<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended March 31, 2001

                        Commission file number 000-25959

                             Private Business, Inc.
            -------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Tennessee                                     62-1453841
-----------------------------------              --------------------------
(State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                     Identification No.)


9010 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.

                                  (1) Yes [X] No [ ]
                                  (2) Yes [X] No [ ]


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

                  Class                       Outstanding as of May 11, 2001
                  -----                       ------------------------------

       Common Stock, no par value                    27,664,613 shares


<PAGE>   2
                             PRIVATE BUSINESS, INC.

                                    FORM 10-Q

                        FOR QUARTER ENDED MARCH 31, 2001

                                      INDEX


<TABLE>
<CAPTION>
                                                                               Page No.
                                                                               --------
<S>                                                                            <C>
Part I - Consolidated Financial Statements

         Item 1 - Unaudited Condensed Consolidated Balance Sheets
                        as of March 31, 2001 and December 31, 2000                 3

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

                  Unaudited Condensed Consolidated Statements of
                       Cashflows for the three months ended March 31,
                       2001 and 2000                                               5

                  Notes to Unaudited Condensed Consolidated
                       Financial Statements                                       6 - 8

         Item 2 - Management's discussion and analysis of
                       financial condition and results of operations              9 - 15

         Item 3 - Quantitative and qualitative disclosures
                       about market risk                                          16

Part II - Other Information

         Item 6 - Exhibits and reports on Form 8-K                                17

Signatures                                                                        18
</TABLE>

                                       2
<PAGE>   3
                             Private Business, Inc.
                Condensed Consolidated Balance Sheets - Unaudited


                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                                          March 31,         December 31,
                                      Assets                                2001                 2000
                                                                          ---------         -------------
<S>                                                                        <C>                <C>
Current Assets:
       Cash and cash equivalents                                           $      4           $  1,891
       Accounts receivable                                                    5,710              6,160
       Accounts receivable - other                                              149                193
       Deferred tax assets                                                      171                274
       Other current assets                                                   1,598              1,625
                                                                           --------           --------
            Total current assets                                              7,632             10,143
                                                                           --------           --------

Property and Equipment, net                                                  13,421             13,972

Other Assets:
       Software development costs, net                                        1,020                942
       Deferred tax assets                                                      138                145
       Intangible and other assets, net                                       4,840              5,017
                                                                           --------           --------
            Total other assets                                                5,998              6,104
                                                                           --------           --------

                                                                           $ 27,051           $ 30,219
                                                                           ========           ========

                Liabilities and Stockholders' Deficit

Current Liabilities:
       Accounts payable                                                    $  3,032           $  3,073
       Accrued liabilities                                                    1,934              3,871
       Deferred revenue                                                         843                933
       Current portion of long-term debt                                      4,319              4,031
                                                                           --------           --------
            Total current liabilities                                        10,128             11,908
                                                                           --------           --------

Long-Term Debt, net of current portion                                       40,924             42,148
Other Liabilities                                                               125                129

Stockholders' Deficit:
       Common stock, no par value; 100,000,000 shares
            authorized; shares issued and outstanding, 27,617,508
            in 2001 and 27,510,167 in 2000                                       --                 --
       Additional paid-in capital                                           (22,392)           (22,509)
       Accumulated deficit                                                   (1,734)            (1,457)
                                                                           --------           --------
            Total stockholders' deficit                                     (24,126)           (23,966)
                                                                           --------           --------

                                                                           $ 27,051           $ 30,219
                                                                           ========           ========
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>   4

                             Private Business, Inc.
           Condensed Consolidated Statements of Operations - Unaudited
                   Three Months Ended March 31, 2001 and 2000


<TABLE>
<CAPTION>

                                                                          2001                  2000
                                                                       ------------           ---------
                                                                     (in thousands, except per share data)
<S>                                                                    <C>                   <C>
Revenues:
       Royalties                                                           $ 10,034           $ 11,347
       Software license                                                         277                562
       Maintenance and other                                                  1,816              1,554
                                                                           --------           --------
                                                                             12,127             13,463
Operating Expenses:
       General and administrative                                             5,543              4,002
       Selling and marketing                                                  5,280              6,149
       Research and development                                                 360                420
       Amortization                                                             267                185
       Other operating                                                           75                 80
                                                                           --------           --------
                                                                             11,525             10,836
                                                                           --------           --------

Operating Income                                                                602              2,627

Other Expenses:
       Interest expense, net                                                  1,056              1,227
                                                                           --------           --------

Income (Loss) Before Income Taxes                                              (454)             1,400

Income Tax Provision (Benefit)                                                 (177)               547
                                                                           --------           --------

Net Income (Loss)                                                          $   (277)          $    853
                                                                           ========           ========

Earnings (Loss) Per Share:
       Basic                                                               $  (0.01)          $   0.03
                                                                           ========           ========
       Diluted                                                             $  (0.01)          $   0.03
                                                                           ========           ========

Weighted Average Common Shares Outstanding:
       Basic                                                                 27,581             27,425
                                                                           ========           ========
       Diluted                                                               27,581             28,264
                                                                           ========           ========
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>   5
                             Private Business, Inc.
           Condensed Consolidated Statements of Cash Flows - Unaudited
                   Three Months Ended March 31, 2001 and 2000

                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                       2001                2000
                                                                                     --------           ---------
<S>                                                                                  <C>                <C>
Cash Flows from Operating Activities:
       Net  income  (loss)                                                           $   (277)          $    853
       Adjustments to reconcile net income (loss) to net cash provided by
            operating activities:
                  Depreciation and amortization                                         1,022                685
                  Deferred taxes                                                          110                509
                  Non-cash deferred charges                                                48                 --

       Changes in assets and liabilities:
            Accounts receivable                                                           494                678
            Other current assets                                                           28                 69
            Other noncurrent assets                                                        56                 63
            Accounts payable                                                              (41)              (329)
            Accrued and other liabilities                                              (1,943)            (3,241)
            Deferred revenue                                                              (90)              (337)

                                                                                     --------           --------
                       Net cash used in operating activities                             (593)            (1,050)
                                                                                     --------           --------

Cash Flows from Investing Activities:
       Additions to property and equipment                                               (203)            (2,201)
       Software development costs                                                        (225)               (97)

                                                                                     --------           --------
                       Net cash used in investing activities                             (428)            (2,298)
                                                                                     --------           --------

Cash Flows from Financing Activities:
       Payments on long-term debt                                                        (936)            (2,047)
       Proceeds from exercise of employee stock options                                    20                150
       Proceeds from issuance of stock through employee stock purchase plan                50                 --

                                                                                     --------           --------
                       Net cash used in financing activities                             (866)            (1,897)
                                                                                     --------           --------

Net change in cash                                                                     (1,887)            (5,245)
Cash at beginning of period                                                             1,891              5,953
                                                                                     --------           --------

Cash at end of period                                                                $      4           $    708
                                                                                     ========           ========

Supplemental Cash Flow Information:
       Cash paid for income taxes during the period                                  $    141           $    137
                                                                                     ========           ========
       Cash paid for interest during the period                                      $  1,095           $  1,313
                                                                                     ========           ========
</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        5
<PAGE>   6

                             PRIVATE BUSINESS, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED


A.       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.

         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, 2000.

B.       Net Income (Loss) Per Share

         Basic earnings (loss) per share is computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding during the year. Diluted earnings (loss) per share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the year, which includes the additional
dilution related to conversion of stock options as computed under the treasury
stock method for the three months ended March 31, 2000. The outstanding stock
options for the three months ended March 31, 2001 were not included in the
adjusted weighted outstanding shares, as the effects of conversion were
antidilutive.

         The following table represents information necessary to calculate
earnings (loss) per share for the three months ended March 31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                                    Three Months Ended March, 31,
                                                                   ------------------------------
(in thousands)                                                       2001                2000
                                                                   ---------          ---------
<S>                                                                <C>                <C>

Net (loss) income                                                  $   (277)         $    853
                                                                   --------          --------
Weighed average common shares outstanding                            27,581            27,425
Plus additional shares from common stock equivalent shares:

Options                                                                   0               839
                                                                   --------          --------
Adjusted weighted average common shares outstanding                  27,581            28,264
                                                                   ========          ========
</TABLE>


                                       6
<PAGE>   7
C.       Comprehensive Income

         Comprehensive income for the three months ended March 31, 2001 and 2000
was comprised solely of net income (loss).

D.       Merger and Stock Split

         On March 13, 2001, the Company announced that it had signed a letter of
         intent to merge with Towne Services, Inc. ("Towne") through a merger of
         Towne into Private Business. A Form S-4 registration and joint proxy
         statement/prospectus statement of Private Business and Towne was
         filed with the Securities and Exchange Commission ("SEC") on May 1,
         2001. The proposed merger, which is subject to certain conditions,
         including approval of the shareholders of both companies, is structured
         as a tax-free exchange of our common shares for all of the issued and
         outstanding Towne common shares. In conjunction with the merger
         agreement, the Board of Directors of the Company approved a
         one-for-three reverse stock split of the Company's common stock, which
         will occur before exchanging the Company's common shares for the Towne
         common shares. All shares and per share amounts in these condensed
         consolidated financial statements for the quarter ended March 31, 2001
         have not been restated for the effect of the pending reverse stock
         split. Once the merger is completed, Private Business' shareholders
         will own approximately 67% of the combined entity.

E.       CEO Change, Severance and Option Grants

         On February 1, 2001, the Company announced the departure of the current
         CEO and the hiring of a new CEO. The former CEO, as part of his
         employment and severance agreement, was entitled to a severance payment
         of $315,000, which was paid and expensed by the Company in February
         2001. The former CEO will serve as a consultant for a minimum of six
         months from the date of termination. As part of his consulting
         agreement, the former CEO was granted options to purchase 300,000
         shares of the Company's common stock at $1.25 per share, the fair
         market value as of that date. Options to purchase 200,000 of the shares
         will vest ratably each month from February 2001 to January 2002, while
         the remaining 100,000 shares vest ratably each month from July 2001 to
         January 2002. The options expire 10 years from the date of the grant.
         The fair value of these options of approximately $288,000 has been
         calculated in accordance with SFAS No. 123, using a risk-free rate of
         6.26%, an expected dividend yield of 0% and an expected volatility of
         75%. This fair value will be expensed to general and administrative
         expense over the vesting period ($256,000 expensed in 2001 and $32,000
         expensed in 2002). Approximately $48,000 was expensed in the quarter
         ended March 31, 2001.

         As of March 31, 2001, the Company has not yet finalized an employment
         agreement with the new CEO, which is expected to include salary and
         stock options, thus, the Company has not recorded any compensation
         expense associated with the new CEO for the first quarter ended March
         31, 2001.


                                       7
<PAGE>   8

F.       Bank Covenants

         The Company's credit facility is secured by a pledge of all Company
         assets and 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. At March 31,
         2001, the Company was in compliance with all covenants.


                                       8
<PAGE>   9
                             PRIVATE BUSINESS, INC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000


MATERIAL 2001 CORPORATE DEVELOPMENTS

         On February 1, 2001, we announced that Thomas L. Black, a co-founder
and former CEO of Private Business during its most rapid growth phase from 1991
to 1995, was named Chief Executive Officer and President replacing Kevin M.
McNamara and Jerry Cover, respectively. Mr. Black has been a director of Private
Business since its founding and most recently has been CEO of privately held
Tecniflex, Inc. An employment agreement with Mr. Black has not yet been
finalized, but will likely include salary and stock options, thus, no
compensation expense was recorded in the quarter ended March 31, 2001. The
former CEO, who will serve as a consultant to the Company, received a severance
payment of $315,000 and stock options to purchase the Company's common stock.
The former President announced his resignation effective July 1, 2001 and it is
expected that some severance will be paid. Any severance paid will be expensed
at the effective date of the resignation.

         On March 13, 2001, we announced that we had signed a letter of intent
to merge with Towne Services, Inc. ("Towne") through a merger of Towne into
Private Business. A Form S-4 registration and joint proxy statement/prospectus
statement of Private Business and Towne was filed with the Securities and
Exchange Commission ("SEC") on May 1, 2001. The proposed merger, which is
subject to certain conditions, including approval of the shareholders of both
companies, is structured as a tax-free exchange of our common shares for all of
the issued and outstanding Towne common shares. In conjunction with the merger
agreement, a one for three reverse stock split of our common stock will occur
before exchanging our common shares for the Towne common shares. Once the merger
is completed, Private Business' shareholders will own approximately 67% of the
combined entity.

OVERVIEW

         We are a leading provider of technology-driven solutions that address
the problems faced by community banks in managing accounts receivable financing
provided to their small business customers. Our solution to these problems is
called Business


                                       9
<PAGE>   10
Manager(R) and is based on software, marketing services and online electronic
transaction processing. One element of this solution is our proprietary software
that enables our network of client banks to purchase accounts receivable from
their small business customers. The banks then process, bill and track those
receivables on an ongoing basis. As a major component of our solution, we work
with client banks to design, implement and manage the sale of Business Manager
accounts receivable financing services to their small business customers. We
also give our client banks the option of outsourcing to us their application
hosting and transaction processing through secure Internet connections, thereby
allowing them to receive accounts receivable information and make funding
decisions electronically.

         We generate revenues from three main sources:

         -        royalties earned on client bank purchases of small business
                  accounts receivable.

         -        software license fees from new client banks.

         -        maintenance fees and other revenues, comprised primarily of
                  fees received for insurance brokerage services, paper-based
                  form sales, software maintenance, medical, leasing and
                  processing services.

         There are two types of royalty fees. The first type is earned upon the
client bank's initial purchase of a small business' accounts receivable during
the first 30 days in our program. The second type is an ongoing royalty fee
earned from subsequent period purchases. Both types of fees are based on a
percentage of the receivables that a client bank purchases from its small
business customers during each month. The second type of fee is a smaller
percentage of the ongoing receivables purchased.

         Software license fees consist of two components: the license fee and
customer training and support fee. These are one-time fees that we receive upon
the initial licensing of our Business Manager program to a community bank. Our
license agreements are executed with terms ranging from three to five years and
are renewable for subsequent terms. We recognize revenues from the license fee
at the time of initiation of the agreement and the customer training and support
fee ratably over the twelve-month service period subsequent to signing the
license agreement. Software license fees for new agreements range from
approximately $5,000 to $156,000 and are generally based on the asset size of
the client bank.

         Maintenance fees and other revenues include several ancillary products
and services we provide to client banks. Annual software maintenance fees are
generated from our client banks starting on the first anniversary date of the
Business Manager license agreement and annually thereafter. These revenues are
recognized ratably over a twelve month period beginning on the first anniversary
date of the agreement. Additionally, since 1995, we have brokered, through our
Private Business Insurance subsidiary, credit and fraud insurance products from
a national insurance company. We


                                       10
<PAGE>   11
earn fees based on a percentage of the premium that is paid to the insurance
company. We also provide a standard set of forms that client banks may purchase
and use in the normal course of administering the Business Manager program.
Revenues related to these forms are recognized in the period that they are
shipped to the client bank. We offer processing services to our client banks for
an additional fee based on the volume of transactions processed through the
system. We also have some industry-focused applications for the medical and
dental markets and an equipment leasing program for use by small business
customers where we receive a commission on referred leasing transactions funded
by a third-party finance company.


RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, the
percentage relationship of the identified consolidated statements of operations
items to total revenue.

<TABLE>
<CAPTION>

                                                First Quarter
                                          ------------------------
                                           2001              2000
                                          ------           -------
<S>                                       <C>              <C>
Revenue:
       Royalties                            82.7%            84.3%
       Software license                      2.3%             4.2%
       Maintenance and other                15.0%            11.5%
                                          ------           ------
                                           100.0%           100.0%

Operating Expenses:
      General and administrative            45.7%            29.7%
      Selling and marketing                 43.5%            45.7%
      Research and development               3.0%             3.1%
      Amortization                           2.2%             1.4%
      Other operating                        0.6%             0.6%
                                          ------           ------
                                            95.0%            80.5%

Operating Income                             5.0%            19.5%

Other Expenses:
      Interest expense, net                  8.7%             9.1%
                                          ------           ------
Income (loss) before income taxes           (3.7)%           10.4%

Income tax (benefit) provision              (1.5)%            4.1%
                                          ------           ------
Net (loss) income                           (2.2)%            6.3%
                                          ======           ======
</TABLE>


                                       11
<PAGE>   12

         Royalties. Royalties decreased 11.6% to $10.0 million for the first
quarter of 2001 compared to $11.3 million for the first quarter of 2000. The
decrease was primarily due to a decrease in the average fee realized on total
funding. Total funding through the Business Manager(R) program remained
unchanged for the first quarter of 2001 compared to the first quarter of 2000 at
approximately $1.5 billion. The decrease in the average fee realized was
primarily due to fewer initial sales funding through the program during the
first quarter of 2001 compared to the first quarter of 2000. As a percentage of
total revenue, initial royalties accounted for 10.3% for the first quarter of
2001 compared to 11.8% for the first quarter of 2000, while ongoing royalties
remained unchanged at 72.5% for both first quarter 2001 and 2000.

         Software License. Software license fees decreased 50.6% to $277,000 for
the first quarter of 2001 compared to $562,000 for the comparable period for
2000. The decrease was primarily due to a decrease in the number of new software
license agreements entered into during 2001 compared to 2000. We believe the
decrease was due to several contributing factors, including our continued focus
on marketing more specifically to banks in targeted areas where we wish to
better penetrate and support the small business market. Further, we believe that
as we increase our market penetration, it becomes more difficult to add new
license agreements from the smaller universe of potential bank clients. Software
license fees accounted for 2.3% of total revenues for the three months ended
March 31, 2001 compared to 4.2% for the comparable period in 2000.

         Maintenance and other. Maintenance and other fees increased 16.8% to
$1.8 million for the three months ended March 31, 2001 compared to $1.6 million
for the first quarter of 2000. The increase was primarily attributable to
increases in our processing services. Fees associated with our processing
services increased 458.0% to $443,000 for the first quarter of 2001 compared to
$79,000 for the comparable period in 2000. The increase was primarily a result
of more of our client banks utilizing our processing services. Maintenance and
other fees accounted for 15.0% of total revenues for the first quarter of 2001
compared to 11.5% for the comparable period in 2000.

         Total revenues. Total revenues for the first quarter of 2001 decreased
9.9% to $12.1 million compared to $13.5 million for the first quarter of 2000
primarily as a result of decreased royalties and software license fees which
were partially offset by increased maintenance and other fees.

         General and administrative. General and administrative expenses
increased 38.5% to $5.5 million compared to $4.0 million for the comparable
period in 2000. General and administrative expenses include the cost of our
executive, finance, human resources, information and support services,
administrative functions and general operations. As a percentage of total
revenue, general and administrative expenses increased 16.0% to 45.7% for the
first quarter ended March 31, 2001 compared to 29.7% for the same period in
2000. The increase was primarily due to higher rent, consulting fees,
depreciation and compensation costs related to our Technology and Service Center
which we placed in service in May 2000 and one-time severance costs for the
former CEO paid in February 2001.


                                       12
<PAGE>   13
         Selling and marketing. Selling and marketing expenses decreased 14.1%
to $5.3 million for the first quarter of 2001 compared to $6.1 million for the
three months ended March 31, 2000. Selling and marketing expenses include the
cost of wages and commissions paid to our dedicated business development and
bank sales force, travel costs of our sales force, recruiting for new sales and
marketing personnel and marketing fees associated with direct and telemarketing
programs. As a percentage of total revenue, selling and marketing expenses
decreased 2.2% to 43.5% for the first quarter of 2001 compared to 45.7% for the
comparable period in 2000. These decreases were primarily due to a reduction in
sales staff as a result of continued focus on sales productivity per sales
person. This resulted in decreased compensation, commissions, training,
recruiting and travel expenses.

         Research and development. Research and development expenses decreased
14.3% to $360,000 for the first quarter of 2001 compared to $420,000 for the
year earlier period. These costs include the direct costs associated with
developing new versions of our systems, including the Business Manager system.
The decrease in costs was primarily due to larger amounts of research and
development costs capitalized as software development costs due increased
activity related to new product development in the first quarter of 2001 as
compared to the first quarter of 2000. As a percentage of total revenues,
research and development expenses decreased to 3.0% for the first quarter of
2001 compared to 3.1% for the year earlier period. The amount of research and
development costs capitalized in the first quarter of 2001 and 2000 were
$225,000 and $97,000, respectively.

         Amortization. Amortization expenses increased 43.9% to $267,000 for the
first quarter of 2001 compared to $185,000 for the comparable period in 2000.
These expenses include the cost of amortizing intangible assets including
trademarks, software development costs, goodwill and debt issuance costs. The
increase was primarily due to additional software development costs amortization
due to the increased activity and capitalization in late 2000 and the first
quarter of 2001.

         Other operating expenses. Other operating expenses decreased $5,000 to
$75,000 for the three months ended March 31, 2001. Other operating expenses
include property tax and other miscellaneous costs associated with providing
support and services to our client banks.

         Operating income. As a result of the above factors, our operating
income decreased 77.1% to $603,000 for the first quarter of 2001 compared to
$2.6 million for the same period in 2000. As a percentage of total revenue,
operating income decreased to 5.0% for the first quarter of 2001 compared to
19.5% for the same period in 2000.

         Interest expense, net. Interest expense, net decreased 13.9% to $1.1
million for the three months ended March 31, 2001 compared to $1.2 million for
the comparable period in 2000. The decrease was primarily due to the continued
reduction of our debt and more favorable interest rates. In addition to our
normal debt service, we reduced


                                       13
<PAGE>   14
long-term debt by approximately $1.3 million at the end of the first quarter
2000 using excess cash from operations as required by a year-end excess cash
provision in our debt agreement and an optional early payment of $3.0 million at
the end of the second quarter 2000.

         Income tax benefit. The income tax benefit was approximately $177,000
for the first quarter of 2001 compared to a provision of approximately $547,000
for the same period in 2000. As a percentage of the loss before taxes, the
income tax benefit was 39.0% for the first quarter of 2001.

LIQUIDITY AND CAPITAL RESOURCES

         Our primary sources of capital have historically been cash provided by
operations, long-term debt and investment from stockholders. During the first
three months of 2001 our operating activities used cash of $593,000 while we
expended $428,000 for investing activities, primarily for purchases of equipment
and software development. We currently estimate that total capital expenditures
for 2001 will be approximately $2.5 million.

         Cash used in financing activities totaled $866,000 for the first
quarter of 2001. These uses consisted of $936,000 in repayments of long-term
debt partially offset by proceeds from the exercise of employee stock options
and the employee stock purchase plan.

         The credit facility includes term loans with balances as of March 31,
2001 of $17.3 million and $28.0 million, and also provides for a revolving line
of credit in the amount of $10.0 million, including a $3.0 million sublimit for
swing line advances and a $2.0 million sublimit for standby letters of credit.
There was no outstanding balance on the revolving line of credit at March 31,
2001. The credit facility bears interest in accordance with a grid pricing
formula based on the achievement of various financial ratios. The formula calls
for advances to bear interest ranging from 1.25% to 2.75% above prime rate or
2.50% to 4.00% above the Eurodollar rate.

         The $17.3 million loan is generally repayable in quarterly installments
of $864,000 through September 30, 2001 and then increasing annually from $1.2
million beginning December 31, 2001 to $1.4 million beginning December 31, 2003
until maturity (August 7, 2004). The $28.0 million loan is repayable in equal
quarterly installments of $72,000 until December 31, 2004, at which time the
required quarterly payments increase to $3.2 million until September 30, 2005
and $4.2 million until June 30, 2006 with a final payment of $1.2 million due at
maturity (August 7, 2006). The revolver has an annual commitment fee and matures
August 7, 2004. As of March 31, 2001, we had $17.3 million outstanding at 7.41%,
$28.0 million outstanding at 8.16%, and no outstanding letters of credit.

         The credit facility is secured by a pledge of all of our assets and
imposes financial covenants and requirements on us and contains limitations on
our ability to sell material assets, redeem capital stock and pay dividends,
among other actions.


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<PAGE>   15
         As of March 31, 2001, we had a working capital deficit of approximately
$2.5 million compared to a deficit of approximately $1.8 million as of December
31, 2000. The change in working capital resulted primarily from decreases in
accrued liabilities and deferred revenue partially offset by decreases in
accounts receivable and deferred tax assets and an increase in the current
portion of our borrowings. We believe that our line of credit availability along
with future operating cash flows will be sufficient to meet our working capital
and capital expenditure requirements for the next twelve months.

         We may, in the future, acquire businesses or products complementary to
our business, although we cannot be certain that any such acquisitions will be
made. 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 such financing will be available, 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.

NOTE REGARDING FORWARD LOOKING INFORMATION

         This interim report contains several "forward-looking statements"
concerning our operations, prospects, strategies and financial condition,
including its future economic performance, intent, plans and objectives, and the
likelihood of success in developing and expanding its business. These statements
are based upon a number of assumptions and estimates which are subject to
significant uncertainties, many of which are beyond our control. Words such as
"may," "would," "could," "will," "expect," "anticipate," "believe," "intend,"
"plan," and "estimate" are meant to identify such forward-looking statements.
Actual results may differ materially from those expressed or implied by such
forward-looking statements. The Company assumes no obligation to update this
information. Factors that could cause actual results to differ materially are
discussed in our filings with the Securities and Exchange Commission, including
our Annual Report on Form 10-K for the year ended December 31, 2000, and
include, among other factors, the timely development and market acceptance of
products and technologies and competitive market conditions.

INFLATION

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


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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is subject to market risk from exposure to changes in
interest rates based on our financing and cash management activities. Our
exposure relates primarily to our long-term debt obligations which expire in
2004 and 2006. In the event that interest rates associated with these debt
obligations were to increase 100 basis points, the annual impact on future cash
flows would be approximately $452,000.



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<PAGE>   17
                           PART II - OTHER INFORMATION




Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  3.1    - Amended and Restated Charter of the Company
                           (incorporated by reference to exhibit 3.1 to the
                           Company's registration statement on 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 Form S-1)

                  10.4.3 - Amendment No. 3 to Credit Agreement dated as of
                           March 31, 2001

         (b)      Reports on Form 8-K

                           The Company filed a current report on Form 8-K on
                  February 5, 2001 announcing the hiring of Thomas L. Black as
                  Chief Executive Officer and President.


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                                    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.


                                            PRIVATE BUSINESS, INC.
                                                 (Registrant)


Date:    May 14, 2001                       By: /s/Thomas L. Black
      ----------------------------------        -------------------------------
                                                Thomas L. Black
                                                Chief Executive Officer


Date:    May 14, 2001                       By: /s/ Fred P. Read
      ----------------------------------        ------------------------------
                                                Fred P. Read
                                                Chief Financial Officer


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