<PAGE>

                                                                      EXHIBIT 13

                              FINANCIAL HIGHLIGHTS

The following selected financial information is derived from the consolidated
financial statements of the Company. The selected financial information should
be read in conjunction with the Company's consolidated financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company's year ends on April
30 of each year.

          CONSOLIDATED INCOME STATEMENT DATA FOR YEARS ENDED APRIL 30,
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             2003(a)     2002(a)        2001(a)    2000(a)     1999(a)
                                                           ---------    ---------     ---------   ---------   ---------
<S>                                                        <C>          <C>           <C>         <C>         <C>
Revenue                                                    $  90,547    $ 105,102     $ 132,094   $ 160,812    $153,261
Cost of services                                              68,475       77,974        94,373     121,772     110,223
                                                           ---------    ---------     ---------   ---------    --------
Gross profit                                                  22,072       27,128        37,721      39,040      43,038
Selling, general and administrative expenses                  18,032       22,783        36,247      45,751      30,991
Impairment and other charges(b)                                   --           --        42,927       2,631       6,650
                                                           ---------    ---------     ---------   ---------    --------
Income (loss) from operations                                  4,040        4,345       (41,453)     (9,342)      5,397
Other income (expenses), net                                    (570)      (1,334)       (3,620)     (3,921)     (3,455)
                                                           ---------    ---------     ---------   ---------    --------
Income (loss) before income taxes                              3,470        3,011       (45,073)    (13,263)      1,942
Provision (benefit) for income taxes                             665       (1,684)      (10,949)     (4,923)        869
                                                           ---------    ---------     ---------   ---------    --------
Net income (loss)                                          $   2,805    $   4,695     $ (34,124)  $  (8,340)   $  1,073
                                                           =========    =========     =========   =========    ========
Net income (loss) per share - basic                        $    0.11    $    0.19     $   (1.36)  $   (0.34)   $   0.04
                                                           =========    =========     =========   =========    ========
Net income (loss) per share - diluted                      $    0.11    $    0.19     $   (1.36)  $   (0.34)   $   0.04
                                                           =========    =========     =========   =========    ========
Weighted average number of common shares - basic              24,647       24,985        25,045      24,763      24,683
                                                           =========    =========     =========   =========    ========
Weighted average number of common shares - diluted            24,949       25,167        25,045      24,763      24,921
                                                           =========    =========     =========   =========    ========
</TABLE>

                 CONSOLIDATED BALANCE SHEET DATA AS OF APRIL 30,
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                2003         2002           2001         2000       1999
                                              --------     --------       --------    ---------   --------
<S>                                           <C>          <C>            <C>         <C>         <C>
Working capital (deficit)                     $  4,545     $  5,615       $  6,417    $ (16,573)  $ 17,699
Total assets                                    53,235       41,377         66,614      137,231    143,631
Long-term debt and non-recourse debt            21,882       14,578         41,294       71,463     61,918
Total shareholders' equity                      20,532       18,115         13,420       47,072     54,554
</TABLE>

(a)  See Note 2 to the consolidated financial statements for a discussion of
     the Company's recent acquisitions and divestitures.

(b)  See Note 12 to the consolidated financial statements for a discussion of
     the impairment and other charges.

                                       14

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

This annual report contains forward-looking statements. All statements other
than statements of historical fact made in this annual report are
forward-looking statements. Forward-looking statements reflect management's
current assumptions, beliefs, and expectations and are subject to risks and
uncertainties, including those discussed below and in the section of the
Company's annual report on Form 10-K entitled "Business - Forward-Looking
Statements," that could cause actual results to differ materially from
historical or anticipated results. The following information should be read in
conjunction with the Company's consolidated financial statements, including the
notes thereto.

OVERVIEW

The Company's performance in fiscal 2003 reflects the dramatic change in its
strategic direction that occurred in fiscal 2001 and 2002. The Company's growth
from fiscal 1997 through fiscal 2000 was driven largely through acquisitions,
diversification, and attempts at cross-selling services. In fiscal 2001, the
Company began to focus its operational, capital, and management resources on its
core competencies of providing information technology ("IT") outsourcing,
consulting, and professional staffing services (the "core operations"). In
fiscal 2003, the Company's revenue from core operations, on which the Company's
management intends to focus its future efforts, was $90.5 million. Professional
staffing, outsourcing, and consulting accounted for 66%, 23%, and 11%,
respectively, of the Company's revenue from core operations in fiscal 2003. As a
result of the RSI acquisition, the Company's revenue mix shifted to more
outsourcing and consulting during the fourth quarter of fiscal 2003 as
professional staffing, outsourcing and consulting comprised 48%, 42% and 10%,
respectively.

The Company is implementing a strategy of expanding the Company's business in
the government consulting sector into Federal contracting. This has produced
both benefits and risks to the Company. Management believes that the success of
the strategy is demonstrated by increased shareholder value and further
definition of the Company as a market leader in the area of government
information technology consulting and solutions. This has produced a much
greater concentration of the business of the Company in the government
consulting sector, and increased the Company's reliance on contracts cancelable
on short notice with federal, state and local government customers which are
subject to budgetary restraints. Because a portion of this strategy utilized
acquisitions, the Company's long term debt level under its current facility has
increased from $12,087,000 in 2002 to $13,527,000 in 2003. Each of these and
other risks presented are discussed in the remainder of this section. Management
is aggressively managing each of these areas. As an example, a senior member of
Company Management is assigned to each large customer of the Company in order to
give personal attention to management of the relationship. Management believes
that its aggressive management of these and other risks will enable the Company
to realize the full value attainable from its government contracting strategy.

                                       15

<PAGE>

Beginning in fiscal 2001 and continuing through fiscal 2002, the Company
disposed of several under-performing business units. These non-core business
units were engaged in specialized policy consulting, computer hardware and
specialty software sales, enterprise resource planning, and computer equipment
leasing (the "non-core operations"). The Company sold its Technology Management
Resources, Proven Technology, and Global Services business units in fiscal 2001
and its Enterprise Resource Planning, Delta Software, and Partners Capital Group
business units in fiscal 2002. The Company completed the last sale of its
non-core operations on April 1, 2002. The disposition of the non-core operations
accounts for 28% of the 44% decrease in the Company's revenue from $160.8
million in fiscal 2000 to $90.5 million in fiscal 2003. The remaining decrease
is due to decreases in average headcount of billable employees, the general
decline in the information technology market recently, employees hired by
clients, increased competition for state and local government proposals, and a
slight shift in commercial customers outsourcing services to offshore countries

Beginning in fiscal 2003, the Company implemented a strategic acquisition plan
focused on growing its core operations through acquiring companies with heavy
concentrations in the government market, primarily the U.S. Federal government
market. The Company completed its first acquisition under its plan with the
purchase of Remtech Services, Inc. on February 6, 2003 as described in Business
Acquisitions below. Subsequent to fiscal 2003, on May 28, 2003, the Company
entered into a definitive agreement to acquire a second company, National
Systems Research Co. This acquisition is expected to close by August 31, 2003 as
described below in Business Acquisitions.

The Company performs IT services for customers in three distinct markets: state
and local governments, agencies of the Federal government of the United States
of America ("U.S.") and commercial enterprises. In fiscal 2003, approximately
57% of the Company's revenue was attributable to state and local governments,
compared to 58% and 48% in fiscal 2002 and 2001, respectively, while commercial
enterprises accounted for 33% of the Company's revenue, a decrease from 42% and
52% in fiscal 2002 and 2001, respectively. The remaining 10% of fiscal 2003
revenue was derived from agencies of the Federal government as a result of the
RSI acquisition (as discussed in Business Acquisitions below). During the fourth
quarter of fiscal year 2003, 44% of the Company's revenue was attributable to
state and local governments, 32% from the Federal government and 24% from
commercial customers. This shift in the fourth quarter was principally due to
the RSI acquisition (as discussed in Business Acquisitions below).

<TABLE>
<CAPTION>
                                            Years Ended April 30,
         MARKETS                      2003         2002           2001
        ---------                     ----         ----           ----
<S>                                   <C>          <C>            <C>
State & Local Government              57%           58%           48%
Federal Government                    10%           --            --
Commercial enterprises                33%           42%           52%
</TABLE>

The Company believes that it is a leading provider of IT services to state and
local governments in the U.S. and this strong presence in that market creates a
competitive advantage and market differentiator for the Company.

The Company currently provides IT services for over 120 clients. In both fiscal
2003 and 2002, the Company's top five revenue-generating clients accounted for
approximately 52% of the Company's revenue, an increase from 44% in fiscal 2001.
During the fourth quarter of fiscal 2003, the same top five clients only
accounted for 40% of the Company's fourth quarter revenue due to the acquisition
of RSI. Although the Company from time to time has substantial accounts
receivable from its top five clients, the Company has not experienced any
significant payment problems from these clients. A material decrease in services
provided to any of the largest clients of the Company could have an adverse
impact on the Company's financial condition and results of operations.

The Company's fiscal year extends from May 1 through the following April 30. The
Company generally recognizes revenue as services are performed. The Company's
third fiscal quarter ending January 31, in which the number of holidays and
vacation days reduces employees' billable hours, generally produces lower
revenue and profitability in comparison to the other three fiscal quarters.

                                       16

<PAGE>

                              RESULTS OF OPERATIONS

COMPARISON OF FISCAL 2003 TO FISCAL 2002

REVENUE AND INCOME FROM OPERATIONS. The Company's revenue decreased 13.8% to
$90.5 million in fiscal 2003 from $105.1 million in fiscal 2002. Revenue from
core operations decreased 8.7% to $90.5 million in fiscal 2003 from $99.1
million in fiscal 2002 due primarily to a decrease in average headcount of
billable employees. Revenue from non-core operations decreased $6.0 million in
fiscal 2003 due to the sale of certain non-core businesses in connection with
the Company's shift in strategic direction. The Company's revenue in fiscal 2003
was increased $9.0 million from fiscal 2002 due to the acquisition of RSI.

The Company's average billable headcount in core operations decreased 18.7% to
602 in fiscal 2003 excluding the employees added as a result of the RSI
acquisition from 741 in fiscal 2002. This decrease was attributable to the
general decline in the information technology market, employees hired by
clients, increased competition for state and local government proposals, and a
slight shift in commercial customers outsourcing services to offshore countries.
The RSI acquisition added 587 billable employees as of February 6, 2003. The
Company's average hourly billing rate for the operations excluding RSI increased
2.2% to $70.23 in fiscal 2003 from $68.73 in fiscal 2002.

The Company's income from operations increased from 4.1% of revenue in fiscal
2002 to 4.5% of revenue in fiscal 2003 mainly due to several cost reduction
measures instituted during the latter part of fiscal 2002 and continuing through
fiscal 2003. These measures included salary and benefit reductions, downsizing
facilities and reducing other general field overhead costs. These reductions
were offset by increases in healthcare benefits for employees. Average direct
cost per billable hour increased 3.7% in fiscal 2003. One of the most
significant components to this increase was the 20% increased cost of group
health insurance claims for employees.

CORPORATE EXPENSES. The Company's corporate expenses decreased 25.6% to $8.3
million in fiscal 2003 from $11.2 million in fiscal 2002. The decrease in
corporate expenses was due in part to the recognition of a $250,000 collection
of an insurance claim for legal fees previously expensed by the Company,
management's cost-reduction efforts, which primarily focused on salaries and
travel-related expenses, and reduced professional fees. The decrease in
corporate expenses was 21.4% excluding the $250,000 insurance claim received in
fiscal 2003 and excluding $959,000 in unusual professional fees expensed in
fiscal 2002.

INTEREST EXPENSE. The Company's interest expense decreased 36.8% to $1.2 million
in fiscal 2003 from $1.9 million in fiscal 2002 due primarily to the reduction
of the Company's bank debt and a general decline in interest rates. Interest
expense in the fourth quarter of fiscal 2003 of $415,000 was higher than the
previous three quarters of fiscal 2003 due to the acquisition of RSI.

TAX RATE. The Company's effective tax rate for fiscal 2003 was 19.2%, compared
to an effective tax benefit of 55.9% for fiscal 2002. The change is mainly due
to a $0.7 million and a $2.5 million reduction in the deferred tax asset
valuation allowance in fiscal 2003 and 2002, respectively (see Note 9 to the
Company's consolidated financial statements). The deferred tax asset valuation
allowance was based on management's calculations of estimated probable future
taxable income over the next several years after considering available federal
and state income tax loss carryforwards of $4.3 million.

                                       17

<PAGE>

COMPARISON OF FISCAL 2002 TO FISCAL 2001

REVENUE AND INCOME FROM OPERATIONS. The Company's revenue decreased 20.4% to
$105.1 million in fiscal 2002 from $132.1 million in fiscal 2001. Revenue from
core operations decreased 1.8% to $99.1 million in fiscal 2002 from $100.9
million in fiscal 2001 due primarily to a slight decrease in average headcount.
Revenue from non-core operations decreased 80.8% to $6.0 million in fiscal 2002
from $31.2 million in fiscal 2001 due to the sale of certain non-core businesses
in connection with the Company's shift in strategic direction.

The Company's average billable headcount in core operations decreased 6.0% to
741 billable employees in fiscal 2002 from 788 billable employees in fiscal
2001. The Company's average hourly billing rate for these operations increased
4.6% to $62.15 in fiscal 2002 from $59.42 in fiscal 2001.

Over the fiscal years ending April 30, 2002 and 2001, the Company has reported
certain unusual items that have significantly affected the comparability of its
financial results. These items include professional fees relating to the
Company's now settled SEC investigation, gains from the sales of non-core
operations, and impairment and other charges. The Company believes that the
exclusion of these unusual items presents a clearer picture of the financial
performance of the Company during fiscal 2002 and 2001.

The following table summarizes the components of the Company's income from
operations (in thousands) in fiscal 2002, 2001 and 2000. The professional fees
for the SEC investigation have been isolated from corporate expenses, the
impairment and other charges have been reclassified from income from core
operations and income (loss) from non-core operations, and each item is shown
separately in order to provide a more comparable presentation.

<TABLE>
<CAPTION>
                                                      Years Ended April 30,
                                               ----------------------------------
                                                 2002         2001         2000
                                               --------     --------     --------
<S>                                            <C>          <C>          <C>
Income from core operations                    $ 15,274     $ 15,325     $  4,883
Income (loss) from non-core operations              263       (1,559)       2,652
Corporate expenses                              (10,233)     (11,633)     (13,550)
Professional fees for SEC investigation            (959)        (659)          --
Impairment and other charges                         --      (42,927)      (3,480)
                                               --------     --------     --------
  Income (loss) from operations as reported    $  4,345     $(41,453)    $ (9,495)
                                               ========     ========     ========
</TABLE>

The following table shows the impact of the professional fees for the SEC
investigation, the gains from the sales of non-core operations, and the
impairment and other charges on the Company's operating income (in thousands) in
fiscal 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                        Years Ended April 30,
                                                 ----------------------------------
                                                   2002         2001         2000
                                                 --------     --------     --------
<S>                                              <C>          <C>          <C>
Income (loss) from operations as reported        $  4,345     $(41,453)    $ (9,495)
Add: Professional fees for SEC investigation          959          659           --
    Impairment and other charges                       --       42,927        3,480
Less: Gain on sales of non-core operations           (505)      (1,366)          --
                                                 --------     --------     --------
Adjusted income (loss) from operations           $  4,799     $    767     $ (6,015)
                                                 ========     ========     ========
</TABLE>

As shown in the table, excluding these unusual items, the Company's adjusted net
income increased to $2.1 million in fiscal 2002 from a loss of $1.7 million in
fiscal 2001.

CORPORATE EXPENSES. The Company's corporate expenses decreased 15.6% to $11.4
million in fiscal 2002 from $13.5 million in fiscal 2001 due to management's
cost reduction efforts which primarily focused on salaries and travel-related
expenses.

INTEREST EXPENSE. The Company's interest expense decreased 62.7% to $1.9 million
in fiscal 2002 from $5.1 million in fiscal 2001 due primarily to the reduction
of the Company's bank debt and a general decline in interest rates.

                                       18

<PAGE>

TAX RATE. The Company's effective tax benefit for fiscal 2002 was 55.9%,
compared to an effective tax benefit of 24.3% for fiscal 2001. The change is
mainly due to a $2.5 million reduction in the valuation reserve (see Note 9 to
the consolidated financial statements). The deferred tax asset valuation
allowance was based on management's calculations of estimated probable future
taxable income over the next several years after considering available federal
and state income tax loss carryforwards of $5.7 million.

RELIANCE UPON SIGNIFICANT CUSTOMERS

The Company earns a significant portion of its revenue from relatively few
customers. In both fiscal 2003 and 2002, the Company's five largest
revenue-generating customers accounted for 52% of its revenue, an increase from
44% in fiscal 2001. In fiscal 2003, the following customers each accounted for
10% or more of the Company's revenue: State of Tennessee (16%), State of
Kentucky (14%), and IBM (successor to Honeywell International Inc.) (11%).
During the fourth quarter of fiscal 2003, the Company's five largest
revenue-generating customers accounted for only 39.7% of its revenue with just
the following two customers accounting for 10% or more of the total revenue:
State of Tennessee (12%) and State of Kentucky (11%)

Generally, the Company's contracts with its top ten clients, in accordance with
industry practice, are cancelable on short notice and without penalty (except
with respect to the Company's larger outsourcing contracts), provide for monthly
payment of fees, and establish other basic terms such as the hourly billing
rates for each type of Company professional who performs work pursuant to the
contract. Some contracts specifically define the services to be performed
pursuant to the contract, while other contracts, particularly professional
staffing contracts, merely establish the basic parameters of the work (i.e., the
system to be evaluated, designed or maintained) and require that additional work
orders be submitted for services to be performed. The Company is the exclusive
service provider under certain contracts, while other contracts, particularly
professional staffing contracts, specifically allow the client to engage other
vendors for the projects covered by the contract.

LIQUIDITY AND CAPITAL RESOURCES

DEBT. On July 23, 2001, the Company refinanced its debt by obtaining a
five-year, $27.5 million credit facility (the "credit facility") that consists
of a $17.5 million revolving loan (the "revolving loan") and a $10.0 million
term loan ("term loan A"). In connection with this refinancing, the Company
refinanced an existing loan with a different financial institution into a
three-year, $4.0 million term loan ("term loan B"). The credit facility is
secured by substantially all the Company's assets and contains various financial
and other covenants. The Company was in compliance with these loan covenants at
April 30, 2003.

The interest rate on borrowings under the revolving loan is prime plus a margin
of 1.0%. At April 30, 2003, the effective annual interest rate under the
revolving loan was 5.25%. At April 30, 2003, approximately $6.3 million was
outstanding on the revolving loan. The amount available for borrowing under the
revolving loan is limited to 85% of billed accounts receivable plus 70% of
unbilled accounts receivable. At April 30, 2003, approximately $4.3 million was
available for borrowing under the revolving loan. Term loan A was paid in full
as of April 30, 2003.

The interest rate on borrowings under term loan B is prime plus a margin of
2.0%. At April 30, 2003, the effective annual interest rate under term loan B
was 6.25%. The Company is amortizing term loan B at the rate of $70,000 of
principal plus accrued interest per month. At April 30, 2003 approximately $1.1
million was outstanding under term loan B.

On February 6, 2003, the Company amended the credit facility to allow for an
additional $7.7 million term loan ("term loan C") to be used to finance part of
the purchase price of RSI acquisition. See Business Acquisitions below and Note
2 to the Company's consolidated financial statements. The interest rate on
borrowings under term loan C is prime plus a margin of 2.75%. At April 30, 2003,
the effective annual interest rate under term loan C was 7.0%. Due to the
Company meeting certain requirements contained in the credit facility, the
margin on term loan C will be 2.25% for the majority of fiscal 2004. The Company
is amortizing the term loan C at the rate of $192,500 of principal plus accrued
interest per month for forty months.

                                       19

<PAGE>

In April 2003, the Company purchased approximately $7.3 million of computer
equipment to be used on one of its outsourcing projects. This equipment was
financed by the vendor until the Company finalized its long-term financing with
a financial institution. Subsequent to year end, on June 15, 2003, the Company
entered into a forty-month term loan ("term loan D") which was used to pay the
computer equipment vendor. This liability has been reflected as a note payable
in the Company's April 30, 2003 financial statements. Term loan D bears interest
at a fixed rate of 4.625% and is secured by the computer equipment purchased
with the proceeds of the loan.

At April 30, 2003, the Company had $21,864 outstanding under a promissory note
with a software vendor that bears interest at 11.0% and is due in fiscal 2004.
The loan is secured by computer software.

In connection with obtaining term loan C, the Company granted to the lender
warrants to purchase 80,000 shares of common stock at an exercise price of $0.68
per share with an expiration date of July 23, 2007 and modified 80,000 warrants
issued to the lender at origination of the credit facility. The modification
decreased the exercise price from $1.00 to $0.68 and extended to the expiration
date to July 23, 2007. At April 30, 2003 Company has outstanding warrants to
purchase 250,000 shares of common stock, at an exercise price of $0.31 per
share, which expire on January 1, 2004; 220,000 shares at an exercise price of
$1.00, which expire on July 23, 2004 and 160,000 shares at an exercise price of
$0.68, which expire on July 23, 2007.

The following is a summary of long-term debt at April 30, 2003 (in thousands):

<TABLE>
<S>                                         <C>
Revolving loan                              $ 6,277
Term loan A                                      --
Term loan B                                   1,067
Term loan C                                   7,250
Term loan D                                   5,759
Notes payable to former RSI shareholders      1,508
Other term notes                                 21
                                            -------
                                            $21,882
                                            =======
</TABLE>

OPERATING CASH FLOW. In addition to the above credit facilities, the Company
funds its operations from cash generated by operations. The Company's operating
activities provided net cash of approximately $14.0 million, $9.9 million and
$15.9 million for fiscal years 2003, 2002, and 2001, respectively. The primary
reason for the increase from fiscal 2002 to 2003 was $2.7 million in income tax
refunds received during fiscal 2003.

CAPITAL EXPENDITURES. The Company's capital expenditures primarily relate to
computer equipment purchases for use by the Company's professionals and on
outsourcing projects. Capital expenditures increased to $7.7 million in fiscal
2003 from $0.3 million in fiscal 2002 due to the purchase of $7.3 million of
computer equipment required to be used on one outsourcing contract, which was
extended during fiscal 2003. The Company does not expect to incur substantial
capital expenditures in fiscal 2004 except to the extent required for new or
revised outsourcing engagements.

DISPOSITIONS OF NON-CORE OPERATIONS. The Company began disposing of its non-core
operations in fiscal 2001 and completed the process in fiscal 2002.

On May 2, 2000, the Company sold substantially all the assets of its Technology
Management Resources business unit, which was engaged in specialized policy
consulting, for $9.7 million in cash plus the assumption of certain related
liabilities. The Company used $8.9 million of the sale proceeds to reduce its
debt and $0.8 million for working capital.

On November 30, 2000, the Company sold substantially all the assets of its
Proven Technology business unit, which was engaged in computer hardware sales,
for 50,000 shares of the Company's common stock plus the assumption of certain
related liabilities.

On November 30, 2000, the Company sold substantially all the assets of its
Global Services business unit, which was engaged in computer hardware sales, for
10,000 shares of the Company's common stock.

                                       20

<PAGE>

On June 20, 2001, the Company sold substantially all the assets of its
Enterprise Resource Planning business unit for $9.1 million in cash plus the
assumption of certain related liabilities. The Company used $8.5 million of the
sale proceeds to reduce its debt and $0.6 million for working capital and to pay
expenses related to the transaction.

On February 28, 2002, the Company sold substantially all the assets of its Delta
Software business unit, which was engaged in specialty software sales, for the
assumption of certain related liabilities.

On April 1, 2002, the Company sold certain assets relating to its Partners
Capital Group business unit, which was engaged in computer equipment leasing,
for $60,000 in cash plus the assumption of certain related liabilities,
including $4.6 million of non-recourse debt.

BUSINESS ACQUISITIONS. On February 4, 2003, the Company, Remtech Services, Inc.
("Remtech" or "RSI"), and the shareholders of Remtech, (the "Shareholders"),
entered into a Stock Purchase Agreement (the "Agreement") pursuant to which the
Company agreed to purchase and the Shareholders agreed to sell 100% of the
outstanding common stock of Remtech. On February 6, 2003 (the "Closing Date"),
the sale was completed. On the Closing Date, the Company acquired all of the
outstanding stock of Remtech from the Shareholders. Pursuant to the Agreement,
the Company paid cash in the amount of $10,864,000 and issued unsecured,
subordinated promissory notes in the amount of $1,800,000 to the Shareholders in
consideration of the sale of all the outstanding shares of common stock of
Remtech (the "Shares"). The purchase price was determined by arms' length
negotiation between the parties, taking into account the historical operating
results and existing customer relationships of Remtech's business. The Company
obtained financing for part of the cash consideration paid pursuant to the
Agreement by (a) a term loan of approximately $7.7 million and (b) borrowing
approximately $3.0 million under the Company's existing revolving loan
agreement. The Company funded the balance of the cash consideration from working
capital. The borrowing base under the existing revolving loan was increased by
approximately $3.7 million by virtue of adding Remtech's accounts receivable to
the Company's borrowing base.

Subsequent to year end, on May 28, 2003, the Company entered into a definitive
stock purchase agreement to acquire National Systems Research Company ("NSR").
The acquisition is expected to close by August 31, 2003 based upon the
satisfactory completion of several closing conditions including the resolution
of certain legal matters and finalization of the financing.

WORKING CAPITAL. At April 30, 2003, the Company had working capital of $4.5
million (including $1.1 million in cash and cash equivalents), a 19.0% decrease
from $5.6 million at April 30, 2002. The decrease in working capital was
primarily due to the Company's large current income tax refunds receivable
recorded as a current asset at April 30, 2002. These refunds were received in
fiscal 2003 and used to reduce long term debt.

The Company generated net cash from operating activities of $14.0 million and
$9.9 million in fiscal 2003 and 2002, respectively. The increase in net cash
provided by operating activities was mainly attributable to income tax refunds
received in fiscal 2003.

STOCK REPURCHASE PROGRAM. On September 10, 2002, the Company's board of
directors approved a stock repurchase program that authorizes the Company to
repurchase up to $3.0 million of common stock. The stock repurchase program
authorizes the Company to repurchase shares of its common stock from time to
time in the open market and through privately negotiated transactions. The
Company will base its decisions to repurchase shares on the prevailing market
conditions, the availability of cash to fund the repurchases, and other relevant
factors. All repurchases will be conducted in accordance with applicable laws,
rules and regulations and the limitations imposed under the Company's credit
facility. Repurchased shares of common stock will be added to the Company's
treasury shares and will be available for future corporate uses. The Company may
discontinue the stock repurchase program at any time.

Under its loan agreement, the Company can repurchase shares with a total cost up
to 50% of the prior quarter's "excess cash flow" as defined in the loan
agreement, provided that the Company's excess availability under the loan
agreement exceeds $4.0 million after the repurchase.

                                       21

<PAGE>

During the year ended April 30, 2003, the Company purchased 689,800 shares of
its common stock for a combined cost of approximately $482,000. The cost of the
shares purchased was recorded as treasury stock, which reduces the amount of
total shareholders' equity.

FUTURE LIQUIDITY REQUIREMENTS. Although it is difficult to predict the Company's
future liquidity requirements, the Company believes that its current cash and
cash equivalents, anticipated cash flows from operations, and available
borrowings under its credit facility will be sufficient for the foreseeable
future to fund the Company's working capital requirements and operations, make
required payments of principal and interest on its debt, and permit future
capital expenditures.

As discussed under "Stock Repurchase Program," the Company will potentially
repurchase shares of its common stock from time to time in the open market and
through privately negotiated transactions based on the prevailing market
conditions, the availability of cash to fund the repurchases, and other relevant
factors. At the beginning of each quarter, based upon the prior quarter's
financial performance, the Company will assess its ability to repurchase shares.
Based upon current information, the Company cannot repurchase more than $571,000
in common stock during the first quarter ended July 31, 2003.

As discussed under "Acquisitions", since the end of fiscal 2003 the Company has
signed a stock purchase agreement and intends on financing the acquisition
through the existing credit facility and seller notes once certain conditions to
closing are resolved.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS. The Company does not utilize
off balance sheet financing other than operating lease arrangements for office
premises and equipment. The following table summarizes all commitments of the
Company under contractual obligations at April 30, 2003 (in thousands):

<TABLE>
<CAPTION>
                                                     Payments Due by Period
                                       --------------------------------------------------
                                                  Less than   1 - 3      4 - 5    After 5
                                         Total      1 Year    Years      Years     Years
                                       --------   ---------  -------    -------   -------
<S>                                    <C>        <C>        <C>        <C>       <C>
Contractual Obligations
Long-term debt                         $ 21,882    $ 5,907   $15,975    $    --    $   --
Operating leases                          5,514      1,565     2,067      1,159       723
                                       --------    -------   -------    -------    ------
    Total cash obligations             $ 27,396    $ 7,472   $18,042    $ 1,159    $  723
                                       ========    =======   =======    =======    ======
</TABLE>

The following table summarizes all other commercial commitments of the Company
at April 30, 2003 (in thousands):

<TABLE>
<CAPTION>
                                              Amount of Commitment Expiration per Period
                                    --------------------------------------------------------------
                                    Total Amount  Less than      1 - 3         4 - 5       After 5
                                     Committed     1 Year        Years         Years        Years
                                    ------------  ---------     -------       --------     -------
<S>                                 <C>           <C>           <C>           <C>          <C>
Other Commercial Commitments
Revolving loan*                        $17,500       $ --       $17,500       $     --       $ --
    Total commercial commitments       $17,500       $ --       $17,500       $     --       $ --
                                       =======       ====       =======       ========       ====
</TABLE>

*    Advances under the revolving loan are limited to a predetermined
     calculation based on the amount of billed and unbilled accounts receivable.
     The outstanding amount under the revolving loan cannot exceed $17,500,000.
     At April 30, 2003, there was $6,277,000 outstanding on the revolving loan
     which is included in long-term debt in the contractual obligations table
     above.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

                                       22

<PAGE>

A "critical accounting policy" is one, which is both important to the
understanding of the financial condition and results of operations of the
Company and requires management's most difficult, subjective or complex
judgments often requiring the need to make estimates about the effect of matters
that are inherently uncertain. The Company's accounting policies that fit this
definition include the following:

REVENUE RECOGNITION. The Company recognizes revenue as professional services are
performed. The Company is compensated for its services on either a time and
materials, fixed fee per month, cost-plus-fee or fixed fee per project basis.

Generally, the Company's contracts with its top ten clients, in accordance with
industry practice, are cancelable on short notice and without penalty (except
with respect to the Company's larger outsourcing contracts), provide for monthly
payment of fees, and establish other basic terms such as the hourly billing
rates for each type of Company professional who performs work pursuant to the
contract. Some contracts specifically define the services to be performed
pursuant to the contract, while other contracts, particularly professional
staffing contracts, merely establish the basic parameters of the work (i.e., the
system to be evaluated, designed or maintained) and require that additional work
orders be submitted for services to be performed. The Company is the exclusive
service provider under certain contracts, while other contracts, particularly
professional staffing contracts, specifically allow the client to engage other
vendors for the projects covered by the contract.

The majority of the Company's revenue, approximately 83%, is billed on a time
and materials basis. Some time and materials contracts contain a cap on the
number of hours to be worked, in which case the hours are monitored to help
prevent exceeding the cap.

Approximately 2% of the Company's revenue is performed on a fixed fee per
project basis. In instances where the Company accepts an engagement on a fixed
fee per project basis, the Company records revenue on a percentage of completion
basis based upon performance milestones. The Company's agreement with the client
calls for the billing of fees at specified increments not directly related to
the timing of costs incurred. The Company records deferred revenue for payments
received from certain customers on service contracts prior to the performance of
services required under the service contract. Estimated losses are recorded when
identified.

Approximately 15% of the Company's revenue is performed on a cost-plus basis.
Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred
plus a proportionate amount of the fee earned. Revenue on time-and-material
contracts is recognized to the extent of billable rates times hours delivered
plus expenses incurred.

Revenue from maintenance support services is nonrefundable and is generally
recognized on a straight-line basis over the term of the service agreement.
Provisions for estimated losses on uncompleted contracts are recorded in the
period such losses are determined.

The Company's U.S. Government contracts (approximately 32% of total revenue in
the fourth quarter of fiscal 2003) are subject to subsequent government audit of
direct and indirect costs. The majority of such audits have been completed
through December 2000. Management does not anticipate any material adjustment to
the consolidated financial statements in subsequent periods for audits not yet
completed.

INCOME TAXES. The Company accounts for income taxes using the liability method.
Under the liability method, 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 basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date. Deferred tax assets
are reduced by a valuation allowance if, based on the weight of available
evidence, management determines that it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The deferred tax
asset valuation allowance is based primarily on management's calculations of
estimated probable future taxable income over the next several years. Management
considers income taxes to be one of the Company's significant accounting
policies because of the estimates and judgment required in predicting probable
future taxable income.

                                       23

<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS. In June 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting standards ("SFAS") No.
143, "Accounting for Asset Retirement Obligations" effective for fiscal years
beginning after June 15, 2002. SFAS 143 requires that a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The Company does not expect the
future adoption of SFAS 143 to have a material effect on its financial position
or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS 145 rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of
Debt," which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of the
related income tax effect. As a result, the criteria in Accounting Principles
Board Opinion No. 30 will now be used to classify those gains and losses. SFAS
145 amends SFAS No. 13, "Accounting for Leases," to require that certain lease
modifications that have economic effects similar to sales-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. The
provisions of SFAS 145 are effective for financial statements for fiscal years
beginning after May 15, 2002. The adoption of SFAS 145 is not expected to have a
material effect on the Company's financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is applicable immediately for variable
interest entities created after January 31, 2003. For variable interest entities
created prior to January 31, 2003, the provisions of FIN 46 are applicable no
later than July 1, 2003. The Company does not expect this interpretation to have
a material effect on its financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003.

In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," that improves
the accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS 150 requires that three instruments be
classified as liabilities in the statement of financial position. This statement
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective for the Company's quarter beginning August 1,
2003. The Company does not believe adoption of this statement will have a
material effect on the Company's financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The statement nullifies Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The statement changes the measurement and
timing of recognition for exit costs, including restructuring charges. The
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. A fundamental
conclusion reached by the Board in this Statement is that an entity's commitment
to a plan, by itself, does not create a present obligation to others that meets
the definition of a liability. The Statement is effective for any such
activities initiated after December 31, 2002. It has no effect on charges
recorded for exit activities begun prior to this date. The adoption of this
statement is not anticipated to have a material effect on the Company's
financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. FIN 45 also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability

                                       24

<PAGE>

for the fair value of the obligation undertaken in issuing the guarantee. The
disclosure requirements of FIN 45 are effective for the Company's fiscal 2003
financial statements. The initial recognition and initial measurement provisions
of FIN 45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The adoption of FIN 45 is not expected to have a
material effect on the Company's financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosures - an amendment of FASB Statement No.
123." SFAS 148 amends SFAS 123 to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The adoption
of SFAS 148 is not expected to have a material effect on financial position or
results of operations.

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risks include fluctuations in interest rates and
variability in interest rate spread relationships (i.e., prime or LIBOR
spreads). Substantially all of the Company's $21.9 million in outstanding debt
at April 30, 2003, relates to credit facilities with commercial lending
institutions. Interest on the outstanding balance is charged based on a variable
rate related to the prime rate. The rate is incremented for margins in the form
of fluctuations in interest rates. The effect of a hypothetical one percentage
point increase across all maturities of variable rate debt would result in a
decrease of $219,000 in pre-tax net income assuming no further changes in the
amount of borrowings subject to variable rate interest from the amounts
outstanding at April 30, 2003. The Company does not trade in derivative
financial instruments.

                                       25
<PAGE>

                          SCB COMPUTER TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except par value)

<TABLE>
<CAPTION>
                                                                                        April 30,
                                                                                ------------------------
                                                                                   2003          2002
                                                                                ----------    ----------
<S>                                                                             <C>           <C>
ASSETS

Current assets:
  Cash and cash equivalents                                                     $    1,112    $      354
  Accounts receivable, net of allowance for doubtful
   accounts of $160 in 2003 and $165 in 2002 (Note 3)                               15,969        14,412
  Prepaid expenses and other current assets                                          1,590         1,874
  Refundable income taxes                                                              574         3,088
  Deferred income taxes (Note 9)                                                     2,028         1,106
                                                                                ----------    ----------
   Total current assets                                                             21,273        20,834

Fixed assets, net (Note 4)                                                          11,811         9,129

Other long-term assets:
  Goodwill (Note 5)                                                                  5,150            --
  Other intangible assets, net of accumulated amortization (Note 5)                  4,770            --
  Deferred income taxes - long-term (Note 9)                                         8,991        10,253
  Other                                                                              1,310         1,161
                                                                                ----------    ----------
                                                                                    20,151        11,414
                                                                                ----------    ----------
    TOTAL ASSETS                                                                $   53,235    $   41,377
                                                                                ==========    ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                              $    2,161    $    1,578
  Deferred revenue                                                                   1,296         1,066
  Accrued expenses                                                                   7,364         5,990
  Current portion of long-term debt (Note 6)                                         5,907         6,585
                                                                                ----------    ----------
  Total current liabilities                                                         16,728        15,219

Other long-term liability                                                               --            50
Long-term debt (Note 6)                                                             15,975         7,993
                                                                                ----------    ----------
Total liabilities                                                                   32,703        23,262

Commitments and contingencies (Notes 7, 8 and 13)

Shareholders' equity (Note 2):

  Preferred stock, no par value - authorized 1,000 shares,
    none issued                                                                         --            --
  Common stock, $.01 par value - 100,000 shares authorized;
    25,025 shares issued; 700 Treasury shares                                          250           250
  Treasury stock                                                                      (482)           (5)
  Additional paid-in capital                                                        40,807        40,713
  Retained earnings (deficit)                                                      (20,038)      (22,843)
                                                                                ----------    ----------
  Total shareholders' equity                                                        20,532        18,115
                                                                                ----------    ----------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                  $   53,235    $   41,377
                                                                                ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

                          SCB COMPUTER TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except earnings per share)

<TABLE>
<CAPTION>
                                                                           Years Ended April 30,
                                                                 ---------------------------------------
                                                                     2003          2002          2001
                                                                 -----------   -----------   -----------
<S>                                                              <C>           <C>           <C>
Revenue                                                          $    90,547   $   105,102   $   132,094
Cost of services                                                      68,475        77,974        94,373
                                                                 -----------   -----------   -----------
  Gross profit                                                        22,072        27,128        37,721

Selling, general and administrative expenses                          18,032        22,783        36,247
Impairment and other charges (Note 12)                                    --            --        42,927
                                                                 -----------   -----------   -----------
  Income (loss) from operations                                        4,040         4,345       (41,453)

Other income (expenses):
  Interest income                                                        355            62            86
  Interest expense                                                    (1,223)       (1,899)       (5,054)
  Other income (Note 2)                                                  298           503         1,348
                                                                 -----------   -----------   -----------
Income (loss) before income taxes                                      3,470         3,011       (45,073)
Income tax expense (benefit) (Note 9)                                    665        (1,684)      (10,949)
                                                                 -----------   -----------   -----------

  Net Income (loss)                                              $     2,805   $     4,695   $   (34,124)
                                                                 ===========   ===========   ===========

Net income (loss) per share - basic (Note 10)                    $      0.11   $      0.19   $     (1.36)
                                                                 ===========   ===========   ===========
Net income (loss) per share - diluted (Note 10)                  $      0.11   $      0.19   $     (1.36)
                                                                 ===========   ===========   ===========
Weighted average number of common shares - basic                      24,647        24,975        25,045
                                                                 ===========   ===========   ===========
Weighted average number of common shares - diluted                    24,949        25,157        25,045
                                                                 ===========   ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

                          SCB COMPUTER TECHNOLOGY, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Additional   Retained        Total
                                                           Number of    Common   Treasury     Paid-In    Earnings     Shareholders'
                                                             Shares     Stock     Shares      Capital    (Deficit)       Equity
                                                           ---------    ------   --------   ----------   ----------   ------------
<S>                                                        <C>          <C>      <C>        <C>          <C>          <C>
Balance at April 30, 2000                                    25,045     $  250    $   --    $ 40,236     $  6,586       $ 47,072
  Retirement of shares of common stock                          (50)        --        --         (23)          --            (23)
  Purchase of treasury shares of common stock                    --         --        (5)         --           --             (5)
  Issuance of common stock warrants                              --         --        --         500           --            500
  Net loss                                                       --         --        --          --      (34,124)       (34,124)
                                                             ------     ------    ------    --------     --------       --------
Balance at April 30, 2001                                    24,975        250        (5)     40,713      (27,538)        13,420
  Net income                                                     --         --        --          --        4,695          4,695
                                                             ------     ------    ------    --------     --------       --------
Balance at April 30, 2002                                    24,975        250        (5)     40,713      (22,843)        18,115
  Purchase of treasury shares of common stock                    --         --      (482)         --           --           (482)
  Issuance of common stock in connection
    with the exercise of employee stock options                  30         --        --          14           --             14
  Issuance of common stock warrants                              --         --        --          80           --             80
  Net income                                                     --         --        --          --        2,805          2,805
                                                             ------     ------    ------    --------     --------       --------
Balance at April 30, 2003                                    25,025     $  250    $ (487)   $ 40,807     $(20,038)      $ 20,532
                                                             ======     ======    ======    ========     ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

                         SCB COMPUTER TECHNOLOGY, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Years Ended April 30,
                                                                                   ------------------------------------
                                                                                      2003         2002         2001
                                                                                   ---------    ----------   ----------
<S>                                                                                <C>          <C>          <C>
Operating Activities:
  Net income (loss)                                                                $   2,805    $    4,695   $  (34,124)
  Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
   Impairment and other charges                                                           --            --       42,927
   Provision (recovery) for bad debts                                                    (58)         (153)       1,637
   Depreciation                                                                        5,138         8,422       10,248
   Amortization                                                                          290           184        2,688
   Deferred income tax expense (benefit)                                                 582         1,148      (10,949)
   Gain on sale of assets                                                                 --          (505)      (1,366)
  Change in operating assets and liabilities, net of
  acquisitions/divestitures of businesses:
   Accounts receivable                                                                 2,518         2,775        3,722
   Prepaid expenses and other assets                                                     194        (2,337)       2,435
   Inventory                                                                              --            --          122
   Refundable income taxes                                                             2,599        (1,244)       6,127
   Accounts payable - trade                                                              239           722       (3,637)
   Accrued expenses and other liabilities                                               (280)       (3,828)      (3,892)
                                                                                   ---------    ----------   ----------
  Net cash provided by operating activities                                           14,027         9,879       15,938
                                                                                   ---------    ----------   ----------

Investing Activities:
  Purchases of fixed assets                                                           (7,685)         (334)      (2,103)
  Payments received from leasing activities                                               --         2,251        6,068
  Purchases of businesses, net of cash acquired of $1,095                            (12,409)           --           --
  Proceeds from sale of businesses, net of liabilities paid                               --        10,144        9,028
                                                                                   ---------    ----------   ----------
  Net cash provided by (used in) investing activities                                (20,094)       12,061       12,993
                                                                                   ---------    ----------   ----------

Financing Activities:
  Payments on short-term debt                                                             --            --       (9,541)
  Borrowings on short-term debt                                                           --            --        2,500
  Borrowings on long-term debt                                                        18,561        21,174           --
  Payments on long-term debt                                                         (10,578)      (45,375)     (12,421)
  Net borrowings (repayments) under line of credit                                      (690)        7,209           --
  Purchases of common stock for treasury                                                (482)           --           --
  Options exercised                                                                       14            --           --
  Payments on non-recourse debt                                                           --        (5,169)     (10,707)
                                                                                   ---------    ----------   ----------
  Net cash provided by (used in) financing activities                                  6,825       (22,161)     (30,169)
                                                                                   ---------    ----------   ----------

Net increase (decrease) in cash and cash equivalents                                     758          (221)      (1,238)
  Cash and cash equivalents at beginning of year                                         354           575        1,813
                                                                                   ---------    ----------   ----------
  Cash and cash equivalents at end of year                                         $   1,112    $      354   $      575
                                                                                   =========    ==========   ==========

Supplemental disclosures of cash flow information:

  Interest paid                                                                    $     837    $    1,635   $    3,553
  Income taxes paid                                                                      194           428           --
  Non-recourse debt assumed by purchaser of business unit (Note 2)                        --         4,556           --
  Current liabilities assumed by purchaser of business unit (Note 2)                      --           316           --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

                          SCB COMPUTER TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial statements
include the accounts of SCB Computer Technology, Inc., and its wholly owned
subsidiaries. All significant intercompany transactions and balances have been
eliminated in consolidation.

GENERAL. SCB Computer Technology, Inc. (the "Company"), was incorporated on May
11, 1984, in the State of Tennessee. The Company is an information technology
company, which primarily provides management and technical services mainly to
state and local governments, agencies of the Federal government of the United
States of Amercica and commercial enterprises.

USE OF ESTIMATES. The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

FIXED ASSETS. All fixed assets are carried at cost. Depreciation, which includes
the amortization of assets recorded under capital leases, is computed using the
straight-line basis over the estimated useful lives of the various fixed assets.
The range of estimated useful lives for computing depreciation on fixed assets
is 3-10 years.

CAPITALIZED SOFTWARE COSTS. Costs incurred internally in creating a computer
software product to be sold or licensed are charged to expense when incurred as
research and development until technological feasibility has been established
for the product. Technological feasibility is established upon completion of a
detailed program design or, in its absence, completion of a working model.
Thereafter, all such software development costs are capitalized and subsequently
reported at the lower of unamortized cost or estimated net realizable value.
Capitalized costs are amortized based on current and future revenue for each
product with annual minimum amortization equal to the straight-line amortization
over the remaining estimated economic life of the product, which ranges from
three to five years.

GOODWILL. The Financial Accounting Standards Board ("FASB") recently issued
Statements of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No.
141 eliminates the pooling method of accounting for all business combinations
initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be
amortized against earnings, but instead reviewed periodically for impairment,
with any identified impairments treated as a cumulative effect of a change in
accounting principle. The Company elected to adopt SFAS No. 142 effective May 1,
2002, and as a result, amortization of goodwill was discontinued. A
reconciliation of previously reported net income and earnings per share with the
amounts adjusted for the exclusion of goodwill amortization net of related
income tax effects follows (in thousands).

                                       30
<PAGE>

<TABLE>
<CAPTION>
                                                          Years Ended April 30,
                                                  ------------------------------------
                                                     2003          2002        2001
                                                  ---------     ---------    ---------
<S>                                               <C>           <C>          <C>
Reported net income (loss)                        $   2,805     $   4,695    $(34,124)
Goodwill amortization, net of tax                        --            --       1,626
                                                  ---------     ---------    --------
Adjusted net income                                   2,805         4,695     (32,498)
Reported basic net income (loss) per share        $    0.11     $    0.19    $  (1.36)
                                                  =========     =========    ========
Goodwill amortization, net of tax                        --            --        0.06
Adjusted basic net income (loss) per share        $    0.11     $    0.11    $   1.30
                                                  =========     =========    ========
Reported diluted net income (loss) per share      $    0.11     $    0.11    $  (1.36)
                                                  =========     =========    ========
Goodwill amortization, net of tax                        --            --        0.06
Adjusted diluted net income (loss) per share      $    0.11     $    0.11    $  (1.30)
                                                  =========     =========    ========
</TABLE>

INTANGIBLE ASSETS. Intangible assets resulted from the Company's acquisition of
RSI. The intangible assets identified during the Company's valuation of RSI's
assets at acquisition date include purchased customer contracts and non-compete
agreements.

ASSET IMPAIRMENT. Long-lived assets consist of tangible assets such as property
and equipment and identifiable intangible assets. The Company monitors events
and changes in circumstances that could indicate that the carrying amount of
long-lived assets may not be recoverable. These events or changes in
circumstances may include, among others, a significant decrease in cash flow, a
significant decrease in earnings, or a significant adverse change in legal
factors. When events or changes in circumstances are present that indicate that
the carrying amount of long-lived assets may not be recoverable, the Company
assesses the recoverability of the assets by determining whether the carrying
value of the assets will be recovered through undiscounted expected future cash
flows after related interest charges. If the Company determines that the
carrying values of specific long-lived assets are not recoverable, the Company
would record a charge to reduce the carrying value of such assets to their fair
values.

REVENUE RECOGNITION. The Company recognizes revenue as professional services are
performed. The Company is compensated for its services on either a time and
materials, fixed fee per month, cost-plus-fee or fixed fee per project basis.

Generally, the Company's contracts with its top ten clients, in accordance with
industry practice, are cancelable on short notice and without penalty (except
with respect to the Company's larger outsourcing contracts), provide for monthly
payment of fees, and establish other basic terms such as the hourly billing
rates for each type of Company professional who performs work pursuant to the
contract. Some contracts specifically define the services to be performed
pursuant to the contract, while other contracts, particularly professional
staffing contracts, merely establish the basic parameters of the work (i.e., the
system to be evaluated, designed or maintained) and require that additional work
orders be submitted for services to be performed. The Company is the exclusive
service provider under certain contracts, while other contracts, particularly
professional staffing contracts, specifically allow the client to engage other
vendors for the projects covered by the contract.

The majority of the Company's revenue, approximately 83%, is billed on a time
and materials basis. Some time and materials contracts contain a cap on the
number of hours to be worked, in which case the hours are monitored to help
prevent exceeding the cap.

                                       31
<PAGE>
Less than 2% of the Company's revenue is performed on a fixed fee per project
basis. In instances where the Company accepts an engagement on a fixed fee per
project basis, the Company records revenue on a percentage of completion basis
based upon performance milestones. The Company's agreements typically call for
the billing of fees at specified increments not directly related to the timing
of costs incurred. The Company records deferred revenue for payments received
from certain customers on service contracts prior to the performance of services
required under the service contract. Estimated losses are recorded when
identified.

Approximately 15% of the Company's revenue is performed on a cost-plus-fee
basis. Revenue on cost-plus-fee contracts is recognized to the extent of costs
incurred plus a proportionate amount of the fee earned. Revenue on
time-and-material contracts is recognized to the extent of billable rates times
hours delivered plus expenses incurred.

Revenue from maintenance support services is nonrefundable and is generally
recognized on a straight-line basis over the term of the service agreement.
Provisions for estimated losses on uncompleted contracts are recorded in the
period such losses are determined.

The Company's U.S. Government contracts (approximately 32% of total revenue in
the fourth quarter of fiscal 2003) are subject to subsequent government audit of
direct and indirect costs. The majority of such audits have been completed
through December 2000. Management does not anticipate any material adjustment to
the consolidated financial statements in subsequent periods for audits not yet
completed.

LEASES. The Company leased equipment to customers prior to the sale of Partners
Capital business unit on April 1, 2002. Leases meeting the criteria for
capitalization in accordance with Statement of Financial Accounting Standards
("SFAS") No. 13, Accounting for Leases, are classified as direct financing
leases. For direct financing leases, the sum of the minimum lease payments and
the unguaranteed residual value is recorded as the gross investment in the
lease. The difference between the gross investment and the cost of the leased
property is recorded as unearned income. Income is recognized over the life of
the lease using the interest method.

Leases not meeting the criteria for capitalization are classified as operating
leases. For operating leases, lease payments are recognized as rental revenue on
a straight-line basis over the life of the lease. Depreciation expense on
equipment under operating leases is recorded over the lease term. The amount
subject to depreciation is the total cost of the leased asset less the
unguaranteed residual value at the end of the lease.

Amendments, extensions, and terminations of leases are accounted for in
accordance with SFAS 13.

INDIRECT LEASING COSTS. Indirect costs incurred in connection with leasing
transactions, such as commissions and certain salaries, are capitalized and
amortized over the lease period.

DETERMINATION OF GROSS RESIDUAL INTERESTS. The unguaranteed gross residual
interests of equipment accounted for as direct financing and operating leases
are determined by assessing the technical and economic life of the equipment in
relation to the length of the lease. The estimated gross residual interests are
periodically reassessed to account for potential fluctuations in residual
values. Reassessment procedures include obtaining independent appraisals,
evaluating new technological developments, and comparing remaining estimated
residual interests with residual values of leases that terminated during the
current period. If there are indications that gross residual interests are
impaired, the Company's policy is to write the amounts down to estimated net
realizable value.

INCOME TAXES. The Company accounts for income taxes using the liability method.
Under the liability method, 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 basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date. Deferred tax assets
are reduced by a valuation allowance if, based on the weight of available
evidence, management determines that it is more likely than not that some
portion or all of the deferred tax assets will not be realized.

                                       32
<PAGE>

STOCK-BASED COMPENSATION. The Company grants stock options for a fixed number of
shares to employees and directors with an exercise price equal to the fair value
of the shares at the date of grant. The Company accounts for stock option grants
in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and accordingly recognizes no
compensation expense for the stock option grants. In accordance with SFAS No.
123, Accounting for Stock-Based Compensation, a valuation using the
fair-value-based accounting method has been made for stock options and
accordingly pro forma net income and earnings per share are shown below For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's pro forma
information follows (in thousands, except earnings per share):

<TABLE>
<CAPTION>
                                                                                  Years Ended April 30,
                                                                          --------------------------------
                                                                            2003        2002        2001
                                                                          --------    --------    --------
<S>                                                                       <C>         <C>         <C>
Net income (loss):
  As reported                                                             $  2,805    $  4,695    $(34,124)
  Add: Stock-based employee compensation expense included in
      net income, net of related tax expense                                    --          --          --
  Deduct: Stock-based employee compensation determined
under fair value based method for all awards, net of related
tax benefit                                                                    228         407         668
  Pro forma - for SFAS 123                                                $  2,577    $  4,288    $(34,792)
Net income (loss) per share:
  As reported - basic                                                     $   0.11    $   0.19    $  (1.36)
  As reported - diluted                                                   $   0.11    $   0.19    $  (1.36)
  Pro forma - for SFAS 123 - basic                                        $   0.10    $   0.17    $  (1.39)
  Pro forma - for SFAS 123 - diluted                                      $   0.10    $   0.17    $  (1.39)
</TABLE>

CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially expose the
Company to concentrations of credit risk consist primarily of trade accounts
receivable. The Company evaluates the credit worthiness of its potential
customers' financial positions and monitors accounts on a periodic basis, but
typically does not require collateral related to accounts receivable. The
Company has not historically experienced significant losses related to accounts
receivable from individual customers or groups of customers in a particular
industry or geographic area. The foregoing concentrations expose the Company to
a greater degree of risk of loss than would be the case with greater
diversification.

FAIR VALUE OF FINANCIAL INSTRUMENTS. At April 30, 2003 and 2002, the carrying
value of cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses approximates its fair values of these instruments due to their
short-term nature. Debt at April 30, 2003 and 2002 approximates the fair value
as these instruments primarily bear interest at variable rates.

NEW ACCOUNTING PRONOUNCEMENTS. In June 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting standards ("SFAS") No.
143, "Accounting for Asset Retirement Obligations" effective for fiscal years
beginning after June 15, 2002. SFAS 143 requires that a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The Company does not expect the
future adoption of SFAS 143 to have a material effect on its financial position
or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS 145 rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of
Debt," which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of the
related income tax effect. As a result, the criteria in Accounting Principles
Board Opinion No. 30 will now be used to classify those gains and losses. SFAS
145 amends SFAS No. 13, "Accounting for Leases," to require that certain lease
modifications that have economic effects similar to sales-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. The
provisions of SFAS 145 are effective for financial statements for fiscal years
beginning after May 15, 2002. The adoption of SFAS 145 is not expected to have a
material effect on the Company's financial position or results of operations.

                                       33
<PAGE>

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is applicable immediately for variable
interest entities created after January 31, 2003. For variable interest entities
created prior to January 31, 2003, the provisions of FIN 46 are applicable no
later than July 1, 2003. The Company does not expect this interpretation to have
a material effect on its financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003.

In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," that improves
the accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS 150 requires that three instruments be
classified as liabilities in the statement of financial position. This statement
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective for the Company's quarter beginning August 1,
2003. The Company does not believe adoption of this statement will have a
material effect on the Company's financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The statement nullifies Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The statement changes the measurement and
timing of recognition for exit costs, including restructuring charges. The
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. A fundamental
conclusion reached by the Board in this Statement is that an entity's commitment
to a plan, by itself, does not create a present obligation to others that meets
the definition of a liability. The Statement is effective for any such
activities initiated after December 31, 2002. It has no effect on charges
recorded for exit activities begun prior to this date. The adoption of this
statement is not anticipated to have a material effect on the Company's
financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. FIN 45 also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The disclosure
requirements of FIN 45 are effective for the Company's fiscal 2003 financial
statements. The initial recognition and initial measurement provisions of FIN 45
are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 is not expected to have a material
effect on the Company's financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosures - an amendment of FASB Statement No.
123." SFAS 148 amends SFAS 123 to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The adoption
of SFAS 148 is not expected to have a material effect on financial position or
results of operations.

2. BUSINESS ACQUISITIONS AND DISPOSITIONS

On February 4, 2003, the Company, Remtech Services, Inc. ("Remtech" or "RSI"),
and the shareholders of Remtech, (the "Shareholders"), entered into a Stock
Purchase Agreement (the "Agreement") pursuant to which the

                                       34
<PAGE>

Company agreed to purchase and the Shareholders agreed to sell 100% of the
outstanding common stock of Remtech. On February 6, 2003 (the "Closing Date"),
the sale was completed. On the Closing Date, the Company acquired all of the
outstanding stock of Remtech from the Shareholders. Pursuant to the Agreement,
the Company paid cash in the amount of $10,864,000 and issued an unsecured,
subordinated promissory notes in the amount of $1,800,000 to the Shareholders in
consideration of the sale of all the outstanding shares of common stock of
Remtech (the "Shares"). The purchase price was determined by arms' length
negotiation between the parties, taking into account the historical operating
results and existing customer relationships of Remtech's business. The Company
obtained financing for part of the cash consideration paid pursuant to the
Agreement by (a) a term loan of approximately $7,700,000 and (b) borrowing
approximately $3,000,000 under the Company's existing revolving loan. The
Company funded the balance of the cash consideration from working capital. The
borrowing base under the existing revolving loan was increased by approximately
$3.7 million by virtue of adding Remtech's accounts receivable to the Company's
borrowing base. The Company also granted non-qualified stock options to purchase
shares of its common stock to several key Remtech employees through the
Company's stock option plans.

The acquired business provides information technology support services primarily
to the federal government, which was one of the primary reasons for the
acquisition. As part of this acquisition, 602 employees joined SCB.
Approximately $5.1 million of the purchase consideration has been allocated to
goodwill, based upon the excess of the purchase price over the $3.4 million
estimated fair value of net tangible assets and the $5.0 million assigned to
identifiable intangible assets acquired. The Company is amortizing these
intangible assets over a period of three to six years with 5.9 years being the
weighted average amortization period. RSI contributed revenue of $9.0 million
for the period from November 1, 2001 to June 30, 2002. The following condensed
balance sheet discloses the amount assigned to each major assets and liabilities
of RSI at the acquisition date (in thousands):

<TABLE>
<S>                                                                      <C>
Assets
Cash                                                                     $    1,095
Accounts receivable, net of allowance for doubtful accounts of $42            4,017
Prepaid expenses and other current assets                                        42
Fixed assets                                                                    133
Deferred income taxes, net                                                      327
Identifiable intangible assets                                                4,990
Goodwill                                                                      5,088
                                                                         ----------
  Total Assets                                                               15,692
                                                                         ==========
Liabilities
Accounts payable                                                         $      344
Accrued expenses                                                              1,832
Debt                                                                             12
  Total Liabilities                                                           2,188
                                                                         ----------
Net assets allocated                                                     $   13,504
                                                                         ==========
</TABLE>

Pro Forma Information (unaudited)

The following unaudited pro forma combined condensed statements of operations
set forth the consolidated results of operations of the Company for the years
ended April 30, 2003 and 2002 as if the above-mentioned acquisition had occurred
at the beginning of both the year of acquisition and the year prior to the
acquisition. This unaudited pro forma information does not purport to be
indicative of the actual financial position or the results that would actually
have occurred if the combinations had been in effect for the years ended April
30 (in thousands):

<TABLE>
<CAPTION>
                                                   April 30,
                                            -----------------------
                                               2003         2002
                                            ----------   ----------
<S>                                         <C>          <C>
Revenue                                     $  112,664   $  133,274
Net Income                                       2,927        4,866
Diluted net income per share                      0.12         0.19
</TABLE>

                                       35
<PAGE>

The following is a summary of the Company's acquisitions completed during the
years ended April 30, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
      Date                 Party               Transaction                        Consideration
      ----                 -----               -----------                        -------------
<S>                 <C>                       <C>                <C>
February 1, 2003    Remtech Services, Inc.    Stock purchase     $13,164,000 consisting of $10,864,000 in
                                                                 cash, $1,800,000 in notes payable to the
                                                                 former RSI owners and $500,000 in future
                                                                 payments under the former owners covenant
                                                                 not to compete agreements. The Company also
                                                                 paid $340,000 in professional fees related
                                                                 to the acquisition.
</TABLE>

The following is a summary of the Company's dispositions completed during the
years ended April 30, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
     Date                          Business Unit              Transaction                Consideration
     ----                          -------------              -----------                -------------
<S>                      <C>                                  <C>               <C>
May 2, 2000              Technology Management Resources       Asset sale       $10,000,000 in cash
                         business unit

November 30, 2000        Proven Technology business unit       Asset sale       $23,000 consisting of 50,000 shares
                                                                                of the Company's common stock, plus
                                                                                assumption of liabilities

November 30, 2000        Global Services business unit         Asset sale       $5,000 consisting of 10,000 shares
                                                                                of the Company's common stock

June 20, 2001            Enterprise Resource Planning          Asset sale       $9,144,000 in cash, plus assumption
                                                                                of liabilities
                         business unit

February 28, 2002        Delta Software business unit          Asset sale       Assumption of liabilities

April 1, 2002            Partners Capital business unit        Asset sale       $60,000 in cash, plus assumption of
                                                                                liabilities, including $4.6 million
                                                                                of non-recourse debt
</TABLE>

As a result of the above dispositions, the Company realized gains on the sale of
assets of $505,000 and $1,366,000 in fiscal 2002 and 2001, respectively. Since
all non-core operations have been disposed, the Company did not have any
non-core operations in fiscal 2003. The summarized operating results of the
disposed business units are presented in Note 15 as the Company's non-core
operations.

The Company acquired Partners Resources, Inc. ("PRI") as of June 30, 1997. In
May 1999, the Company paid $7.1 million and issued 1,580,582 shares of common
stock to the former shareholders of PRI in full settlement of the remaining
earnout provisions.

At April 30, 2003, the Company has no remaining earnout or other contingent
payment obligations to any of the sellers or buyers in the above transactions.

3. ACCOUNTS RECEIVABLE

Accounts receivable includes unbilled receivables of approximately $2,234,000
and $1,179,000 at April 30, 2003 and 2002, respectively. Such amounts are the
result of services performed and revenue recognized in advance of

                                       36
<PAGE>

contractual billings to customers. Substantially all of the unbilled receivables
are expected to be collected within one year.

The Company earns a significant portion of its revenue from relatively few
customers. The Company's five largest revenue-generating customers accounted for
52%, 52%, and 44% of its revenue for the years ended April 30, 2003, 2002, and
2001, respectively. The following customers accounted for 10% or more of the
Company's revenue in fiscal 2003: State of Tennessee (16%), State of Kentucky
(14%), and IBM (successor to Honeywell International, Inc.) (11%). At April 30,
2003 and 2002, the Company's accounts receivable from the five largest
revenue-generating customers were approximately $6,316,000 and $7,807,000,
respectively.

4. FIXED ASSETS

Fixed assets consisted of the following at April 30, 2003 and 2002 (in
thousands):

<TABLE>
<CAPTION>
                                          April 30,
                                    ---------------------
                                       2003        2002
                                    ---------   ---------
<S>                                 <C>         <C>
Furniture, fixtures and equipment   $  37,059   $  29,513
Accumulated depreciation              (25,248)    (20,384)
                                    ---------   ---------
                                    $  11,811   $   9,129
                                    =========   =========
</TABLE>

5. INTANGIBLE ASSETS

Intangible assets resulted from the Company's acquisition of RSI. The intangible
assets identified during the Company's valuation of RSI's assets at the date of
acquisition include purchased customer contracts and non-compete agreements.
These intangible assets are being amortized over 3 to 6 years with 5.9 years
being the weighted average amortization period. No residual value has been
assigned to these identifiable intangible assets. Amortization expense was
$290,000 for the year ended April 30, 2003. Amortization expense for all of the
Company's intangible assets including goodwill is deductible for Federal income
tax purposes using the straight-line method over a fifteen-year amortization
period. Intangible assets consisted of the following at April 30, 2003 and 2002
(in thousands):

<TABLE>
<CAPTION>
                                          April 30,
                                     -------------------
                                        2003      2002
                                     --------   --------
<S>                                  <C>        <C>
Goodwill                             $  5,150   $     --
Accumulated amortization                   --         --
                                     --------   --------
                                     $  5,150   $     --
                                     ========   ========

Covenant not to compete agreements   $    500   $     --
Accumulated amortization                  (42)        --
                                     --------   --------
                                     $    458   $     --
                                     ========   ========

Purchased customer contracts         $  4,490   $     --
Accumulated amortization                 (248)        --
                                     --------   --------
                                     $  4,242   $     --
                                     ========   ========
</TABLE>

Future estimated aggregate amortization for all identifiable intangible assets
subject to amortization as of April 30, 2003 are as follows (in thousands):

<TABLE>
<CAPTION>
Years Ending April 30,
----------------------
<S>                      <C>
      2004               $   1,144
      2005                   1,077
      2006                     932
      2007                     670
      2008                     491
      Thereafter               387
                         ---------
                         $   4,700
                         =========
</TABLE>

                                       37

<PAGE>

6. LONG-TERM DEBT

On July 23, 2001, the Company refinanced its debt by obtaining a five-year,
$27.5 million credit facility (the "credit facility") that consists of a $17.5
million revolving loan (the "revolving loan") and a $10.0 million term loan
("term loan A"). In connection with this refinancing, the Company refinanced an
existing loan with a different financial institution into a three-year, $4.0
million term loan ("term loan B"). The credit facility is secured by
substantially all the Company's assets and contains various financial and other
covenants. The Company was in compliance with these loan covenants at April 30,
2003.

The interest rate on borrowings under the revolving loan is prime plus a margin
of 1.0%. At April 30, 2003, the effective annual interest rate under the
revolving loan was 5.25%. At April 30, 2003, approximately $6,277,000 million
was outstanding on the revolving loan. The amount available for borrowing under
the revolving loan is limited to 85% of billed accounts receivable plus 70% of
unbilled accounts receivable. At April 30, 2003, approximately $4.3 million was
available for borrowing under the revolving loan. Term loan A was paid in full
as of April 30, 2003.

The interest rate on borrowings under term loan B is prime plus a margin of
2.0%. At April 30, 2003, the effective annual interest rate under the secondary
term loan was 6.25%. The Company is amortizing the term loan B at the rate of
$70,000 of principal plus accrued interest per month. Because the Company
achieved certain financial results during fiscal 2002, the primary lender
advanced the Company $1.0 million to repay part of term loan B. At April 30,
2003, approximately $1,067,000 was outstanding on term loan B.

On February 6, 2003, the Company amended the credit facility to allow for an
additional $7,700,000 term loan ("term loan C") to be used to finance part of
the purchase price of the RSI acquisition. See Note 2. The interest rate on
borrowings under term loan C is prime plus a margin of 2.75%. At April 30, 2003,
the effective annual interest rate under term loan C was 7.0%. Due to the
Company meeting certain requirements contained in the credit facility, the
margin on term loan C will be 2.25% for the majority of fiscal 2004. The Company
is amortizing the term loan C at the rate of $192,500 of principal plus accrued
interest per month for forty months.

In April 2003, the Company purchased approximately $6.5 million of computer
equipment to be used on one of its outsourcing projects. The vendor financed
this equipment until the Company finalized its long-term financing with a
financial institution. Subsequent to year-end, on June 15, 2003, the Company
entered into a forty-month term loan ("term loan D") and used the proceeds to
pay the computer equipment vendor. This liability has been reflected as a note
payable in the Company's April 30, 2003 financial statements. Term loan D bears
interest at a fixed rate of 4.625% and is secured by the computer equipment
purchased with the proceeds of the loan.

At April 30, 2003, the Company had $21,864 outstanding under a promissory note
with a software vendor that bears interest at 11.0% and is due in fiscal 2004.
The loan is secured by computer software.

Long-term debt consisted of the following at April 30, 2003 and 2002 (in
thousands):

<TABLE>
<CAPTION>
                                                 April 30,
                                           ---------------------
                                              2003        2002
                                           ---------   ---------
<S>                                        <C>         <C>
Revolving loan                             $   6,277   $   5,587
Term loan A                                       --       6,500
Term loan B                                    1,067       2,407
Term loan C                                    7,250          --
Term loan D                                    5,759          --
Notes payable to former RSI shareholders       1,508          --
Other term notes                                  21          84
                                           ---------   ---------
                                              21,882      14,578

Less: current portion                         (5,907)     (6,585)
                                           ---------   ---------
                                           $  15,975   $   7,993
                                           =========   =========
</TABLE>

Future maturities related to long-term debt as of April 30, 2003 are as follows
(in thousands):

                                       38

<PAGE>

<TABLE>
<CAPTION>
Years Ending April 30,
----------------------
<S>                      <C>
      2004               $   5,907
      2005                   4,767
      2006                   4,323
      2007                   6,885
      2008                      --
      Thereafter                --
                         ---------
                         $  21,882
                         =========
</TABLE>

In connection with obtaining a term loan to finance part of the purchase price
of the RSI acquisition, the Company granted to the lender warrants to purchase
80,000 shares of common stock at an exercise price of $0.68 per share with an
expiration date of July 23, 2007 and modified 80,000 warrants issued to the
lender at origination of the credit facility. The modification decreased the
exercise price from $1.00 to $0.68 and extended the expiration date to July
23, 2007. At April 30, 2003 the Company has outstanding warrants to purchase
250,000 shares of common stock, at an exercise price of $0.31 per share, which
expire on January 1, 2004; 220,000 shares at an exercise price of $1.00, which
expire on July 23, 2004 and 160,000 shares at an exercise price of $0.68, which
expire on July 23, 2007.

7. PROFIT-SHARING PLAN

The Company maintains the SCB Computer Technology, Inc., KSOP for the benefit of
its eligible employees. The KSOP is a tax-qualified profit-sharing plan under
Section 401(k) of the Internal Revenue Code of 1986, as amended. A participant
in the KSOP may elect to reduce his or her compensation by an amount that the
Company will contribute to a trust under the KSOP on behalf of the participant.
The Company, at the discretion of its board of directors, may match a percentage
of a participant's contribution based on his or her length of service with the
Company. The Company's matching contributions to the KSOP on behalf of all
participants were $245,615, $275,894, and $634,380 in the years ended April 30,
2003, 2002, and 2001, respectively. The KSOP also contains provisions pursuant
to which certain participants' account balances under the Company's predecessor
employee stock ownership plan (the "ESOP") are maintained in the KSOP. The ESOP
accounts are invested primarily in the Company's common stock. The Company did
not make any contributions to the ESOP accounts maintained in the KSOP in the
years ended April 30, 2003, 2002, and 2001. The Company paid administrative
expenses associated with the KSOP of approximately $63,000, $36,000, and $23,000
in the years ended April 30, 2003, 2002, and 2001, respectively.

Effective May 1, 2003, the Company made several changes to the KSOP. First the
KSOP was amended to divide the plan into its component elements which resulted
in the creation of the SCB Computer Technology, Inc. ESOP and the SCB Computer
Technology, Inc. 401(k) Plan. The ESOP now holds all employee stock accounts and
the 401(k) plan holds all other plan assets. Second, the 401(k) plan was amended
to merge the 401(k) plans formerly sponsored by RSI into the Company's 401(k)
plan.

8. LEASES

Total rent expense for the years ended April 30, 2003, 2002, and 2001 was
$2,521,322, $1,772,339, and $2,398,667, respectively. The Company leases certain
office facilities and vehicles under non-cancelable operating lease agreements,
which expire at various dates. Total future annual lease requirements are as
follows (in thousands):

<TABLE>
<CAPTION>
Years Ending April 30,
----------------------
<S>                      <C>
      2004               $  1,565
      2005                  1,411
      2006                    656
      2007                    581
      2008                    578
      Thereafter              723
                         --------
                         $  5,514
                         ========
</TABLE>

9. FEDERAL AND STATE INCOME TAXES

                                       39

<PAGE>

The significant components of the provision for income taxes are as follows (in
thousands):

<TABLE>
<CAPTION>
                                  Years Ended April 30,
                          ------------------------------------
                             2003         2002         2001
                          ----------   ----------   ----------
<S>                       <C>          <C>           <C>
Federal:
  Current                 $       --   $   (2,832)   $      --
  Deferred                       487        1,404       (9,286)
                          ----------   ----------    ---------
                                 487       (1,428)      (9,286)
                          ----------   ----------    ---------
State:
  Current                         83           --           --
  Deferred                        95         (256)      (1,663)
                          ----------   ----------    ---------
                                 178         (256)      (1,663)
                          ----------   ----------    ---------
Total expense (benefit)   $      665   $   (1,684)   $ (10,949)
                          ==========   ==========    =========
</TABLE>

The deferred tax assets and liabilities are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
                                      Years Ended April 30,
                                     -----------------------
                                        2003         2002
                                     ---------    ---------
<S>                                  <C>          <C>
Deferred tax assets:
   Goodwill impairment               $   8,308    $   9,160
   Accrued liabilities                     794          901
   Net operating loss carryforward       1,690        2,256
   Alternative minimum tax credits         502          502
   Allowance for doubtful accounts         176          205
                                     ---------    ---------
   Total deferred tax assets            11,469       13,024
   Less valuation allowance                 --         (705)
                                     ---------    ---------
Net deferred tax assets                 11,469       12,319
Deferred tax liabilities:
   Leasing activities                       --           --
   Accumulated depreciation                449          960
                                     ---------    ---------
   Total deferred tax liabilities          449          960
                                     ---------    ---------
Net deferred income taxes               11,020       11,359
Less: Amount classified as current      (2,028)      (1,106)
                                     ---------    ---------
Deferred income taxes - long term    $   8,991    $  10,253
                                     =========    =========
</TABLE>

The deferred tax asset valuation allowance was based on management's
calculations of estimated probable future taxable income over the next several
years after considering available federal and state income tax loss
carryforwards of $4.3 million.

                                       40

<PAGE>

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       Years Ended April 30,
                                                 ----------------------------------------------------------------
                                                        2003                   2002                   2001
                                                 -------------------   --------------------   -------------------
                                                  Amount     Percent    Amount     Percent     Amount     Percent
                                                 --------    -------   --------    -------    --------    -------
<S>                                              <C>         <C>       <C>         <C>        <C>         <C>
Tax at U.S. federal statutory rates              $  1,180     34.0%    $  1,024      34.0%    $(15,325)    (34.0)%
State income taxes, net of federal tax benefit        230      6.6         (169)     (5.6)      (1,098)     (2.4)
Change in deferred tax valuation allowance           (705)   (20.3)      (2,513)    (83.5)       3,218       7.1
Non-deductible goodwill impairment                     --       --           --        --        1,193       2.6
Other, net                                            (40)    (1.1)         (26)     (0.9)       1,063       2.4
                                                 --------    -----      --------     ----      --------    -----
                                                 $    665     19.2%    $ (1,684)    (55.9)%   $(10,949)    (24.3)%
                                                 ========    =====      ========    =====      ========    =====
</TABLE>

At April 30, 2003, the Company had federal and state income tax loss
carryforwards for tax return purposes of $4.3 million. The loss carryforwards
expire in various amounts through 2017.

Due to tax legislation enacted during fiscal 2002, the Company received $1.5
million of additional income tax refunds from net operating loss carrybacks in
fiscal 2002. The Company received another $0.7 million of such tax refunds in
May 2002 and anticipates receiving an additional $0.2 million during the balance
of fiscal 2003.

                                       41

<PAGE>

10. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                             Years Ended April 30,
                                                                       ---------------------------------
                                                                          2003        2002        2001
                                                                       ---------   ---------   ---------
<S>                                                                    <C>         <C>         <C>
Numerator:
  Net income (loss)                                                    $   2,805   $   4,695   $ (34,124)
                                                                       =========   =========   =========
Denominator:
  Denominator for basic earnings per share - weighted average shares      24,647      24,975      25,045
  Effect of diluted securities:
     Employee stock options and outstanding warrants                         302         182          --
                                                                       ---------   ---------   ---------
  Denominator for diluted earnings per share - adjusted weighted
  average and assumed conversions                                         24,949      25,157      25,045
Basic earnings (loss) per share                                        $    0.11   $    0.19   $   (1.36)
                                                                       =========   =========   =========
Diluted earnings (loss) per share                                      $    0.11   $    0.19   $   (1.36)
                                                                       =========   =========   =========
</TABLE>

Options to purchase 2.2 million and 2.4 million shares of common stock at April
30, 2003 and 2002, respectivley, were excluded from the computation of diluted
earnings per share because their effect would have been anti-dilutive.

11. STOCK INCENTIVE PLAN

The Company maintains two stock incentive plans for the benefit of the officers,
other key employees, and outside directors of and consultants to the Company and
its subsidiaries. The Company is authorized to grant incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock, and
other stock-based awards under the stock incentive plans. To date, the Company
has granted only non-qualified stock options to purchase shares of its common
stock. Generally, the exercise price of the options is equal to the market value
of the underlying shares of common stock on the date of grant, the options
become exercisable within one to four years from the date of grant, and the
options expire ten years from the date of grant. The Company is allowed to issue
a total of 4,800,000 shares of common stock pursuant to the stock incentive
plans. At April 30, 2003, there were outstanding options to purchase an
aggregate of 3,871,660 shares of common stock and a total of 727,323 options
available for future awards to be granted under the stock incentive plans. The
following amounts reflect the effect of all stock dividends and splits declared
through April 30, 2003.

A summary of the options outstanding at April 30, 2003, follows (in thousands,
except weighted average exercise price):

<TABLE>
<CAPTION>
                                           Options Outstanding                        Options Exercisable
                           --------------------------------------------------   ------------------------------
                                             Weighted           Weighted
                             Number      Average Remaining   Average Exercise     Number      Weighted Average
Range of Exercise Prices   Outstanding    Contractual Life        Price         Exercisable    Exercise Price
------------------------   -----------   -----------------   ----------------   -----------   ----------------
<S>                        <C>           <C>                 <C>                <C>           <C>
    $0.45 - $ 2.72            1,869             9.39              $0.71              353            $0.53
    $2.88 -   3.63              577             6.73              $2.92              577            $2.92
    $3.75 -   5.50            1,164             3.51              $4.38            1,164            $4.38
    $5.88 -  11.56              262             4.45              $8.53              261            $8.54
                              -----                                                -----
    $0.45 - $11.56            3,872             6.89              $2.67            2,354            $3.90
                              =====                                                =====
</TABLE>

                                       42

<PAGE>

The following is a summary of the option transactions for fiscal 2003, 2002 and
2001 (in thousands, except weighted average exercise price):

<TABLE>
<CAPTION>
                                                         Years Ended April 30,
                                     --------------------------------------------------------------
                                            2003                 2002                  2001
                                     ------------------   -------------------   -------------------
                                               Weighted              Weighted              Weighted
                                                Average               Average               Average
                                               Exercise              Exercise              Exercise
                                     Options    Price     Options      Price    Options      Price
                                     -------    -----     -------      -----    -------      -----
<S>                                  <C>       <C>        <C>        <C>        <C>        <C>
Outstanding at May 1                  2,614    $   4.09    2,621     $   4.84     3,283    $   5.24
Granted                               1,518    $   0.75      350     $   0.49        40    $   0.68
Exercised                               (30)   $   0.45       --     $     --        --    $     --
Canceled                               (230)   $   6.69     (357)    $   5.81      (702)   $   6.14
                                      -----                -----                  -----
Outstanding at April 30               3,872    $   2.67    2,614     $   4.09     2,621    $   4.84
                                      =====                =====                  =====
Exercisable at fiscal year end        2,354    $   3.90    2,454     $   4.19     2,244    $   5.06
Weighted average fair value of
options granted during fiscal year             $   0.75              $   0.49              $   0.31
</TABLE>

The exercise prices of the options outstanding at April 30, 2003, ranged from
$0.45 to $11.56 per share. The weighted average remaining contractual life of
those options is approximately six years.

The Company has elected to follow APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for its employee
stock options, because as discussed below, the alternative fair value accounting
provided for under SFAS No. 123, Accounting for Stock-Based Compensation,
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB Opinion 25, the Company recognizes no
compensation expense upon the grant of the options, because the exercise price
of the options equals the market price of the underlying stock on the date of
grant.

Pro forma information regarding net income and earnings per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
options under the fair value method of that Statement. The fair value for the
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for fiscal 2003, 2002, and
2001, respectively: risk-free interest rates of 4.50 percent, 5.00 percent and
6.00 percent; no dividend yield; volatility factors of the expected market price
of the Company's common stock of .866, .959 and .490: and a weighted average
expected life of the option of five years. Using the Black-Scholes option
valuation model, the weighted average value of options granted during the years
ended April 30, 2003, 2002, and 2001, were $0.49, $0.32 and $0.31 per option,
respectively.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its options.

12. IMPAIRMENT AND OTHER CHARGES

During the second quarter of fiscal 2001, the Company began an evaluation of its
operations, including the strategic direction of the Company. For over twenty
years, the Company's primary focus was providing clients with IT consulting,
outsourcing and professional staffing services (the "core operations").
Approximately five years ago, the Company initiated an acquisition program in an
effort to become a provider of diversified IT services such as specialized
policy consulting, computer hardware and specialty software sales, enterprise
resource planning, and computer equipment leasing (the "non-core operations").
The evaluation included assessing the carrying value of long-lived assets
(including goodwill and unguaranteed lease residuals), space needs in several
locations, certain employment-related matters, and the disposition of the
non-core operations. The evaluation, which was completed in the fourth quarter
of fiscal 2001, indicated that the Company should focus its resources on the
core operations and de-emphasize the non-core operations.

                                       43

<PAGE>

As a result of this evaluation, the Company recorded the following impairment
and other charges in the year ended April 30, 2001, of which approximately $2.6
million represented cash payments (in thousands):

<TABLE>
<CAPTION>
                                                      Core      Non-Core     Total
                                                   ---------   ---------   ---------
<S>                                                <C>         <C>         <C>
Impairment charges:
  Goodwill - Partners Resources, Inc.              $  26,894   $      --   $  26,894
  Goodwill - Partners Capital Group                       --       3,510       3,510
  Unguaranteed lease residuals                            --       7,302       7,302
  Leasehold improvements                                 824          --         824
  Equipment                                               --         308         308
Other charges:
  Severance and other employee benefits                2,237          --       2,237
  Lease cancellation, buyout, and abandonments           384          --         384
  Abandoned software                                     514          --         514
  Loss on disposal of Global Services (Note 2)            --         783         783
  Loss on disposal of Proven Technology (Note 2)          --         171         171
                                                   ---------   ---------   ---------
Total impairment and other charges                 $  30,853   $  12,074   $  42,927
                                                   =========   =========   =========
</TABLE>

The components of the change in this accrual associated with these charges for
fiscal 2003, 2002 and 2001 are as follows (in thousands):

<TABLE>
<CAPTION>
Fiscal      Beginning                                                                 Ending
 Year       Accrual           Expense Provision     Cash Payments     Reversals       Accrual
------      ---------        -------------------   ---------------   -----------      -------
<S>                          <C>                   <C>               <C>             <C>
2003        $    259                  --                $  259            --           $   --
2002        $  1,069                  --                   810            --           $  259
2001        $     --                1,909                  551           289           $1,069
</TABLE>

13. LITIGATION AND LEGAL PROCEEDINGS

The Company is from time to time involved in various claims and litigation
incidental to its business. The Company is not currently involved in any
litigation.

14. RELATED PARTY TRANSACTIONS

On July 16, 2001, the Company agreed to lend up to $192,000 to T. Scott Cobb,
the President and Chief Executive Officer and a director of the Company (the
"first loan"). The proceeds of the first loan were to be used by Mr. Cobb to
repay his personal indebtedness to a commercial bank. The first loan bears
interest at prime and originally had a maturity date of April 30, 2002. On
January 18, 2002, the Company and Mr. Cobb modified the first loan by increasing
the maximum available principal amount to $313,755 and extending the maturity
date to August 31, 2002, subject to the requirement that Mr. Cobb prepay the
first loan in certain circumstances. On August 28, 2002, the Company extended
the maturity date of the first loan for two months to October 31, 2002, in order
to provide Mr. Cobb with sufficient time to repay the first loan in its
entirety. On October 31, 2002, Mr. Cobb repaid $300,000 of the principal balance
on the first loan to the Company. At October 31, 2002, the outstanding principal
balance of the first loan was $11,480 and the interest accrued thereunder was
$13,739. On November 6, 2002, Mr. Cobb repaid in full the principal and accrued
interest on the first loan.

On February 15, 2002, the Company agreed to lend an additional $500,000 to Mr.
Cobb (the "second loan"). The second loan incurred interest at prime, had a
maturity date of January 31, 2003, and was secured by a pledge by Mr. Cobb to
the Company of 1,503,691 shares of the Company's common stock owned by Mr. Cobb.
The proceeds of the second loan were to be used by Mr. Cobb to repay his
personal indebtedness to a commercial bank. On June 14, 2002, Mr. Cobb repaid
the $500,000 principal balance of the second loan to the Company. At October 31,
2002, the interest accrued under the second loan was $7,851. On November 6,
2002, Mr. Cobb repaid in full the accrued interest on the second loan.

In fiscal 2003, the Company paid IT Resources Solutions.net, Inc. ("ITRS"), a
minority owned business, $73,500 for marketing management services in the

                                       44

<PAGE>

northeastern United States, $26,506 for the lease of office and storage
facilities in New York, and $28,432 for contract labor used on the Company's
projects. The Company received $70,390 in revenue for employees working under
sub-contractual agreements on ITRS projects. Kenneth J. Cobb, the son of T.
Scott Cobb, is a shareholder of ITRS.

15. SEGMENT INFORMATION

Beginning with the second quarter of fiscal 2001, the Company operated within
two business segments as a result of the strategic business decisions discussed
in Note 13. The two business segments are (1) core operations, which consist of
IT outsourcing, consulting, and professional staffing services, and (2) non-core
operations, which consist of specialized policy consulting, computer hardware
and specialty software sales, enterprise resource planning, and computer
equipment leasing. Accordingly, the Company is presenting the following
summarized financial information concerning the Company's operating segments at
April 30, 2003, 2002, and 2001, and for each of the fiscal years then ended (in
thousands):

<TABLE>
<CAPTION>
                                               Years Ended April 30,
                                      ---------------------------------------
                                         2003           2002        2001(a)
                                      -----------   -----------   -----------
<S>                                   <C>           <C>           <C>
Revenue:
  Core operations                     $    90,547   $    99,136   $   100,911
  Non-core operations                          --         5,966        31,183
  Corporate                                    --            --            --
                                      -----------   -----------   -----------
                                      $    90,547   $   105,102   $   132,094
                                      ===========   ===========   ===========
Income (loss) from operations:
  Core operations                     $    12,368   $    15,274   $    15,325
  Non-core operations                          --           263        (1,559)
  Corporate                                (8,328)      (11,192)      (12,292)
                                      -----------   -----------   -----------
                                      $     4,040   $     4,345   $     1,474
                                      ===========   ===========   ===========
Total assets:
  Core operations                     $    35,577   $    21,144   $    30,723
  Non-core operations                          --            --        17,962
  Corporate                                17,578        20,233        17,929
                                      -----------   -----------   -----------
                                      $    53,155   $    41,377   $    66,614
                                      ===========   ===========   ===========
Expenditures for long-lived assets:
  Core operations                     $     7,608   $       170   $       388
  Non-core operations                          --            --         1,294
  Corporate                                    77           164           421
                                      -----------   -----------   -----------
                                      $     7,685   $       334   $     2,103
                                      ===========   ===========   ===========
Depreciation and amortization:
  Core operations                     $     4,827   $     4,528   $     6,669
  Non-core operations                          --         3,197         4,400
  Corporate                                   601           881         1,867
                                      -----------   -----------   -----------
                                      $     5,428   $     8,606   $    12,936
                                      ===========   ===========   ===========
</TABLE>

(a) Fiscal 2001 income from operations excludes impairment and other charges of
$42.9 million.

The non-core operations consist of the business units that were disposed of from
May 2000 to April 2002 as described in Note 2.

Since all non-core operations were disposed of prior to May 1, 2002, the Company
did not have any non-core operations during fiscal 2003.

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. There are no
inter-segment sales. Long-term assets consist of intangible assets and fixed
assets. Corporate services, consisting of general and administrative services,
are provided to the segments from a

                                       45

<PAGE>

centralized location. In addition, substantially all the sales and recruiting
workforce are contained in the core operations segment.

16. UNAUDITED CONSOLIDATED RESULTS OF OPERATIONS BY QUARTER

The Company's unaudited consolidated results of operations for each quarter in
fiscal 2002 and 2001 are set forth in the tables below (in thousands, except
earnings per share).

<TABLE>
<CAPTION>
                                                                                      Quarters Ended
                                                             -----------------------------------------------------------------
                                                             July 31, 2002  October 31, 2002  January 31, 2003  April 30, 2003
                                                             -------------  ----------------  ----------------  --------------
<S>                                                          <C>            <C>               <C>               <C>
Revenue                                                        $  21,796       $  21,548         $  19,137        $  28,066
Cost of services                                                  16,359          16,102            14,538           21,476
                                                               ---------       ---------         ---------        ---------
Gross profit                                                       5,437           5,446             4,599            6,590
Selling, general and administrative expenses                       4,725           4,177             3,759            5,371
                                                               ---------       ---------         ---------        ---------
Income from operations                                               712           1,269               840            1,219
Other income (expenses)                                             (175)           (229)             (126)             (40)
                                                               ---------       ---------         ---------        ---------
Income before taxes                                                  537           1,040               714            1,179
Income tax expense (benefit) (Note 10)(a)                            212             411               282             (240)
                                                               ---------       ---------         ---------        ---------
Net income                                                     $     325       $     629         $     432        $   1,419
                                                               =========       =========         =========        =========
Net income per share - basic                                   $    0.01       $    0.03         $    0.02        $    0.06
                                                               =========       =========         =========        =========
Net income per share - diluted                                 $    0.01       $    0.03         $    0.02        $    0.06
                                                               =========       =========         =========        =========
Weighted average number of common shares (basic)                  24,985          24,741            24,474           24,390
                                                               =========       =========         =========        =========
Adjusted weighted average number of common shares (diluted)       25,228          24,979            24,724           24,785
                                                               =========       =========         =========        =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                       Quarters Ended
                                                             -----------------------------------------------------------------
                                                             July 31, 2001  October 31, 2001  January 31, 2002  April 30, 2002
                                                             -------------  ----------------  ----------------  --------------
<S>                                                          <C>            <C>               <C>               <C>
Revenue                                                        $  28,626       $  27,693         $  24,647        $  24,136
Cost of services                                                  20,989          20,529            18,515           17,941
                                                               ---------       ---------         ---------        ---------
Gross profit                                                       7,637           7,164             6,132            6,195
Selling, general and administrative expenses                       6,429           5,741             5,227            5,387
                                                               ---------       ---------         ---------        ---------
Income from operations                                             1,208           1,423               905              808
Other income (expenses)                                             (165)           (590)             (332)            (246)
                                                               ---------       ---------         ---------        ---------
Income before taxes                                                1,043             833               573              562
Income tax expense (benefit) (Note 10)(b)                            412             329               226           (2,651)
                                                               ---------       ---------         ---------        ---------
Net income                                                     $     631       $     504         $     347        $   3,213
                                                               =========       =========         =========        =========
Net income per share - basic                                   $    0.03       $    0.02         $    0.01        $    0.13
                                                               =========       =========         =========        =========
Net income per share - diluted                                 $    0.03       $    0.02         $    0.01        $    0.13
                                                               =========       =========         =========        =========
Weighted average number of common shares (basic)                  24,985          24,985            24,985           24,985
                                                               =========       =========         =========        =========
Adjusted weighted average number of common shares (diluted)       25,072          25,190            25,187           25,226
                                                               =========       =========         =========        =========
</TABLE>

(a)   Income tax expense was reduced in the fourth quarter of fiscal 2003 by
      $705,000 as a result of a decrease in the Company's deferred tax asset
      valuation allowance. See Note 9.

(b)   Due to federal tax legislation enacted during the fourth quarter of fiscal
      2002, the Company then received $1.5 million of additional income tax
      refunds from net operating loss carrybacks in that same period. The
      Company received another $0.7 million of such tax refunds in May 2002 and
      anticipates receiving an additional $0.2 million during the balance of
      fiscal 2003. Due to the impact of this new tax legislation and
      management's assessment of the impact of profitability for fiscal 2002,
      the deferred tax valuation allowance was reduced. These factors combined
      to create a $2,874,000 income tax benefit in the fourth quarter of fiscal
      2002.

17. SUBSEQUENT EVENTS

On May 28, 2003, the Company entered into a definitive agreement to acquire
National Systems Research Company ("NSR"). The acquisition is expected to close
by August 31, 2003 based upon the satisfactory completion of several closing
conditions including the resolution of certain legal matters and finalization of
the financing.

                                       46

<PAGE>

In April 2003, the Company purchased approximately $7.3 million of computer
equipment to be used on one of its outsourcing projects. This equipment was
financed by the vendor until the Company finalized its financing with a
financial institution. Subsequent to year end, on June 15, 2003, the Company
entered into a forty month term loan ("term loan D") which was used to pay the
computer equipment vendor. See Note 6.

                                       47

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders
SCB Computer Technology, Inc.

We have audited the accompanying consolidated balance sheets of SCB Computer
Technology, Inc. (the "Company") as of April 30, 2003 and 2002, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the three years in the period ended April 30, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SCB Computer
Technology, Inc., at April 30, 2003 and 2002, and the results of its operations
and its cash flows for each of the three years in the period ended April 30,
2003, in conformity with accounting principles generally accepted in the United
States of America.


Memphis, Tennessee
June 18, 2003

                                             /s/ BDO SEIDMAN, LLP
                                             -----------------------------



                                       48

<PAGE>

                      MARKET FOR THE COMPANY'S COMMON STOCK

The Company's common stock currently is traded in the over-the-counter market
and has been quoted on the OTC Bulletin Board under the ticker symbol "SCBI"
since September 21, 2000.

The following table sets forth the high and low sales prices per share of the
Company's common stock during each quarter in fiscal 2003 and 2002 as reported
by the OTC Bulletin Board for the respective periods in which such organizations
quoted the public trading of the common stock:

<TABLE>
<CAPTION>
                                       Stock Price
                                    -----------------
                                     High       Low
                                    -------   -------
<S>                                 <C>       <C>
Fiscal year ended April 30, 2003:
  Fourth quarter                    $  1.00   $  0.65
  Third quarter                        0.84      0.55
  Second quarter                       0.86      0.60
  First quarter                        1.00      0.70
Fiscal year ended April 30, 2002:
  Fourth quarter                    $  1.03   $  0.68
  Third quarter                        0.80      0.60
  Second quarter                       1.00      0.54
  First quarter                        0.63      0.30
</TABLE>

At June 18, 2003, there were 216 record holders of common stock and an estimated
2,884 beneficial owners of common stock.

The Company did not pay any cash dividends on its common stock during fiscal
2003 and 2002. The payment of cash dividends in the future will be at the
discretion of the board of directors of the Company and will depend on the
Company's earnings, financial condition, capital needs, and other factors deemed
pertinent by the board of directors, including the limitations on the payment of
dividends under state law and the Company's credit arrangements. It is the
current intention of the board of directors not to pay cash dividends and to
retain any earnings to finance the operation and expansion of the Company's
business.

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