<PAGE>   1
                                                                      EXHIBIT 13


                             [financial information]

                      SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                             FISCAL YEAR ENDED APRIL 30,
------------------------------------------------------------------------------------------------------------

(IN THOUSANDS, EXCEPT PER SHARE DATA)          1999           1998           1997        1996         1995
------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>          <C>          <C>           <C>
INCOME STATEMENT DATA:
Revenue                                     $ 156,670    $  109,472    $   64,064    $  56,024     $  39,170
Cost of services                              109,440        75,634        46,586       39,508        27,027
Gross profit                                   47,230        33,838        17,478       16,516        12,143
Selling, general and
administrative expenses                        36,224        20,325        10,345       13,345         9,642
Income from operations                         11,006        13,513         7,133        3,171         2,501
Other income (expenses), net                   (3,454)       (1,012)          983          (27)         (146)
Income before income taxes                      7,552        12,501         8,116        3,144         2,355
Provision for income taxes                      3,113         4,909         3,053        1,187           718
Net income                                  $   4,439     $   7,592     $   5,063    $   1,957     $   1,637
Net income per share - basic                $    0.18     $    0.34     $    0.23    $    0.11     $    0.09
Net income per share - diluted              $    0.18     $    0.33     $    0.23    $    0.11     $    0.09
Net income                                  $   4,439     $   7,592     $   5,063    $   1,957     $   1,637
Pro forma adjustment for income taxes              --            --           177          162           309
Pro forma net income                               --            --     $   4,886    $   1,795     $   1,328
Pro forma net income per share - basic             --            --     $    0.22    $    0.10     $    0.08
Pro forma net income per share - diluted           --            --     $    0.22    $    0.10     $    0.08
Cash dividends declared per share                  --            --            --           --     $  0.0016
Weighted average number                        24,683        22,464        22,432       18,556        17,546
 of common shares - basic
Weighted average number of common
shares assuming conversion - diluted           24,921        22,756        22,495       18,623        17,631
------------------------------------------------------------------------------------------------------------
                                                                     AS OF APRIL 30,
------------------------------------------------------------------------------------------------------------
                                                 1999          1998          1997         1996          1995
------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Working capital                             $  18,074     $  17,007     $  20,351    $  24,643     $   1,347
Total assets                                  146,847        98,546        35,094       29,272         7,089
Long-term debt, less current portion           33,755        22,782            --           --           171
Total shareholders' equity                  $  59,426     $  39,881     $  31,633    $  26,796     $   2,862
</TABLE>

25                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   2
                    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 $39.2 million in fiscal 1995 to $156.7 million in fiscal 1999 is a
function of three principal factors: (i) an increase in the volume of services
provided (as measured by aggregate hours billed), (ii) a shift in the mix of
services provided from lower rate professional staffing services to higher rate
consulting and outsourcing services, and (iii) additional revenues attributable
to acquired operations. In fiscal 1999, the Company derived more than 6% of its
revenue from providing enterprise resource planning services and less than 6% of
its revenue from leasing activity. The change in revenue mix is due to increased
emphasis on selling enterprise resource planning solutions. In general, the
Company recognizes revenue 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 over 250 clients, consisting of state and local governments, Fortune 500
companies, and other large organizations. For the fiscal years ended April 30,
1999, 1998, and 1997, approximately 41%, 39%, and 48%, 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, 1999, 1998, and 1997, the
Company's top five clients (in terms of revenue to the Company) accounted for
approximately 35%, 37%, and 49% 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 an adverse impact 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
enterprise resource

26                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   3
planning and telecommunications consulting services offerings.

The Company's growth in fiscal 1999, 1998, and 1997 has been significantly
affected by acquisition activity. In September 1996, the Company effected a
business combination with Delta Software Systems, Inc. ("Delta"), an information
technology company and custom software programmer. In February 1997, the Company
acquired substantially all of the assets of Technology Management Resources,
Inc. ("TMRI"), an information technology consulting company. In June 1997, the
Company acquired all of the outstanding stock of Partners Resources, Inc. and
Partners Capital Group, Inc. (collectively "The Partners Group"), information
technology outsourcing and computer leasing companies. In May 1998, the Company
effected a business combination with Proven Technology, Inc. ("PTI"), a company
in substantially the same business as the Company. 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 $9.4 million is being amortized ratably over a thirty year period.
The Partners Group transaction was also accounted for as a purchase and goodwill
of approximately $38 million, including the earnout payment made after the end
of fiscal 1998, is being amortized ratably over a thirty year period. The PTI
combination was accounted for using the pooling of interests method of
accounting. The Company exchanged 543,724 shares of its common stock for all the
outstanding stock of PTI, of which 54,372 shares are being held in escrow to
secure potential indemnification claims. Because of its size, the transaction
does not require restatement of prior financial results.

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 1999 TO FISCAL 1998

Revenue increased from $109.5 million in fiscal 1998 to $156.7 million in fiscal
1999, an increase of 43.1%. This increase was primarily 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 of
$14.6 million in sales at The Partners Group.

Gross profit increased from $33.8 million in fiscal 1998 to $47.2 million in
fiscal 1999, an increase of 39.6%. This increase was attributable to an increase
in revenue. Gross profit margin decreased from 30.9% to 30.1% during the period.
Cost of services consists of all costs directly attributable to the Company's
personnel assigned to various client en-


27                                                     SCB COMPUTER TECHNOLOGY
<PAGE>   4
gagements, including salaries, benefits, training, travel, and relocation. The
decrease in the gross profit margin was primarily attributable to a charge for a
provision for contract losses of $1.8 million which effectively reduced gross
profit 1.1% (See Note 17 in the audited financial statements).

Selling, general and administrative expenses increased from $20.3 million in
fiscal 1998 to $29.6 million in fiscal 1999, primarily due to the growth in
revenue. The company also recorded non-recurring charges for the provision of
$2.7 million for the TVA settlement and the severance payments and a $4.0
million write-down for the impairment of certain data center equipment (See Note
16 and 17, respectively, in the audited financial statements). As a percentage
of revenues, selling, general and administrative expenses increased from 18.6%
in 1998 to 18.9% in 1999.

Interest income decreased from $347,000 in fiscal 1998 to $159,000 in fiscal
1999, primarily as a result of the decrease in cash available for investment.
Interest expense increased from $1.4 million in fiscal 1998 to $3.5 million in
1999 primarily as a result of an increase in borrowings used to finance a
portion of the acquisition of The Partners Group and the financing of equipment
associated with new outsourcing contracts.

COMPARISON OF FISCAL 1998 TO FISCAL 1997

Revenue increased from $64.1 million in fiscal 1997 to $109.5 million in fiscal
1998, an increase of 70.9%. This increase was primarily 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 of
$26.7 million in sales resulting from the acquisition of The Partners Group.

Gross profit increased from $17.5 million in fiscal 1997 to $33.8 million in
fiscal 1998, an increase of 93.6%. This increase was attributable primarily to
an increase in revenue. Gross profit margin increased from 27.3% to 30.9% during
the period. Cost of services consists of all costs directly attributable to the
Company's personnel assigned to various client engagements, including salaries,
benefits, training, travel, and relocation. The increase in the gross profit
margin was primarily attributable to a continued shift to higher margin
consulting and outsourcing work.

Selling, general and administrative expenses increased from $10.3 million in
fiscal 1997 to $20.3 million in fiscal 1998, primarily due to The Partners Group
acquisition and increased staffing relating to the regional offices. As a
percentage of revenue, selling, general, and administrative expenses increased
from 16.1% in 1997 to 18.6% in 1998.

Interest income decreased from $938,000 in fiscal 1997 to $347,000 in fiscal
1998, primarily as a result of the decrease in cash used to acquire The Partners
Group. Interest


28                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   5
expense increased to $2.0 million in 1998 primarily as a result of an increase
in borrowings used to finance the acquisition of The Partners Group.

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 $8.6 million, $2.9 million, and $1.9
million for fiscal 1999, 1998, and 1997, respectively. The increase in cash flow
in fiscal 1999 was primarily attributable to the profitability of the Company
before noncash charges.

The Company's historical capital expenditures have related primarily to the
acquisition of office buildings used as the Company's corporate headquarters.
With the acquisition of The Partners Group and the up-front purchases of
equipment relating to their outsourcing contracts, the Company expects its
capital expenditures to increase over prior periods. In fiscal 1999, the Company
had approximately $20.1 million in capital expenditures, the substantial
majority of which were related to purchases of equipment associated with new
outsourcing contracts and equipment to complete Emerging Technology Centers in
Memphis, Nashville, Dallas and Phoenix.

At April 30, 1999, the Company had approximately $5.3 million of available cash
and $1.1 million available for future borrowing under its credit facility.
Primarily as a result of the Company's recent acquisitions, borrowings have
become a more significant source of liquidity. The Company believes that its
cash flows from operations and borrowings under its credit facility will be
sufficient to meet the Company's needs for at least the next twelve months.

The Company and its significant subsidiaries have a credit facility with a
commercial bank. The credit facility, which was amended on July 31, 1998, is
comprised of a revolving line of credit and a term loan. The revolving line of
credit initially provided for borrowings of up to $30 million, but was reduced
to $27.5 million on May 1, 1999, and will continue to reduce by $1.25 million
quarterly until it matures on October 1, 2000. The Company uses the borrowings
under the revolving line of credit for general corporate purposes, including
acquisitions. At April 30, 1999, there was $13,681,912 outstanding under the
term loan. The repayment schedule for the term loan initially required monthly
principal and interest payments of $130,248 through January 15, 1999, at which
time the monthly principal and interest payments increased to $353,845. The term
loan matures on July 15, 2002. The Company used the term loan to fund the
purchase of certain equipment utilized in an outsourcing engagement. Borrowings
under the credit facility bear interest at a rate equal to LIBOR plus a spread,
which varies based on certain financial ratios. At April 30, 1999, borrowings
under the credit facility bore interest at the rate of 6.43% per year. The
Company is negotiating with its lender to


29                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   6
increase the amount available for borrowing under the credit facility.

In May 1999, the Company used a short-term loan of $7 million from this
commercial bank to fund the acquisition of Global Services, Inc. This term loan
matures on September 17, 1999, and the outstanding principal bears interest at a
rate based on LIBOR. The rate is currently about 6.50% per year.

The Company also has a $5 million line of credit with a bank, which bears
interest at a rate of prime less 0.55% (7.2% at April 30, 1999) and is due upon
demand. At April 30, 1999, $4,974,288 was outstanding under this line of credit.

YEAR 2000 In fiscal 1999, the Company derived about 10% of its revenue from Year
2000 ("Y2K") consulting services and anticipates that such percentage will
decrease in fiscal 2000. Many of the Company's engagements, particularly with
regard to Y2K services, involve projects that are critical to the operations of
its clients' businesses and provide benefits that may be difficult to quantify.
Any failure in a client's system could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. Furthermore, any litigation, regardless of its outcome, could result in
substantial costs to the Company, diversion of management's attention from
operations, and negative publicity, any of which could adversely affect the
Company's results of operations and financial condition.

Because the Company's business includes the assessment of clients' Y2K problems
and the recommendation and implementation of solutions to such problems, the
Company has long been aware of the potential adverse effects on a company if its
systems are not Y2K compliant. The Company has also made an assessment of its
computer systems and applications. This assessment indicated that some minor
adjustments needed to be performed in order to get the operating systems,
software and hardware ready for Y2K. Therefore the cost for Y2K remediation has
not been material. All required procedures of which the Company is presently
aware have been completed. The Company's suppliers have also verified that all
computers, software, telephones, alarms, battery backups, and generators that
have been purchased by the Company are now Y2K compliant after loading any
required fixes. Based on this internal assessment and these external
verifications, the Company believes that its computer systems are ready for Y2K
in all material respects and that problems related to Y2K with its computer
systems will pose minimal, if any, risk of business disruption.

The Company believes that the Y2K problem as it relates to the Company's
computer systems will not have a material adverse effect on its business,
results of operations, or financial condition. Nevertheless, the Company depends
on numerous independent external providers of goods and services. These external
businesses include electricity,



30                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   7
telephone service and other utilities as well as financial institutions. The
Company does not control these external businesses and cannot ensure that they
and their goods and services will be ready for Y2K. The most reasonably likely
worst case Y2K scenario for the Company would be for the Company to lose
electricity, communications or banking services. The Company has battery backups
and generators in place for loss of electricity. The Company is seeking to
verify the readiness of external businesses (such as telephone companies and
banking institutions); however, if they were to experience a Y2K problem,
particularly a critical one, the resulting business disruption could have a
material adverse effect on the Company's business, results of operations and
financial condition.

NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
established standards for the way that public business enterprises report
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company adopted the new requirements
for the year ended April 30, 1999. In the Company's report for the first quarter
ending July 31, 1999 and in subsequent quarters, it will present the interim
disclosures for both fiscal 2000 and comparative fiscal 1999 interim
information.

FORWARD LOOKING STATEMENTS This annual report may be deemed to contain certain
forward-looking statements within the meaning of the federal securities laws.
Forward-looking statements are those that express management's view of future
performance and trends, and usually are preceded with "expects", "anticipates",
"believes", "hopes", "estimates", "plans" or similar phrasing. Forward-looking
statements include statements regarding projected operating revenues and costs,
liquidity, capital expenditures, and availability of capital resources as well
as Y2K readiness and potential exposure. Such statements are based on
management's beliefs, assumptions and expectations, which in turn are based on
information currently available to management. Information contained in these
forward-looking statements is inherently uncertain, and the Company's actual
performance and results may differ materially due to a number of factors, most
of which are beyond the Company's ability to predict or control, including the
Company's dependence on key clients; the Company's dependence on the
availability, recruitment, and retention of qualified IT employees; the
Company's dependence on key management personnel; the Company's potential
liability to its clients in connection with the provision of IT services,
particularly Y2K services; the Company's ability to finance, sustain, and manage
growth; the Company's ability to integrate acquired businesses; competition; and
general economic conditions. The Company undertakes no obligation to publicly
release any revision to any forward-looking statement contained herein to
reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.



31                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   8
<TABLE>
<CAPTION>
                                                           CONSOLIDATED BALANCE SHEETS
                                                                      APRIL 30,
----------------------------------------------------------------------------------------
ASSETS                                                       1999               1998
----------------------------------------------------------------------------------------
<S>                                                     <C>                <C>
CURRENT ASSETS:
   Cash and cash equivalents                            $   5,318,259      $   2,983,372
ACCOUNTS RECEIVABLE:
   Trade, net of allowance for doubtful accounts of
   $120,175 in 1999 and $73,891 in 1998                    38,390,232         25,362,352
   Related parties                                            166,491             99,553
                                                        --------------------------------
                                                           38,556,723         25,461,905
Prepaid expenses                                            2,463,721          2,632,076
Inventory                                                     330,356            439,182
Receivable for income taxes                                   404,155                 --
Deferred federal and state income tax                       2,830,274            335,663
                                                        --------------------------------
Total Current Assets                                       49,903,488         31,852,198
EQUIPMENT UNDER OPERATING LEASES, NET OF
ACCUMULATED DEPRECIATION OF
$3,725,697 IN 1999 AND $450,396 IN 1998                     4,826,291          5,266,429
                                                        --------------------------------
FIXED ASSETS:
   Buildings                                                1,348,293          1,348,293
   Furniture, fixtures, and equipment                      29,675,296         15,221,841
   Accumulated depreciation                                (6,753,640)        (3,629,636)
                                                        --------------------------------
                                                           24,269,949         12,940,498
   Land                                                       209,912            209,912
                                                        --------------------------------
                                                           24,479,861         13,150,410
                                                        --------------------------------
OTHER ASSETS:
   Investment in Direct Financing Leases                   16,229,954         17,109,698
   Goodwill, net of accumulated amortization of
   $2,445,226 in 1999 and $824,844 in 1998                 45,085,230         26,115,672
   Other                                                    6,322,010          5,051,939
                                                        --------------------------------
                                                           67,637,194         48,277,309
                                                        --------------------------------

TOTAL ASSETS                                            $ 146,846,834      $  98,546,346
                                                        ================================
</TABLE>



32                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   9
<TABLE>
<CAPTION>
                                                                        APRIL 30,
----------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                            1999              1998
----------------------------------------------------------------------------------------
CURRENT LIABILITIES:
<S>                                                       <C>               <C>
   Accounts payable-trade                                 $   6,763,376     $  3,614,622
   Accrued TVA Settlement Cost                                1,658,516                -
   Accrued and withheld payroll taxes,
   insurance, and payroll deductions                          2,371,844          606,414
   Accrued vacation                                           1,238,508          924,296
   Deferred revenue                                           1,244,623        1,036,902
   Other accrued expenses                                     3,244,784        1,787,070
   Lines of credit                                            4,974,288        2,405,245
   Current portion of long term debt                          9,796,227        2,600,000
   Current portion of capital lease obligation                  536,870          490,000
   Accrued federal and state income taxes                             -        1,380,801
                                                          ------------------------------
   Total Current Liabilities                                 31,829,036       14,845,350
                                                          ------------------------------

   Notes payable - non-recourse                              16,224,198       18,072,026
   Long-term debt                                            33,754,628       22,782,122
   Other long-term liability                                    900,000                -
   Capital lease obligation                                     738,193        1,317,527
   Deferred federal and state income taxes                    3,974,576        1,648,220
                                                          ------------------------------
   Total Liabilities                                         87,420,631       58,665,245
                                                          ------------------------------
SHAREHOLDERS' EQUITY:
   Preferred stock, no par value-authorized 1,000,000
   shares, none issued                                                -                -
   Common stock-100,000,000 shares of $.01 par value
   authorized and 24,710,749 shares issued and out-
   standing at April 30, 1999 and 22,529,965 shares
   issued and out standing at April 30, 1998                    247,107          225,300
   Additional paid-in capital                                39,380,220       24,504,619
   Retained earnings                                         19,798,876       15,151,182
                                                          ------------------------------
   Total Shareholders' Equity                                59,426,203       39,881,101
                                                          ------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $146,846,834      $98,546,346
                                                           =============================
</TABLE>


See accompanying notes.


33                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   10
                                               CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                           YEAR ENDED APRIL 30,
----------------------------------------------------------------------------------------------------
                                                       1999              1998              1997
----------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>                <C>
Revenue                                          $ 156,670,233      $ 109,471,727      $  64,063,576
Cost of Services                                   107,640,340         75,634,218         46,585,959
Provision for contract losses                        1,800,000                 --                 --
                                                 ---------------------------------------------------
Gross Profit                                        47,229,893         33,837,509         17,477,617
                                                 ---------------------------------------------------

Selling, general and administrative expenses        29,573,364         20,324,990         10,345,277
TVA settlement and severance payments                2,700,000                 --                 --
Impairment of assets                                 3,950,000                 --                 --
                                                 ---------------------------------------------------
Income from operations                              11,006,529         13,512,519          7,132,340
OTHER INCOME (EXPENSES):
   Interest income                                     159,484            346,727            938,172
   Interest expense                                 (3,494,112)        (1,358,620)                --
   Other, net                                         (119,655)                --             45,216
                                                 ---------------------------------------------------
   Total other income (expenses)                    (3,454,283)        (1,011,893)           983,388
                                                 ---------------------------------------------------
Income before income taxes                           7,552,246         12,500,626          8,115,728
                                                 ---------------------------------------------------

INCOME TAX EXPENSE:
   Current                                           3,281,183          4,755,573          2,895,063
   Deferred (benefit)                                 (168,255)           152,937            157,627
                                                 ---------------------------------------------------
Total income tax expense                             3,112,928          4,908,510          3,052,690
                                                 ---------------------------------------------------

Net Income                                       $   4,439,318      $   7,592,116      $   5,063,038
                                                 ===================================================
Net Income per share - basic                     $         .18      $         .34      $         .23
                                                 ===================================================
Net Income per share - diluted                   $         .18      $         .33      $         .23
                                                 ===================================================
Net Income                                                                             $   5,063,038
Pro forma adjustment for income taxes                                                        177,000
Pro forma net income                                                                   $   4,886,038
                                                                                       =============
Pro forma net income per share - basic                                                 $         .22
                                                                                       =============
Pro forma net income per share -
diluted                                                                                $         .22
                                                                                       =============
Weighted average number of common
shares - basic                                      24,683,000         22,464,000         22,432,000
                                                 ===================================================
Weighted average number of common
shares assuming conversion - diluted                24,921,000         22,756,000         22,495,000
                                                 ===================================================
</TABLE>


See accompanying notes.

34                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   11
<TABLE>
<CAPTION>
                                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------
                                 NUMBER                         ADDITIONAL                          TOTAL
                                   OF             COMMON         PAID-IN           RETAINED      SHAREHOLDERS'
                                 SHARES            STOCK         CAPITAL           EARNINGS         EQUITY
---------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>              <C>              <C>              <C>
Balance at May 1, 1996          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
  Stock split (3 for 2)         3,742,002           37,420               --          (37,420)              --
 Stock split (2 for 1)         11,264,648          112,648               --         (112,648)              --
Shares retired upon
  settlement of
  DSS escrow                       (7,754)             (78)         (95,800)              --          (95,878)
 Issuance of Common
  Stock in connection
  with the exercise of
  employee stock options           53,025              530          750,836               --          751,366
Net income                             --               --               --        7,592,116        7,592,116
                               ------------------------------------------------------------------------------
Balance at April 30, 1998      22,529,965          225,300       24,504,619       15,151,182       39,881,101
Restatement for pooling
of interest                       543,724            5,437           (5,437)         208,376          208,376
                               ------------------------------------------------------------------------------
 Restated balance
at April 30, 1998              23,073,689          230,737       24,499,182       15,359,558       40,089,477
  Tax benefit of stock
  options exercised                    --               --          183,391               --          183,391
 Issuance of common
  stock as additional
  purchase price for
  Partners acquisition          1,580,582           15,806       14,239,168               --       14,254,974
  Issuance of Common
  Stock in connection
  with the exercise of
  employee stock options           56,478              564          458,479               --          459,043
  Net income                           --               --               --        4,439,318        4,439,318
                               ------------------------------------------------------------------------------


Balance at April 30, 1999      24,710,749     $    247,107     $ 39,380,220     $ 19,798,876     $ 59,426,203
                               ==============================================================================
</TABLE>



See accompanying notes.

35                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   12
                      CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                YEAR ENDED APRIL 30,
------------------------------------------------------------------------------------------------
                                                      1999            1998              1997
------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S>                                              <C>              <C>              <C>
   Net income                                    $  4,439,318     $  7,592,116     $  5,063,038
   Adjustments to reconcile net income to
   net cash provided by operating activities:
   Impairment of assets                             3,950,000               --               --
   Provision for contract losses                    1,800,000               --               --
   Gain on lease disposals                           (994,391)        (628,514)            (500)
 Provision for bad debts                               46,284           30,000            4,680
   Depreciation included in cost of services        4,105,583        2,648,483               --
   Depreciation included in selling, general
   and administrative expenses                      1,172,939          592,661          255,643
   Amortization                                     1,620,382          756,344           72,032
   Deferred income taxes                             (168,255)         152,937          157,627
   (Increase) decrease in:
   Accounts receivable:
   Trade                                          (12,865,788)     (11,351,324)      (3,100,208)
   Related parties                                    (66,938)         338,008            6,958
   Other                                                   --            8,402           (8,402)
   Prepaid expenses                                   168,355       (1,996,798)        (279,496)
   Inventory                                          108,826          386,940          (28,182)
   Other assets                                    (1,486,920)      (4,927,494)        (427,792)
   Net investment in direct financing
   lease activity                                     633,975        8,407,454               --
   Increase (decrease) in:
   Accounts payable - trade                         3,148,754         (519,550)         253,216
   Accrued federal and state income taxes          (1,554,399)       1,230,860           26,734
   Accrued TVA settlement                           1,658,516               --               --
Accrued vacation                                      314,212          263,533           83,295
   Deferred revenue                                   207,721         (356,589)              --
   Other accrued expenses                             557,714         (114,673)        (175,731)
   Accrued and withheld payroll taxes,
   insurance and accrued payroll
   deductions                                       1,765,430          362,763           27,954
                                                  ---------------------------------------------
   Total adjustments                                4,122,000       (4,716,557)      (3,132,172)
                                                  ---------------------------------------------
   Net cash provided by operating activities        8,561,318        2,875,559        1,930,866
                                                  ---------------------------------------------
</TABLE>


36                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   13
<TABLE>
<CAPTION>
                                                               YEAR ENDED APRIL 30,
------------------------------------------------------------------------------------------------
                                                     1999              1998              1997
------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>              <C>
INVESTING ACTIVITIES
   Purchases of fixed assets                      (20,122,998)      (8,959,456)        (792,187)
   Proceeds from lease disposals                    1,245,323        2,996,664              800
   Purchase of The Partners Group                  (6,165,283)     (16,806,411)              --
   Purchase of
   Technology Management Resources Inc.                    --       (1,200,000)      (8,500,000)
   Proceeds from land sale                                 --          273,284               --
                                                  ---------------------------------------------
   Net cash used by investing activities          (25,042,958)     (23,695,919)      (9,291,387)
-----------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
   Borrowings on long-term debt                    27,926,092       25,674,484               --
   Payments on long-term debt                      (9,757,359)      (6,776,135)              --
   Net borrowings (repayments) under line
   of credit                                        2,569,043        2,405,245               --
   Options exercised                                  459,043          751,366           14,338
   Repayment of capital lease obligations            (532,464)        (315,205)              --
   Proceeds from non-recourse debt                  4,000,000        3,400,182               --
   Payment on non-recourse debt                    (5,847,828)     (13,150,992)              --
   Payment of dividends                                    --               --         (240,000)
   Other                                                   --               --              (45)
   Net cash provided (used) by                     --------------------------------------------
   financing activities                            18,816,527       11,988,945         (225,707)
   Net increase (decrease) in                      --------------------------------------------
   cash and cash equivalents                        2,334,887       (8,831,415)      (7,586,228)
   Cash and cash equivalents at
   beginning of period                              2,983,372       11,814,787       19,401,015
                                                   --------------------------------------------
   Cash and cash equivalents at end of period    $  5,318,259     $  2,983,372     $ 11,814,787
                                                 ==============================================

SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
   Interest paid                                 $  3,613,167     $  1,953,130     $         --
   Income taxes paid                                4,500,009        3,791,000        2,805,293
</TABLE>


See accompanying notes.


37                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   14
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 APRIL 30, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of SCB
Computer Technology, Inc. and its wholly-owned subsidiaries. All significant
intercompany transactions 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.

EARNINGS PER SHARE Basic and diluted earnings per share is calculated in
accordance with FASB Statement No. 128, Earnings Per Share. All earnings per
share amounts for all periods have been presented, and where appropriate,
restated to conform to the requirements of Statement 128.


38                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   15
FIXED ASSETS All fixed assets are carried at cost. Depreciation, which includes
the amortization of assets recorded under capital leases, is computed using the
straight-line basis over the useful lives of the various fixed assets. The
estimated useful lives for computing depreciation on fixed assets are as
follows:

<TABLE>
<CAPTION>
                                                                   YEARS
    --------------------------------------------------------------------
<S>                                                                <C>
    Furniture, fixtures and equipment                              5-10
    Autos                                                          3-6
    Buildings                                                      31-39
</TABLE>

GOODWILL Goodwill represents the excess of the cost of businesses 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.

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. The Company records deferred revenue for payments received from
certain customers on service contracts prior to the performance of services
required under the service contract. Estimated losses are recorded when
identified.

DIRECT FINANCING LEASES Leases meeting the criteria for capitalization in
accordance with SFAS No.13 are classified as direct financing leases. For direct
financing leases, the sum of the minimum lease payments and the unguaranteed
residual value is recorded as the gross investment in the lease. The difference
between the gross investment and the cost of the leased property is recorded as
unearned income. Income is recognized over the life of the lease using the
interest method.



39                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   16
OPERATING LEASES Leases not meeting the criteria for capitalization are
classified as operating leases. For operating leases, lease payments are
recognized as rental revenue on a straight-line basis over the life of the
lease. Depreciation expense on equipment under operating leases is recorded over
the lease term. The amount subject to depreciation is the total cost of the
leased asset less the expected gross residual value at the end of the lease.

RESIDUAL INTEREST IN REMARKETED LEASE TRANSACTIONS In certain instances, the
Company will act as a lease intermediary, or will sell the ownership rights of
leased property. Typically, in connection with such transactions, the Company
retains a percentage interest in the residual value at the end of the lease.
These residual interests are recorded at the present value of the Company's
portion of the estimated gross residual value at the end of the lease.

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

DETERMINATION OF GROSS RESIDUAL INTERESTS The unguaranteed gross residual
interests of equipment on direct financing leases, operating leases, and
remarketed lease transactions are determined by assessing the technical and
economic life of the equipment in relation to the length of the lease. The
estimated gross residual interests are periodically reassessed to account for
potential fluctuations in residual values. Reassessment procedures include
independent appraisals, evaluation of new technological developments, and
comparison of remaining estimated residual interests with residual values of
leases which terminated during the current period.

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.

40                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   17
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 prior to acquisition date. There is no
impact in the current year.

STOCK BASED COMPENSATION The Company grants stock options for a fixed number of
shares to employees and directors with an exercise price equal to the fair value
of the shares at the date of grant. The Company accounts for stock option grants
in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense for the stock option
grants.

SEGMENT REPORTING In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of SFAS No. 131 did not affect the results of operations
or financial position of the Company, but did affect the disclosure of segment
information as the Company was not required to make such disclosures under
previous guidance. See Note 18.

CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially expose the
Company to concentrations of credit risk consist primarily of trade accounts
receivable. 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.


41                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   18
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.

RECLASSIFICATION Certain account reclassifications have been made to the 1998
and 1997 financial statements to conform with the 1999 presentation, none of
which are material.

FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and debt
approximates fair values of these instruments at April 30, 1999 and 1998.

2. BUSINESS COMBINATIONS

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 was held in escrow
for certain contingencies in accordance with the acquisition agreement. The
operating results of PRI and PCG are included in the Company's consolidated
statements of operations since July 1, 1997. The unaudited pro forma impact of
the acquisition of PRI and PCG as if the transaction had occurred on May 1, 1996
is as follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED APRIL 30, 1997
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<S>                                                              <C>
PRO FORMA
Revenue                                                           $   94,359
Net income, including pro forma adjustment for income taxes       $    3,293
Net income per share, including pro forma adjustment for
income taxes - basic and diluted                                  $     0.15

</TABLE>


42                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   19
During May 1998, the Company paid $7,127,437 and issued 1,580,582 additional
shares of its common stock to the former shareholders of PRI as additional
purchase price of $21,382,312. This was equal to 14 times PRI's net income for
the calendar year ended December 31, 1997 calculated in accordance with the
contingent purchase price provisions of the acquisition agreement. The Company
received $962,154 of the original $1,600,000 escrow as PCG failed to meet its
earnings benchmark as defined in the acquisition agreement. These transactions
resulted in additional goodwill that is being expensed over the remaining 30
year amortization period.

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 initially paid by the Company related to this
acquisition was $8,500,000 of which $500,000 was held in escrow for certain
contingencies in accordance with the acquisition agreement. The initial 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. SCB
initially agreed to issue the former TMR shareholders up to $4,000,000 in SCB
Common Stock as additional purchase price contingent upon growth in the acquired
business's revenues and earnings for the fiscal years ending April 30, 1998,
1999, and 2000. Effective December 30, 1997, SCB agreed to pay the former TMR
shareholders $1,200,000 in cash in full and final settlement of any additional
purchase price payments which has been accounted for as additional goodwill.
Also effective as of December 30, 1997, SCB released the $500,000 escrow amount
that was being held to satisfy potential indemnification obligations and
terminated the employment of one of the former shareholders. The operating
results of TMR are included in the Company's consolidated statements of
operations since March 1, 1997. The unaudited pro forma impact of the TMR
acquisition as if the transaction had occurred on May 1, 1996 is as follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED APRIL 30, 1997
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------------
PRO FORMA
--------------------------------------------------------------------------------------
<S>                                                                <C>
Revenue                                                            $   67,694
Net income, including pro forma adjustment for income taxes        $    5,578
Net income per share, including pro forma adjustment for
income taxes - basic and diluted                                   $     0.25
</TABLE>


43                                                       SCB COMPUTER TECHNOLOGY
<PAGE>   20
In September 1996, the Company acquired Delta Software Services, Inc. ("DSS"), a
Company in substantially the same business as the Company. The acquisition was
accounted for using the pooling-of-interests method of accounting. The Company
exchanged 1,384,608 shares of its common stock for all the outstanding stock of
DSS. In November 1997, common shares of 7,754 were returned to the Company and
retired in settlement of an escrow agreement under the original merger
agreement.

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.

In May 1998, the Company effected a business combination with Proven Technology,
Inc. ("PTI"), a company in substantially the same business as the Company. The
combination was accounted for using the pooling-of-interests method of
accounting. The Company exchanged 543,724 shares of its common stock for all the
outstanding stock of PTI of which 54,372 shares are being held in escrow to
secure potential indemnification claims. Because of its size, the transaction
does not require restatement of prior financial results.

3. ACCOUNTS RECEIVABLE -- TRADE

Accounts receivable-trade includes unbilled receivables of $16,042,715 and
$9,916,821 under contracts to purchase services as of April 30, 1999 and 1998,
respectively. Such amounts are billable upon completion of performance
milestones. Substantially all of the unbilled receivables are expected to be
collected within one year.

4. NET INVESTMENT IN DIRECT FINANCING LEASES

The components of the net investment in direct financing leases are as follows:

<TABLE>
<CAPTION>
                                                                   APRIL 30,
                                                              1999            1998
                                                              ----            ----
<S>                                                       <C>              <C>
Minimum lease payments receivable                         $14,906,541      $15,469,381
Unguaranteed residual values of leased equipment            3,696,281        3,809,905
Indirect leasing costs                                        161,581          181,418
Unearned income                                            (2,534,449)      (2,351,006)
                                                          -----------      -----------
Net investment in direct financing leases                 $16,229,954      $17,109,698
                                                          ===========      ===========

</TABLE>


                           SCB Computer Technology 44
<PAGE>   21
The following is a summary by year of the future minimum lease payments
receivable from direct financing leases:

<TABLE>
<CAPTION>
YEAR ENDING APRIL 30,
---------------------
<S>                                                                 <C>
         2000                                                        $ 6,574,115
         2001                                                          4,618,224
         2002                                                          1,973,743
         2003                                                          1,524,593
         2004                                                            215,866
                                                                     -----------
Total minimum future lease payments receivable                       $14,906,541
                                                                     ===========
</TABLE>


The minimum lease payments receivable for all direct financing leases are
assigned to lenders as security for non-recourse debt.

5. RENTALS UNDER OPERATING LEASES

The following is a summary by year of the minimum future rentals on
noncancellable operating leases as of April 30, 1999.


<TABLE>
<CAPTION>
YEAR ENDING APRIL 30,
---------------------
<S>                                                                  <C>
    2000                                                              $1,578,204
    2001                                                                 960,375
    2002                                                                 694,891
    2003                                                                 159,477
    2004                                                                  25,648
                                                                      ----------
Total minimum future rentals                                          $3,418,595
                                                                      ==========
</TABLE>



All of the above future rentals have been assigned to lenders in connection with
the repayment of non-recourse debt.




                           SCB Computer Technology 45
<PAGE>   22
6. NON-RECOURSE DEBT

At April 30, 1999 the non-recourse debt balances were $13,255,517 and $2,968,681
for direct financing leases and operating leases, respectively. At April 30,
1998, the non-recourse debt balances were $13,760,157 and $4,311,869 for direct
financing leases and operating leases, respectively. Substantially all of the
proceeds from the issuance of non-recourse debt was used to purchase assets
leased under direct financing and operating leases. The non-recourse financing,
which bears interest at rates ranging from 6.4% to 11.6%, is secured by the
assigned lease payments and the underlying leased property. The lenders receive
lease payments directly from the lessees.

The following is a summary of the future maturities of non-recourse debt:

<TABLE>
<CAPTION>
  YEAR ENDING      DEBT RELATING TO DIRECT        DEBT RELATING TO
   APRIL 30,          FINANCING LEASES            OPERATING LEASES            TOTAL
   ---------          ----------------            ----------------            -----
<S>                <C>                            <C>                     <C>
    2000                $5,685,524                  $1,184,976             $6,870,500
    2001                 4,164,526                     828,884              4,993,410
    2002                 1,753,127                     694,039              2,447,166
    2003                 1,439,407                     222,895              1,662,302
    2004                   212,933                      37,887                250,820
                       -----------                  ----------            -----------
                       $13,255,517                  $2,968,681            $16,224,198
                       ===========                  ==========            ===========
</TABLE>



7. DEBT

The Company has a $5,000,000 line of credit with a bank which bears interest at
a rate of prime less 0.55% (7.2% at April 30, 1999) and is due upon demand. At
April 30, 1999, $4,974,288 was outstanding under this line of credit which is
unsecured.

Long-term debt consisted of the following at April 30, 1999 and 1998:


<TABLE>
<CAPTION>
                                                                   APRIL 30,
                                                           1999                  1998
                                                           ----                  ----
<S>                                                   <C>                   <C>
Credit Facility and Term Loan                         $ 41,337,912          $ 19,643,667
Term notes                                               2,212,943             5,738,455
                                                        43,550,855            25,382,122
Less current portion                                     9,796,227             2,600,000
                                                      $ 33,754,628          $ 22,782,122
</TABLE>




                           46 SCB COMPUTER TECHNOLOGY
<PAGE>   23
Under the Second Amended and Restated Loan Agreement (the Loan Agreement), dated
July 31, 1998, the Company has a $30,000,000 revolving credit facility (the
Facility) and a $15,000,000 term loan (the Term Loan) with a bank which is
secured by a portion of the Company's equity interest in various subsidiaries.
The Facility and Term Loan bear interest at LIBOR plus an additional margin
depending on the funded debt to EBITDA ratio (6.43% and 7.16% at April 30, 1999
and 1998, respectively).

Pursuant to the Loan Agreement, the aggregate outstanding balance allowed under
the Facility is reduced $1,250,000 quarterly commencing in February 1999 through
August 2000. The Facility expires and matures in October 2000, and is renewable
at that time. At April 30, 1999 and 1998, $27,656,000 and $19,643,667,
respectively, were outstanding under the Facility.

The Term Loan is payable in monthly installments of $130,248 commencing August
1998 through December 1998, then monthly installments of $353,845 commencing
January 1999 through July 2002 with a final payment of all unpaid principal and
interest due in July 2002. At April 30, 1999, there was $13,681,912 outstanding
under the Term Loan.

The Loan Agreement contains various covenants, including a maximum leverage
ratio and restrictions on capital expenditures and leasing obligations.

The Company has several term notes with various lending institutions which bear
interest at rates ranging from 8.5% to 9.55%. These notes have varying maturity
dates ranging from August 2000 to October 2000. The notes are secured primarily
by computer equipment, as the majority of the notes were obtained for the
purchase of such equipment.

Future maturities related to long-term debt are as follows:


<TABLE>
<CAPTION>
YEAR ENDING APRIL 30,                                         LONG TERM DEBT
---------------------                                         --------------
<S>                                                           <C>
    2000                                                        $9,796,227
    2001                                                        27,124,890
    2002                                                         4,050,157
    2003                                                         2,579,581
                                                               -----------
                                                               $43,550,855
                                                               ===========
</TABLE>

                           47 SCB COMPUTER TECHNOLOGY


<PAGE>   24
8. CAPITAL LEASE

The Company has a capital lease for computer equipment used on various
outsourcing engagements which requires payments of principal and interest of
$624,000 in fiscal 2000, $624,000 in fiscal 2001 and $208,000 in fiscal 2002,
with $180,937 of these payments representing interest. The present value of the
minimum lease payments at April 30, 1999 and 1998 was $1,275,063 and $1,807,527,
respectively. At April 30, 1999, the current portion of the present value of
minimum lease payments is $536,870. The capital lease is secured by the
equipment leased which is included in furniture, fixtures and equipment in the
consolidated balance sheets at April 30, 1999 and 1998 in the amount of
$2,114,199 with accumulated depreciation of $924,962 and $396,412, respectively.

9. 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, 1999, 1998 and 1997, but paid
administrative expenses associated with the plan of $21,510, $21,960, and $6,660
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 thirty days by
April 30. Contributions by the Company are at the discretion of the Board of
Directors. Contributions were $538,758, $144,330, and $93,413 for the years
ended April 30, 1999, 1998 and 1997, respectively.

10. EMPLOYMENT AGREEMENTS

Effective November 1, 1998, the Company entered into employment agreements with
its Chairman and Vice Chairman for a term of three years expiring October 31,
2001. These agreements provide for a base salary of $425,000 each for the
initial year, $600,000 each for the second year, and $700,000 each for the third
year. Additionally, the Company granted options to each to purchase 35,211
shares of common stock.


                           SCB COMPUTER TECHNOLOGY 48
<PAGE>   25
11. LEASES

Total rent expense for the years ended April 30, 1999, 1998 and 1997 was
$1,559,211, $1,015,572, and $258,348, respectively. The Company leases certain
office facilities and vehicles under terms of noncancelable operating lease
agreements which expire at various dates.

Total future annual lease requirements are as follows:

<TABLE>
<S>                     <C>
2000                    $1,722,086
2001                     1,534,182
2002                     1,371,658
2003                     1,325,938
2004                       502,500
Thereafter              $3,015,300
                        ----------
                        $9,471,714
                        ==========
</TABLE>



12. SIGNIFICANT CUSTOMERS

The Company earns a significant portion of its revenue from its top five
customers. Revenues earned from its top five customers totaled 35%, 37%, and 49%
for the years ended April 30, 1999, 1998 and 1997, respectively.

At April 30, 1999 and 1998 accounts receivable from these significant customers
were $15,676,198 and $8,658,419, respectively.

13. FEDERAL AND STATE INCOME TAXES

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED APRIL 30,
                                                                                --------------------
                                                          1999                           1998                          1997
                                                          ----                           ----                          ----
<S>                                                   <C>                            <C>                           <C>
FEDERAL:
   Current                                            $ 2,768,248                    $ 3,878,708                   $ 2,439,146
   Deferred                                              (159,889)                       133,330                       141,035
                                                      -----------                    -----------                   -----------
                                                        2,608,359                      4,012,038                     2,580,181
                                                      -----------                    -----------                   -----------
STATE:
   Current                                                512,935                        876,865                       455,917
   Deferred                                                (8,366)                        19,607                        16,592
                                                      -----------                    -----------                   -----------
                                                          504,569                        896,472                       472,509
                                                      -----------                    -----------                   -----------
TOTAL                                                 $ 3,112,928                    $ 4,908,510                   $ 3,052,690
                                                      ===========                    ===========                   ===========
</TABLE>



                           49 SCB COMPUTER TECHNOLOGY



<PAGE>   26
Deferred tax liabilities and assets are comprised of the following:


<TABLE>
<CAPTION>
                                                                                                   YEAR ENDED APRIL 30,
                                                                                           1999                             1998
                                                                                           ----                             ----
<S>                                                                                     <C>                             <C>
DEFERRED TAX LIABILITIES:
   Leasing activities                                                                   $ 2,678,189                     $ 1,188,262
   Deductible Goodwill                                                                      932,349                         339,880
   Other                                                                                    364,038                         120,078
                                                                                        -----------                     -----------
   Total deferred tax liabilities                                                         3,974,576                       1,648,220
                                                                                        -----------                     -----------
DEFERRED TAX ASSETS:
   Unusual charges (See Note 17)                                                          2,282,699                              --
   Vacation expense                                                                         547,575                         335,663
   Total deferred tax assets                                                              2,830,274                         335,663
                                                                                        -----------                     -----------
   NET DEFERRED TAX LIABILITIES                                                         $(1,144,302)                    $(1,312,557)
                                                                                        ===========                     ===========
</TABLE>



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


<TABLE>
<CAPTION>
                                                                            YEAR ENDED APRIL 30,
                                                                            --------------------
                                                         1999                       1998                         1997
                                                         ----                       ----                         ----
                                                AMOUNT         PERCENT      AMOUNT        PERCENT        AMOUNT         PERCENT
                                                ------         -------      ------        -------        ------         -------
<S>                                         <C>                <C>       <C>              <C>         <C>               <C>
Tax at U.S. statutory rates                 $ 2,567,764         34.0%    $ 4,250,213       34.0%      $ 2,759,348         34.0%
State income taxes net of
federal tax benefit                             322,695          4.3         591,672        4.7           311,856           3.8
Other-net                                       222,469          2.9          66,625        0.6           (18,514)        (0.2)
                                            -----------         ----     -----------       ----       -----------         ----
                                            $ 3,112,928         41.2%    $ 4,908,510       39.3%      $ 3,052,690         37.6%
                                            ===========         ====     ===========       ====       ===========         ====
</TABLE>


Partners Capital Group, Inc., a subsidiary of the Company, has a federal income
tax loss carryforward for tax return purposes in excess of $1.2 million that was
created primarily from leasing activities. These loss carryforwards expire in
various amounts through 2011.


                           50 SCB COMPUTER TECHNOLOGY



<PAGE>   27
14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                           YEAR ENDED APRIL 30,
                                                           --------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)           1999        1998        1997
----------------------------------------           ----        ----        ----
<S>                                              <C>         <C>         <C>
NUMERATOR:
   Net income                                    $ 4,439     $ 7,592     $ 5,063
   Pro forma adjustment for income taxes               -           -         177
                                                 -------     -------     -------
   Pro forma net income                                -           -       4,886
                                                 -------     -------     -------
DENOMINATOR:
   Denominator for basic earnings per share
   - weighted average shares                      24,683      22,464      22,432
   Effect of dilutive securities:
   Employee stock options                            238         292          63
   Denominator for diluted earnings
   per share - adjusted weighted average
   and assumed conversions                        24,921      22,756      22,495
                                                 -------     -------     -------
Basic earnings per share                         $  0.18     $  0.34     $  0.23
Basic pro forma earnings per share               $     -     $     -     $  0.22
                                                 -------     -------     -------
Diluted earnings per share                       $  0.18     $  0.33     $  0.23
Diluted pro forma earnings per share             $     -     $     -     $  0.22
                                                 =======     =======     =======
</TABLE>


                           51 SCB COMPUTER TECHNOLOGY


<PAGE>   28
15. STOCK INCENTIVE PLANS

The Stock Incentive Plans provide 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 within one to four years from the date of grant and expire ten years
from the date of grant. Under the Plan, 3,000,000 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, 1999:


<TABLE>
<CAPTION>
                                                   FISCAL YEAR ENDED 1999      FISCAL YEAR ENDED 1998      FISCAL YEAR ENDED 1997
                                                 ------------------------      -----------------------    ------------------------
                                                                 WEIGHTED                     WEIGHTED                    WEIGHTED
                                                                 AVERAGE                      AVERAGE                     AVERAGE
                                                                 EXERCISE                     EXERCISE                    EXERCISE
                                                   OPTIONS         PRICE        OPTIONS         PRICE     OPTIONS          PRICE
                                                   -------         -----        -------         -----     -------          -----
<S>                                              <C>             <C>          <C>             <C>         <C>            <C>
Outstanding May 1                                 2,015,183        $7.01       1,093,050        $5.41       597,600        $5.17
Granted                                             388,922        $6.74       1,172,075        $8.50       559,500        $5.63
Exercised                                           (56,478)       $7.26        (112,330)       $6.75        (2,775)       $5.17
Canceled                                           (224,532)       $7.24        (137,612)       $7.35       (61,275)       $5.33
                                                  ---------        -----         -------        -----       -------        -----
Outstanding April 30                              2,123,095        $6.93       2,015,183        $7.01     1,093,050        $5.41
                                                  ---------        -----         -------        -----       -------        -----
Exercisable at year end                           1,480,498        $7.04         874,983        $6.69       366,375        $5.41
Weighted average fair
value of options
granted during the year                                            $3.22                        $4.25                      $2.86
                                                  =========        =====       =========        =====       =======        =====
</TABLE>



Exercise prices for options outstanding as of April 30, 1999, ranged from $4.94
to $13.25. The weighted average remaining contractual life of those options is
approximately eight 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.


                           52 SCB COMPUTER TECHNOLOGY
<PAGE>   29
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 1999, 1998 and 1997, respectively: risk-free interest rate of
5.01 percent, 6.04 percent and 6.56 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>
                                                    1999          1998           1997
                                                    ----          ----           ----
<S>                                              <C>            <C>           <C>
Pro forma net income:
   As reported - (including pro forma
   for income taxes in 1997)                     $4,439,318     $7,592,116    $4,886,038
Pro forma-for SFAS No 123                        $3,652,139     $4,971,136    $4,341,195
Pro forma earnings per share:
   As reported - (including pro forma for
   income taxes in 1997) - basic                       $.18           $.34          $.22
   As reported - (including pro forma for
   income taxes in 1997) - diluted                     $.18           $.33          $.22
Pro forma-for SFAS No 123 - basic                      $.15           $.22          $.19
Pro forma-for SFAS No 123 - diluted                    $.15           $.22          $.19
                                                 ==========     ==========    ==========
</TABLE>


                           53 SCB COMPUTER TECHNOLOGY

<PAGE>   30

16. TVA SETTLEMENT

In the fiscal quarter ended October 31, 1998, the Company reached a tentative
agreement with the United States Attorney for the Western District of Tennessee
and the Tennessee Valley Authority (TVA) to settle on a civil basis all claims
against the Company related to the Company's billing practices under its
consulting contract with the TVA. The Company has agreed to pay $1,000,000 to
the United States government and $600,000 to the TVA in settlement of all claims
against the Company. The Company provided an accrual of $1,900,000 for the
anticipated settlement and related costs. The Final Agreement was executed May
5, 1999.

In connection with the settlement, a former officer of the Company plead guilty
to a single felony count of submitting a false claim of less than $10,000.
Pursuant to the resignation of such officer from the Company, SCB recorded
severance expense of $800,000 in the fiscal quarter ended October 31, 1998, with
non-compete payments to the former officer (aggregating $980,000) being
amortized ratably over three years.

The $1,900,000 settlement charge and the $800,000 severance charge are reflected
separately on the consolidated statement of income under the caption "TVA
settlement and severance payments."

17. UNUSUAL CHARGES

During the fourth fiscal quarter of 1999, the Company completed an evaluation of
its operations related to a data center and determined that its best course of
action would be to close the facility. The data center had historically
generated revenues through data processing services for customers using legacy
systems. However, due to changes in the industry conditions and significant
increases in the pricing of software licenses used in conjunction with legacy
systems, it became obvious that the data center would continually generate
operating losses in the future without significant capital improvements.
Consequently, the Company recorded a non-cash charge of $1,800,000 for contract
loss reserves which management believes are sufficient to cover estimated losses
on the wind-down of its remaining contractual obligations related to the data
center.

Additionally, the Company identified a non-cash impairment of the long-term
assets related to the data center as the projected future cash flows of the data
center were less


                           54 SCB COMPUTER TECHNOLOGY

<PAGE>   31
than the carrying value of the assets. These assets which primarily consist of
computer equipment were written down to their fair value based on the salvage
value of the assets. As a result, an impairment loss of $3,950,0000 was also
recorded in the fourth fiscal quarter of 1999.

These charges are based on estimates and, therefore, are subject to various
risks and uncertainties related to the Company's ability to secure agreements
with third parties and relinquish the assets. As a result, the Company believes
it is reasonably possible that these estimates may be revised in the near-term.
However, the impacts of such revisions, if any, are not expected to be material.

18. SEGMENT INFORMATION

The Company operates in two industry segments -- Professional Services and
Enterprise Solutions.

The revenue components of the Professional Services segment consist primarily
of: (1) IT Consulting, including evaluation, design and reengineering of
computer systems, management, quality assurance and technical direction for IT
projects, as well as functional expertise and training and (2) Professional
Staffing, which involves providing skilled IT staff on an as-needed basis.

The revenue components of the Enterprise Solutions segment consist primarily of:
(1) Outsourcing, including system development and integration, maintenance, data
center management, help desk and technical services, remote processing, computer
hardware sales and leasing; (2) Enterprise Resource Planning (ERP) services,
which include planning and evaluation, systems analysis and administration,
implementation and functional support; and (3) E-Services, which include
Enterprise Management Services, Internet application development and design and
implementation of communication networks.



                           55 SCB COMPUTER TECHNOLOGY
<PAGE>   32
Summarized financial information concerning the operating segments in which the
Company operated at April 30, 1999, 1998 and 1997 and for each of the years then
ended is shown in the following tables:

<TABLE>
<CAPTION>
OPERATING SEGMENTS   (IN THOUSANDS)                                            1999                    1998                 1997 (b)
------------------   --------------                                            ----                    ----                 --------
<S>                                                                         <C>                     <C>                     <C>
REVENUES:
Professional Services                                                       $110,060                $ 78,399                $ 64,064
Enterprise Solutions                                                          46,610                  31,073                      --
                                                                            --------                --------                --------
                                                                            $156,670                $109,472                $ 64,064
                                                                            ========                ========                ========
INCOME FROM OPERATIONS: (A)
Professional Services                                                       $ 13,040                $  9,324                $  7,360
Enterprise Solutions                                                           6,416                   4,188                      --
                                                                            --------                --------                --------
                                                                             $19,456                $ 13,512                $  7,360
                                                                            ========                ========                ========
TOTAL ASSETS:
Professional Services                                                       $ 44,603                $ 34,761                $ 35,094
Enterprise Solutions                                                         101,820                  63,785                      --
                                                                            --------                --------                --------
                                                                            $146,423                $ 98,546                $ 35,094
                                                                            ========                ========                ========
EXPENDITURES FOR LONG-LIVED ASSETS:
Professional Services                                                       $  2,438                $  2,429                $ 10,226
Enterprise Solutions                                                          37,741                  24,042                      --
                                                                            $ 40,179                $ 26,471                $ 10,226
                                                                            ========                ========                ========
DEPRECIATION AND AMORTIZATION:
Professional Services                                                       $  1,488                $    564                $    328
Enterprise Solutions                                                           5,411                   3,433                      --
                                                                            --------                --------                --------
                                                                            $  6,899                $  3,997                $    328
                                                                            ========                ========                ========
</TABLE>



(a)  1999 income from operations excludes the nonrecurring charges of $1,800,000
     contract loss reserves and $3,950,000 for an impairment of long-lived
     assets (See Note 17) as well as a $2,700,000 nonrecurring charge related to
     the TVA settlement (See Note 16).

(b)  The Company operated in only one segment in 1997 as the operations that
     comprise Enterprise Solutions were acquired in 1998.


                           56 SCB COMPUTER TECHNOLOGY
<PAGE>   33
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. There are no
intersegment sales. Long-term assets is made up of goodwill and property, plant
and equipment. Corporate services, consisting of general and administrative
services are provided to the segments from a centralized location. Such costs
are allocated to the segments based on revenue, headcount, and resources
dedicated to a particular segment. In addition, substantially all of the sales
and recruiting workforce is contained in the Professional Services segment.
Costs associated with the sales and recruiting workforce are allocated to the
Enterprise Solutions segment based generally on forecasted revenues.

19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                 JULY 31,       OCTOBER 31,    JANUARY 31,     APRIL 30,
QUARTER ENDED:                     1998            1998           1999            1999
--------------                     ----            ----           ----            ----
<S>                           <C>             <C>            <C>             <C>
Revenue                       $ 35,488,610    $ 39,280,625   $ 38,619,450    $ 43,281,548
Cost of services                24,042,414      26,945,679     26,544,646      30,107,601
Provision for contract
   losses                                -               -              -       1,800,000
                                ----------      ----------     ----------      ----------
Gross profit                    11,446,196      12,334,946     12,074,804      11,373,947
Selling, general and
administrative expenses          6,826,357       7,133,003      7,396,022       8,217,982
TVA Settlement and
severance payments               1,900,000         800,000              -               -
Impairment of assets                     -               -              -       3,950,000
Income from operations           2,719,839       4,401,943      4,678,782       (794,035)
Other expenses                     626,572         882,437      1,041,403         903,871
                                ----------      ----------     ----------      ----------
Income (loss) before taxes       2,093,267       3,519,506      3,637,379     (1,697,906)
Income (loss) tax expense        1,197,000       1,368,886      1,380,204       (833,162)
                                ----------      ----------     ----------      ----------
Net income (loss)             $    896,267    $  2,150,620   $  2,257,175    $  (864,744)
Net income (loss)
per share - basic             $       0.04    $       0.09   $       0.09    $     (0.04)
                                ==========      ==========     ==========      ==========
Net income (loss)
per share - diluted           $       0.04    $       0.09   $       0.09    $     (0.04)
                                ==========      ==========     ==========      ==========

Weighted average (basic)        24,665,318      24,671,661     24,683,382      24,709,965
                                ==========      ==========     ==========      ==========

Adjusted weighted average
shares and assumed
conversion (diluted)            25,114,168      24,844,604     24,918,710      24,709,965
                                ==========      ==========     ==========      ==========
</TABLE>


                           57 SCB COMPUTER TECHNOLOGY
<PAGE>   34
<TABLE>
<CAPTION>
                                       JULY 31,          OCTOBER 31,       JANUARY 31,         APRIL 30,
QUARTER ENDED:                           1997               1997              1998               1998
--------------                           ----               ----              ----               ----
<S>                                 <C>                <C>               <C>               <C>
Revenue                             $ 21,333,202       $ 28,054,205      $ 28,275,210      $ 31,809,110
Cost of services                      14,853,966         19,356,691        19,680,310        21,743,251
                                      ----------         ----------        ----------      ----------
Gross profit                           6,479,236          8,697,514         8,594,900        10,065,859
Selling, general and
administrative expenses                3,700,596          5,176,168         5,416,518         6,031,708
                                      ----------         ----------        ----------      ----------
Income from operations                 2,778,640          3,521,346         3,178,382         4,034,151
Other income/(expense)                   148,201           (235,047)         (450,246)         (474,801)
                                      ----------         ----------        ----------      ----------
Income before taxes                    2,926,841          3,286,299         2,728,136         3,559,350
Income tax expense                     1,138,400          1,267,664         1,189,046         1,313,400
                                      ----------         ----------        ----------      ----------
Net income                          $  1,788,441       $  2,018,635      $  1,539,090      $  2,245,950
                                      ==========         ==========        ==========      ==========
Net income per share - basic        $       0.08       $       0.09      $       0.07      $       0.10
                                      ==========         ==========        ==========      ==========
Net income per share - diluted      $       0.08       $       0.09      $       0.07      $       0.10
                                      ==========         ==========        ==========      ==========

Weighted average (basic)              22,440,666         22,459,676        22,472,494        22,484,627
                                      ==========         ==========        ==========      ==========

Adjusted weighted
average shares and
assumed conversion (diluted)          22,634,148         22,734,298        22,744,304      22,911,445
                                      ==========         ==========        ==========      ==========
</TABLE>




                           58 SCB COMPUTER TECHNOLOGY
<PAGE>   35
                         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, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended April 30, 1999. 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, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 1999, in conformity with generally
accepted accounting principles.



Memphis, Tennessee
June 17, 1999



                           59 SCB COMPUTER TECHNOLOGY