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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-Q

|   |  |                                                                                         
|-- |  | ----------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|   |  | FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2003                                         
|   |  |                                                                                         
|OR
|   |  |                                                                                         
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|   |  | FOR THE TRANSITION PERIOD FROM _______________ TO _______________                       

Commission File No. 0-27694

SCB COMPUTER TECHNOLOGY,
INC.

(Exact Name of Registrant as
Specified in its Charter)


|                                |  |                                     
|------------------------------- |  | ------------------------------------
|Tennessee                       |  | 62-1201561                          
|(State or other Jurisdiction of |  | (I.R.S. Employer Identification No.)
|Incorporation or Organization)  |  |                                     

3800 Forest Hill-Irene Road, Suite 100
Memphis, Tennessee 38125(Address of Principal Executive Offices)

901-754-6577(Registrants Telephone Number, Including Area Code)

Not Applicable(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No þ

At December 9, 2003, there were 25,302,454 shares of common stock
outstanding.



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TABLE OF CONTENTS



|                                                 |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
|PART I  FINANCIAL INFORMATION                  
|                                                 | Item 1. Financial Statements                                                                 
|                                                 | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                 | Item 3. Quantitative and Qualitative Disclosures about Market Risks                          
|                                                 | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                     
|                                                 | Item 1. Legal Proceedings                                                                    
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                 | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                      
|EXHIBIT INDEX                                   
|Ex-31.1 Section 302 Certification of the CEO    
|Ex-31.2 Section 302 Certification of the CFO    
|Ex-32.1 Section 906 Certification of the CEO    
|Ex-32.2 Section 906 Certification of the CFO    



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SCB COMPUTER TECHNOLOGY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

|                                                 |                                                                                               |      |      |    | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ---- | ---- | -- | 
|                                                 |                                                                                               |      | Page
|                                                 |                                                                                               |      |     
|Cautionary Note About Forward-Looking Statements |                                                                                               |      | 1    |   
|Part I  Financial Information                   |                                                                                               |      |      |   
|                                                 | Item 1. Financial Statements                                                                  |      |      | 2  | 
|                                                 | Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations |      |      | 13 | 
|                                                 | Item 3. Quantitative and Qualitative Disclosures About Market Risks                           |      |      | 21 | 
|                                                 | Item 4. Controls and Procedures                                                               |      |      | 21 | 
|Part II  Other Information                      |                                                                                               |      |      |   
|                                                 | Item 1. Legal Proceedings                                                                     |      |      | 22 | 
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                   |      |      | 22 | 
|                                                 | Item 6. Exhibits and Reports on Form 8-K                                                      |      |      | 22 | 
|Signatures                                       |                                                                                               |      | 24   |   
|Exhibit Index                                    |                                                                                               | EI-1





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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. All statements made in
this report, other than statements of historical fact, are forward-looking
statements. They usually include, without limitation, the words believes,
anticipates, expects, estimates, projects, intends, plans, hopes,
future and words of similar phrasing and meaning. Forward-looking statements
reflect managements current assumptions, beliefs, and expectations and express
managements views of future performance and trends.

Forward-looking statements are subject to a number of risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from historical or anticipated results. These factors
include, but are not limited to, the potential for the Companys business
relationships with its significant customers to change or deteriorate; the
potential early termination of the Companys IT service contracts without
penalty; the potential for the Companys customers to reduce their IT services
outsourcing for various reasons, including federal and state budgetary
constraints; the Companys potential liability to its customers in connection
with the provision of IT services; the Companys potential inability to
attract, develop and retain qualified IT employees; the potential for customers
to hire the Companys employees; potential changes in the utilization and
productivity rates of the Companys IT employees; the Companys dependence on
key management personnel; the types and mix of IT services that the Company
performs during any particular period; potential changes in the Companys gross
profit due to a variety of factors, including increased wage and benefit costs
that are not offset by billed rate increases; the Companys potential inability
to finance, sustain and manage growth; the Companys potential inability to
develop or acquire additional IT service offerings; the Companys potential
inability to effectively identify, integrate and manage acquired businesses,
including Remtech Services, Inc. and National Systems & Research Co.; the
Companys increased leveraged position as a result of the Remtech Services,
Inc. and National Systems & Research Co. acquisitions; the potential effects of
competition; the potential outcome of possible litigation involving the
Company; the potential effects of governmental audits of direct and indirect
costs for the Companys U.S. Federal government contracts; the Companys
decision to focus on its core competencies of IT outsourcing, consulting and
professional staffing; potential deterioration in the condition of the U.S.
economy and the IT services industry; and the receipt of regulatory and
shareholder approvals required for the proposed merger with CIBER, Inc., as
well as the timing of the anticipated completion and possible conditions of the
planned merger and their consequences.

The Company disclaims any intent and undertakes no obligation to publicly
release any revision to or update of any forward-looking statement contained in
this report to reflect events occurring or circumstances existing after the
date hereof or otherwise.





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PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |                |        |        |  | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------------- | ------------------------------------ | ------ | ---------------- | ----- | -------------- | ------ | ------ |  | 
|                                                                                        |                                                                                                   |                                            |                            |                                      |        | October 31, 2003 |       | April 30, 2003
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   |                                            |                            |                                      |        | (unaudited)      |       |                |        |       
|                                                                                        |                                                                                                   |                                            |                            | ASSETS                               |        |                  |       |                |        |        |  | 
|Current assets:                                                                         |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        | Cash and cash equivalents                                                                         |                                            | $                          | 1,008                                |        |                  | $     | 1,112          |       
|                                                                                        | Accounts receivable, net of allowance of $372 and $160, respectively                              |                                            |                            | 23,061                               |        |                  |       | 15,969         |       
|                                                                                        | Refundable income taxes                                                                           |                                            |                            | 77                                   |        |                  |       | 574            |       
|                                                                                        | Deferred income taxes                                                                             |                                            |                            | 2,320                                |        |                  |       | 2,028          |       
|                                                                                        | Prepaid expenses and other current assets                                                         |                                            |                            | 1,778                                |        |                  |       | 1,590          |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   | Total current assets                       |                            |                                      | 28,244 |                  |       |                | 21,273 |       
|Fixed assets:                                                                           |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        | Furniture, fixtures and equipment                                                                 |                                            |                            | 36,630                               |        |                  |       | 37,059         |       
|                                                                                        | Accumulated depreciation                                                                          |                                            |                            | (26,553                              | )      |                  |       | (25,248        | )     
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   | Net                                        |                            |                                      | 10,077 |                  |       |                | 11,811 |       
|Goodwill                                                                                |                                                                                                   |                                            | 10,554                     |                                      |        |                  | 5,150 |               
|Other intangible assets, net of accumulated amortization of $968 and
$290, respectively |                                                                                                   |                                            | 6,882                      |                                      |        |                  | 4,700 |               
|Deferred income taxes  long-term                                                       |                                                                                                   |                                            | 8,831                      |                                      |        |                  | 8,991 |               
|Other long-term assets                                                                  |                                                                                                   |                                            | 1,031                      |                                      |        |                  | 1,310 |               
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        | Total assets                                                                                      |                                            | $                          | 65,619                               |        |                  | $     | 53,235         |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |                |       
|                                                                                        |                                                                                                   |                                            |                            | LIABILITIES AND SHAREHOLDERS EQUITY |        |                  |       |                |        |        |  | 
|Current liabilities:                                                                    |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        | Accounts payable                                                                                  |                                            | $                          | 1,507                                |        |                  | $     | 2,161          |       
|                                                                                        | Accrued expenses                                                                                  |                                            |                            | 8,727                                |        |                  |       | 7,364          |       
|                                                                                        | Current portion of long-term debt                                                                 |                                            |                            | 7,959                                |        |                  |       | 5,907          |       
|                                                                                        | Deferred revenue                                                                                  |                                            |                            | 1,031                                |        |                  |       | 1,296          |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   |                                            | Total current liabilities  |                                      |        | 19,224           |       |                |        | 16,728 | 
|                                                                                        | Long-term debt                                                                                    |                                            |                            | 24,071                               |        |                  |       | 15,975         |       
|                                                                                        | Accrued loss on interest rate swap                                                                |                                            |                            | 20                                   |        |                  |       |               |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   |                                            | Total liabilities          |                                      |        | 43,315           |       |                |        | 32,703 | 
|                                                                                        | Commitments
and contingencies                                                                     |                                            |                            |                                      |        |                  |       |                |       
|Shareholders equity:                                                                    |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        | Common stock, $0.01 par, 100,000 shares authorized; 26,002 and
25,025 issued;
700 Treasury shares |                                            |                            | 260                                  |        |                  |       | 250            |       
|                                                                                        | Treasury stock, at cost                                                                           |                                            |                            | (487                                 | )      |                  |       | (487           | )     
|                                                                                        | Additional paid-in capital                                                                        |                                            |                            | 42,500                               |        |                  |       | 40,807         |       
|                                                                                        | Retained earnings (deficit)                                                                       |                                            |                            | (19,957                              | )      |                  |       | (20,038        | )     
|                                                                                        | Accumulated other comprehensive loss                                                              |                                            |                            | (12                                  | )      |                  |       |               |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   |                                            | Total shareholders equity |                                      |        | 22,304           |       |                |        | 20,532 | 
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |               
|                                                                                        |                                                                                                   | Total liabilities and shareholders equity |                            | $                                    | 65,619 |                  |       | $              | 53,235 |       
|                                                                                        |                                                                                                   |                                            |                            |                                      |        |                  |       |                |       

See accompanying notes to condensed consolidated financial statements (unaudited).

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SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for earnings per share)
(unaudited)

|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |        |  | 
|-------------------------------------------------- | ---------------------- | - | ------ | ------------ |  | ----------- | ------ | ----- |  | ---- | ------ | ------ |  | - | ------ | ------ |  | 
|                                                   |                        |   |        | Three Months |  | Six Months 
|                                                   |                        |   |        | Ended        |  | Ended      
|                                                   |                        |   |        | October 31,  |  | October 31,
|                                                   |                        |   |        |              |  |            
|                                                   |                        |   |        | 2003         |  | 2002        |        | 2003  |  | 2002
|                                                   |                        |   |        |              |  |             |        |       |  |     
|Revenue                                            |                        | $ | 31,812 |              |  | $           | 21,548 |       |  | $    | 60,394 |        |  | $ | 43,344 |       
|Cost of services                                   |                        |   | 24,405 |              |  |             | 16,102 |       |  |      | 45,852 |        |  |   | 32,461 |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|                                                   | Gross profit           |   |        | 7,407        |  |             |        | 5,446 |  |      |        | 14,542 |  |   |        | 10,883 | 
|Selling, general and administrative expenses       |                        |   | 6,499  |              |  |             | 4,177  |       |  |      | 11,717 |        |  |   | 8,902  |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|                                                   | Income from operations |   |        | 908          |  |             |        | 1,269 |  |      |        | 2,825  |  |   |        | 1,981  | 
|Net interest expense                               |                        |   | 406    |              |  |             | 261    |       |  |      | 827    |        |  |   | 549    |       
|Other income                                       |                        |   | 50     |              |  |             | 32     |       |  |      | 121    |        |  |   | 145    |       
|Loss on extinguishment of debt                     |                        |   | 1,985  |              |  |             |       |       |  |      | 1,985  |        |  |   |       |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Income (loss) before income taxes                  |                        |   | (1,433 | )            |  |             | 1,040  |       |  |      | 134    |        |  |   | 1,577  |       
|Income tax expense (benefit)                       |                        |   | (566   | )            |  |             | 411    |       |  |      | 53     |        |  |   | 623    |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Net income (loss)                                  |                        | $ | (867   | )            |  | $           | 629    |       |  | $    | 81     |        |  | $ | 954    |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Net income (loss) per share  basic                |                        | $ | (0.03  | )            |  | $           | 0.03   |       |  | $    | 0.00   |        |  | $ | 0.04   |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Net income (loss) per share  diluted              |                        | $ | (0.03  | )            |  | $           | 0.03   |       |  | $    | 0.00   |        |  | $ | 0.04   |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Weighted average number of common
shares  basic   |                        |   | 25,074 |              |  |             | 24,741 |       |  |      | 24,753 |        |  |   | 24,845 |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       
|Weighted average number of common
shares  diluted |                        |   | 25,074 |              |  |             | 24,979 |       |  |      | 25,593 |        |  |   | 25,118 |       
|                                                   |                        |   |        |              |  |             |        |       |  |      |        |        |  |   |        |       

See accompanying notes to condensed consolidated financial statements (unaudited).

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SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands, unaudited)

|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |               |       |          |   |         |    |       |   |             |     |   |   |        |       |  
|--------------------------- | ---------------------------------------------------------------------------------- |  | --------- | --- | ------ | - | -------- | - | ------- | - | --------- | - | ------------- | - | ------------- | ----- | -------- | - | ------- | -- | ----- | - | ----------- | --- | - | - | ------ | ----- | -
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |               |       |          |   |         |    |       |   | Accumulated |     |   |   |       
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   | Additional    |       | Retained |   | Other   |    | Total
|                            |                                                                                    |  | Number of |     | Common |   | Treasury |   | Paid-In |   | Earnings  |   | Comprehensive |   | Shareholders
|                            |                                                                                    |  | Shares    |     | Stock  |   | Shares   |   | Capital |   | (Deficit) |   | Loss          |   | Equity       
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |              
|Balance at April 30, 2003   |                                                                                    |  | 25,025    |     |        | $ | 250      |   |         | $ | (487      | ) |               | $ | 40,807        |       |          | $ | (20,038 | )  |       | $ |            |     |   | $ | 20,532 |      
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |               |       |          |   |         |    |       |   |             |     |   |   |        |      
|                            | Issuance of common stock in connection
with the acquisition of NSR                 |  |           | 882 |        |   |          | 9 |         |   |           |  |               |   |               | 1,691 |          |   |         |   |       |   |             |    |   |   |        | 1,700 |  
|                            | Issuance of common stock in connection
with the exercise of employee stock options |  |           | 8   |        |   |          |  |         |   |           |  |               |   |               | 3     |          |   |         |   |       |   |             |    |   |   |        | 3     |  
|                            | Issuance of common stock in connection
with the exercise of warrants               |  |           | 87  |        |   |          | 1 |         |   |           |  |               |   |               | (1    | )        |   |         |   |       |   |             |    |   |   |        |      |  
|                            | Loss on interest rate swap, net of taxes                                           |  |           |    |        |   |          |  |         |   |           |  |               |   |               |      |          |   |         |   |       |   |             | (12 | ) |   |        | (12   | )
|                            | Net
income for the six months ended October 31, 2003                               |  |           |    |        |   |          |  |         |   |           |  |               |   |               |      |          |   |         | 81 |       |   |             |    |   |   |        | 81    |  
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |               |       |          |   |         |    |       |   |             |     |   |   |        |      
|Balance at October 31, 2003 |                                                                                    |  | 26,002    |     |        | $ | 260      |   |         | $ | (487      | ) |               | $ | 42,500        |       |          | $ | (19,957 | )  |       | $ | (12         | )   |   | $ | 22,304 |      
|                            |                                                                                    |  |           |     |        |   |          |   |         |   |           |   |               |   |               |       |          |   |         |    |       |   |             |     |   |   |        |      

See accompanying notes to condensed consolidated financial statements (unaudited).

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SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

|                                                                                  |                                                                |                                        |       |                              |      |      |       |        |        |  
|--------------------------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------- | ----- | ---------------------------- | ---- | ---- | ----- | ------ | ------ | -
|                                                                                  |                                                                |                                        |       | Six Months Ended October 31,
|                                                                                  |                                                                |                                        |       |                             
|                                                                                  |                                                                |                                        |       | 2003                         |      | 2002
|                                                                                  |                                                                |                                        |       |                              |      |     
|Operating Activities                                                              |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Net income                                                     |                                        | $     | 81                           |      |      | $     | 954    |       
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Provision (recovery) for bad debts                             |                                        |       | 38                           |      |      |       | (439   | )     
|                                                                                  | Depreciation and amortization                                  |                                        |       | 2,686                        |      |      |       | 2,570  |       
|                                                                                  | Deferred income taxes                                          |                                        |       | 5                            |      |      |       | 623    |       
|                                                                                  | Extinguishment of debt, net of cash prepayment penalty of $746 |                                        |       | 1,239                        |      |      |       |       |       
|                                                                                  | Changes in operating assets and liabilities:                   |                                        |       |                              |      |      |       |        |       
|                                                                                  |                                                                | Accounts receivable                    |       |                              | (740 | )    |       |        | 2,717  |  
|                                                                                  |                                                                | Refundable income taxes                |       |                              | 505  |      |       |        | 751    |  
|                                                                                  |                                                                | Prepaid expenses and other assets      |       |                              | 805  |      |       |        | 947    |  
|                                                                                  |                                                                | Accounts payable                       |       |                              | (818 | )    |       |        | (465   | )
|                                                                                  |                                                                | Accrued expenses and other liabilities |       |                              | (716 | )    |       |        | (1,190 | )
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Net cash provided by operating activities                                         |                                                                |                                        | 3,085 |                              |      |      | 6,468 |       
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Investing Activities                                                              |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Purchases of businesses, net of $937 cash acquired             |                                        |       | (13,145                      | )    |      |       |       |       
|                                                                                  | Purchases of fixed assets                                      |                                        |       | (192                         | )    |      |       | (164   | )     
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Net cash used in investing activities                          |                                        |       | (13,337                      | )    |      |       | (164   | )     
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Financing Activities                                                              |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Borrowings on long-term debt                                   |                                        |       | 31,306                       |      |      |       | 14     |       
|                                                                                  | Purchases of common stock for treasury                         |                                        |       |                             |      |      |       | (340   | )     
|                                                                                  | Payments on long-term debt                                     |                                        |       | (21,297                      | )    |      |       | (3,202 | )     
|                                                                                  | Net borrowings (repayments) under revolving loan               |                                        |       | 139                          |      |      |       | (2,346 | )     
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Net cash provided by (used in) financing activities            |                                        |       | 10,148                       |      |      |       | (5,874 | )     
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Net increase (decrease) in cash and cash equivalents                              |                                                                |                                        | (104  | )                            |      |      | 430   |       
|Cash and cash equivalents at beginning of period                                  |                                                                |                                        | 1,112 |                              |      |      | 354   |       
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Cash and cash equivalents at end of period                                        |                                                                | $                                      | 1,008 |                              |      | $    | 784   |       
|                                                                                  |                                                                |                                        |       |                              |      |      |       |        |       
|Supplemental Disclosures of Cash Flow                                             |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Interest paid                                                  |                                        | $     | 476                          |      |      | $     | 591    |       
|                                                                                  | Income taxes paid                                              |                                        | $     | 71                           |      |      | $     | 45     |       
|                                                                                  |                                                                |                                        |       |                              |      |      |       |       
|Supplemental
Disclosures of Non-cash Investing and Financing Activities           |                                                                |                                        |       |                              |      |      |       |       
|                                                                                  | Common
stock issued in NSR acquisition                         |                                        | $     | 1,700                        |      |      | $     |       |       
|                                                                                  | Notes
payable issued in NSR acquisition                        |                                        | $     | 5,100                        |      |      | $     |       |       

See accompanying notes to condensed consolidated financial statements (unaudited).

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SCB COMPUTER TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.     BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of SCB
Computer Technology, Inc. (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments (which consist of normal recurring
adjustments) considered necessary for the fair presentation of the financial
position of the Company as of October 31, 2003, and the results of operations
and cash flows for the three-month and six-month periods ended October 31, 2003
and October 31, 2002. Operating results for the period ended October 31, 2003,
are not necessarily indicative of the results that may be expected for the
fiscal year ending April 30, 2004. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys annual report on Form 10-K for the fiscal year ended April 30, 2003,
filed with the Securities and Exchange Commission.

2.     EARNINGS PER SHARE

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

|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ----------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                                                                      |  | Three Months |        | Six Months 
|                                                                                                      |  | Ended        |        | Ended      
|                                                                                                      |  | October 31,  |        | October 31,
|                                                                                                      |  |              |        |            
|                                                                                                      |  | 2003         |        | 2002        |  | 2003 |        | 2002
|                                                                                                      |  |              |        |             |  |      |        |     
|Net income (loss)                                                                                     |  | $            | (867   | )           |  | $    | 629    |      |  | $ | 81     |  |  | $ | 954    | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Denominator for basic earnings per share  weighted average
shares                                    |  |              | 25,074 |             |  |      | 24,741 |      |  |   | 24,753 |  |  |   | 24,845 | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Effect of dilutive securities-stock options and warrants                                              |  |              |       |             |  |      | 238    |      |  |   | 840    |  |  |   | 273    | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Denominator for diluted earnings per share  adjusted weighted
average shares and assumed conversions |  |              | 25,074 |             |  |      | 24,979 |      |  |   | 25,593 |  |  |   | 25,118 | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income (loss) per share  basic                                                                   |  | $            | (0.03  | )           |  | $    | 0.03   |      |  | $ | 0.00   |  |  | $ | 0.04   | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income (loss) per share  diluted                                                                 |  | $            | (0.03  | )           |  | $    | 0.03   |      |  | $ | 0.00   |  |  | $ | 0.04   | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 

3.     STOCK-BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees and
directors with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and accordingly recognizes no compensation expense for the stock
option grants. In accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, a valuation using the fair-value-based accounting method has been
made for stock options and accordingly pro forma net income and earnings per
share are shown below For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options vesting period.
The fair value for the options was estimated at the date of grant
using a Black-Scholes option pricing model with the following
weighted average assumptions for fiscal 2003 and 2002, respectively:
risk-free interest rates of 4.50 percent and 5.00 percent; no
dividend yield, volatility factors of the expected market price of
the Companys common stock of .866 and .959 and a weighted
average expected life of the option of five years. The Companys pro forma information follows (in thousands, except earnings per
share):

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|                             |                                                                                                                               |  |                                |        |                              |  |      |      |      |  |   |      |  |  |   |      | 
|---------------------------- | ----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ---------------------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                             |                                                                                                                               |  | Three Months Ended October 31, |        | Six Months Ended October 31,
|                             |                                                                                                                               |  |                                |        |                             
|                             |                                                                                                                               |  | 2003                           |        | 2002                         |  | 2003 |      | 2002
|                             |                                                                                                                               |  |                                |        |                              |  |      |      |     
|Net income (loss):           |                                                                                                                               |  |                                |        |                              |  |      |      |      |  |   |      |  |  |   |     
|                             | As reported                                                                                                                   |  | $                              | (867   | )                            |  | $    | 629  |      |  | $ | 81   |  |  | $ | 954  | 
|                             | Add: Stock-based employee compensation expense included in
net income, net of related tax expense                             |  |                                |       |                              |  |      |     |      |  |   |     |  |  |   |     | 
|                             | Deduct: Stock-based employee compensation determined
under fair value based method for all awards, net of related
tax benefit |  |                                | 36     |                              |  |      | 48   |      |  |   | 78   |  |  |   | 136  | 
|                             |                                                                                                                               |  |                                |        |                              |  |      |      |      |  |   |      |  |  |   |      | 
|                             | Pro
forma - for SFAS 123                                                                                                      |  | $                              | (903   | )                            |  | $    | 581  |      |  | $ | 3    |  |  | $ | 818  | 
|                             |                                                                                                                               |  |                                |        |                              |  |      |      |      |  |   |      |  |  |   |     
|Net income (loss) per share: |                                                                                                                               |  |                                |        |                              |  |      |      |      |  |   |      |  |  |   |     
|                             | As
reported - basic                                                                                                           |  | $                              | (0.03) |                              |  | $    | 0.03 |      |  | $ | 0.00 |  |  | $ | 0.04 | 
|                             | As
reported - diluted                                                                                                         |  | $                              | (0.03  | )                            |  | $    | 0.03 |      |  | $ | 0.00 |  |  | $ | 0.04 | 
|                             | Pro
forma - for SFAS 123 - basic                                                                                              |  | $                              | (0.04  | )                            |  | $    | 0.02 |      |  | $ | 0.00 |  |  | $ | 0.03 | 
|                             | Pro
forma - for SFAS 123 - diluted                                                                                            |  | $                              | (0.04  | )                            |  | $    | 0.02 |      |  | $ | 0.00 |  |  | $ | 0.03 | 

4.     ACQUISITION

On May 28, 2003, the Company, National Systems & Research Co. (NSR), and the
shareholders of NSR, (the Shareholders), entered into a Stock Purchase
Agreement (the Agreement) pursuant to which the Company agreed to purchase
and the Shareholders agreed to sell 100% of the outstanding common stock of NSR
subject to the resolution of certain contingencies. On August 29, 2003, all of
the closing contingencies were resolved, and the Agreement was finalized and
funded on September 4, 2003. Pursuant to the Agreement, the Company paid cash
in the amount of $8,850,000, issued unsecured, subordinated promissory notes in
the amount of $5,100,000 (the Notes) to the Shareholders and issued
shares of the Companys common stock valued at $1,700,000 to the Shareholders
in consideration of the sale of all the outstanding shares of common stock of
NSR (the Shares). At closing the Shareholders purchased approximately
$950,000 of NSRs assets from the Company. The purchase price was determined
by arms length negotiation between the parties, taking into account the
historical operating results and existing customer relationships of NSRs
business.

The acquired business provides information technology support services
primarily to the federal government, which was one of the primary reasons for
the acquisition. As part of this acquisition, 253 employees joined SCB.
Approximately $5.5 million of the purchase consideration has
been preliminarily allocated to
goodwill, based upon the excess of the purchase price over the $8.2 million
estimated fair value of net tangible assets and the $2.9 million assigned to
identifiable intangible assets acquired. The Company is amortizing these
intangible assets over a period of three to nine years. NSR contributed
revenue of $4.1 million for the period from September 1, 2003 to October 31,
2003. The following condensed balance sheet discloses the amount assigned to
each major assets and liabilities of NSR at the acquisition date (in
thousands):

|                                          |                   |   |        |        | 
|----------------------------------------- | ----------------- | - | ------ | ------ | 
|Assets                                    |                   |   |        |       
|Cash                                      |                   | $ | 937    |       
|Accounts receivable                       |                   |   | 5,649  |       
|Prepaid expenses and other current assets |                   |   | 3,332  |       
|Fixed assets                              |                   |   | 80     |       
|Deferred income taxes, net                |                   |   | 137    |       
|Identifiable intangible assets            |                   |   | 2,860  |       
|Goodwill                                  |                   |   | 5,480  |       
|                                          |                   |   |        |       
|                                          | Total Assets      |   |        | 18,475 | 
|                                          |                   |   |        |       
|Liabilities                               |                   |   |        |       
|Accounts payable                          |                   | $ | 163    |       
|Accrued expenses                          |                   |   | 1,575  |       
|Deferred revenue                          |                   |   | 240    |       
|                                          | Total Liabilities |   |        | 1,978  | 
|                                          |                   |   |        |       
|Net assets allocated                      |                   | $ | 16,497 |       
|                                          |                   |   |        |       

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Pro Forma Information (unaudited)

The following unaudited pro forma combined condensed statements of operations
set forth the consolidated results of operations of the Company for
the three months and six
months ended October 31, 2003 and 2002 as if the above-mentioned acquisition
and the Remtech Services, Inc. acquisition both had occurred on May
1, 2002. This
unaudited pro forma information does not purport to be indicative of
the actual results that would actually have occurred if the
combinations had been in effect for the years ended October 31 (in thousands):

|                             |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        | 
|---------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                             |  | Three
Months Ended |        | Six
Months Ended
|                             |  | October 31,        |        | October 31,     
|                             |  |                    |        |                 
|                             |  | 2003               |        | 2002             |  | 2003 |        | 2002
|                             |  |                    |        |                  |  |      |        |     
|Revenue                      |  | $                  | 33.788 |                  |  | $    | 35,916 |      |  | $ | 68,298 |  |  | $ | 71,779 | 
|Net Income                   |  |                    | (874   | )                |  |      | 1,060  |      |  |   | 51     |  |  |   | 1,553  | 
|Diluted net income per share |  |                    | (0.03  | )                |  |      | 0.04   |      |  |   | 0.00   |  |  |   | 0.06   | 

5.     INTANGIBLE ASSETS

Intangible assets resulted from the Companys acquisitions of Remtech Services,
Inc. (RSI) during the year ended April 30, 2003 and NSR during the quarter
ended October 31, 2003. The intangible assets identified during the Companys
valuation of RSI and NSR net assets at the dates of acquisition include
purchased customer contracts and non-compete agreements. These intangible
assets are being amortized over 3 to 9 years with 6.8 years being the weighted
average amortization period. No residual value has been assigned to these
identifiable intangible assets. Amortization expense was $391,000 and $681,000
for the three-month and six-month periods ended October 31, 2003, respectively.
Amortization expense for all of the Companys intangible assets from the RSI
acquisition is deductible for Federal income tax purposes using the
straight-line method over a fifteen-year amortization period. Amortization
expense for the Companys intangible assets from the NSR acquisition is not
deductible for Federal income tax purposes. Intangible assets consisted of the
following at October 31, 2003 (in thousands):

|                         |                                    |                                |        |       |       |  
|------------------------ | ---------------------------------- | ------------------------------ | ------ | ----- | ----- | -
|Goodwill                 |                                    | $                              | 10,554 |      
|Accumulated amortization |                                    |                                |       |      
|                         |                                    |                                |        |      
|                         |                                    | $                              | 10,554 |      
|                         |                                    |                                |        |      
|Other intangible assets: |                                    |                                |        |      
|                         | Covenant not to compete agreements |                                | $      | 810   |      
|                         | Accumulated amortization           |                                |        | (142  | )    
|                         |                                    |                                |        |      
|                         |                                    | $                              | 668    |      
|                         |                                    |                                |        |      
|                         | Purchased customer contracts       |                                | $      | 7,040 |      
|                         | Accumulated amortization           |                                |        | (826  | )    
|                         |                                    |                                |        |      
|                         |                                    | $                              | 6,214  |      
|                         |                                    |                                |        |      
|                         |                                    | Total other intangible assets  |        | $     | 7,850 |  
|                         |                                    | Total accumulated amortization |        |       | (968  | )
|                         |                                    |                                |        |      
|                         |                                    | $                              | 6,882  |      
|                         |                                    |                                |        |      

6.     LONG-TERM DEBT

At the beginning of the second fiscal quarter of 2004, the Company had a $27.5
million credit facility (the Credit Facility) that consisted of a $17.5
million revolving loan and a $10.0 million term loan with one financial
institution. The Credit Facility was secured by substantially all the
Companys assets and contained various financial and other covenants.
Additionally, the Company had a $7.3 million term loan (Term Loan D) with a

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second financial institution and a three-year, $4.0 million term loan (Term
Loan C) with a third financial institution.

On August 29, 2003, the Company obtained a new senior credit facility (the
Senior Credit Facility) with another financial institution, the proceeds of
which were used to refinance the Credit Facility and Term Loan D. The Senior
Credit Facility consists of a $17.5 million revolving loan (the Senior
Revolving Loan), a $5.6 million term loan (Term Loan A) and a $6.9 million
term loan (Term Loan B). The Senior Credit Facility is secured by
substantially all the Companys assets and contains various financial and other
covenants including a minimum fixed charge ratio, a minimum asset coverage
ratio and a funded debt to EBITDA ratio. The Company was in compliance with
these loan covenants at October 31, 2003.

The Company enters into derivative instruments to hedge variable interest
payments on certain debt instruments utilizing interest-rate swaps to convert
the variable payments into fixed payments. On the date on which the derivative
contract is executed, the Company designated the derivatives a cash flow
hedges. Changes in derivative fair value that are designated as cash flow
hedges are deferred and recorded as a component of accumulated other
comprehensive income until the hedged transactions occur and are recognized in
earnings. The ineffective portion of a hedging derivatives change in fair
value is immediately recognized in earnings. The Company formally documents
all relationships between hedging instruments and hedged items, as well as its
risk management objectives and strategies for undertaking various hedge
transactions. The Company assesses, both at the inception of the hedge and on
an on-going basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of hedged
items.

The Company uses derivative financial instruments to reduce the impact of
changes in interest rates on its earnings and cash flow. The Company enters
into derivative financial contracts based on analysis of specific and known
economic exposures and by policy prohibits holding or issuing derivative
financial instruments for trading or speculative purposes. The Company is a
party to two interest rate swaps as discussed below on Term Loan A and Term
Loan B.

The interest rate on borrowings under the Senior Revolving Loan is LIBOR plus a
margin of 2.5%. At October 31, 2003, the effective annual interest rate under
the Revolving Loan was 3.62%. At October 31, 2003, approximately $4.1 million
was available for borrowing under the Senior Revolving Loan.

The interest rate on borrowings under Term Loan A is LIBOR plus a margin of
2.5%. The Company entered into an interest-rate swap to reduce the impact of
changes in interest rates on Term Loan A. Under the terms of the interest-rate
swap the Company receives interest payments based on LIBOR plus a margin of
2.5% on a notional amount equal to the balance of Term Loan A and pays interest
at an effective annual fixed rate of 4.31%. Term Loan A requires principal
payments of $700,000 plus accrued interest per quarter.

The interest rate on borrowings under Term Loan B is LIBOR plus a margin of
2.5%. The Company entered into an interest-rate swap to reduce the impact of
changes in interest rates on Term Loan B. Under the terms of the interest-rate
swap the Company receives interest payments based on LIBOR plus a margin of
2.5% on a notional amount equal to the balance of Term Loan B and pays interest
at an effective annual fixed rate of 4.76%. Term Loan B requires principal
payments of $181,579 plus accrued interest monthly.

Long-term debt consisted of the following at October 31, 2003 (in thousands):

|                                         |  |   |        |  
|---------------------------------------- |  | - | ------ | -
|Revolving Loan                           |  | $ | 13,156 |  
|Term Loan A                              |  |   | 5,600  |  
|Term Loan B                              |  |   | 6,527  |  
|Term Loan C                              |  |   | 647    |  
|Notes payable to former NSR shareholders |  |   | 5,100  |  
|Notes payable to former RSI shareholders |  |   | 1,000  |  
|                                         |  |   |        |  
|                                         |  |   | 32,030 |  
|Less: current portion                    |  |   | (7,959 | )
|                                         |  |   |        |  
|                                         |  | $ | 24,071 |  
|                                         |  |   |        |  

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Future maturities related to long-term debt as of October 31, 2003 are as
follows (in thousands):

|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Years Ending October 31, |  |   |        | 
|                         |  |   |        | 
|2004                     |  | $ | 7,959  | 
|2005                     |  |   | 6,313  | 
|2006                     |  |   | 16,658 | 
|2007                     |  |   | 1,100  | 
|2008                     |  |   |       | 
|Thereafter               |  |   |       | 
|                         |  |   |        | 
|                         |  | $ | 32,030 | 
|                         |  |   |        | 

7.     SEGMENT INFORMATION

Beginning in the first quarter of fiscal 2004, the Company began operating
within three business segments, State and Local Government, Federal Government
and Commercial, as defined by its customer markets. The Company is presenting
the following summarized financial information concerning the Companys
operating segments for the three months and six months ended October 31, 2003
and 2002 (in thousands):

|                        |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|----------------------- | -------------------------- | - | ------------------------------ | ------ | ---------------------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                        |                            |   | Three Months Ended October 31, |        | Six Months Ended October 31,
|                        |                            |   |                                |        |                             
|                        |                            |   | 2003                           |        | 2002                         |   | 2003   |        | 2002
|                        |                            |   |                                |        |                              |   |        |        |     
|Revenue:                |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        | State and Local Government |   | $                              | 11,936 |                              |   | $      | 13,752 |      |   | $      | 24,025 |   |   | $      | 27,270 |  
|                        | Federal Government         |   |                                | 13,876 |                              |   |        |       |      |   |        | 24,339 |   |   |        |       |  
|                        | Commercial                 |   |                                | 6,000  |                              |   |        | 7,796  |      |   |        | 12,030 |   |   |        | 16,074 |  
|                        |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        |                            | $ | 31,812                         |        |                              | $ | 21,548 |        |      | $ | 60,394 |        |   | $ | 43,344 |       
|                        |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|Income from operations: |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        | State and Local Government |   | $                              | 1,303  |                              |   | $      | 1,876  |      |   | $      | 3,302  |   |   | $      | 3,647  |  
|                        | Federal Government         |   |                                | 771    |                              |   |        |       |      |   |        | 1,728  |   |   |        |       |  
|                        | Commercial                 |   |                                | 967    |                              |   |        | 1,149  |      |   |        | 2,189  |   |   |        | 2,556  |  
|                        | Corporate                  |   |                                | (2,133 | )                            |   |        | (1,756 | )    |   |        | (4,394 | ) |   |        | (4,222 | )
|                        |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        |                            | $ | 908                            |        |                              | $ | 1,269  |        |      | $ | 2,825  |        |   | $ | 1,981  |       
|                        |                            |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. There are no
inter-segment sales. Corporate services, consisting of general and administrative services, are
provided to the segments from a centralized location. In addition, substantially
all of the sales and recruiting workforce are included in the Corporate income
from operations.

8.     STOCK REPURCHASE PROGRAM

The Companys board of directors approved a stock repurchase program that
authorizes the Company to repurchase up to $2.0 million of common stock. The
stock repurchase program authorizes the Company to repurchase shares of its
common stock from time to time in the open market and through privately
negotiated transactions. The Company will base its decisions to repurchase
shares on the prevailing market conditions, the availability of cash to fund
the repurchases, and other relevant factors. All repurchases will be conducted
in accordance with applicable laws, rules and regulations and the limitations
imposed under the Companys credit facility. Repurchased shares of common stock
will be added to the Companys treasury shares and will be available for future
corporate uses. The cost of the shares purchased is recorded as treasury
stock, which reduces the amount of total shareholders equity. The Company may
discontinue the stock repurchase program at any time. The Company did not
purchase any shares of its common stock during the six-month period ended
October 31, 2003. As of October 31, 2003, the Company has 699,800 shares of
its common stock held as treasury shares.

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9.     RELATED-PARTY TRANSACTIONS

In the second quarter and first six months of fiscal 2004, the Company paid IT
Resources Solutions.net, Inc. (ITRS), a minority owned business, $18,000 and
$36,000, respectively, for marketing and management services in the
northeastern United States, $0 and $4,109, respectively, for the lease of an
office to house an SCB sales account representative and storage facilities
which SCB uses to store furniture and miscellaneous office items from a closed
SCB office in New York, and $6,504 and $9,676, respectively, for contract labor
used on the Companys projects. Kenneth J. Cobb, the son of T. Scott Cobb, is a
shareholder of ITRS.

10.     LITIGATION AND LEGAL PROCEEDINGS

On October 13, 2003, the Company filed suit in state court in Frankfort,
Kentucky against the Commonwealth of Kentucky and three vendors, Cook Systems
International, Inc., Ajilon LLC d/b/a Ajilon Consulting, and Adecco USA d/b/a
Adecco Technical, seeking review of service agreements awarded to these vendors
by the Commonwealth of Kentucky for the states information technology systems
designs and development services. Subsequently, the complaint was amended to
include three additional vendors, Pomeroy IT Solutions, Inc., Keane, Inc., and
EER Systems, Inc., which were also awarded service agreements under the bid
solicitation for information technology systems designs and development
services.

On December 9, 2003, a purported class
action lawsuit was filed against the Company in the United States
District Court for the Western District of Tennessee. The complaint
alleges that the Company violated certain provisions of the
Federal Labor Standards Act (FLSA) by failing to pay certain salaried
computer professionals on a salary basis. The plaintiffs allege the
Company failed to pay these employees the wages to which they were
entitled under the FLSA and seeks monetary damages, injunctive relief
and cost of litigation, including attorney fees. The Company intends
to vigorously defend itself against the allegations.

The Company from time to time is subject to various claims and lawsuits arising
out of its operations in the ordinary course of business. Management believes
that the disposition of such claims and lawsuits will not have a material
adverse effect on the Companys financial condition or results of operations.

11.     PROPOSED AGREEMENT AND PLAN OF MERGER

On October 24, 2003, the Company entered into a definitive agreement to be
acquired by CIBER, Inc. of Greenwood Village, Colorado. Under the terms of the
definitive agreement, a CIBER subsidiary would merge into SCB in exchange for
consideration with an aggregate value of $2.15 for each share of SCB common
stock. Pursuant to the definitive agreement, $1.08 of the merger consideration
will be paid in cash and $1.07 in equivalent value in common stock in CIBER,
unless CIBER elects to pay a greater percentage of the merger consideration in
cash. SCB would become a wholly owned subsidiary of CIBER. The boards of
directors of SCB and CIBER have each approved the transaction. The offer is
subject to SCB shareholders approval. SCB expects to issue a proxy statement to
its shareholders seeking approval of the transaction in a special meeting
expected to be held during the first calendar quarter of 2004. The arrangement
with CIBER includes lockup agreements with shareholders representing
approximately 20 percent of SCB shares. A vote by the shareholders of CIBER is
not required for consummation of this transaction. If the SCB shareholders
approve the merger, consummation of the transaction should occur shortly
thereafter.

12.     NEW
ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting standards (SFAS) No.
143, Accounting for Asset Retirement Obligations effective for fiscal years
beginning after June 15, 2002. SFAS 143 requires that a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The adoption of SFAS 143 in the
first quarter of fiscal 2004 did not have a material effect on its the
Companys financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS 4, Reporting Gains and Losses from Extinguishment of Debt, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. As a result, the
criteria in Accounting Principles Board Opinion No. 30 will now be used to
classify those gains and losses. SFAS 145 amends SFAS No. 13, Accounting for
Leases, to require that certain lease modifications that have economic effects
similar to sales-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. The provisions of SFAS 145 became effective during
the Companys first quarter of 2004. Accordingly, the loss on extinguishment
of debt recorded by the Company in the second quarter of fiscal 2004 was not
classified as extraordinary.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. The adoption of this statement has not had a material effect on the Companys financial position or results of operations.

In May 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, that improves
the accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS 150 requires that three instruments
be classified as liabilities in the statement of financial position. The
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities. The Statement is to be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance of the date of the Statement
and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. On November 7, 2003, the FASB deferred the
classification and measurement provisions of FASB No. 150 as they apply to
certain mandatory redeemable non-controlling interests. This deferral is
expected to remain in effect while these provisions are further evaluated by
the FASB. The adoption of this statement is not expected to have a material
effect on the Companys financial position or results of operations.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the Companys
condensed consolidated financial statements, including the notes thereto, in
this report.

Overview

In fiscal 2001, management re-evaluated the Companys strategic direction
and concluded that while the acquisition and diversification strategy followed
by the Company since fiscal 1997 had grown revenues at a robust rate, the
Companys net income had declined over the same period. Accordingly, management
changed the Companys business development strategy to focus on its historical
core competencies of providing IT consulting, outsourcing, and professional
staffing services (the core operations). A portion of that change in
strategic direction included focusing on the Companys strengths with
government customers and adding agencies of the U.S. Federal government as
customers. As a result of the change in strategic direction, beginning in
fiscal 2001 and continuing through fiscal 2002, the Company disposed of several
underperforming business units. These non-core business units were engaged in
specialized policy consulting, computer hardware and specialty software sales,
enterprise resource planning, and computer equipment leasing (the non-core
operations). All of the Companys non-core operations were disposed as of
April 1, 2002. Beginning in fiscal 2003, the Company implemented a strategic
acquisition plan focused on growing its core operations through acquiring
companies with heavy concentrations in the government market, primarily the
U.S. Federal government market. The Company completed its first acquisition
under its plan with the purchase of Remtech Services, Inc. (RSI) on February
1, 2003 and its second acquisition under the plan of National Systems &
Research Co. (NSR) which closed on August 29, 2003 and was funded on
September 4, 2003.

The Company provides information technology (IT) professional services
to its customers. These IT professional services are designed based upon the
specific needs and requirements of the customer. Accordingly, the Company
offers its customers a wide range of IT professional services that typically
are designed to evaluate all phases of customers projects, from front-end
needs assessment surveys to detailed design and implementation of appropriate
systems. The Company delivers these IT services through three forms of
projects: a) Consulting, b) Outsourcing/Facilities Management, and c)
Professional Staffing. In the first quarter and first six months of fiscal
2004 and 2003, the Companys revenue from professional staffing, outsourcing,
and consulting accounted for the following percentages of total revenue:

|                      |  |                                |    |                              |  |      |    |      |  |  |    |   |  |  |    |  
|--------------------- |  | ------------------------------ | -- | ---------------------------- |  | ---- | -- | ---- |  |  | -- | - |  |  | -- | -
|                      |  | Three Months Ended October 31, |    | Six Months Ended October 31,
|SERVICES              |  | 2003                           |    | 2002                         |  | 2003 |    | 2002
|                      |  |                                |    |                              |  |      |    |     
|Professional Staffing |  |                                | 36 | %                            |  |      | 75 | %    |  |  | 40 | % |  |  | 75 | %
|Outsourcing           |  |                                | 52 | %                            |  |      | 14 | %    |  |  | 49 | % |  |  | 14 | %
|Consulting            |  |                                | 12 | %                            |  |      | 11 | %    |  |  | 11 | % |  |  | 11 | %

The Companys strategy of expanding its business in the government
consulting sector into Federal contracting has produced both benefits and risks
to the Company. Management believes that the success of the strategy is
demonstrated by increased shareholder value and further definition of the
Company as a market leader in the area of government information technology
consulting and solutions. This has produced a much greater concentration of the
business of the Company in the government consulting sector, and has increased
the Companys reliance on contracts cancelable on short notice with federal,
state and local government customers which are subject to budgetary restraints.
Because a portion of this strategy utilized acquisitions, the Companys long
term debt level under its credit facility has increased from $5,031,000 as of
January 31, 2003, prior to the RSI acquisition, to $24,071,000 as of October
31, 2003. Management is aggressively managing each of these areas. As an
example, a senior member of Company Management is assigned to each large
customer of the Company in order to give personal attention to management of
the relationship. Management believes that its aggressive management of these
and other risks will enable the Company to realize the full value attainable
from its government contracting strategy.

During the second quarter and first six months of fiscal 2004, the Company
performed IT services for customers in three distinct markets as discussed
above: state and local governments, agencies of the U.S. Federal government

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and commercial enterprises. In the first quarter and first six months of
fiscal 2004 and 2003, the Companys revenue from these three markets accounted
for the following percentages of total revenue:

|                         |  |                                |    |                              |  |      |    |      |  |  |    |   |  |  |    |  
|------------------------ |  | ------------------------------ | -- | ---------------------------- |  | ---- | -- | ---- |  |  | -- | - |  |  | -- | -
|                         |  | Three Months Ended October 31, |    | Six Months Ended October 31,
|MARKETS                  |  | 2003                           |    | 2002                         |  | 2003 |    | 2002
|                         |  |                                |    |                              |  |      |    |     
|State & Local Government |  |                                | 37 | %                            |  |      | 64 | %    |  |  | 40 | % |  |  | 63 | %
|Federal Government       |  |                                | 44 | %                            |  |      | 0  | %    |  |  | 40 | % |  |  | 0  | %
|Commercial enterprises   |  |                                | 19 | %                            |  |      | 36 | %    |  |  | 20 | % |  |  | 37 | %

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

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

On October 24, 2003, the Company entered into a definitive agreement to be
acquired by CIBER, Inc. of Greenwood Village, Colorado. Under the terms of the
definitive agreement, a CIBER subsidiary would merge into SCB in exchange for
consideration with an aggregate value of $2.15 per SCB share of common stock.
Pursuant to the definitive agreement, $1.08 of the merger consideration will be
paid in cash and $1.07 in equivalent value in common stock in CIBER, unless
CIBER elects to pay a greater percentage of the merger consideration in cash.
SCB would become a wholly owned subsidiary of CIBER. The boards of directors of
SCB and CIBER have each approved the transaction. The offer is subject to SCB
shareholders approval. SCB expects to issue a proxy statement to its
shareholders seeking approval of the transaction in a special meeting expected
to be held during the first calendar quarter of 2004. The arrangement with
CIBER includes lockup agreements with shareholders representing approximately
20 percent of SCB shares. A vote by the shareholders of CIBER is not required
for consummation of this transaction. If the SCB shareholders approve the
merger, consummation of the transaction should occur shortly thereafter.

Results of Operations

Comparison of Second Quarter of Fiscal 2004 to Second Quarter of Fiscal
2003

REVENUE AND INCOME FROM OPERATIONS. The Companys revenue increased 47.6% to
$31.8 million in the second quarter of fiscal 2004 from $21.5 million in the
second quarter of fiscal 2003. The Companys revenue in the second quarter of
fiscal 2004 was increased $14.9 million from the second quarter of fiscal 2003
due to the acquisitions of RSI and NSR. Absent the acquisitions of RSI and
NSR, revenue decreased $4.6 million due to the general decline in the
information technology market, employees hired by clients, increased
competition for state and local government proposals, and a slight shift in
commercial customers outsourcing services to offshore companies.

During the quarter ended October 31, 2003, the Company was notified that it was
not awarded a renewal of its State of Kentucky contract. That contract
accounted for revenue of $3.1 million and operating income of approximately
$0.6 million during the quarter ended October 31, 2003. The Company anticipated
the State of Kentucky contract to add approximately $3.0 million in revenue and approximately $0.6 million in operating
income during both the third and fourth fiscal quarters of 2004.
Additionally, the State of Tennessee has hired 21 of the Companys billable
consultants to become State of Tennessee employees during the quarter ended
October 31, 2003.

Excluding the employees that were added as a result of the RSI and NSR
acquisitions, the Companys average billable headcount decreased 24.3% to 455
from 601 in the second quarter of fiscal 2004 and 2003, respectively. The RSI
acquisition added 587 billable employees and the NSR acquisition added 253
billable employees. The Companys average hourly billing rate for the
operations, excluding RSI and NSR, increased 1.4% to $61.91 in fiscal 2004 from
$61.07 in fiscal 2003.

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The Companys gross margin decreased from 25.2% for the second quarter of
fiscal 2003 to 23.2% for the second quarter of fiscal 2004 due mainly to the
addition of RSI and NSR. Excluding these acquired companies gross profit
increased to 26.3% during the second quarter of 2004 from 25.3% during the
second quarter of fiscal 2003.

The Companys income from operations decreased from 5.8% of revenue in the
second quarter of fiscal 2003 to 2.9% of revenue in the second quarter of
fiscal 2004 due to the acquisition of RSI and NSR.

CORPORATE EXPENSES. The Companys corporate expenses increased 21.4% to $2.1
million in the second quarter of fiscal 2004 from $1.7 million in the second
quarter of fiscal 2003 mainly due to a $361,000 recovery of a previously
written off bad debt in the second quarter of fiscal 2003. Excluding this
recovery last year, corporate expenses were consistent with the prior year.

NET INTEREST EXPENSE. The Companys net interest expense increased 55.5% to
$0.4 million in the second quarter of fiscal 2004 from $0.3 million in the
second quarter of fiscal 2003 due primarily to the debt incurred in connection
with the acquisitions of RSI and NSR partially offset by a decline in interest
rates on the Companys Senior Credit Facility.

LOSS ON EXTINGUISHMENT OF DEBT. On August 29, 2003, the Company refinanced its
credit facility with one financial institution with another credit facility
with lower interest costs with a different financial institution. In
connection with this transaction, the Company incurred a loss on extinguishment
of debt of $1,985,000 which included a $746,000 prepayment penalty and
$1,239,000 in expense related to unamortized debt issuance costs.

TAX RATE. The Companys effective tax rate for the second quarter of fiscal
2004 and 2003 was 39.5%.

Comparison of the First Six Months of Fiscal 2004 to the First Six Months
of Fiscal 2003

REVENUE AND INCOME FROM OPERATIONS. The Companys revenue increased 39.3% to
$60.4 million in the first six months of fiscal 2004 from $43.3 million in the
first six months of fiscal 2003. The Companys revenue in the first six months
of fiscal 2004 was increased $24.8 million from the first six months of fiscal
2003 due to the acquisitions of RSI and NSR. Absent the acquisitions of RSI
and NSR, revenue decreased $18.0 million due to the general decline in the
information technology market, employees hired by clients, increased
competition for state and local government proposals, and a slight shift in
commercial customers outsourcing services to offshore companies.

During the quarter ended October 31, 2003, the Company was notified that it was
not awarded a renewal of its State of Kentucky contract. That contract
accounted for revenue of $6.4 million and operating income of $1.5 million
during the six months ended October 31, 2003. The Company anticipated the
State of Kentucky contract to add approximately $3.0 million in revenue and approximately $0.6 million in operating income
during both the third and fourth fiscal quarters of 2004, respectively.
Additionally, the State of Tennessee has hired 31 of the Companys billable
consultants to become State of Tennessee employees during the six months ended
October 31, 2003.

Excluding the employees that were added as a result of the RSI and NSR
acquisitions, the Companys average billable headcount decreased 23.8% to 477
from 626 in the first six months of fiscal 2004 and 2003, respectively. The
RSI acquisition added 587 billable employees and the NSR acquisition added 253
billable employees. The Companys average hourly billing rate for the
operations, excluding RSI and NSR, decreased 0.4% to $61.37 in fiscal 2004 from
$61.65 in fiscal 2003.

The Companys gross margin decreased from 25.1% for the first six months of
fiscal 2003 to 24.1% for the first six months of fiscal 2004 due mainly to the
addition of RSI and NSR. Excluding these acquired companies gross profit
increased to 27.2% during the first six months of 2004 from 25.1% during the
first six months of fiscal 2003.

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The Companys income from operations increased from 4.6% of revenue in the
first six months of fiscal 2003 to 4.7% of revenue in the first six months of
fiscal 2004.

CORPORATE EXPENSES. The Companys corporate expenses increased 4.1% to $4.4
million in the first six months of fiscal 2004 from $4.2 million in the first
six months of fiscal 2003 due to a $361,000 recovery of a previously written
off bad debt in the second quarter of fiscal 2003. Excluding this recovery
last year, corporate expenses decreased 4.1% from the prior year.

NET INTEREST EXPENSE. The Companys net interest expense increased 50.6% to
$0.8 million in the first six months of fiscal 2004 from $0.6 million in the
first six months of fiscal 2003 due primarily to the debt incurred in
connection with the acquisitions of RSI and NSR partially offset by a decline
in interest rates on the Companys Senior Credit Facility.

LOSS ON EXTINGUISHMENT OF DEBT. On August 29, 2003, the Company refinanced its
credit facility with one financial institution with another credit facility
with lower interest costs with a different financial institution. In
connection with this transaction, the Company incurred a loss on extinguishment
of debt of $1,985,000 which included a $746,000 prepayment penalty and
$1,239,000 in expense related to unamortized debt issuance costs.

TAX RATE. The Companys effective tax rate for the first six months of fiscal
2004 and 2003 was 39.5%.

Reliance Upon Government Contracting and Significant Customers

The Company earns a significant portion of its revenue from relatively few
customers. In the first quarter of fiscal 2004 and 2003, the Companys five
largest revenue-generating customers accounted for 39% and 57% of its revenue,
respectively. The decrease from fiscal 2003 to fiscal 2004 was mainly as a
result of the increased revenue from the acquisition of RSI. In the
second quarter and first six months of fiscal 2004, the following customer accounted for 10% or more of the
Companys revenue: State of Kentucky (10%). During the quarter ended October
31, 2003, the Company was notified that it was not awarded a renewal of its
State of Kentucky contract as discussed above. That contract
accounted for revenue of $3.1 million and $6.4 million and operating income of
$0.6 million and $1.5 million during the quarter and six months ended October
31, 2003, respectively. The Company anticipated the
State of Kentucky contract to add approximately $3.0 million in revenue and approximately $0.6 million in operating income
during both the third and fourth fiscal quarters of 2004, respectively. Additionally, the State of Tennessee has hired 21 and
31 of the Companys billable consultants to become State of Tennessee employees
during the quarter and six months ended October 31, 2003, respectively.

Generally, the Companys contracts with its top ten clients, in accordance with
industry practice, are cancelable on short notice and without penalty (except
with respect to the Companys larger outsourcing contracts), provide for
monthly payment of fees, and establish other basic terms such as the hourly
billing rates for each type of Company professional who performs work pursuant
to the contract. Some contracts specifically define the services to be
performed pursuant to the contract, while other contracts, particularly
professional staffing contracts, merely establish the basic parameters of the
work (i.e., the system to be evaluated, designed or maintained) and require
that additional work orders be submitted for services to be performed. The
Company is the exclusive service provider under certain contracts, while other
contracts, particularly professional staffing contracts, specifically allow the
client to engage other vendors for the projects covered by the contract. The
Company had backlog at October 31, 2003 of approximately
$323 million from contracts extending over the next nine years, in
comparison to approximately $16 million at October 31, 2002. Because
the Companys clients can cancel or reduce the scope of their engagements on
short notice, the Company does not believe that backlog is a reliable
indication of future business. The Companies backlog significantly
increased due to the acquisitions of RSI and NSR. The backlog set forth above excludes any
contracts and open work orders the Company has for its Professional Staffing
business (which represents approximately 40% of revenue).

Liquidity and Capital Resources

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DEBT. At the outset of the second fiscal quarter of 2004, the Company had a
$27.5 million credit facility (the Credit Facility) that consisted of a $17.5
million revolving loan, a $10.0 million term loan and a $7.7 million term loan
with one financial institution. The Credit Facility was secured by
substantially all the Companys assets and contained various financial and
other covenants. Additionally, the Company had a $7.3 million term loan (Term
Loan D) with a second financial institution and a three-year, $4.0 million
term loan (Term Loan C) with a third financial institution.

On August 29, 2003, the Company obtained a new senior credit facility (the
Senior Credit Facility) syndicated through Bank of America, the proceeds of
which were used to refinance the Credit Facility and Term Loan D. The Senior
Credit Facility consists of a $17.5 million revolving loan which
express during November 2005 (the Senior
Revolving Loan), a $5.6 million term loan (Term Loan A) and a $6.9 million
term loan (Term Loan B). The Senior Credit Facility is secured by
substantially all the Companys assets and contained various financial and
other covenants. The Company was in compliance with these loan covenants at
October 31, 2003.

The interest rate on borrowings under the Revolving Loan is LIBOR plus a margin
of 2.5%. At October 31, 2003, the effective annual interest rate under the
Revolving Loan was 3.62%. The amount available for borrowing under the
Revolving Loan is limited to 70% of eligible assets as defined in the loan
agreement. At October 31, 2003, approximately $4.1 million was available for
borrowing under the Revolving Loan.

The interest rate on borrowings under Term Loan A is LIBOR plus a margin of
2.5%. The Company entered into an interest-rate swap to reduce the impact of
changes in interest rates on Term Loan A. Under the terms of the interest-rate
swap the Company receives interest payments based on LIBOR plus a margin of
2.5% on a notional amount equal to the balance of Term Loan A and pays interest
at an effective annual fixed rate of 4.31%. Term
Loan A requires principal payments of $700,000 plus accrued interest per quarter.

The interest rate on borrowings under Term Loan B is LIBOR plus a margin of
2.5%. The Company entered into an interest-rate swap to reduce the impact of
changes in interest rates on Term Loan B. Under the terms of the interest-rate
swap the Company receives interest payments based on LIBOR plus a margin of
2.5% on a notional amount equal to the balance of Term Loan B and pays interest
at an effective annual fixed rate of 4.76%. Term
Loan B requires principal payments of $181,579 plus accrued interest monthly.

On July 3, 2003, outstanding warrants to purchase 220,000 shares of common
stock at an exercise price of $1.00 were exercised in a non-cash transaction.
The Company issued 87,230 shares of its common stock in exchange for the
warrants to purchase 220,000 shares of common stock. On August 29, 2003, in
connection with the Companys new Senior Credit Facility the Company amended
warrants to purchase 250,000 shares of common stock previously granted to one
of the participating lenders in the Senior Credit Facility by extending the
expiration date of these warrants from January 1, 2004 to January 2007. At
October 31, 2003, the Company has outstanding warrants to purchase the
aforementioned 250,000 shares of common stock and 160,000 shares at an exercise
price of $0.68, which expire on July 23, 2007.

Long-term debt consisted of the following at October 31, 2003 (in thousands):

|                                         |  |   |        |  
|---------------------------------------- |  | - | ------ | -
|Revolving Loan                           |  | $ | 13,156 |  
|Term Loan A                              |  |   | 5,600  |  
|Term Loan B                              |  |   | 6,527  |  
|Term Loan C                              |  |   | 647    |  
|Notes payable to former NSR shareholders |  |   | 5,100  |  
|Notes payable to former RSI shareholders |  |   | 1,000  |  
|                                         |  |   |        |  
|                                         |  |   | 32,030 |  
|Less: current portion                    |  |   | (7,959 | )
|                                         |  |   |        |  
|                                         |  | $ | 24,071 |  
|                                         |  |   |        |  

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CASH FLOW. Operating cash flow was
$3.1 million in the first six months of fiscal 2004, a decrease from
$6.5 million in the first six months of 2003. The primary reason for
the decrease in cash flow from operating activities is an increase in
accounts receivable. Cash used in investing activities in the first
six months of fiscal 2004 was $13.3 million, an increase from $0.2
million in fiscal 2003. The acquisition of NSR accounted for all the
change in cash used in investing activities. Financing activities
during the first six months of fiscal 2004 provided $10.2 million in
cash flow compared to financing activities used $5.9 million in cash
in the first six months of fiscal 2003. The acquisition of NSR
accounted for $13.0 million of the change.

CAPITAL EXPENDITURES. The Companys capital expenditures primarily relate to
computer equipment purchases for use by the Companys professionals and on
outsourcing projects. Capital expenditures were $0.2 million in the first six
months of fiscal 2004 and 2003. The Company does not expect to incur
substantial capital expenditures in fiscal 2004 except to the extent required
for new or revised outsourcing engagements.

WORKING CAPITAL. At October 31, 2003, the Company had working capital of $9.0
million (including $1.0 million in cash and cash equivalents), a 98.3% increase
from $4.5 million at April 30, 2003. The increase in working capital was
primarily due to working capital obtained from the addition of RSI and NSR.

STOCK REPURCHASE PROGRAM. The Companys board of directors approved a stock
repurchase program that authorizes the Company to repurchase up to $2.0 million
of common stock. The stock repurchase program authorizes the Company to
repurchase shares of its common stock from time to time in the open market and
through privately negotiated transactions. The Company will base its decisions
to repurchase shares on the prevailing market conditions, the availability of
cash to fund the repurchases, and other relevant factors. All repurchases will
be conducted in accordance with applicable laws, rules and regulations and the
limitations imposed under the Companys credit facility. Repurchased shares of
common stock will be added to the Companys treasury shares and will be
available for future corporate uses. The cost of the shares purchased is
recorded as treasury stock, which reduces the amount of total shareholders
equity. The Company may discontinue the stock repurchase program at any time.
The Company did not purchase any shares of its common stock during the
six-month period ended October 31, 2003. As of October 31, 2003, the Company
has 699,800 shares of its common stock held as treasury shares.

Under the Companys new Senior Credit Facility, the Company can repurchase
shares with a total cost up to 50% of the prior quarters excess cash flow as
defined in the loan agreement, provided that the Companys collateral is
greater than 175% of the outstanding borrowings after the repurchase.

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

As discussed under Stock Repurchase Program, the Company will potentially
repurchase shares of its common stock from time to time in the open market and
through privately negotiated transactions based on the prevailing market
conditions, the availability of cash to fund the repurchases, and other
relevant factors. At the beginning of each quarter, based upon the prior
quarters financial performance, the Company will assess its ability to
repurchase shares. Based upon current information and in accordance with its
loan covenants, the Company cannot repurchase any common stock during the third
quarter ended January 31, 2004.

CRITICAL ACCOUNTING POLICIES

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

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

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

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

The majority of the Companys revenue, approximately 79%, is billed on a time
and materials basis. Some time and materials contracts contain a cap on the
number of hours to be worked, in which case the hours are monitored to help
prevent exceeding the cap.

Approximately 9% of the Companys revenue is performed on a fixed fee per
project basis. In instances where the Company accepts an engagement on a fixed
fee per project basis, the Company records revenue on a percentage of
completion basis based upon performance milestones. The Companys agreement
with the client calls for the billing of fees at specified increments not
directly related to the timing of costs incurred. The Company records deferred
revenue for payments received from certain customers on service contracts prior
to the performance of services required under the service contract. Estimated
losses are recorded when identified.

Approximately 12% of the Companys revenue is performed on a cost-plus basis.
Revenue on cost-plus-fee contracts is recognized to the extent of costs
incurred plus a proportionate amount of the fee earned. Revenue on
time-and-material contracts is recognized to the extent of billable rates times
hours delivered plus expenses incurred.

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

The Companys U.S. Government contracts (approximately 40% of total revenue in
the first six months of fiscal 2004) are subject to subsequent government audit
of direct and indirect costs. The majority of such audits have been completed
through December 2000. Management does not anticipate any material adjustment
to the consolidated financial statements in subsequent periods for audits not
yet completed.

INCOME TAXES. The Company accounts for income taxes using the liability method.
Under the liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date. Deferred tax assets
are reduced by a valuation allowance if, based on the weight of available
evidence, management determines that it is more likely than not that some
portion or all of the deferred tax assets will not be realized based primarily
on managements calculations of estimated probable future taxable income over
the next several years. The Company does not have a deferred tax asset
valuation allowance as of October 31, 2003. Management considers income taxes
to be one of the Companys significant accounting policies because of the
estimates and judgment required in predicting probable future taxable income.

NEW ACCOUNTING PRONOUNCEMENTS. In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting standards (SFAS) No.
143, Accounting for Asset Retirement Obligations effective for fiscal years
beginning after June 15, 2002. SFAS 143 requires that a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The adoption of SFAS 143 in the
first quarter of fiscal 2004 did not have a material effect on its the
Companys financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS 4, Reporting Gains and Losses

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from Extinguishment of Debt, which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. As a result, the
criteria in Accounting Principles Board Opinion No. 30 will now be used to
classify those gains and losses. SFAS 145 amends SFAS No. 13, Accounting for
Leases, to require that certain lease modifications that have economic effects
similar to sales-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. The provisions of SFAS 145 became effective during
the Companys first quarter of 2004. Accordingly, the loss on extinguishment
of debt recorded by the Company in the second quarter of fiscal 2004 was not
classified as extraordinary.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. The adoption of this statement has not had a material effect on the Companys financial position or results of operations.

In May 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, that improves
the accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS 150 requires that three instruments
be classified as liabilities in the statement of financial position. The
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities. The Statement is to be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance of the date of the Statement
and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. On November 7, 2003, the FASB deferred the
classification and measurement provisions of FASB No. 150 as they apply to
certain mandatory redeemable non-controlling interests. This deferral is
expected to remain in effect while these provisions are further evaluated by
the FASB. The adoption of this statement is not expected to have a material
effect on the Companys financial position or results of operations.

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Item 3. Quantitative and Qualitative Disclosures about Market Risks

The Companys primary market risks include fluctuations in interest rates
and variability in interest rate spread relationships (i.e., prime or LIBOR
spreads). $13.8 million of the Companys outstanding debt at October 31, 2003
relates to credit facilities with commercial lending institutions with variable
interest rates. The rate is incremented for margins in the form of
fluctuations in interest rates. The effect of a hypothetical one percentage
point increase across all maturities of variable rate debt would result in a
decrease of $138,000 in pre-tax net income assuming no further changes in the
amount of borrowings subject to variable rate interest from the amounts
outstanding at October 31, 2003.

The
Company enters into derivative instruments to hedge variable interest
payments on two of its debt instruments utilizing interest-rate swaps
to convert the variable payments into fixed payments. The Company
maintains an overall interest rate risk management strategy that
incorporates the use of these swaps to minimize significant unplanned
fluctuations in earnings that are caused by interest rate volatility.
The swap agreements contain notional amounts and expiration terms
that are substantially identical to the amounts and terms of the
related debt agreements.




Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures. Based upon that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer concluded that
the Companys disclosure controls and procedures are effective in enabling the
Company to record, process, summarize and report information required to be
disclosed in the Companys periodic filings with the Securities and Exchange
Commission within the required time period. There have been no significant
changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.

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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

On October 13, 2003, the Company filed suit in state court in Frankfort,
Kentucky against the Commonwealth of Kentucky and three vendors, Cook Systems
International, Inc., Ajilon LLC d/b/a Ajilon Consulting, and Adecco USA d/b/a
Adecco Technical, seeking review of service agreements awarded to these vendors
by the Commonwealth of Kentucky for the states information technology systems
designs and development services. Subsequently, the complaint was amended to
include three additional vendors, Pomeroy IT Solutions, Inc., Keane, Inc., and
EER Systems, Inc., which were also awarded service agreements under the bid
solicitation for information technology systems designs and development
services.

On December 9, 2003, a purported class
action lawsuit was filed against the Company in the United States
District Court for the Western District of Tennessee. The complaint
alleges that the Company violated certain provisions of the
Federal Labor Standards Act (FLSA) by failing to pay certain salaried
computer professionals on a salary basis. The plaintiffs allege the
Company failed to pay these employees the wages to which they were
entitled under the FLSA and seeks monetary damages, injunctive relief
and cost of litigation, including attorney fees. The Company intends
to vigorously defend itself against the allegations.

The Company from time to time is subject to various claims and lawsuits
arising out of its operations in the ordinary course of business. Management
believes that the disposition of such claims and lawsuits will not have a
material adverse effect on the Companys financial condition or results of
operations.




Item 4. Submission of Matters to a Vote of Security Holders

On September 23, 2003, the Company held its 2003 Annual Meeting of
Shareholders at which the shareholders of the Company considered and voted on
the following two matters: The shareholders elected the following three people
to serve as Class II directors of the Company for a term expiring at the 2006
annual meeting of shareholders. The results of the shareholder vote were as
follows:

|                |  |       |            |                    |  |  |           | 
|--------------- |  | ----- | ---------- | ------------------ |  |  | --------- | 
|                |  | Votes
|                |  |      
|                |  | For   |            | Withhold Authority
|                |  |       |            |                   
|Jack R. Blair   |  |       | 15,527,707 |                    |  |  | 2,504,256 | 
|Walter M. Grant |  |       | 17,094,619 |                    |  |  | 937,344   | 
|Robert J. Hunt  |  |       | 17,520,264 |                    |  |  | 511,699   | 

Other directors whose terms of office continue beyond the 2003 Annual
Meeting of Shareholders are T. Scott Cobb, James E. Harwood, Robert G. McEniry
and Jim Rout.

The shareholders ratified the appointment of BDO Seidman, LLP as the
Companys independent accountants for the fiscal year ending April 30, 2004.
The results of the shareholder vote were as follows:

|           |  |         |        |         |  |  |        | 
|---------- |  | ------- | ------ | ------- |  |  | ------ | 
|Votes     
|          
|For        |  | Against |        | Abstain
|           |  |         |        |        
|17,989,894 |  |         | 31,754 |         |  |  | 10,315 | 




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

The exhibits listed in the Exhibit Index following the signature page
hereof are filed as part of this report or are incorporated herein by
reference.

(b)  Reports on Form 8-K

The Company filed the following Current Reports on Form 8-K during the
three-month period ending October 31, 2003.

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|i.   |  | Current Report on Form 8-K filed with the SEC on August 20, 2003, which
attached and incorporated by reference the Companys press release
regarding financial results for the first quarter ended July 31, 2003.                                                                                                                                      
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|ii.  |  | Current Report on Form 8-K filed with the SEC on September 8, 2003,
announcing the completion of the Companys acquisition of National
Systems & Research Co. and the completion of a syndication for a new
senior credit facility.                                                                                                                    
|    
|iii. |  | Current Report on Form 8-K filed with the SEC on September 29, 2003,
updating financial guidance for fiscal 2004 second quarter ending
October 31, 2003 and fiscal year ending April 30, 2004 and reporting
on the status of its Master Service Agreement with the Commonwealth
of Kentucky.                                                           
|    
|iv.  |  | Current Report on Form 8-K filed with the SEC on October 14, 2003,
reporting that the Company filed suit in state court in the
Commonwealth of Kentucky for review of contracts awarded by the state
to six other vendors.                                                                                                                             
|    
|v.   |  | Current Report on Form 8-K filed with the SEC on October 30, 2003,
announcing the execution of an Agreement and Plan of Merger by and among
CIBER, Inc., Daphne Acquisition Corporation, and SCB Computer Technology,
Inc. and the execution of a Voting and Option Agreement between CIBER,
Inc., T. Scott Cobb, T. Scott Cobb, Jr., and Jeffrey Cobb.

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SIGNATURES

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

Date: December 12, 2003

| |  |                              |                       |                                                                                    | 
| |  | ---------------------------- | --------------------- | ---------------------------------------------------------------------------------- | 
| |  | SCB COMPUTER TECHNOLOGY, INC |                      
| |  |                              |                       |                                                                                    | 
| |  | By:                          | /s/ MICHAEL J. BOLING |                                                                                   
| |  |                              |                       |                                                                                   
| |  |                              |                       | Michael J. Boling
Executive Vice President,
Chief Financial Officer, and Treasurer | 

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  | 
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  | 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  | 
|2.1     |  | Agreement and Plan of Merger by and among CIBER, Inc., Daphne Acquisition
Corporation and SCB Computer Technology, Inc. dated as of October 24, 2003
(incorporated herein by reference to Exhibit 2.1 to the Companys current report
on Form 8-K filed on October 30, 2003). Schedules and exhibits have been omitted
from this filing. The Company will furnish, as supplementary information, copies
of the omitted materials to the SEC upon request.                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.1*   |  | Credit Agreement dated as of August 29, 2003 among the Company, Remtech Services,
Inc., National Systems & Research Co., and Bank of America, N.A., acting as lead
bank and administrative agent, with First Tennessee National Bank, N.A. and
Trustmark Bank participating in the credit facility (incorporated herein by
reference to Exhibit 10.1 to the Companys current report on Form 8-K filed on
November 21, 2003).Schedules and exhibits have been omitted from this filing.
The Company will furnish, as supplementary information, copies of the omitted
materials to the Commission upon request.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|11      |  | Computation of earnings per share (included in Note 2 of the Notes to Condensed
Consolidated Financial Statements (unaudited) in Item 1 of Part I of this report).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|31.1*   |  | Certification by the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|31.2*   |  | Certification by the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|32.1*   |  | Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|32.2*   |  | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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|* |  | All or part of this exhibit is filed herewith.
|- |  | ----------------------------------------------

EI-1