<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

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

For the fiscal year ended April 30, 1997         Commission file number: 0-27694

                          SCB COMPUTER TECHNOLOGY, INC.
             (Exact name of Registrant as specified in its charter)

               Tennessee                                   62-1201561
             -------------                               -------------
       (State or other jurisdiction                      (I.R.S. Employer
       of incorporation or organization)                 Identification Number)

       1365 West Brierbrook Road
       Memphis, Tennessee                                    38138
       ------------------------------                    -------------
       (Address of principal executive                   (Zip Code)
       offices)

       Registrant's telephone number, including area code: (901) 754-6577

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, $.01 PAR VALUE PER SHARE
                     --------------------------------------
                                (Title of class)

        Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 
                                                  Yes X    No
                                                     ---     ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant on July 22, 1997, was approximately $91,196,252. The market
value calculation was determined using the closing sale price of the
Registrant's common stock on July 22, 1997 ($24.50 per share), as reported on
The Nasdaq Stock Market's National Market.

Shares of common stock, $.01 par value per share, outstanding on July 22, 1997,
were 7,481,419.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part of Form 10-K    Documents from which portions are incorporated by reference
-----------------    -----------------------------------------------------------

Part III             Portions of the Registrant's Proxy Statement relating
                     to the Registrant's Annual Meeting of Shareholders
                     currently scheduled to be held on September 23, 1997, are
                     incorporated by reference into Items 10, 11, and 12.



<PAGE>   2



                          SCB COMPUTER TECHNOLOGY, INC.

                                     PART I

ITEM 1.      BUSINESS

GENERAL

             SCB Computer Technology, Inc. ("SCB" or the "Company") is an
information technology ("IT") services company providing management and
technical services primarily to state and local governments, public utilities,
Fortune 500 companies, and other large organizations. The Company's services are
delivered to clients operating information systems primarily in mainframe,
client/server, and other network environments in one or more of the following
five general categories: (i) consulting services, including advising clients on
the acquisition and strategic utilization of IT systems, planning and designing
new IT systems, and redesigning existing IT systems to increase their
efficiency; (ii) outsourcing services, including using IT professionals employed
and managed by SCB for network design and management, systems support and
maintenance, programming and application software development, and data center
management to utilize a client's IT resources more cost-effectively; (iii)
professional staffing services, including providing skilled technical employees
on an as-needed basis under the direction of a client's management to eliminate
a client's need to recruit, hire, and train technical employees whose skills may
not be needed between projects; (iv) telecommunications consulting, including
ProWatchSM, a systems monitoring and management tool for voice and data
communications networks; and (v) Year 2000 consulting, including Pro2000SM, a
suite of services that address solutions to millennium transition.

             SCB was founded as a partnership in 1976 and incorporated under the
laws of the State of Tennessee in 1984. The Company's principal executive
offices are located at 1365 West Brierbrook Road, Memphis, Tennessee 38138, and
its telephone number at that address is (901) 754- 6577. The Company can also be
contacted at the following Internet address: http://www.scb- inc.com

ACQUISITIONS

             The Company's revenues have increased significantly over the last
five fiscal years, from $21.8 million in fiscal 1992 to $64.0 million in fiscal
1997. Prior to the Company's initial public offering (the "IPO") in February
1996, a substantial majority of the Company's growth was attributable to
developing and providing additional IT services to existing clients and
obtaining new IT clients. Since the IPO, in addition to continuing to expand its
services, expand existing client relationships, and add new clients, the Company
has added revenues through the combination with or acquisition of other
businesses. Since the IPO, the Company has engaged in the following significant
combinations and acquisitions:

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<PAGE>   3



             Delta Software. On September 26, 1996, the Company effected a
business combination with Delta Software Systems, Inc. ("Delta"), an information
technology and consulting company and custom software programmer, pursuant to a
merger of Delta with and into a wholly-owned subsidiary of the Company. The
transaction was accounted for as a pooling of interests. As a result of the
merger, all of the outstanding capital stock of Delta was converted into an
aggregate of 461,536 shares of the Company's common stock. The Company's
historical financial statements presented elsewhere herein have been restated to
include the financial position and results of operations of Delta for periods
prior to the merger.

             Technology Management Resources. On February 28, 1997, the Company
acquired substantially all of the assets of Technology Management Resources,
Inc. ("TMRI"), an information technology consulting company, in a transaction
accounted for using the purchase method of accounting. Accordingly, the results
of operations of TMRI have been included in the consolidated financial
statements only since the date of acquisition. The purchase price for the assets
included the assumption of certain liabilities (primarily accounts payable) and
$8,500,000 in cash, of which $500,000 is being held in escrow to secure
potential indemnification claims. In addition, up to $4,000,000 (payable in
shares of the Company's common stock) may be paid to TMRI as additional purchase
price based on growth in the acquired business's revenues and earnings in fiscal
years ending April 30, 1998, 1999, and 2000.

             The Partners Group. Effective June 30, 1997, the Company acquired
all of the outstanding capital stock of Partners Resources, Inc. ("PRI"), an
information technology outsourcing company, and Partners Capital Group ("PCG"
and, collectively with PRI, "The Partners Group"), a computer leasing company,
in a transaction to be accounted for under the purchase method. The aggregate
purchase price for the capital stock of the affiliated entities was $16,000,000
in cash, of which $1,600,000 is being held in escrow to secure potential
indemnification claims. In addition, the shareholders of PRI are entitled to
receive earnout consideration based on the net income of PRI for the fiscal year
ending December 31, 1997.

SCB SERVICES

             Consulting Services

             The objective of SCB's consulting services engagements is to use
proven techniques to assist clients in evaluating and redesigning IT operations
to achieve improvements in IT cost, quality, and efficiency. SCB consultants
frequently employ state-of-the-art information engineering methodologies and
processes to assist clients in migrating from centralized, mainframe systems to
open, client/server and other network architectures. Consulting services
typically are designed to evaluate all phases of clients' projects, from
front-end needs assessment surveys to detailed design and implementation of
appropriate systems, and include:

             o    performing an IT "wellness" test on a client's existing IT
                  systems to determine whether the overall management
                  information systems ("MIS") function is performing to optimum
                  management and technical specifications;

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             o    developing an Information Strategy Plan ("ISP") that
                  identifies a client's strategic organizational objectives,
                  recommends an IT infrastructure, either firm-wide or by
                  business unit, and establishes a time-line and prioritizes
                  tasks for accomplishing the ISP;

             o    forecasting a client's expected returns (or cost savings) on a
                  particular technology investment;

             o    creating IT project specifications that can be submitted for
                  bids; and o designing and implementing hardware, networks,
                  operating systems, and database infrastructures as well as 
                  integrating software applications with these infrastructures.

             SCB's consulting services are delivered by professionals who are
specialists in providing complete systems development lifecycle consulting and
who have extensive experience working with relational database, networking,
client/server, and related technologies. SCB consultants also have the business
acumen necessary to understand clients' IT systems' support needs.

             SCB consulting service contracts are typically for short periods of
time and specify the discrete tasks to be performed. SCB's consulting services
fees are negotiated on a case-by-case basis, depend on the size of the project
and the skills required, and range from billing at hourly rates to fixed-price
engagements.

             Outsourcing Services

             The Company believes that the outsourcing of information systems
management and operations is growing rapidly primarily because outsourcing often
allows large organizations to add expertise and improve end-user service in
their IT operations at a reduced cost. Because of the emerging hardware and
software technologies and the demands by end-users for more memory, speed, and
flexibility, many large organizations have been forced to deploy selectively
their IT assets and personnel. Many of the Company's clients have elected to
focus their internal staffs on the emerging technologies and therefore have
engaged the Company to maintain and enhance their legacy systems in connection
with the development and operation of newer systems. SCB believes these
developments will increase the need to outsource IT services.

             The Company's outsourcing services are designed to support a wide
range of legacy and client/server systems and include network design and
management, systems support and maintenance, programming and application
software development, client/server and other network maintenance, data center
management, client staff training, and help desk services. Most of SCB's
outsourcing services are provided at the client's business site. Under the
general direction of the client, SCB assumes full and ongoing management and
technical responsibility for the installation or operation of a client's systems
on a long-term basis. Prior to The Partners Group acquisition in June 1997, SCB
had not assumed asset ownership in connection with its outsourcing services.
Future outsourcing services may involve substantial up-front expenditures to
purchase IT systems equipment, hire personnel, and operate systems on behalf of
the client.

             Outsourcing contracts tend to be for longer terms and tend to
produce more revenue per contract than consulting services or professional
staffing services contracts. Outsourcing services

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contracts are expressed in terms of fixed prices for defined services or hourly
rates. In general, the Company determines its prices based on the salaries and
overhead costs of professionals assigned to a project plus a margin designed to
cover other expenses and provide a profit. The Company also provides outsourcing
services on a fixed-price basis to some clients, when the Company has a well-
defined understanding of the services to be delivered or extensive knowledge of
the client's business.

             Professional Staffing Services

             The Company provides the services of highly skilled professional IT
personnel at a client's facilities on an as-needed basis. These services are
provided primarily to clients who desire the flexibility to supplement internal
staff with people having particular skill sets or to eliminate the need to
recruit, hire, and train technical employees whose skills may not be needed
between projects. The Company's objectives in providing professional staffing
services include developing an understanding of the client's business and IT
systems needs and positioning the Company to provide consulting and outsourcing
services if the need arises. Professional staffing services engagements range
from short-term discrete projects to long-term extended support arrangements.

             Year 2000 Compliance Consulting

             The Company's year 2000 compliance consulting services combine
comprehensive analysis, design, development, implementation, and follow-up to
assist clients in managing the year 2000 impact on application software, system
software, and mainframe and desktop hardware. A substantial portion of the work
provided by the Company involves the use of the Company's Pro 2000(sm), a suite
of services designed to be a comprehensive solution for program planning and
management, project planning, systems integration, project management and
implementation, and quality assurance and control. The Company uses third-party
suppliers of software tools for conversions, particularly in the mainframe
applications. The Company also uses its ProVision 2000SM software to aid in
"language specific" analysis of lines of code. The Company's fees for these
types of services range from hourly billings to payments per lines of computer
code.

             Telecommunications Consulting

             Primarily through the Company's ProNetworkSM, a systems monitoring
and management tool for voice and data communications networks, SCB provides a
comprehensive set of telecommunications and networking solutions for clients,
based on SCB's experience and expertise in the following areas:

             o project management of large network-related projects; 
             o development and implementation of Disaster Recovery Solutions; 
             o network services (LAN/WAN, Design, Engineering); 
             o implementation of Project Pilots and Tests Beds for integrated 
               testing; 
             o training; 
             o help desk centers; and 
             o remote network monitoring and management.

                                        5


<PAGE>   6



CLIENTS AND MARKETS

             The Company currently performs services for approximately 200
clients. SCB's clients represent a diverse group of public entities and private
industries. Most of the Company's clients are large organizations for which the
Company delivers services to a number of business units or agencies. SCB's state
government clients include the Commonwealth of Kentucky, the State of Tennessee,
the State of Alabama, and the Arkansas Department of Human Services. SCB's
public utility clients include, among others, the Tennessee Valley Authority
("TVA"), Nashville Electric Service ("NES"), and Memphis Light, Gas & Water
("MLG&W"). The Company also performs services for a number of Fortune 500
companies, including AT&T, Eastman Chemical Company, Federal Express
Corporation, and International Paper Company. Because of its diverse client
base, the Company believes that it is not dependent on any single industry or
market.

             For the fiscal year ended April 30, 1997, the Company's top five
clients (in terms of revenue to the Company) accounted for approximately 49% of
the Company's total revenue, and two clients each accounted for more than 10% of
the Company's total revenue. Those clients and the percentages of total revenue
attributable to such clients were as follows: Commonwealth of Kentucky - 14.3%;
and Federal Express Corporation - 11.5%.

             Generally, SCB's contracts with its top ten clients are, in
accordance with industry practice, cancelable on short notice and without
penalty, provide for monthly payment of fees, and establish other basic terms,
such as the hourly billing rates for each type of SCB 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 services 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.
SCB is the exclusive service provider under certain contracts, while other
contracts, particularly professional staffing services contracts, specifically
allow the client to engage other vendors for the projects covered by the
agreement.

MARKETING AND SALES

             The Company markets it services through senior management and a
sales staff of 20 persons. The Company currently has personnel located at sales
offices in 16 cities. Relationships with SCB's larger clients and key government
personnel are maintained and fostered by at least one of the Company's executive
officers. The Company believes that its senior management's hands-on involvement
with major clients is a significant competitive advantage.

             Account managers market SCB's services and serve as the primary
contacts in maintaining client relationships. Accordingly, account managers
learn the basic aspects of a client's business in order to identify
opportunities for providing additional IT services to the client. Account
managers are paid a salary plus commissions based on the revenues associated
with client relationships under their supervision. In general, account managers
are not IT technicians. They are, however, supported by SCB technical personnel
in their marketing and sales efforts.

                                        6


<PAGE>   7



EMPLOYEES AND RECRUITING

             The Company currently employs approximately 840 persons, consisting
of approximately 750 technicians, 20 salespersons, 18 recruiters, 9 executives,
and 43 other administrative personnel. The Company believes there is a
continuing shortage in the industry for computer professionals, especially
programmers and systems designers, and the Company competes for these persons
with in-house MIS departments and other computer services firms. In order to
attract and retain these highly sought employees, the Company has recently
expanded its equity-based awards programs, primarily in the form of options to
purchase SCB Common Stock, that are offered to such employees.

             In general, the Company seeks to hire professionals who have
substantial experience either with an in-house MIS department or another IT
services firm. SCB recruits worldwide by soliciting resumes generated by
advertisements in trade journals and major city newspapers. Employee referrals
are another major source of recruiting leads and the Company awards bonuses to
employees whose referrals lead to the hiring of a new IT professional. In
addition, the Company's Web Site on the Internet is used for recruiting. Most of
the Company's recruiters have technical or IT sales backgrounds and understand
the skill sets needed for the project for which they are recruiting.

COMPETITION

             The Company believes its principal competitors, categorized
according to the services performed, are as follows: (i) consulting services
(including Year 2000 and telecommunications) SHL Systemhouse Inc., Stone &
Webster, Inc., Andersen Consulting, and EDS; (ii) outsourcing services - IBM,
EDS, Perot Systems Corporation, Computer Sciences Corporation, Computer
Management Sciences, Inc., and Andersen Consulting; and (iii) professional
staffing services Computer Task Group, Inc., IBM, Computer Horizons Corporation,
Keane, Inc., and Metro Information Services, Inc.

             The Company believes that the principal competitive factors in the
IT services industry are (i) responsiveness to clients' needs and speed in
delivering IT solutions; (ii) effectiveness of delivered solutions as measured
through cost reductions and improvements in price/performance ratios; (iii)
output per employee, as reflected in utilization rates; (iv) quality of service;
(v) price; and (vi) technical expertise. SCB believes that its ability to
estimate costs accurately, particularly for existing clients, and its lower
labor costs, which are a function, in part, of higher than industry average
utilization rates, cause it to be a lower cost provider than many of its
competitors, which is especially critical in a competitive bid environment. The
Company also believes its reputation for delivering services at the agreed price
without requesting or requiring additional client funds distinguishes SCB from
its competitors.

             The Company also competes for the hiring and retention of
management and other professional personnel. See "-- Employees and Recruiting."
In connection with professional staffing services engagements, particularly in
situations where the Company is one of a number of approved

                                        7


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vendors, the Company competes to provide services based on the relative
qualifications of SCB personnel.

EXECUTIVE OFFICERS

             The following is a list of the executive officers of the Company,
including all positions and offices held with the Company:
<TABLE>
<CAPTION>

Name                                Age              Position and Term
----                                ---              -----------------
<S>                                 <C>              <C>           
T. Scott Cobb                       60               Mr. Cobb is a founder of the Company and has served
                                                     as Chairman of the Board since 1984.  From 1984
                                                     until June 1996, Mr. Cobb also served as President of
                                                     the Company.  Mr. Cobb was a partner in Seltmann,
                                                     Cobb & Bryant, the Company's predecessor, from its
                                                     formation in 1976.  Mr. Cobb is the father of Jeffrey
                                                     S. Cobb.

Ben C. Bryant, Jr.                  50               Mr. Bryant is a founder of the Company and has
                                                     served as Chief Executive Officer, Treasurer, and
                                                     Vice Chairman of the Board of the Company since
                                                     1984.  Mr. Bryant has also served as President of the
                                                     Company since June 1996.  Mr. Bryant was a partner
                                                     in Seltmann, Cobb & Bryant, the Company's
                                                     predecessor, from its formation in 1976.

Steve N. White                      50               Mr. White has served as Executive Vice President of
                                                     Development since June 1996 and as a Director since
                                                     December 1995.  Mr. White has also served in
                                                     varying capacities for the Company for more than 15
                                                     years, including as Chief Operating Officer from 1990
                                                     to 1996.

Gordon L. Bateman                   48               Mr. Bateman joined the Company as a controller in
                                                     1984 and has served as Secretary since June 1996, as
                                                     Executive Vice President of Finance and
                                                     Administration since December 1995, and as Chief
                                                     Financial Officer since 1988.  Mr. Bateman was also
                                                     a Senior Vice President of the Company from 1987 to
                                                     December 1995.
</TABLE>



                                        8


<PAGE>   9


<TABLE>
<CAPTION>
Name                                Age              Position and Term
<S>                                 <C>              <C>                        
Jeffrey S. Cobb                     35               Mr. Cobb has served as Executive Vice President of
                                                     Operations since December 1995.  Mr. Cobb
                                                     previously served as Senior Vice President of
                                                     Operations and Administration from 1992 to
                                                     December 1995, Director of Projects from 1990 to
                                                     1992, and Director of Recruiting from 1989 to 1990.
                                                     Mr. Cobb is the son of T. Scott Cobb.

Gary Ellis                          48               Mr. Ellis has served as Senior Vice President of
                                                     Outsourcing since 1990.  Mr. Ellis was a Project
                                                     Manager from 1987 to 1990, and held the position of
                                                     Senior Technical Specialist from 1983 to 1987.

Gary E. McCarter                    48               Mr. McCarter has served as Senior Vice President,
                                                     Finance and Administration since November 1996.
                                                     Mr. McCarter served as a consultant to the Company
                                                     from October 1995 until November 1996 as the owner
                                                     of McCarter & Associates, a business consulting
                                                     company, which he operated from 1986 to 1992 and
                                                     from 1993 to 1996.  From 1992 to 1993, Mr.
                                                     McCarter served as Vice President of Finance at
                                                     U.N.A. of Memphis, Inc., a home health care
                                                     company.

Steven H. Smith                     42               Mr. Smith has served as Senior Vice President of
                                                     Marketing since 1992.  Prior to such time, he served
                                                     as Vice President of Marketing from 1989 to 1992
                                                     and as account manager from 1986 to 1991.
</TABLE>

ITEM 2.         PROPERTIES

                The Company owns its corporate headquarters buildings
(aggregating approximately 13,200 square feet) and leases a building for its
Emerging Technology Center (approximately 10,000 square feet) in Memphis,
Tennessee, under a long-term lease expiring in May 2000 with a three year
renewal option. The Company leases sales offices or has access to office
facilities in Atlanta, Georgia; Baltimore, Maryland; Dallas, Texas; Frankfort,
Kentucky; Indianapolis, Indiana; Jackson, Mississippi; Kansas City, Missouri;
Little Rock, Arkansas; Long Island, New York; Montgomery, Alabama; Nashville,
Tennessee; Phoenix, Arizona; Santa Fe, New Mexico; St. Louis, Missouri; and
Omaha, Nebraska. The Nashville location is approximately 1,400 square feet. The
other offices tend to be smaller than the Nashville office and are used
primarily for sales and marketing purposes.

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<PAGE>   10



ITEM 3.         LEGAL PROCEEDINGS

                In May 1996, the Company was issued a subpoena by the Federal
Grand Jury of the United States District Court for the Western District of
Tennessee. Subsequent subpoenas have been issued to the Company and certain of
its officers by the grand jury since May 1996. The Company has not been
identified as the subject or target of the grand jury's investigation. The
Company currently believes that the grand jury's investigation relates to the
Company's billing practices under its consulting contract with the Tennessee
Valley Authority, that was completed in February 1996, particularly the hourly
billings and expenses of T. Scott Cobb, the Company's Chairman, and Steve N.
White, the Company's Executive Vice President-Development. The subpoenas
apparently relate to an audit of the Company's TVA billings being conducted by
the Office of the Inspector General. Additionally, in July 1996, the Securities
and Exchange Commission (the "SEC") notified the Company that the SEC is
conducting an informal inquiry, which inquiry appears to be focused on the TVA
billings and the impact thereof on the Company's financial statements. The
Company has not had any contact with the SEC in this regard since the Company's
response to the SEC's initial inquiry.

                An internal investigation by the Special Committee of the Board
of Directors, which investigation was substantially completed in May 1996,
identified possible misbillings of expenses under the TVA contract, primarily
relating to mileage and per diem expenses submitted to TVA, and on May 31, 1996,
the Company remitted approximately $40,000 to the TVA relating to the possible
misbillings.

                Due to the prospective and continuing nature of the government's
investigation, it is not possible presently to predict with any certainty when
the investigation will be completed, its ultimate outcome, or the effect thereof
on the Company's management, financial condition, or results of operations. The
Company currently believes, however, that the ultimate outcome of the
government's investigation will not have a long-term material adverse effect on
the Company's management, financial condition, or results of operations.

ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

                No matters were submitted to a vote of the shareholders during
the fourth quarter ended April 30, 1997.

                                     PART II

ITEM 5.         MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
                MATTERS

                On February 14, 1996, the Company consummated the IPO of its
Common Stock at a price per share of $15.50. The Company's Common Stock is
traded on The Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "SCBI." As of July 22, 1997, there were 68
shareholders of record and, based on securities positions listings,
approximately 1,700 beneficial owners of the Common Stock.

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                The following table sets forth for the period indicated, the
high and low closing sales prices of the Company's Common Stock as reported by
the Nasdaq National Market:
<TABLE>
<CAPTION>
                                                                   High                    Low
                                                              --------------         ---------------
<S>                                                               <C>                  <C>   
1996
----
Fourth Fiscal Quarter
(from February 14, 1996).................................         $26.50               $15.50

1997
----
First Fiscal Quarter.....................................         $29.63               $14.44

Second Fiscal Quarter....................................         $21.50               $16.75

Third Fiscal Quarter.....................................         $20.25               $17.00

Fourth Fiscal Quarter....................................         $19.00               $16.00
</TABLE>

                No cash dividends were declared or paid on the Common Stock
during the fiscal years ended April 30, 1996 or April 30, 1997. The payment of
cash dividends in the future will be at the Board of Directors' discretion and
will depend on the Company's earnings, financial condition, capital needs, and
other factors deemed pertinent by the Company's 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 earnings, if any, to finance the operations
and expansion of the Company's business.

                The terms of a Loan Agreement relating to a $16.0 million credit
facility (the "Credit Facility"), by and between NationsBank of Tennessee, N.A.
("NationsBank"), the Company, and certain of its subsidiaries, limit the
Company's ability to pay cash dividends to 25% of the Company's net income per
fiscal year.

                On July 23, 1997, the Board of Directors of the Company declared
a three-for-two stock split in the form of a 50% stock dividend, payable on
September 3, 1997 to shareholders of record on August 20, 1997. The information
included herein has not been adjusted to reflect such stock split.

                                       11


<PAGE>   12



ITEM 6.         SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS EXCEPT PER 
                SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
                                                               Fiscal Year Ended April 30,
                                                1997         1996           1995            1994            1993
                                             ---------   -----------    -----------    -----------    -----------
INCOME STATEMENT DATA: ..................                 (restated)     (restated)     (restated)     (restated)
<S>                                         <C>          <C>            <C>            <C>            <C>        
Revenue .................................   $   64,064   $    56,024    $    39,170    $    28,565    $    25,004
   Cost of services .....................       46,586        39,508         27,027         20,543         18,255
                                            ----------   -----------    -----------    -----------    -----------
Gross profit ............................       17,478        16,516         12,143          8,022          6,749
Compensation - key executives ...........          700         3,765          4,170          3,131          2,641
Other selling, general and administrative
   expenses .............................        9,417         9,580          5,472          4,838          3,649
                                            ----------   -----------    -----------    -----------    -----------
Income from operations ..................        7,360         3,170          2,501             53            459
   Other income (expense), net ..........          755           (27)          (146)            84            (30)
                                            ----------   -----------    -----------    -----------    -----------
Income before income taxes and
   cumulative effect of change in .......        8,116         3,143          2,355            137            429
   accounting principle
Provision for income taxes ..............        3,053         1,187            718            116            143
Cumulative effect of change in method of
   accounting for income taxes ..........         --            --             --              (36)          --
                                            ----------   -----------    -----------    -----------    -----------
Net income (loss) .......................   $    5,063   $     1,957    $     1,637    $       (15)   $       286
                                            ==========   ===========    ===========    ===========    ===========
Net income (loss) per share .............   $      .67   $       .31    $       .28           --      $       .04
                                            ==========   ===========    ===========    ===========    ===========
Net income (loss) .......................   $    5,063   $     1,957    $     1,637    $       (15)   $       286
Pro forma adjustment for income taxes ...          177           162            309           --               32
                                            ----------   -----------    -----------    -----------    -----------
Pro forma net income ....................   $    4,886   $     1,795    $     1,328    $       (15)   $       254
                                            ==========   ===========    ===========    ===========    ===========
Pro forma net income per share ..........   $      .65   $       .29    $       .23           --      $       .04
                                            ==========   ===========    ===========    ===========    ===========
Cash dividends declared per share .......         --            --      $     .0049    $     .0033    $     .0033
                                            ==========   ===========    ===========    ===========    ===========
Weighted average number of common
   and common equivalent shares
   outstanding ..........................    7,512,276     6,222,343      5,895,379      5,895,379      5,895,379
                                            ==========   ===========    ===========    ===========    ===========
</TABLE>
<TABLE>
<CAPTION>
                                                             AS OF APRIL 30,
                                            ---------------------------------------------------------------------

                                               1997          1996           1995            1994          1993
                                            ----------   -----------    -----------    -----------    -----------
                                                          (restated)     (restated)     (restated)     (restated)
<S>                                         <C>          <C>            <C>            <C>            <C>    
BALANCE SHEET DATA:
Working capital..........................   $20,351      $24,643        $1,347         $1,189         $1,230
Total assets.............................    35,094       29,272         7,089          4,965          4,052
Long-term debt, less current portion.....        --           --           171            310            157
Total shareholders' equity...............    31,633       26,796         2,862          1,783          1,827
</TABLE>


                                       12


<PAGE>   13



ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS

OVERVIEW

         The Company derives substantially all of its revenue from providing IT
consulting, outsourcing, and professional staffing services. The increase in
revenue from $25.0 million in fiscal 1993 to $64.1 million in fiscal 1997 is a
function of two principal factors: (i) an increase in the volume of services
provided (as measured by aggregate hours billed), and (ii) a shift in the mix of
services provided from lower rate professional staffing services to higher rate
consulting and outsourcing services. In general, revenue is recognized by the
Company as services are performed. The Company's third fiscal quarter (ending
January 31), in which the number of holidays and employee vacation days reduces
the Company's employee billable hours, generally reflects lower revenue and
profitability in comparison to the other three fiscal quarters.

         The Company has historically derived a significant portion of its
revenue from a relatively limited number of clients. The Company currently
performs services for approximately 200 clients, consisting of state and local
governments, public utilities, Fortune 500 companies, and other large
organizations. For the fiscal years ended April 30, 1997, 1996, and 1995,
approximately 48%, 55%, and 60%, respectively, of the Company's revenue was
attributable to governmental and quasi-governmental entities (such as public
utilities), with the balance attributable to commercial enterprises.

         For the fiscal years ended April 30, 1997, 1996, and 1995, the
Company's top five clients (in terms of revenue to the Company) accounted for
approximately 49%, 57%, and 62% of the Company's revenue, respectively. From
time to time the Company has substantial accounts receivable from its top five
clients, but 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 a material adverse impact on the
Company's operating results. In July 1997, the Company learned that its
outsourcing contract with NES would terminate in accordance with its terms in
November 1997 without renewal. For the fiscal year ended April 30, 1997, the NES
contract accounted for approximately 8.4% of the Company's revenue. With the
Company's anticipated growth in revenues and the redevelopment of employees
dedicated to the NES contract, the Company believes that the termination of such
contract will not have a material adverse effect on the Company's operating
results.

         The Company's strategy has been to sustain growth in professional
staffing revenue while simultaneously increasing the percentage of revenue
contributed by consulting and outsourcing services. Generally, the Company
charges its clients higher hourly rates for consulting and outsourcing services
than for professional staffing services. The Company's marketing strategy
emphasizes cross-selling all of its services to existing and potential clients.
In addition to expanding existing client relationships, the Company has made a
strategic determination to seek more high- value, premium-billing business,
concentrating particularly on increasing its consulting, client/server, and
other network engagements, as evidenced by the Company's recent commitment to
expanding its Year 2000 and telecommunications consulting service offerings.

                                       13


<PAGE>   14



         The Company's growth in fiscal 1997 has been significantly affected by
acquisition activity. In September 1996, the Company effected a business
combination with Delta, an information technology consulting company and custom
software programmer. In February 1997, the Company acquired substantially all of
the assets of TMRI, an information technology consulting company. See "Item 1.
Business -- Acquisitions." The Delta merger was accounted for as a pooling of
interests and the Company's historical financial statements and management's
discussion thereof have been restated to include the financial position and
results of operations for Delta for periods prior to the merger. The TMRI
transaction was accounted for as a purchase and goodwill of approximately $8.2
million will be amortized ratably over a thirty year period.

         With the addition of Delta and TMRI, the distinctions between the
Company's previously identified lines of business, into consulting services,
outsourcing services, and professional staffing services, have become less
meaningful. Accordingly, revenue growth attributable to these lines of business,
which has previously been provided, is no longer considered by the Company to be
material to investors.

         Prior to the Delta merger, Delta had elected "S" Corporation status for
federal income tax purposes. As a result of the merger, Delta's S Corporation
status was terminated. Accordingly, certain pro forma information is presented
in the Company's Consolidated Statements of Income as if Delta had been a "C"
Corporation for tax purposes during the periods presented.

RESULTS OF OPERATIONS

         Comparison of Fiscal 1997 to Fiscal 1996

         Revenue increased from $56.0 million in fiscal 1996 to $64.0 million in
fiscal 1997, an increase of 14%. This increase was primary attributable to the
expansion of the Company's client base, an increase in consulting and
professional staffing services provided to existing clients, and an increase in
equipment and software sales resulting from the Delta acquisition.

         Gross profit increased from $16.5 million to $17.5 million, an increase
of 6%. This increase was attributable primary to an increase in revenue. Gross
profit margin decreased from 29.5% to 27.3% during the period. Cost of services
consists of all costs directly attributable to SCB personnel assigned to various
client engagements, including salaries, benefits, training, travel, and
relocation. The decrease in the gross profit margin was primary attributable to
(i) investments made for the development of Year 2000 services, (ii) costs
associated with the development of a governmental budgeting and tracking
software package for resale, and (iii) underutilization of certain technical
staff in the first part of the year in anticipation of the consulting agreement
with AT&T, which began the final quarter of fiscal 1997.

         Historically, a significant portion of the Company's operating expenses
has been attributable to the compensation of two key executives: T. Scott Cobb
and Ben C. Bryant, Jr. In connection with the Company's IPO in February 1996,
Messrs. Cobb and Bryant entered into employment agreements which reduced their
salaries to $600,000 per year. The employment agreements were

                                       14


<PAGE>   15


amended effective as of July 1, 1996 to reduce each executive's salary to
$300,000 per year. The employment agreements, as amended, also provide for
bonuses of $100,000 or $200,000 per year to each of Messrs. Cobb and Bryant in
the event the Company exceeds 110% or 125%, respectively, of pre-tax earnings
targets established by the Board of Directors at the beginning of each fiscal
year. Compensation for key executives decreased from $3.8 million in 1996 (which
included bonuses of $1.4 million) to $700,000 in 1997.

         Other selling, general, and administrative expenses decreased from $9.6
million in 1996 to $9.4 million in 1997. Other selling, general and
administrative expenses for 1996 included a $1.2 million stock bonus granted to
certain management personnel. The decrease in 1997 relating to the 1996 stock
bonus was offset by the expansion of the Company's sales and recruiting efforts
and the continuing development of training programs for these departments. As a
percentage of total revenue, other selling, general, and administrative expenses
decreased from 17.1% in 1996 to 14.7% in 1997.

         Interest income increased from $199,000 in fiscal 1996 to $938,000 in
fiscal 1997, primarily as a result of the investment of the IPO proceeds.

         In May 1996, the Company was issued a subpoena by the Federal Grand
Jury of the United States District Court for the Western District of Tennessee.
Subsequent subpoenas have been issued to the Company and certain of its officers
by the grand jury since May 1996. The Company has not been identified as a
subject or target of the grand jury's investigation. The Company believes that
the grand jury's investigation relates primarily to the Company's billing
practices under its consulting contract with the Tennessee Valley Authority. An
internal investigation by the Special Committee of the Company's Board of
Directors, which investigation was substantially completed in May 1996,
identified possible misbillings of expenses under the TVA contract, primarily
relating to mileage and per diem expenses submitted to TVA, and on May 31, 1996,
the Company remitted approximately $40,000 to the TVA relating to the possible
misbillings. Due to the prospective and continuing nature of the government's
investigation, it is not possible presently to predict with any certainty when
the investigation will be completed, its ultimate outcome, or the effect thereof
on the Company. The Company currently believes, however, that the ultimate
outcome of the government's investigation will not have a long-term material
adverse effect on the Company's management, financial condition, or results of
operations. See "Item 3. Legal Proceedings."

         Comparison of Fiscal 1996 to Fiscal 1995

         Revenue increased from $39.2 million in fiscal 1995 to $56.0 million in
fiscal 1996, an increase of 43.0%. This increase was primarily attributable to
increased services provided under two outsourcing services contracts, and
significant increases in professional staffing services provided to four of
SCB's existing clients.

         Gross profit increased from $12.1 million to $16.5 million, an increase
of 36.0%. This increase was attributable primarily to an increase in revenue.
Gross profit margin decreased from 31.0% to 29.5% during the period.

                                       15


<PAGE>   16



         Other selling, general, and administrative expenses increased from $5.5
million in 1995 to $9.6 million in 1996, an increase of approximately 75%. This
increase was primarily attributable to a $1.2 million stock bonus granted to
certain management personnel in October 1995 as well as the expansion of the
Company's sales and recruiting efforts and the development of training programs
for these departments. As a percentage of total revenue, other selling, general,
and administrative expenses increased from 14.0% in 1995 to 17.1% in 1996.

         Compensation for key executives decreased from $4.2 million in 1995 to 
$3.8 million in 1996.

         Comparison of Fiscal 1995 to Fiscal 1994

         Revenue increased from $28.6 million in fiscal 1994 to $39.2 million in
fiscal 1995, an increase of approximately 37.1%. This increase was primarily
attributable to a contract for consulting services that began in May 1994, and
significant increases in professional staffing services provided to two of SCB's
existing clients.

         Gross profit increased from $8.0 million to $12.1 million, an increase
of approximately 51.4%. This increase was attributable primarily to an increase
in revenue. Gross profit margin increased from 28.0% to 31.0% as a result of an
increase in higher-margin consulting and outsourcing services revenue as a
percentage of total revenue.

         Compensation for key executives increased from $3.1 million in 1994 to
$4.2 million in 1995, which included bonuses of $550,000 in 1994 and $1.3
million in 1995.

         Other selling, general, and administrative expenses increased from $4.8
million in 1994 to $5.5 million in 1995, an increase of approximately 13.1%.
This increase was primarily attributable to the Company's heightened commitment
to expanding its sales and recruiting efforts as well as developing training
programs for these departments. As a percentage of total revenue, other selling,
general, and administrative expenses decreased from 16.9% in fiscal 1994 to
14.0% in fiscal 1995, as relatively fixed general and administrative costs were
spread over a larger revenue base.

         In fiscal 1994, the Company recognized a $36,000 charge to reflect the
cumulative effect of adopting Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes.

LIQUIDITY AND CAPITAL RESOURCES

         Operating cash flow has historically been the Company's primary source
of liquidity. The Company's net cash provided by operating activities was
approximately $1,945,000, $739,000, and $798,000 and for fiscal 1997, 1996, and
1995, respectively. The increase in cash flow in 1997 was primarily attributable
to increased profits.

         The Company completed its IPO in February 1996. The net proceeds to the
Company in the offering were $20.8 million, after deduction of underwriting
commissions and other offering expenses. The proceeds from the offering were
used primarily to repay $1.5 million in bank debt,

                                       16


<PAGE>   17



the acquisition of TMRI, and for working capital purposes. Pending such uses,
the proceeds were invested in highly liquid investments, including securities
purchased under agreements to resell.

         The Company's working capital increased from $1.3 million in fiscal
1995 to $24.6 million in fiscal 1996, primarily as a result of the IPO. The
Company's working capital decreased from $24.6 million in fiscal 1996 to $20.5
million in fiscal 1997, primarily as a result of the acquisition of the assets
of TMRI for $8.5 million in cash. The acquisition of The Partners Group in June
1997 for $16.0 million in cash was funded with $6.0 million in cash on hand and
borrowings under the Credit Facility.

         The Company's historical capital expenditures relate primarily to the
acquisition of office buildings used as the Company's corporate headquarters. In
fiscal 1997, a substantial portion of the Company's capital expenditures related
to build-up and equipment purchases associated with its Emerging Technology
Center in Memphis, Tennessee. The Company has budgeted approximately $1,000,000
for capital expenditures in fiscal 1998, the majority of which will be spent on
completion of the Memphis Emerging Technology Center and leasehold improvements
related to an Emerging Technology Center in Nashville, Tennessee.

         On July 10, 1997, the Company entered into the Credit Facility with
NationsBank, which provides for borrowings of up to $16.0 million (assuming
certain conditions are satisfied, including conditions imposed by NationsBank
relating to the acquisition of The Partners Group). On July 10, 1997, the
Company borrowed approximately $10.0 million under the Credit Facility in
connection with the acquisition of The Partners Group. The Credit Facility bears
interest at LIBOR plus a spread over LIBOR, which varies based on certain
financial ratios. Certain of the Company's existing subsidiaries are
co-borrowers under the Credit Facility and their stock is pledged to secure the
indebtedness thereunder. In addition, each of PRI and PCG have executed
guarantees in favor of NationsBank. All borrowings under the Credit Facility
mature on August 1, 2000.

         The Company believes that cash flows from operations and borrowings
under the Credit Facility will be sufficient to fund the Company's operating
needs for at least the next twelve months. Other than the acquisitions described
herein, the Company has no present acquisition agreements or arrangements. The
Company may need to incur additional indebtedness or issue equity securities
(including Common Stock), however, to fund future acquisitions.

FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-K may be deemed to contain certain
forward-looking statements regarding the anticipated financial and operating
results of the Company. The Company undertakes no obligation to publicly release
any revisions to any forward-looking statements contained herein to reflect
events or circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. Information contained in these
forward-looking statements is inherently uncertain and actual performance and
results may differ materially due to many important factors, many of which are
beyond the Company's control, including the Company's dependence on key clients;
the Company's dependence on the availability of qualified IT employees; the


                                       17


<PAGE>   18


Company's dependence on key management personnel; the Company's ability to
sustain and manage growth; the Company's ability to integrate acquired
businesses; the timing and ultimate outcome of the governmental investigations
of the Company and certain members of its management; competition; general
economic conditions; and the like.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                 
<TABLE>
<CAPTION>                                                                   
                                                                              PAGE OF
                                                                             FORM 10-K
                                                                             ---------
<S>                                                                             <C>
Report of Independent Auditors ..............................................   19

Consolidated Balance Sheets as of April 30, 1997 and 1996 ...................   20

Consolidated Statements of Income for each of the three
         years in the period ended April 30, 1997 ...........................   22

Consolidated Statements of Shareholders' Equity for each of
         the three years in the period ended April 30, 1997..................   23

Consolidated Statements of Cash Flows for each of the three
         years in the period ended April 30, 1997 ...........................   24

Notes to Consolidated Financial Statements ..................................   25
</TABLE>


                                       18


<PAGE>   19
                         Report of Independent Auditors


Board of Directors
SCB Computer Technology, Inc.

We have audited the accompanying consolidated balance sheets of SCB Computer
Technology, Inc. and subsidiaries as of April 30, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended April 30, 1997. 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 generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SCB Computer
Technology, Inc. and subsidiaries at April 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 1997, in conformity with generally
accepted accounting principles.

                                                        /s/ Ernst & Young LLP

Memphis, Tennessee
June 9, 1997, except for
  Note 12, as to which the
  date is June 30, 1997






                                                                          19
<PAGE>   20

                        SCB Computer Technology, Inc.

                         Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                  APRIL 30
                                                                          1997                1996
                                                                  -----------------------------------------
ASSETS                                                                                     (RESTATED)
<S>                                                                 <C>                  <C>           
Current assets:
   Cash and cash equivalents:
     Cash                                                           $       947,083      $    1,990,745
     Securities purchased under agreement to resell                         787,704          10,000,000
     Marketable securities                                               10,080,000           7,410,270
                                                                  -----------------------------------------
   Total cash and cash equivalents                                       11,814,787          19,401,015

   Accounts receivable:
     Trade, net of allowance for doubtful accounts of
       $21,289 in 1996 and $19,861 in 1997                               11,326,517           7,386,273
     Related parties                                                         12,018              18,976
     Other                                                                    8,402                   -
                                                                  -----------------------------------------
                                                                         11,346,937           7,405,249
   Prepaid expenses                                                         307,287              27,791
   Inventory                                                                 28,182                   -
   Deferred federal and state income tax                                    231,663             201,290
                                                                  -----------------------------------------
Total current assets                                                     23,728,856          27,035,345

Fixed assets:
   Buildings                                                              1,348,293           1,348,293
   Furniture, fixtures, and equipment                                     1,813,920           1,005,895
   Accumulated depreciation                                                (838,888)           (583,578)
                                                                  -----------------------------------------
                                                                          2,323,325           1,770,610
   Land                                                                     444,670             443,301
                                                                  -----------------------------------------
                                                                          2,767,995           2,213,911

Other assets:
   Goodwill                                                               8,150,782                   -
   Other                                                                    446,741              22,481
                                                                  ------------------------------------------
                                                                          8,597,523              22,481
                                                                  ==========================================
Total assets                                                        $    35,094,374         $29,271,737
                                                                  ==========================================

</TABLE>

20
<PAGE>   21





<TABLE>
<CAPTION>

                                                                                 APRIL 30
                                                                         1997                1996
                                                                  -----------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                                       (RESTATED)
<S>                                                                  <C>                <C>            
Current liabilities:
   Accounts payable-trade                                            $    1,072,451     $       672,823
   Accrued and withheld payroll taxes, insurance, and 
     payroll deductions                                                     299,859             262,655
   Accrued vacation                                                         660,763             530,067
   Other accrued expenses                                                 1,007,102             804,058
   Accrued federal and state income taxes                                   149,941             123,207
                                                                  ------------------------------------------
Total current liabilities                                                 3,190,116           2,392,810


   Deferred federal and state income taxes                                  270,761              82,761
                                                                  -------------------------------------------
Total liabilities                                                         3,460,877           2,475,571








SHAREHOLDERS' EQUITY:
   Preferred stock, no par value-authorized 1,000,000 shares,
     none issued                                                                  -                   -
   Common stock-20,000,000 shares of $.01 par value authorized
     and 7,478,044 shares issued and outstanding at April 30,
     1997 and 7,477,119 shares issued and outstanding at April
     30, 1996                                                                74,780              74,771
   Additional paid-in capital                                            23,849,583          23,835,254
   Retained earnings                                                      7,709,134           2,886,141
                                                                  -----------------------------------------
Total shareholders' equity                                               31,633,497          26,796,166
                                                                  -----------------------------------------
Total liabilities and shareholders' equity                           $   35,094,374     $    29,271,737
                                                                  =========================================

</TABLE>
                                                                             21
See accompanying notes.


<PAGE>   22

                          SCB Computer Technology, Inc.

                        Consolidated Statements of Income

<TABLE>
<CAPTION>

                                                                        YEAR ENDED APRIL 30
                                                            1997                1996                1995
                                                     ------------------------------------------------------------
                                                                               (RESTATED)          (RESTATED)
<S>                                                       <C>               <C>                 <C>
Revenue                                                   $ 64,063,576      $   56,023,871      $   39,170,119
Cost of services                                            46,585,959          39,508,422          27,027,159
                                                     ------------------------------------------------------------
Gross profit                                                17,477,617          16,515,449          12,142,960

Compensation-key executives                                    700,000           3,764,840           4,170,000
Other selling, general and 
    administrative expenses                                  9,417,297           9,580,223           5,472,175
                                                     ------------------------------------------------------------
Total operating expenses                                    10,117,297          13,345,063           9,642,175
                                                     ------------------------------------------------------------
Income from  operations                                      7,360,320           3,170,386           2,500,785

Other income (expenses):
Interest income                                                938,172             199,476              25,587
Interest expense                                                     -             (69,304)           (120,764)
Other, net                                                    (182,764)           (157,100)            (50,741)
                                                     ------------------------------------------------------------
Total other income (expenses)                                  755,408             (26,928)           (145,918)
                                                     ------------------------------------------------------------
Income before income taxes                                   8,115,728           3,143,458           2,354,867

Income tax expense:
Current                                                      2,895,063           1,215,434             751,504
Deferred (benefit)                                             157,627             (28,895)            (33,302)
                                                     ------------------------------------------------------------
Total income tax expense                                     3,052,690           1,186,539             718,202
                                                     ------------------------------------------------------------

Net income                                                $  5,063,038      $    1,956,919      $    1,636,665
                                                     ============================================================

Net income per share                                          $.67                  $.31               $.28
                                                     ============================================================

Net income                                                $  5,063,038      $    1,956,919      $    1,636,665

Pro forma adjustment for income taxes                          177,000             162,000             309,000
                                                     ------------------------------------------------------------

Pro forma net income                                      $  4,886,038      $    1,794,919      $    1,327,665
                                                     ============================================================

Pro forma net income per share                                 $.65                 $.29               $ .23
                                                     ============================================================

Weighted average number of common and common
   equivalent shares outstanding
                                                             7,512,276           6,222,343           5,895,379
                                                     ============================================================
</TABLE>

See accompanying notes.

                                                                             22

<PAGE>   23
                        SCB Computer Technology, Inc.

               Consolidated Statements of Shareholders' Equity
                                                   
 
<TABLE>
<CAPTION>

                                          NUMBER                        ADDITIONAL                            TOTAL
                                            OF             COMMON        PAID-IN          RETAINED         SHAREHOLDERS'
                                          SHARES            STOCK        CAPITAL          EARNINGS            EQUITY
                                     --------------------------------------------------------------------------------------
<S>                                       <C>              <C>            <C>          <C>                   <C>        
Balance at May 1, 1994, as
   previously reported                    5,387,129        $53,871        $ 393,156    $     785,010         $ 1,232,037
Adjustment for pooling -of-         
   interests                                461,536          4,616        1,318,975       (1,463,386)           (139,795)
                                     --------------------------------------------------------------------------------------

Balance at May 1, 1994, as
   restated                               5,848,665         58,487        1,712,131         (678,376)          1,092,242
   Cash dividends declared 
   ($.0049 per share)                                                                        (29,067)            (29,067)
   Net income                                                                              1,636,665           1,636,665
                                     --------------------------------------------------------------------------------------

Balance at April 30, 1995, as
   restated                               5,848,665         58,487        1,712,131          929,222           2,699,840
   Issuance of Common Stock in
      connection with employees'
      Stock Grants                          125,948          1,259        1,226,734                            1,227,993
   Issuance of Common Stock in
      connection with Initial 
      Public Offering                     1,495,000         14,950       20,801,464                           20,816,414
   Issuance of Common Stock in
      cancellation of stock
      appreciation right                      7,506             75           94,925                               95,000
   Net income                                                                              1,956,919           1,956,919
                                     --------------------------------------------------------------------------------------

Balance at April 30, 1996, as 
   restated                               7,477,119         74,771       23,835,254        2,886,141          26,796,166
   Pre-merger dividends to 
      former DSS owners                                                                     (240,000)           (240,000)
   Other                                                                                         (45)                (45)
   Issuance of Common Stock in
      connection with the 
      exercise of employee stock 
      options                                   925              9           14,329                               14,338
   Net Income                                                                              5,063,038           5,063,038
                                     --------------------------------------------------------------------------------------

Balance at April 30, 1997                 7,478,044        $74,780      $23,849,583    $   7,709,134         $31,633,497
                                     ======================================================================================
</TABLE>
                                                                         23
See accompanying notes.


<PAGE>   24
                          SCB Computer Technology, Inc.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                               YEAR ENDED APRIL 30
                                                                      1997              1996              1995
                                                               --------------------------------------------------------
                                                                                   (RESTATED)         (RESTATED)
<S>                                                              <C>               <C>               <C>          
OPERATING ACTIVITIES
Net income                                                       $   5,063,038     $   1,956,919     $   1,636,665
Adjustments to reconcile net income to net cash
   by operating activities:
     Gain on sale of fixed assets                                         (500)                -                 -
     Provision for bad debts                                             4,680                 -                 -
     Depreciation                                                      255,643           146,272           114,620
     Amortization                                                       72,032                 -                 -
     Deferred income taxes                                             157,627           (28,895)          (33,302)
     Stock grant                                                             -         1,227,993                 -
     Issuance of common stock                                           14,338            95,000                 -
     (Increase) decrease in:
       Accounts receivable:
         Trade                                                      (3,100,208)       (2,609,794)       (1,884,407)
         Related parties                                                 6,958            14,048           (75,285)
       Other                                                            (8,402)                -                 -
       Prepaid expenses                                               (279,496)           64,827           (42,687)
       Inventory                                                       (28,182)                -            24,773
       Other assets                                                   (427,792)            4,546            (5,532)
     Increase (decrease) in:
       Accounts payable-trade                                          253,216            (7,932)          513,730
       Accrued federal and state income taxes                           26,734           103,421            28,703
       Accrued vacation                                                 83,295           116,976            81,945
       Other accrued expenses                                         (175,731)         (399,932)          861,601
       Accrued and withheld payroll taxes, insurance 
         and accrued payroll deductions                                27,954            55,156          (422,543)
                                                              --------------------------------------------------------  
Total adjustments                                                   (3,117,834)       (1,218,314)         (838,384)
                                                              --------------------------------------------------------
Net cash provided by operating activities                            1,945,204           738,605           798,281

INVESTING ACTIVITIES
Purchases of fixed assets                                             (792,187)         (687,727)         (609,049)
Sale of fixed assets                                                       800                 -                 -
                                                              --------------------------------------------------------
Net cash used by investing activities                                 (791,387)         (687,727)         (609,049)

FINANCING ACTIVITIES
Proceeds from initial public offering                                        -        20,816,414                 -
Purchase of Technology Management Resources Inc.                    (8,500,000)                -                 -
Net borrowings (repayments)  under line of credit                            -        (1,469,899)          165,000
Borrowings on long-term debt                                                 -                 -           325,000
Payments on long-term debt                                                   -          (170,952)         (529,500)
Payment of dividends                                                  (240,000)          (29,067)          (19,377)
Other                                                                      (45)                -                 -
                                                              --------------------------------------------------------
Net cash provided (used) by financing activities                    (8,740,045)       19,146,496           (58,877)
                                                              --------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                (7,586,228)       19,197,374           130,355
Cash and cash equivalents at beginning of period                    19,401,015           203,641            73,286
                                                              --------------------------------------------------------
Cash and cash equivalents at end of period                      $   11,814,787    $   19,401,015     $     203,641
                                                              ========================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid                                                   $            -    $       69,305     $     136,152
Income taxes paid                                                    2,805,293         1,124,849           692,546

</TABLE>

See accompanying notes.

                                                                             24
<PAGE>   25
                          SCB Computer Technology, Inc.

                   Notes to Consolidated Financial Statements

                                 April 30, 1997



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

GENERAL

SCB Computer Technology, Inc. (the "Company" or "SCB") 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 primarily to
state and local governments, public utilities, Fortune 500 companies, and other
large organizations.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

The Company enters into purchases of securities under agreements to resell. The
amounts advanced under these agreements represent overnight loans and are
reflected as a cash equivalent in the consolidated balance sheets. Securities
purchased under agreement to resell are held in safekeeping in the Company's
name. Should the market value of the underlying securities decrease below the
amount recorded, the counterparty, a large national banking institution, is
required to place an equivalent amount of additional securities in safekeeping
in the name of the Company.

FIXED ASSETS

All fixed assets are carried at cost. Depreciation is computed using the
straight-line basis over the useful lives of the various fixed assets. The
estimated useful lives for computing depreciation on fixed assets are as
follows:

     Furniture, fixtures and equipment               5-10 years
     Autos                                            3-6 years
     Buildings                                      31-39 years



                                                                          25

<PAGE>   26



                          SCB Computer Technology, Inc.

             Notes to Consolidated Financial Statements (continued)





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

Goodwill represents the excess of the cost of the business acquired using the
purchase method of accounting over the fair value of the net identifiable assets
at the date of acquisition and is being amortized using the straight line method
over 30 years. Amortization expense related to goodwill was $68,500 for the year
ended April 30, 1997.

The Company continually monitors events and changes in circumstances that could
indicate the carrying amount of goodwill may not be recoverable. When events or
changes in circumstances are present that indicate the carrying amount of
goodwill may not be recoverable, the Company assesses the recoverability of
goodwill by determining whether the carrying value of such intangible assets
will be recovered through undiscounted expected future cash flows after related
interest charges. Should the Company determine that the carrying values of
specific intangible 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 revenues as professional services are performed.

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.

STOCK BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees 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 APB Opinion No.
25, "Accounting for



26
<PAGE>   27
                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Issued to Employees," and, accordingly, recognizes no compensation expense
for the stock option grants.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially expose the Company to concentrations of
credit risk consist primarily of trade accounts receivable and securities
purchased under agreement to resell. The Company continually evaluates the
credit worthiness of its customers' financial positions and monitors accounts on
a periodic basis, but typically does not require collateral related to trade
receivables. The Company has not experienced significant losses related to
receivables from individual customers or groups of customers in a particular
industry or geographic area. Credit losses have been immaterial and have
consistently been within management's expectations.

USE OF ESTIMATES

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

NET INCOME PER SHARE

Net income per common and common equivalent share is based on the
weighted-average number of common and common equivalent shares outstanding
during 1997, 1996 and 1995. The incremental shares attributable to cheap stock
have been included in 1996 and 1995.

PRO FORMA PROVISION FOR INCOME TAXES

During fiscal year 1997, the Company acquired Delta Software Services, Inc.
("DSS") in a merger transaction accounted for as a pooling-of-interests. Prior
to the merger, DSS had elected "S" Corporation status for income tax purposes.
As a result of the merger, DSS terminated its "S" Corporation election. Pro
forma provision for income taxes, presents the combined pro forma tax expense of
DSS as if it had been a "C" Corporation during the periods presented.

                                                                             27

<PAGE>   28

                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PRO FORMA NET INCOME PER COMMON SHARE

Pro forma net income per share is based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the period.
Common stock equivalents include the dilutive effect of the assumed exercise of
certain outstanding stock options. Fully diluted pro forma net income per common
share is not presented as it is not materially different from primary pro forma
net income per share or it is antidilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximates fair values of these instruments at
April 30, 1997 and 1996.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 128, Earnings Per Share, and
No. 129, Disclosure of Information about Capital Structure. Statement 128
simplifies the calculation of earnings per share (EPS) and makes it comparable
to international EPS standards. Statement 128 is effective for both interim and
annual periods ending after December 15, 1997. Statement 129 is effective for
financial statements for periods ending after December 15, 1997. Statement 129,
which is applicable to all companies, consolidates the existing guidance
relating to a company's capital structure. The Company does not believe that the
adoption of these statements will have a material effect on its consolidated
financial position or results of operations.


                                                                        28
<PAGE>   29

                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)



2.    BUSINESS COMBINATIONS

In February 1997, the Company acquired substantially all of the assets of
Technology Management Resources, Inc. ("TMR"), a Company in substantially the
same business as the Company, which was accounted for using the purchase method
of accounting. The consideration paid by the Company related to this acquisition
was $8,500,000 of which $500,000 is to be held in escrow for certain
contingencies in accordance with the acquisition agreement. The total purchase
price of $8,500,000 has been allocated to the assets acquired and liabilities
assumed based on their estimated fair value as of the date of acquisition. In
addition to the initial purchase price of $8,500,000, the Company is required to
pay up to $4,000,000 in its common stock over a three year period to the former
TMR shareholders if certain levels of TMR revenue and net income are attained
during fiscal years 1998, 1999 and 2000. Any amounts paid under this contingent
payment agreement will be recorded as additional goodwill at time of payment.
The operating results of TMR are included in the Company's consolidated
statements of operations from March 1, 1997 to April 30, 1997. The pro forma
impact of the TMR acquisition as if the transaction had occurred on May 1, 1996
and 1995, respectively, is as follows:

                                                  YEAR ENDED APRIL 30
                                               1997              1996
Pro forma                                  ----------------------------------
---------                                  (in thousands, except per share data)
          
Revenue                                        $67,694          $59,277
Net income, including pro forma
   adjustment for income taxes                 $ 5,578          $ 2,252
Net income per share, including pro forma
   adjustment for income taxes                   $.74             $.36

The Company also acquired Delta Software Services, Inc. ("DSS"), a Company in
substantially the same business as the Company, in September 1996. The
acquisition was accounted for using the pooling-of-interests method of
accounting. The Company exchanged 461,536 shares of its common stock for all the
outstanding stock of DSS.

In accordance with the pooling-of-interests method of accounting, no adjustment
has been made to the historical carrying amount of assets and liabilities of
DSS. The accompanying consolidated financial statements have been restated to
include the financial position and operating results of DSS for all periods
prior to the merger.

                                                                          29
<PAGE>   30



                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)




2.    BUSINESS COMBINATIONS (CONTINUED)

A reconciliation of revenue, pro forma net income and pro forma net income per
common share of the Company, as previously reported, DSS, and combined,
including the pro forma tax provision for DSS, is as follows:
<TABLE>
<CAPTION>

                                              1996                1995
                                           ------------------------------------
                                           (in thousands, except per share data)
<S>                                          <C>                <C>      
Revenue:                                                                 
   SCB as previously reported                $48,710            $33,355  
   DSS                                         7,314              5,815  
                                           -------------------------------------
     Combined                                $56,024            $39,170  
                                           =====================================
Pro forma net income:                                                    
     SCB, as previously reported             $ 1,502            $   824  
     DSS                                         455                813  
Pro forma provision for DSS income taxes        (162)              (309) 
                                           -------------------------------------
     Combined                                $ 1,795            $ 1,328  
                                           =====================================
                                                                         
Pro forma net income per share:                                          
     SCB, as previously reported             $   .26            $   .15  
                                           =====================================
     Combined                                $   .29            $   .23  
                                           =====================================

</TABLE>

3. ACCOUNTS RECEIVABLE-TRADE

Accounts receivable-trade includes unbilled receivables of $499,636 and $308,035
as of April 30, 1997 and 1996, respectively.

4. EMPLOYEE BENEFIT PLANS

The Company has a profit sharing plan with an employee stock ownership plan
(ESOP) provision for full-time employees age 21 and over. Contributions are made
at the discretion of the Board of Directors. The Company did not contribute to
the plan for the years ended April 30, 1997, 1996 and 1995, but paid
administrative expenses associated with the plan of $6,660, $5,980 and $5,655 in
such years.

The Company also provides a qualified 401(k) profit sharing plan for full-time
employees age 21 or over, and who have been with the Company for ninety days by
April 30. Contributions by the Company are at the discretion of the Board of
Directors. Contributions were $93,413, $32,916 and $23,500 for the years ended
April 30, 1997, 1996 and 1995, respectively.


                                                                          30
<PAGE>   31


                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        

5. EMPLOYMENT AGREEMENTS

Effective upon consummation of the initial public offering in February 1996,
the Company entered into employment agreements with the two majority
shareholders for a term of three years expiring April 30, 1999. These
agreements provide for a base salary of $600,000 each for the initial year and
increases 10% on May 1, 1997 and May 1, 1998. In the event the Company exceeds
110% to 125% of projected pre-tax earnings targeted by the Board of Directors,
bonuses of up to $200,000 each per year would be earned. During fiscal 1997,
the employment agreements were amended to reduce the amount of base salary to
$300,000 each.

6. LEASES

Total rent expense for the years ended April 30, 1997, 1996 and 1995 was
$258,348, $364,763 and $292,704 respectively. The Company leases certain office
facilities and vehicles under terms of noncancelable operating lease agreements
which expire at various dates through 2001.

Total future annual lease requirements are as follows:


                  1998                              $  418,243
                  1999                                 314,131
                  2000                                 233,965
                  2001                                  15,000
                                                    ----------
                                                    $  981,339
                                                    ==========

7. SIGNIFICANT CUSTOMERS

The Company earns a significant portion of its revenue from its top five
customers. Revenues earned from its top five customers (each representing
greater than 5% of revenues) totaled 49%, 57% and 62% for the years ended April
30, 1997, 1996 and 1995, respectively.

At April 30, 1997 and 1996 accounts receivable from these significant customers
were $3,232,070 and $3,495,477 respectively.


                                                                          31
<PAGE>   32

                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        


8. FEDERAL AND STATE INCOME TAXES

Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>

                                                                           YEAR ENDED APRIL 30
                                                             1997                 1996                    1995
                                                     ----------------------------------------------------------------
                                                                                (RESTATED)            (RESTATED)
<S>                                                       <C>                   <C>                     <C>     
     Federal:                                                                   
         Current                                          $2,439,146            $1,026,164              $626,081
         Deferred                                            141,035               (24,500)              (28,044)
                                                     ----------------------------------------------------------------
                                                           2,580,181             1,001,664               598,037
     State:
         Current                                             455,917               189,270               125,423
         Deferred                                             16,592                (4,395)               (5,258)
                                                     ----------------------------------------------------------------
                                                             472,509               184,875               120,165
                                                     ----------------------------------------------------------------
     Total                                                $3,052,690            $1,186,539              $718,202
                                                     ================================================================
</TABLE>

Deferred tax liabilities and assets are comprised of the following:

<TABLE>
<CAPTION>
                                                                               APRIL 30
                                                                         1997             1996
                                                                   ----------------------------------
    Deferred tax liability:                                                            (RESTATED)
    <S>                                                                 <C>              <C>
       Depreciation expense                                             $ 22,800         $ 22,800
       Basis difference in assets                                        188,000                -
       Other                                                              59,961           59,961
                                                                   ----------------------------------
    Total deferred tax liability                                         270,761           82,761
    Deferred tax assets:
       Vacation expense                                                  231,663          201,290
                                                                   ----------------------------------
    Total deferred tax assets                                            231,663          201,290
                                                                   ----------------------------------
    Net deferred tax assets (liabilities)                               $(39,098)        $118,529
                                                                   ==================================

</TABLE>

                                                                          32

<PAGE>   33
                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        


8. FEDERAL AND STATE INCOME TAXES (CONTINUED)

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:

<TABLE>
<CAPTION>

                                                             YEARS ENDED APRIL 30
                                         1997                           1996                         1995
                                AMOUNT          PERCENT          AMOUNT        PERCENT        AMOUNT       PERCENT
                          -------------------------------------------------------------------------------------------
                                                               (RESTATED)   (RESTATED)     (RESTATED)    (RESTATED)

<S>                         <C>                    <C>        <C>                <C>       <C>               <C>  
Tax at U.S. statutory       
rates                       $  2,759,348           34.0%      $   1,068,776      34.0%     $  800,655        34.0%
State income taxes net of
   federal tax benefit           311,856            3.8             122,018       3.9          79,309         3.4
Non-taxable   income   of
   company   acquired  in
   pooling                             -              -            (180,963)      5.8        (309,339)      (13.1)
Other-net                        (18,514)          (0.2)            176,708       5.6         147,577         6.2
                          ===========================================================================================
                            $  3,052,690           37.6%      $   1,186,539      37.7%     $  718,202        30.5%
                          ===========================================================================================

</TABLE>

9. SHAREHOLDERS' EQUITY

On December 21, 1995, the Company's charter was revised to modify the Company's
capital structure. The authorized shares of common stock were increased from
1,000,000 to 20,000,000. Additionally, 1,000,000 shares of preferred stock were
authorized for future issuance. No terms or preferences have been established
for the preferred stock. In connection with this change, the Company approved a
5.56-for-1 common stock split to effect the change in capitalization. A total of
4,418,220 additional shares of common stock were issued in connection with the
stock split and $44,182 was reclassified from retained earnings to common stock.
All share and per share amounts have been retroactively restated to reflect the
stock split and change in capitalization.

During February 1996, the Company completed its initial public offering issuing
1,495,000 shares of common stock with net proceeds received of $20,816,414.


                                                                          33
<PAGE>   34

                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        

10. 1995 STOCK INCENTIVE PLAN

The 1995 Stock Incentive Plan provides for the granting of incentive stock
options or non-qualified options to employees and to the Company's non-employee
directors to purchase shares of the Company's common stock. The options
generally become exercisable on a schedule established by the Board's
Corporation Committee and generally expire ten years from the date of grant.
Under the Plan, 600,000 shares of common stock have been reserved for
distribution. The Plan also provides for grants of stock appreciation rights
and restricted stock. The following amounts reflect the effect of all stock
dividends and splits declared through April 30, 1997:

<TABLE>
<CAPTION>

                                          FISCAL YEAR END 1997                 FISCAL YEAR END 1996
                                    ----------------------------------------------------------------------
                                                        Weighted                           Weighted
                                                    average exercise                   average exercise
                                        OPTIONS           price             Options          price
                                    ----------------------------------  ----------------------------------
<S>                                       <C>            <C>                <C>             <C>   
Outstanding May 1                         199,200        $15.50                   -              -
Granted                                   186,500        $16.89             209,300         $15.50
Exercised                                    (925)       $15.50                   -              -
Cancelled                                 (20,425)       $15.98             (10,100)        $15.50
----------------------------------------------------------------------  ----------------------------------
Outstanding April 30                      364,350        $16.19             199,200         $15.50
----------------------------------------------------------------------  ----------------------------------

Exercisable at year end                   122,125        $16.24                   -              -
Weighted average fair value of
  options granted during the year                        $ 8.57                             $ 7.56
</TABLE>

Exercise prices for options outstanding as of April 30, 1997, ranged from $15.50
to $18.50. The weighted average remaining contractual life of those options is
approximately nine years.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issues to Employees" (APB No. 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement 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 No. 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.


                                                                            34
<PAGE>   35
                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        


10. 1995 STOCK INCENTIVE PLAN (CONTINUED)

Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1997
and 1996, respectively: risk-free interest rate of 6.56 percent and 5.14
percent; no dividend yield; volatility factors of the expected market price of
the Company's common stock of .487; and a weighted average expected life of the
option of five years.

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 stock 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 employee stock options.

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:

<TABLE>
<CAPTION>

                                                                       1997                  1996
                                                               --------------------------------------------
<S>                                                                   <C>                  <C>       
Pro forma net income:
As reported-including pro forma
   for income taxes                                                   $4,886,038           $1,794,919
Pro forma-for SFAS No. 123                                             4,341,195            1,734,941
Pro forma earnings per share:
As reported-including pro forma
   for income taxes                                                       $.65                  $.29
Pro forma-for SFAS No. 123                                                $.58                  $.28

</TABLE>

                                                                          35
<PAGE>   36

                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                        

11.   CONTINGENCIES

In May 1996, the Company was issued a subpoena by the Federal Grand Jury of the
United States District Court for the Western District of Tennessee. A subsequent
subpoena was issued to the Company by the grand jury in June 1996. The Company
has not been identified as the subject or target of the grand jury's
investigation. The Company currently believes that the grand jury's
investigation relates to the Company's billing practices under its consulting
contract with the TVA, particularly the hourly billings and expenses of T. Scott
Cobb, the Company's Chairman and Steve N. White, the Company's Executive Vice
President-Development. The subpoenas apparently relate to an audit of the
Company's TVA billings being conducted by the Office of the Inspector General.

Additionally, on July 3, 1996, the Securities and Exchange Commission notified
the Company that it is conducting an informal inquiry, which appears to be
focused on the TVA billings and the impact thereof on the Company's financial
statements.

An internal investigation by the Special Committee of the Board of Directors,
has identified possible misbillings of expenses under the TVA contract,
primarily relating to mileage and per diem expenses submitted to TVA. On May
31, 1996, the Company remitted $39,759 to the TVA relating to the possible
misbillings.

Due to the ongoing and prospective nature of the above-mentioned investigations,
it is not possible presently to predict with any certainty when the
investigations will be completed, their ultimate outcome, or the effect thereof
on the Company's financial condition or results of operations.

12. SUBSEQUENT EVENT

Effective June 30, 1997, the Company acquired all the outstanding capital stock
of Partners Resources, Inc. (PRI); an information technology outsourcing company
and Partners Capital Group, Inc. (PCG); a computer leasing company, which were
accounted for using the purchase method of accounting. The cash consideration
paid for these entities was $16,000,000 of which $1,600,000 is being held in
escrow for certain contingencies in accordance with the acquisition agreements.
The Company may be required to pay as additional purchase price an amount equal
to 14 times PRI's net income for the calendar year ended December 31, 1997
calculated in accordance with the acquisition agreement. In connection with the
acquisitions, the Company entered into a revolving term loan facility with a
bank providing for borrowings up to $16,000,000 maturing August 1, 2000.


                                                                          36


<PAGE>   37


                        SCB Computer Technology, Inc.

           Notes to Consolidated Financial Statements (continued)
                                                              

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
                                        JULY 31          OCTOBER 31        JANUARY 31          APRIL 30
QUARTER ENDED:                            1996              1996              1997               1997
                                   --------------------------------------------------------------------------
                                         (RESTATED)
<S>                                      <C>              <C>                <C>              <C>       
Revenue                               $  15,581,317    $  15,583,536      $  15,491,395     $ 17,474,680
Cost of services                         11,062,541       11,242,601         11,560,839       12,787,330
Gross profit                              4,518,776        4,340,935          3,930,556        4,687,350
Selling, general and
   administrative expenses                2,771,179        2,441,789          2,270,514        2,633,815
Income from operations                    1,747,597        1,899,146          1,660,042        2,053,535
Other income                                214,886          239,664            230,600           70,258
Income before taxes                       1,962,483        2,138,810          1,890,642        2,123,793
Income tax expense                          684,905          804,000            725,700          838,085
Net income                            $   1,277,578    $   1,334,810      $   1,164,942     $  1,285,708
                                   ==========================================================================
Net income per share                         $.18             $.18               $.16             $.17
                                   ==========================================================================

Net income                            $   1,277,578    $   1,334,810     $    1,164,942     $  1,285,708
Pro forma tax expense
   adjustment                               113,000           64,000                  -                -
                                   --------------------------------------------------------------------------
Pro forma net income                  $   1,164,578    $   1,270,810     $    1,164,942     $  1,285,708
                                   ==========================================================================
Pro forma net income
   per share                                 $.17             $.17               $.16             $.17
                                   ==========================================================================

                                        JULY 31           OCTOBER 31        JANUARY 31             APRIL 30
QUARTER ENDED:                            1995               1995               1996                 1996
                                   ---------------------------------------------------------------------------
                                         (RESTATED)        (RESTATED)          (RESTATED)        (RESTATED)

Revenue                               $  12,689,649     $ 14,110,318     $   14,712,853     $ 14,511,051
Cost of services                          8,812,337        9,867,189         10,712,999       10,115,897   
Gross profit                              3,877,312        4,243,129          3,999,854        4,395,154   
Selling, general and                                                                                       
   administrative expenses                3,050,237        4,516,832          2,896,293        2,881,701   
Income (loss) from                                                                                         
   operations                               827,075         (273,703)         1,103,561        1,513,453   
Other (expense) income                      (53,215)         (39,972)           (88,740)         154,999   
Income (loss) before taxes                  773,860         (313,675)         1,014,821        1,668,452   
Income tax expense (benefit)                271,044         (203,307)           346,718          772,084   
Net income (loss)                     $     502,816    $    (110,368)     $     668,103     $    896,368   
                                   ==========================================================================
Net income (loss) share                      $.09             $(.02)             $.11             $.12
                                   ==========================================================================

Net income (loss)                     $     502,816    $    (110,368)     $     668,103     $    896,368    
Pro forma tax expense                                                                                       
   adjustment                                53,000           58,000             58,000                -    
                                   --------------------------------------------------------------------------
Pro forma net income (loss)           $     449,816    $    (168,368)     $     610,103     $    896,368
                                   ==========================================================================
Pro forma net income (loss)
   per share                                 $.08             $(.03)             $.10             $.12
                                   ==========================================================================
</TABLE>

                                                                          37
<PAGE>   38



ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
                 AND FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10.         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Proxy Statement issued in connection with the Annual Meeting of
Shareholders currently scheduled to be held on September 23, 1997 contains under
the caption "Proposal One: Election of Directors" information required by Item
10 of Form 10-K and is incorporated herein by reference. Pursuant to General
Instruction G(3), certain information concerning executive officers of the
Company is included in Part I (Item 1.) of this Form 10-K under the caption
"Business-Executive Officers."

ITEM 11.         EXECUTIVE COMPENSATION

         The Proxy Statement issued in connection with the Annual Meeting of
Shareholders currently scheduled to be held on September 23, 1997 contains under
the caption "Executive Compensation" information required by Item 11 of Form
10-K and is incorporated herein by reference.

ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The Proxy Statement issued in connection with the Annual Meeting of
Shareholders currently scheduled to be held on September 23, 1997 contains under
the caption "Security Ownership of Certain Beneficial Owners and Management"
information required by Item 12 of Form 10-K and is incorporated herein by
reference.

ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Not applicable.

                                     PART IV

ITEM 14.         EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      1.      Financial Statements: See Item 8.

         2.      Financial Statement Schedules: Not applicable.

         3.      Exhibits:



                                       38


<PAGE>   39
                  (a)      See Exhibit Index following signatures.


                  (b)      During the fiscal quarter ended April 30, 1997, the
                           Company filed a Current Report on Form 8-K dated
                           March 14, 1997, in connection with the acquisition of
                           substantially all of the assets of Technology
                           Management Resources, Inc., as amended by a Current
                           Report on Form 8-K/A dated May 14, 1997.

                                       39


<PAGE>   40



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Memphis, Tennessee, on
July 15, 1997.

                                               SCB COMPUTER TECHNOLOGY, INC.

                                               By:   /s/ Ben C. Bryant, Jr.
                                                  -----------------------------
                                                  Ben C. Bryant, Jr., President
                                                  and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
                     SIGNATURE                                          TITLE                                 DATE
                     ---------                                          -----                                 ----
<S>                                                <C>                                                   <C> 
/s/ T. Scott Cobb                                  Chairman of the Board of Directors                    July 15, 1997
-----------------------------------
T. Scott Cobb

/s/ Ben C. Bryant, Jr.                             Chief Executive Officer, President,                   July 15, 1997
----------------------------------
Ben C. Bryant, Jr.                                 and Vice Chairman of the Board of
                                                   Directors,  (Principal Executive
                                                   Officer)

/s/ Steve N. White                                 Director                                              July 15, 1997
-----------------------------------
Steve N. White

/s/ Gordon L. Bateman                              Chief Financial Officer (Principal                    July 15, 1997
Gordon L. Bateman                                  Financial and Accounting Officer)

/s/ James E. Harwood                               Director                                              July 15, 1997
--------------------------------
James E. Harwood

/s/ Joseph W. McLeary                              Director                                              July 15, 1997
-------------------------------
Joseph W. McLeary
</TABLE>

                                       40


<PAGE>   41



                                  EXHIBIT INDEX
                                  -------------

       EXHIBIT
       NUMBER                                DESCRIPTION
       ------                                -----------

         2.1                   Agreement and Plan of Merger by and among SCB
                               Computer Technology, Inc., Delta Software
                               Systems, Inc., Delta Acquisition, Inc., and the
                               shareholders of Delta Software Systems, Inc.,
                               dated as of September 20, 1996, including Form of
                               Indemnity and Escrow Agreement (incorporated by
                               reference to Exhibit 2 of the Company's Current
                               Report on Form 8-K, dated October 8, 1996).
                               (Schedules and other exhibits have been omitted
                               from this filing. The Registrant will furnish, as
                               supplementary information, copies of the omitted
                               materials to the Securities and Exchange
                               Commission upon request.)

         2.2                   Asset Purchase Agreement, dated February 28,
                               1997, by and among SCB Computer Technology, Inc.,
                               TMR Acquisition, Inc., Technology Management
                               Resources, Inc., and the shareholders of
                               Technology Management Resources, Inc.
                               (incorporated by reference to Exhibit 2.2 of the
                               Company's Registration Statement on Form S-3
                               (Registration No. 333-22869)). (Schedules and
                               other exhibits have been omitted from this
                               filing. The Registrant will furnish, as
                               supplementary information, copies of the omitted
                               materials to the Securities and Exchange
                               Commission upon request.)

         3.1                   Amended and Restated Charter of Registrant
                               (incorporated by reference to Exhibit 3.1 to the
                               Registration Statement on Form S-1 (Registration 
                               No. 33-80707)).

         3.2                   Amended and Restated Bylaws of Registrant
                               (incorporated by reference to Exhibit 3.2 to the
                               Registration Statement on Form S-1 (Registration
                               No. 33-80707)).

         4.1                   Specimen Common Stock certificate (incorporated
                               by reference to Exhibit 4.1 to the Registration 
                               Statement on Form S-1 (Registration No. 
                               33-80707)).

                                       41

<PAGE>   42



       EXHIBIT
       NUMBER                                   DESCRIPTION
       ------                                   -----------
         4.2                   Article 7 of the Registrant's Amended and 
                               Restated Charter (included in Exhibit 3.1) 
                               (incorporated by reference to Exhibit 4.2 to the 
                               Registration Statement on Form S-1 (Registration 
                               No. 33-80707)).

        10.1                   Employee Stock Ownership Plan and Trust
                               (incorporated by reference to Exhibit 10.1 to the
                               Registration Statement on Form S-1 (Registration
                               No. 33-80707)).

        10.2                   1995 Stock Incentive Plan (incorporated by 
                               reference to Exhibit 10.2 to the Registration
                               Statement on Form S-1 (Registration No. 
                               33-80707)).

        10.3                   Form of Employment Agreements between the
                               Company and each of Messrs. T. Scott Cobb and Ben
                               C. Bryant, Jr. (incorporated by reference to 
                               Exhibit 10.3 to the Registration Statement on
                               Form S-1 (Registration No. 33-80707)).

        10.4                   Professional Services Agreement, dated as of
                               December 1, 1990, by and between the Company and
                               the Metropolitan Government of Nashville and
                               Davidson County, acting by and through the
                               Electric Power Board of said Government
                               (including Amendment) (incorporated by reference
                               to Exhibit 10.4 to the Registration Statement on
                               Form S-1 (Registration No. 33-80707)).

         11                    Statement re computation of per share earnings.

         21                    Subsidiaries of the Registrant.

         23                    Consent of Ernst & Young LLP.

         27                    Financial Data Schedule (for SEC use only).



                                       42