a quarterly basis a ratio of Funded Debt, as defined and generally including
all liabilities for borrowed money, to EBITDA. The definition of EBITDA in the
credit facility agreement is different from the one used elsewhere in this
quarterly report in that it permits to be added back to EBITDA various specified
amounts that include employee severance expenses, non-cash debt amortization
expenses, costs associated with the change of our corporate name, certain
litigation expenses and non-cash stock compensation expenses. We are required to
maintain on a quarterly basis a ratio of Funded Debt to EBITDA not exceeding 2:1
until the earlier of the sale of a specified subsidiary or the earlier of
July 23, 2006 or the repayment of the $6,000,000 term loan that is part of
the credit facility. Thereafter, we must maintain on a quarterly basis a ratio
of Funded Debt to EBITDA not exceeding 1.75:1. This ratio is calculated
(a) at the end of each fiscal quarter, using the results of the
twelve-month period ending with that fiscal quarter and after giving pro forma
effect to any acquisition made during such period and (b) on the date of
any borrowing under the credit facility, using EBITDA for the most recent period
and Funded Debt after giving pro forma effect to such borrowing. We are also
required to maintain for the 12-calendar month period ending on the last day of
each calendar quarter, a Fixed Charge Coverage Ratio (as defined) of: 1.75:1
through June 30, 2006; 1.50:1 through September 30, 2006; 1.30:1
through December 31, 2006; and 1.60:1 thereafter. In addition, we may not
acquire fixed assets (other than any equipment purchased by KVI Capital with
proceeds of non-recourse loans) having a value greater than $2.5 million
during any 12-month period ending with each fiscal quarter. The credit agreement
also contains customary negative covenants, including but not limited to a
prohibition on declaring and paying any cash dividends on any class of
stock.

In connection with
the January 2006 amendment and restatement of the Bank of America credit
facility:

| |  | The Lightyear Fund, L.P., an affiliate of Lightyear, guaranteed a
$6.0 million term loan included in the facility that is due July 23,
2006 and we agreed to pay a fee of $45,000 to The Lightyear Fund, L.P. and to
reimburse the Lightyear Fund, L.P. for up to $50,000 of its expenses in
connection with this guaranty;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                            
| |  | Lightyear exchanged its senior subordinated $10.0 million note for
10,000 shares of our Series C preferred stock, which decreased our
debt by $10.0 million but added that same amount in redeemable preferred
stock; and                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                            
| |  | we amended and restated the common stock warrants that we issued to Lightyear in
December 2005 in connection with the Lightyear note.                                                                                                                                                                                      

The Series C
preferred stock issued to Lightyear has a mandatory redemption date of
December 9, 2010 at a redemption price of $10.0 million plus accrued
and unpaid dividends, and has a 10% annual dividend rate that increases to 12%
on June 9, 2007.

We subsequently
amended the Bank of America credit facility again in April 2006 to provide for
an additional $1.75 million in short-term loans. The facility currently
provides for a total of $19.75 million in loans.

Off-Balance Sheet Arrangements

As of
December 31, 2005 and as of the date of this amended report, we did not
have and do not have any off-balance sheet arrangements as defined by
Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

In December 2004,
the FASB issued SFAS No. 123 (Revised 2004)Share-Based
Payment, or SFAS No. 123R. SFAS No. 123R replaces
SFAS No. 123 and supersedes Accounting Principles Board, or APB,
Opinion No. 25,Accounting for Stock Issued to Employees.
SFAS No. 123R became effective for us on January 1, 2006.
SFAS No. 123R requires us to recognize in our financial statements the
cost of employee services received in exchange for equity instruments awarded or
liabilities incurred. We will measure compensation cost using a fair-value based
method over the period that the employee provides service in exchange for the
award. We anticipate using the Black-Scholes option-pricing model to determine
the annual compensation cost related to share-based payments under
SFAS No. 123R. SFAS No. 123R also requires the benefits of
tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow as required under the
current rules. This requirement will reduce net operating cash flow and reduce
net financing cash outflow by offsetting and equal amounts.

As disclosed in
Note 2 to our audited consolidated financial statements included in this
quarterly report, based on the current assumptions and calculations used, had we
recognized compensation expense based on the fair value of awards of equity
instruments, net income would have increased by approximately $71,000 for the
year ended December 31, 2005. This compensation expense is the after-tax
net effect of the stock-based compensation expense determined using the
fair-value based method for all awards and stock-based employee compensation
included previously in reported net income under APB Opinion No. 25.
SFAS No. 123R will apply to all awards we grant or have granted after
January 1, 2006 and to the unvested portion of our existing option awards,
as well as modifications, repurchases or cancellations of our existing awards.
We estimate the impact of the adoption of SFAS No. 123R for the year
ending December 31, 2006, based upon the options outstanding as of
March 31, 2006, to result in an increase in compensation expense of
approximately $640,000. The actual effect of adopting SFAS No. 123R
will depend on future awards and actual option forfeitures, which are currently
unknown. The effect of future awards will vary depending on factors that include
the timing, amount and valuation methods used for those awards, and our past
awards are not necessarily indicative of our future awards.

12



Seasonality

Historically, we
have generally realized lower revenues and income in the first quarter and, to a
lesser extent, in the second quarter of each year. We believe that this seasonal
decline in revenues is primarily due to a general slowdown in economic activity
following the fourth quarters holiday season and, more specifically, a
decrease in the amount of accounts receivable that our client financial
institutions purchase. Therefore, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful and that you should not
rely on that comparison as an indicator of our future performance. Due to the
relatively fixed nature of costs such as personnel, facilities and equipment
costs, a revenue decline in a quarter will typically result in lower
profitability for that quarter.

Inflation

We do not believe
that inflation has had a material effect on our results of operations. There can
be no assurance, however, that inflation will not affect our business in the
future.

13



Part II  Other InformationItem 6. Exhibits

The exhibits
described in the following Index to Exhibits are filed as part of this quarterly
report on Form 10-Q.

|Exhibit No. |  |   | Description                                                                                                                                                                                                                                                                                                   
|----------- |  | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |   |                                                                                                                                                                                                                                                                                                               
|3.1         |  |  | Amended and Restated Charter of the Company (incorporated by reference to
Exhibit 3.1 to the Companys Registration Statement on
No. 333-75013 Form S-1).                                                                                                                                                     
|            |  |   |                                                                                                                                                                                                                                                                                                               
|3.2         |  |  | Amended and Restated By-laws of the Company (incorporated by reference to
Exhibit 3.2 to the Companys Registration Statement on
No. 333-75013 Form S-1).                                                                                                                                                     
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.1        |  |  | Stock Purchase Agreement dated January 23, 2006 among Private Business,
Inc. and the Stockholders of Goldleaf Technologies, Inc. (incorporated by
reference to Exhibit 2.1 to Private Business, Inc.s Current Report on
Form 8-K filed with the Securities and Exchange Commission on
January 24, 2006).     
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.2        |  |  | Amended and Restated Credit Agreement dated January 23, 2006 between
Private Business, Inc. and Bank of America, N.A. (incorporated by reference to
Exhibit 10.1 to Private Business, Inc.s Current Report on Form 8-K
filed with the Securities and Exchange Commission on January 26,
2006).               
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.3        |  |  | Guaranty Side Letter dated January 23, 2006 between Private Business, Inc.,
The Lightyear Fund, L.P. and Lightyear PBI Holdings, LLC (incorporated by
reference to Exhibit 10.2 to Private Business, Inc.s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
January 26, 2006).
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.4        |  |  | Exchange Agreement dated January 23, 2006 between Private Business, Inc.
and Lightyear PBI Holdings, LLC (incorporated by reference to Exhibit 10.3
to Private Business, Inc.s Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 26, 2006).                            
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.5        |  |  | Amended and Restated Warrant Agreement dated January 23, 2006 between
Private Business, Inc. and Lightyear PBI Holdings, LLC (incorporated by
reference to Exhibit 10.4 to Private Business, Inc.s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
January 26, 2006).        
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.6        |  |  | Amended and Restated Warrant Certificate dated January 23, 2006 issued by
Private Business, Inc. to Lightyear PBI Holdings, LLC. (incorporated by
reference to Exhibit 10.5 to Private Business, Inc.s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
January 26, 2006).    
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.7        |  |  | Amended and Restated Warrant Certificate dated January 23, 2006 issued by
Private Business, Inc. to Lightyear PBI Holdings, LLC (incorporated by reference
to Exhibit 10.6 to Private Business, Inc.s Current Report on
Form 8-K filed with the Securities and Exchange Commission on
January 26, 2006).     
|            |  |   |                                                                                                                                                                                                                                                                                                               
|10.8        |  |  | Employment Agreement dated January 31, 2006 between Private Business, Inc.
and Paul McCulloch (incorporated by reference to Exhibit 10.1 to Private
Business Inc.s Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 26, 2006).                                          
|            |  |   |                                                                                                                                                                                                                                                                                                               
|31.1        |  |  | Certification pursuant to Rule 13a  14(a)/15d  14(a) 
Chief Executive Officer.                                                                                                                                                                                                                             
|            |  |   |                                                                                                                                                                                                                                                                                                               
|31.2        |  |  | Certification pursuant to Rule 13a  14(a)/15d  14(a) 
Chief Financial Officer.                                                                                                                                                                                                                             
|            |  |   |                                                                                                                                                                                                                                                                                                               
|32.1        |  |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002  Chief Executive
Officer.                                                                                                                                                              
|            |  |   |                                                                                                                                                                                                                                                                                                               
|32.2        |  |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial
Officer.                                                                                                                                                              
|            |  |   |                                                                                                                                                                                                                                                                                                               

14



Signatures

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



|                       |                                    |                          
|---------------------- | ---------------------------------- | -------------------------
|                       | Goldleaf Financial Solutions, Inc.
|                       | (f/k/a Private Business, Inc.)    
|                       | (Registrant)                      
|                       |                                    |                          
|                       |                                    |                          
|Date: March   28, 2007 | By:                                | /s/ G. Lynn   Boggs      
|                       |                                    |                          
|                       |                                    | G. Lynn   Boggs          
|                       |                                    | Chief   Executive Officer
|                       |                                    |                          
|                       |                                    |                          
|Date: March   28, 2007 | By:                                | /s/ J. Scott   Craighead 
|                       |                                    |                          
|                       |                                    | J. Scott   Craighead     
|                       |                                    | Chief   Financial Officer
|                       |                                    |                          

15