##### 



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---



Form 10-Q

þ
        
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2003ORo
        
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR 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

At February 28, 2003, there were 24,461,424 shares of common stock
outstanding.



---

---





---



##### 



SCB COMPUTER TECHNOLOGY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PageCautionary Note About Forward-Looking Statements
        
        
        1Part I  Financial InformationItem 1.
        
        Financial Statements
        
        
        2Item 2.
        
        Managements Discussion and Analysis of Financial Condition and
Results of Operations
        
        
        8Item 3.
        
        Quantitative and Qualitative Disclosures About Market Risks
        
        
        15Item 4.
        
        Controls and Procedures
        
        
        15Part II  Other InformationItem 1.
        
        Legal Proceedings
        
        
        16Item 6.
        
        Exhibits and Reports on Form 8-K
        
        
        16Signatures
        
        
        17CertificationsCertification pursuant to and in connection with the Quarterly Reports on Form 10Q to be
filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended
        
        
        18Certification pursuant to and in connection with the Quarterly Reports on
Form 10Q to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended
        
        
        19Exhibit Index
        
        EI-1






---



##### 






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 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; 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 the Remtech Services, Inc. business just acquired; the Companys
increased leveraged position as a result of the Remtech Services, Inc.
acquisition; the potential effects of competition; the potential outcome of
litigation and investigations involving the Company; the Companys decision to
focus on its core competencies of IT outsourcing, consulting and professional
staffing; and potential deterioration in the condition of the U.S. economy and
the IT services industry.

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.





---



##### 



PART I  FINANCIAL INFORMATION

Item 1.   Financial Statements

SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

January 31, 2003
        
        April 30, 2002(unaudited)ASSETSCurrent assets:Cash and cash equivalents
        
        $
        45
        
        
        $
        354Accounts receivable, net of allowance of $93 and $165, respectively
        
        
        10,719
        
        
        
        14,412Refundable income taxes
        
        
        2,311
        
        
        
        3,088Deferred income taxes
        
        
        1,062
        
        
        
        1,106Other current assets
        
        
        1,042
        
        
        
        1,874Total current assets
        
        
        15,179
        
        
        
        20,834Fixed assets:Furniture, fixtures and equipment
        
        
        29,652
        
        
        
        29,513Accumulated depreciation
        
        
        (24,088
        )
        
        
        (20,384
        )Net
        
        
        5,564
        
        
        
        9,129Deferred income taxes  long-term
        
        
        9,392
        
        
        
        10,253Other long-term assets
        
        
        1,025
        
        
        
        1,161Total assets
        
        $
        31,160
        
        
        $
        41,377LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
        
        $
        1,348
        
        
        $
        1,578Accrued expenses
        
        
        4,314
        
        
        
        5,990Current portion of long-term debt
        
        
        3,211
        
        
        
        6,585Deferred revenue
        
        
        1,325
        
        
        
        1,066Total current liabilities
        
        
        10,198
        
        
        
        15,219Long-term debt
        
        
        1,820
        
        
        
        7,993Other long-term liabilities
        
        
        
        
        
        
        50Shareholders equity
        
        
        19,142
        
        
        
        18,115Total liabilities and shareholders equity
        
        $
        31,160
        
        
        $
        41,377


See accompanying notes to condensed consolidated financial statements.

2



---



##### 



SCB COMPUTER TECHNOLOGY, INC.

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

Three Months
        
        Nine MonthsEnded
        
        EndedJanuary 31,
        
        January 31,2003
        
        2002
        
        2003
        
        2002Revenue
        
        $
        19,137
        
        
        $
        24,647
        
        
        $
        62,481
        
        
        $
        80,965Cost of services
        
        
        14,538
        
        
        
        18,515
        
        
        
        46,999
        
        
        
        60,032Gross profit
        
        
        4,599
        
        
        
        6,132
        
        
        
        15,482
        
        
        
        20,933Selling, general and administrative expenses
        
        
        3,759
        
        
        
        5,227
        
        
        
        12,661
        
        
        
        17,397Income from operations
        
        
        840
        
        
        
        905
        
        
        
        2,821
        
        
        
        3,536Net interest expense
        
        
        206
        
        
        
        400
        
        
        
        755
        
        
        
        1,489Other income
        
        
        80
        
        
        
        68
        
        
        
        225
        
        
        
        401Income before income taxes
        
        
        714
        
        
        
        573
        
        
        
        2,291
        
        
        
        2,448Income tax expense
        
        
        282
        
        
        
        226
        
        
        
        905
        
        
        
        967Net income
        
        $
        432
        
        
        $
        347
        
        
        $
        1,386
        
        
        $
        1,481Net income per share  basic
        
        $
        0.02
        
        
        $
        0.01
        
        
        $
        0.06
        
        
        $
        0.06Net income per share  diluted
        
        $
        0.02
        
        
        $
        0.01
        
        
        $
        0.06
        
        
        $
        0.06Weighted average number of common
shares  basic
        
        
        24,474
        
        
        
        24,985
        
        
        
        24,731
        
        
        
        24,985Weighted average number of common
shares  diluted
        
        
        24,724
        
        
        
        25,187
        
        
        
        25,011
        
        
        
        25,149


See accompanying notes to condensed consolidated financial statements.

3



---



##### 



SCB COMPUTER TECHNOLOGY, INC.

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

Nine Months Ended January 31,2003
        
        2002Operating ActivitiesNet income
        
        $
        1,386
        
        
        $
        1,481Adjustments to reconcile net income to net cash provided by operating activities:Provision (recovery) for bad debts
        
        
        (72
        )
        
        
        (12
        )Depreciation and amortization
        
        
        3,853
        
        
        
        6,829Deferred income taxes
        
        
        905
        
        
        
        967Gain on sale of assets
        
        
        
        
        
        
        (396
        )Changes in operating assets and liabilities:Accounts receivable
        
        
        3,765
        
        
        
        2,483Refundable income taxes
        
        
        777
        
        
        
        (276
        )Prepaid expenses and other assets
        
        
        968
        
        
        
        (326
        )Accounts payable
        
        
        (231
        )
        
        
        896Accrued expenses and other liabilities
        
        
        (1,466
        )
        
        
        (4,570
        )Net cash provided by operating activities
        
        
        9,885
        
        
        
        7,076Investing ActivitiesPurchases of fixed assets
        
        
        (288
        )
        
        
        (185
        )Payments received from leasing activities
        
        
        
        
        
        
        1,909Proceeds from sale of businesses, net of liabilities paid
        
        
        
        
        
        
        9,420Net cash provided by (used in) investing activities
        
        
        (288
        )
        
        
        11,144Financing ActivitiesBorrowings on long-term debt
        
        
        
        
        
        
        10,000Payments on long-term debt
        
        
        (5,343
        )
        
        
        (29,816
        )Payments on non-recourse debt
        
        
        
        
        
        
        (4,322
        )Net borrowings (repayments) under revolving loan
        
        
        (4,204
        )
        
        
        5,650Purchases of common stock for treasury
        
        
        (373
        )
        
        
        Proceeds from exercise of stock options
        
        
        14
        
        
        
        Net cash used in financing activities
        
        
        (9,906
        )
        
        
        (18,488
        )Net increase (decrease) in cash and cash equivalents
        
        
        (309
        )
        
        
        (268
        )Cash and cash equivalents at beginning of period
        
        
        354
        
        
        
        575Cash and cash equivalents at end of period
        
        $
        45
        
        
        $
        307Supplemental Disclosures of Cash FlowInterest paid
        
        $
        775
        
        
        $
        1,945Income taxes paid
        
        $
        241
        
        
        $
        276


See accompanying notes to condensed consolidated financial statements.

4



---



##### 



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 January 31, 2003, and the results of operations
and cash flows for the three and nine-month periods ended January 31, 2003 and
January 31, 2002. Operating results for the period ended January 31, 2003, are
not necessarily indicative of the results that may be expected for the fiscal
year ending April 30, 2003. 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, 2002, filed with the
Securities and Exchange Commission.

As discussed further in Note 9., the Company acquired all the outstanding
common stock of Remtech Services, Inc. on February 6, 2003.



|2. |  | RECLASSIFICATIONS
|-- |  | -----------------

Certain account reclassifications have been made to the financial statements
for fiscal 2002 to conform to the presentation for fiscal 2003.



|3. |  | 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
        
        Nine MonthsEnded
        
        EndedJanuary 31,
        
        January 31,2003
        
        2002
        
        2003
        
        2002Net income
        
        $
        432
        
        
        $
        347
        
        
        $
        1,386
        
        
        $
        1,481Denominator for basic earnings per share  weighted average
shares
        
        
        24,474
        
        
        
        24,985
        
        
        
        24,731
        
        
        
        24,985Effect of dilutive securities-stock options
        
        
        250
        
        
        
        202
        
        
        
        280
        
        
        
        164Denominator for diluted earnings per share  adjusted weighted
average shares and assumed conversions
        
        
        24,724
        
        
        
        25,187
        
        
        
        25,011
        
        
        
        25,149Net income per share  basic
        
        $
        0.02
        
        
        $
        0.01
        
        
        $
        0.06
        
        
        $
        0.06Net income per share  diluted
        
        $
        0.02
        
        
        $
        0.01
        
        
        $
        0.06
        
        
        $
        0.06




|4. |  | LONG-TERM DEBT
|-- |  | --------------

The Company has a five-year, $27.5 million credit facility with a
financial institution that consists of a $17.5 million revolving loan (the
revolving loan) and a $10.0 million term loan (the primary term loan). The
credit facility is secured by substantially all the Companys assets and
contains various financial and other covenants to which the Company is subject.
The Company was in compliance with these loan covenants at January 31, 2003.
The Company also has a three-year, $4.0 million term loan with another
financial institution (the secondary term loan).

5



---



##### 



The interest rate on borrowings under the revolving loan is prime plus a
margin of 1.0%. At January 31, 2003, the effective annual interest rate under
the revolving loan was 5.25%. At January 31, 2003, $1.4 million was
outstanding
on the revolving loan. The amount available for borrowing under the revolving
loan is limited to 85% of billed accounts receivable plus 70% of unbilled
accounts receivable. At January 31, 2003, $5.6 million was available for
borrowing under the revolving loan.

The interest rate on borrowings under the primary term loan is prime plus
a margin of 2.25%. At January 31, 2003, the effective annual interest rate
under the primary term loan was 6.5%. The Company is amortizing the primary
term loan at the rate of $350,000 of principal plus accrued interest per month.
At January 31, 2003, $1.8 million was outstanding under the primary term loan.

The interest rate on borrowings under the secondary term loan is prime
plus a margin of 2.0%. At January 31, 2003, the effective annual interest rate
under the secondary term loan was 6.25%. The Company is amortizing the
secondary term loan at the rate of $70,000 of principal plus accrued interest
per month. At January 31, 2003, $1.8 million was outstanding under the
secondary term loan.

At January 31, 2003, the Company had $36,021 outstanding under a
promissory note that bears interest at 11.0% and is due in fiscal 2004. The
loan is secured by computer software.

As discussed in Note 9., the Companys debt increased by approximately
$12.5 million on February 6, 2003 due to the Companys purchase of all the
outstanding stock of Remtech Services, Inc.



|5. |  | SEGMENT INFORMATION
|-- |  | -------------------

Beginning with the second quarter of fiscal 2001, the Company operated
within two business segments as a result of certain strategic business
decisions made by management. The two business segments are (1) core
operations, which consist of IT outsourcing, consulting, and professional
staffing services, and (2) non-core operations, which consist of specialized
policy consulting, computer hardware and specialty software sales, enterprise
resource planning, and computer equipment leasing. Accordingly, the Company is
presenting the following summarized financial information concerning the
Companys operating segments at January 31, 2003 and 2002, and for each of the
fiscal quarters and nine month periods then ended (in thousands):

Three Months Ended January 31,
        
        Nine Months Ended January 31,2003
        
        2002
        
        2003
        
        2002Revenue:Core operations
        
        $
        19,137
        
        
        $
        23,368
        
        
        $
        62,481
        
        
        $
        75,654Non-core operations (a)
        
        
        
        
        
        
        1,279
        
        
        
        
        
        
        
        5,311Corporate
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        19,137
        
        
        $
        24,647
        
        
        $
        62,481
        
        
        $
        80,965Income from operations:Core operations
        
        $
        2,599
        
        
        $
        3,515
        
        
        $
        8,801
        
        
        $
        11,727Non-core operations (b)
        
        
        
        
        
        
        154
        
        
        
        
        
        
        
        165Corporate
        
        
        (1,759
        )
        
        
        (2,764
        )
        
        
        (5,980
        )
        
        
        (8,356
        )$
        840
        
        
        $
        905
        
        
        $
        2,821
        
        
        $
        3,536




|(a) |  | Since all non-core operations have been divested as of April 1, 2002, the
Company did not have any non-core operations during the first nine months
of fiscal 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | The non-core operations consist of the Enterprise Resource Planning,
Delta Software and Partners Capital Group business units that were
disposed of on June 20, 2001, February 28, 2002, and April 1, 2002,
respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



---



##### 



The following sets forth the assets and liabilities of the non-core
operations (in thousands):

As of January 31,2003
        
        2002Investment in leasing activities
        
        $
        
        
        
        $
        5,281Other assets
        
        
        
        
        
        
        41Total assets
        
        $
        
        
        
        $
        5,322Non-recourse debt
        
        $
        
        
        
        $
        5,403Other liabilities
        
        
        
        
        
        
        93Retained deficit
        
        
        
        
        
        
        (174
        )Total liabilities and equity
        
        $
        
        
        
        $
        5,322


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



|6. |  | STOCK REPURCHASE PROGRAM
|-- |  | ------------------------

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

During the three and nine month periods ended January 31, 2003, the
Company purchased 44,900 and 553,900 shares of its common stock for a combined
cost of $33,344 and $373,464, respectively. The cost of the shares purchased
was recorded as treasury stock, which reduces the amount of total shareholders
equity.



|7. |  | RELATED-PARTY TRANSACTIONS
|-- |  | --------------------------

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

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

7



---



##### 



In the third quarter and first nine months of fiscal 2003, the Company
paid IT Resources Solutions.net, Inc. (ITRS), a minority owned business,
$18,000 and $55,500, respectively, for marketing and management services in the
northeastern United States, $6,000 and $20,100, 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 $3,068 and $25,156, respectively, for contract
labor used on the Companys projects. Kenneth J. Cobb, the son of T. Scott
Cobb, is a shareholder of ITRS.



|8. |  | LEGAL PROCEEDINGS
|-- |  | -----------------

On August 30, 2002, the Company settled an administrative proceeding
brought by the Securities and Exchange Commission (the SEC) following an
investigation that arose after the Company restated its financial results for
periods in its 1998-2000 fiscal years. The SEC investigation was focused on the
accounting policies of two Arizona-based companies that the Company acquired in
1997. Following the acquisition, these subsidiaries were operated as a
stand-alone division within the Company and had an accounting operation that
was separate from that of the rest of the Company. The SEC concluded from its
investigation that these subsidiaries improperly accounted for certain
transactions, and that their flawed financial results were incorporated into
the Companys consolidated financial statements, thereby rendering the
Companys reported financial results inaccurate. As a result, the SEC found
that the Company committed civil violations of the reporting, books and
records, and internal controls requirements of the federal securities laws and
ordered the Company to cease and desist from any future violations. The Company
neither admitted nor denied the SECs findings. The SEC did not make a finding
of fraud on the Companys part, and no monetary penalty or other sanction was
imposed against the Company beyond the cease-and-desist order. In reaching the
settlement, the SEC took into account the Companys prompt remedial actions and
its cooperation in the investigation. The matter is now completely resolved as
to the Company.



|9. |  | SUBSEQUENT EVENTS
|-- |  | -----------------

On February 4, 2003, the Company, Remtech Services, Inc. (Remtech), and
the shareholders of Remtech, (the Shareholders), entered into a Stock
Purchase Agreement (the Agreement) pursuant to which the Company agreed to
purchase and the Shareholders agreed to sell 100% of the outstanding common
stock of Remtech. On February 6, 2003 (the Closing Date), the sale was
completed. On the Closing Date, the Company acquired all of the outstanding
stock of Remtech from the Shareholders. Pursuant to the Agreement, the Company
paid cash in the amount of $10,737,500 and issued an unsecured, subordinated
promissory note in the amount of $1,800,000 (the Note) to the Shareholders in
consideration of the sale of all the outstanding shares of common stock of
Remtech (the Shares). The purchase price was determined by arms length
negotiation between the parties, taking into account the historical operating
results and existing customer relationships of Remtechs business. The Company
obtained financing for part of the cash consideration paid pursuant to the
Agreement by (a) a term loan of approximately $7,700,000 and (b) borrowing
approximately $3,000,000 under the Companys existing revolving loan. The
Company funded the balance of the cash consideration from working capital.
The borrowing base under the existing revolving loan was increased by
approximately $3.7 million by virtue of adding Remtechs accounts receivable to
the Companys borrowing base.

On February 10, 2003, the Company issued a press release announcing it has
entered into a non-binding letter of intent to acquire another government
information technology professional services company. The acquisition is
subject to completion of due diligence, negotiation of a definitive agreement,
and obtaining board approval.

8



---



##### 



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

The Company is a leading provider of information technology (IT)
management and technical services to state and local governments and commercial
enterprises. The Companys services consist of (1) consulting, which entails
the evaluation, design and re-engineering of computer systems, system
development and integration, management, quality assurance and technical
directions for IT projects, network planning and implementation, and functional
expertise and training; (2) outsourcing, which involves systems maintenance,
data center management, help desk and technical services; and (3) professional
staffing, which includes providing skilled IT staff on an as-needed basis.

The Companys performance in the first nine months of fiscal 2003 reflects
the dramatic change in its strategic direction that occurred in fiscal 2001.
The Companys growth from fiscal 1997 through fiscal 2000 was driven largely
through acquisitions, diversification, and attempts at cross-selling services.
In fiscal 2001, the Company began to focus its operational, capital, and
management resources on its core competencies of providing IT consulting,
outsourcing, and professional staffing services (the core operations). In the
third quarter and the first nine months of fiscal 2003, the Companys revenue
from core operations, on which the Companys management intends to focus its
future efforts, was $19.1 million and $62.5 million, respectively. Professional
staffing, outsourcing, and consulting accounted for 72%, 16%, and 12%,
respectively, and 74%, 11% and 15%, respectively, of the Companys revenue from
core operations in the third quarter and first nine months of fiscal 2003.

After the end of the third quarter of fiscal 2003, the Company acquired
all of the outstanding stock of Remtech and announced that it had entered into
a non-binding letter of intent to acquire another government information
technology professional services company. The acquisition of Remtech and the
proposed additional acquisition are discussed in the Liquidity section below.
These acquisitions will enable the Company to increase its outsourcing and
consulting business and to broaden its customer base to include agencies of the
federal government.

Beginning in fiscal 2001 and continuing through fiscal 2002, the Company
disposed of several under-performing business units. These non-core business
units were engaged in specialized policy consulting, computer hardware and
specialty software sales, enterprise resource planning, and computer equipment
leasing (the non-core operations). The Company sold its Technology Management
Resources, Proven Technology, and Global Services business units in fiscal 2001
and its Enterprise Resource Planning, Delta Software, and Partners Capital
Group business units in fiscal 2002. The Company completed the sale of Partners
Capital Group, its last non-core operation, on April 1, 2002, and thus had no
revenue from non-core operations in the first nine months of fiscal 2003.

The Companys fiscal year extends from May 1 through the following April
30. The Company generally recognizes revenue as services are performed.

Results of Operations

Comparison of Third Quarter of Fiscal 2003 to Third Quarter of Fiscal 2002

Revenue and Income from Operations.The Companys operations in the third
quarter of fiscal 2003 consisted only of core operations, as all non-core
operations had been disposed of by April 1, 2002. Overall revenue decreased 22%
to $19.1 million in the third quarter of fiscal 2003 from $24.6 million in the
third quarter of fiscal 2002. Overall income from operations decreased 7% to
$0.8 million in the third quarter of fiscal 2003 from $0.9 million in the third
quarter of fiscal 2002.

Revenue from core operations decreased 18% to $19.1 million in the third
quarter of fiscal 2003 from $23.4 million in the third quarter of fiscal 2002.
Professional staffing revenue decreased $2.4 million for the quarter due
primarily to a 21% decrease in average billable headcount caused by reductions
in spending on information technology projects by the Companys existing and
potential customers. Revenue from consulting and outsourcing

9



---



##### 



declined $1.0
million and $0.8 million for the quarter, respectively, due mainly to fewer
consulting projects. Income from core operations decreased 26% to $2.6 million
in the third quarter of fiscal 2003 from $3.5 million in the third quarter of
fiscal 2002.

Revenue from non-core operations decreased to zero in the third quarter of
fiscal 2003 from $1.3 million in the third quarter of fiscal 2002. The revenue
from non-core operations in the third quarter of fiscal 2002 consisted of $0.1
million from the Delta Software business unit, which was sold on February 28,
2002 and $1.2 million from the Partners Capital Group business unit, which was
sold on April 1, 2002. Since April 1, 2002, the Company has had no non-core
operations and thus no revenue or income attributable thereto.

Corporate Expenses.Corporate expenses decreased 36% to $1.8 million in
the third quarter of fiscal 2003 from $2.8 million in the third quarter of
fiscal 2002. The decrease in corporate expenses was due in part to the
recognition of a $250,000 collection of an insurance claim for legal fees
previously expensed by the Company, managements cost-reduction efforts, which
primarily focused on salaries and travel-related expenses, and reduced
professional fees for the SEC investigation. The decrease in corporate
expenses was 27% excluding the $250,000 insurance claim.

Interest Expense.Net interest expense decreased 49% to $0.2 million in
the third quarter of fiscal 2003 from $0.4 million in the third quarter of
fiscal 2002 due primarily to the reduction in the Companys bank debt and a
decline in interest rates.

Tax Rate.The effective tax rate for the third quarters of fiscal 2003 and
2002 was 39.5%.

Comparison of First Nine Months of Fiscal 2003 to First Nine Months of
Fiscal 2002

Revenue and Income from Operations.The Companys operations in the first
nine months of fiscal 2003 consisted only of core operations, as all non-core
operations had been disposed of by April 1, 2002. Overall revenue decreased 23%
to $62.5 million in the first nine months of fiscal 2003 from $81.0 million in
the first nine months of fiscal 2002. Overall income from operations decreased
20% to $2.8 million in the first nine months of fiscal 2003 from $3.5 million
in the first nine months of fiscal 2002.

Revenue from core operations decreased 17% to $62.5 million in the first
nine months of fiscal 2003 from $75.7 million in the first nine months of
fiscal 2002. Professional staffing revenue decreased $8.0 million for the first
nine months due primarily to a 18% decrease in average billable headcount
caused by reductions in spending on information technology projects by the
Companys existing and potential customers and a three-day work stoppage on the
State of Tennessee project resulting from a temporary shutdown of non-essential
government services due to state budgetary constraints, which were partially
offset by a 1.4% increase in average billing rate. Revenue from consulting and
outsourcing declined $3.5 million and $1.4 million for the first nine months,
respectively, due primarily to fewer consulting projects. Income from core
operations decreased 25% to $8.8 million in the first nine months of fiscal
2003 from $11.7 million in the first nine months of fiscal 2002.

Revenue from non-core operations decreased to zero in the first nine
months of fiscal 2003 from $5.3 million in the first nine months of fiscal
2002. The revenue from non-core operations in the first nine months of fiscal
2002 consisted of $1.7 million from the Enterprise Resource Planning business
unit, which was sold on June 20, 2001; $0.1 million from the Delta Software
business unit, which was sold on February 28, 2002; and $3.5 million from the
Partners Capital Group business unit, which was sold on April 1, 2002. Since
April 1, 2002, the Company has had no non-core operations and thus no revenue
or income attributable thereto.

Corporate Expenses.Corporate expenses decreased 28% to $6.0 million in
the first nine months of fiscal 2003 from $8.4 million in the first nine months
of fiscal 2002. The decrease in corporate expenses was due in part to the
recognition of a $250,000 insurance claim for legal fees previously expensed by
the Company, a $361,000 recovery of a previously written off bad debt,
managements cost-reduction efforts, which primarily focused on salaries and
travel-related expenses, and reduced professional fees for the SEC
investigation. The decrease in corporate expenses was 21% excluding the
$250,000 recognition of an insurance claim receivable for legal fees expensed
by the Company and the $361,000 bad debt recovery.

10



---



##### 



Interest Expense.Net interest expense decreased 49% to $0.8 million in
the first nine months of fiscal 2003 from $1.5 million in the first nine months
of fiscal 2002 due primarily to the reduction in the Companys bank debt and a
decline in interest rates.

Tax Rate.The effective tax rate for first nine months of fiscal 2003 and
2002 was 39.5%.

Reliance Upon Government Contracting and Significant Customers

During the third quarter and the first nine months of fiscal year 2003,
the Company performed IT services for customers in two distinct markets: state
and local governments, and commercial enterprises. In the first nine months of
fiscal 2003 and 2002, approximately 63% and 62%, respectively, of the Companys
revenue was attributable to state and local governments, with the balance being
attributable to commercial enterprises. The Company is a leading provider of IT
services to state and local governments in the United States of America.

While the Company currently provides IT services for over 150 clients, it
earns a significant portion of its revenue from relatively few customers. The
Companys top five revenue-generating customers in the first nine months of
fiscal 2003 accounted for 55% of its revenue, an increase from 54% in the first
nine months of fiscal 2002. In the first nine months of fiscal 2003, the
following customers accounted for 10% or more of the Companys revenue: State
of Tennessee (18%), State of Kentucky (15%), and Honeywell International Inc.
(12%). One customer, Honeywell International Inc., accounted for 81% of the
Companys revenue from outsourcing operations, a decrease from 82% of
outsourcing revenue in the first nine months of fiscal 2002. The foregoing
concentrations expose the Company to a greater degree of risk of loss than
would be the case with greater diversification. Although the Company from time
to time has substantial accounts receivable from its top five clients, the
Company has not experienced any significant payment problems from these
clients. The Company believes that its length of tenure with and historical
renewal rates for its contracts with these top five customers help to reduce
the Companys risk of reliance upon significant customers. A material decrease
in the services provided to any of the largest clients, however, would have an
adverse impact on the Companys financial condition and results of operations.

Liquidity and Capital Resources

Debt.During the first nine months of fiscal 2003, the Company reduced its
debt 65% to $5.0 million at January 31, 2003 from $14.6 million at April 30,
2002. The debt reduction reflects the Companys ongoing repayment of its
funded debt.

The Company has a five-year, $27.5 million credit facility with a
financial institution that consists of a $17.5 million revolving loan (the
revolving loan) and a $10.0 million term loan (the primary term loan). The
credit facility is secured by substantially all the Companys assets and
contains various financial and other covenants. The Company was in compliance
with these loan covenants at January 31, 2003. The Company also has a
three-year, $4.0 million term loan with another financial institution (the
secondary term loan).

The interest rate on borrowings under the revolving loan is prime plus a
margin of 1.0%. At January 31, 2003, the effective annual interest rate under
the revolving loan was 5.25%. At January 31, 2003, $1.4 million was outstanding
on the revolving loan. The amount available for borrowing under the revolving
loan is limited to 85% of billed accounts receivable plus 70% of unbilled
accounts receivable. At January 31, 2003, $5.6 million was available for
borrowing under the revolving loan.

The interest rate on borrowings under the primary term loan is prime plus
a margin of 2.25%. At January 31, 2003, the effective annual interest rate
under the primary term loan was 6.5%. The Company is amortizing the primary
term loan at the rate of $350,000 of principal plus accrued interest per month.
At January 31, 2003, $1.8 million was outstanding under the primary term loan.

The interest rate on borrowings under the secondary term loan is prime
plus a margin of 2.0%. At January 31, 2003, the effective annual interest rate
under the secondary term loan was 6.25%. The Company is amortizing the
secondary term loan at the rate of $70,000 of principal plus accrued interest
per month. At January 31, 2003, $1.8 million was outstanding under the
secondary term loan.

11



---



##### 



At January 31, 2003, the Company had $36,021 outstanding under a
promissory note that bears interest at 11.0% and is due in fiscal 2004. The
loan is secured by computer software.

As discussed under Acquisitions, the Companys debt increased by
approximately $12.5 million on February 6, 2003 due to the Companys purchase
of all the outstanding stock of Remtech Services, Inc.

Capital Expenditures.The Companys capital expenditures in the first nine
months of fiscal 2003 primarily relate to computer equipment purchases for use
by the Companys professionals and on outsourcing projects. Capital
expenditures increased 56% to $288,000 in the first nine months of fiscal 2003
from $185,000 in the first nine months of fiscal 2002. The Company does not
expect to incur substantial capital expenditures in the remainder of fiscal
2003 except to the extent required for new or revised outsourcing engagements.
The Company is currently negotiating the extension of an outsourcing contract,
which could result in a significant capital expenditure of $7-11 million during
the remainder of fiscal 2003. The Company believes that this potential capital
expenditure will be financed through equipment leasing arrangements.

Dispositions of Non-Core Operations.The Company began disposing of its
non-core operations in fiscal 2001 and completed the process in fiscal 2002.
The sales of non-core business units that occurred in fiscal 2002 are described
below.

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

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

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

Acquisitions.On February 4, 2003, the Company, Remtech Services, Inc.
(Remtech), and the shareholders of Remtech, (the Shareholders), entered
into a Stock Purchase Agreement (the Agreement) pursuant to which the Company
agreed to purchase and the Shareholders agreed to sell 100% of the outstanding
common stock of Remtech. On February 6, 2003 (the Closing Date), the sale was
completed. On the Closing Date, the Company acquired all of the outstanding
stock of Remtech from the Shareholders. Pursuant to the Agreement, the Company
paid cash in the amount of $10,737,500 and issued an unsecured, subordinated
promissory note in the amount of $1,800,000 (the Note) to the Shareholders in
consideration of the sale of all the outstanding shares of common stock of
Remtech (the Shares). The purchase price was determined by arms length
negotiation between the parties, taking into account the historical operating
results and existing customer relationships of Remtechs business. The Company
obtained financing for part of the cash consideration paid pursuant to the
Agreement by (a) a term loan of approximately $7,700,000 and (b) borrowing
approximately $3,000,000 under the Companys existing revolving loan. The
Company funded the balance of the cash consideration from working capital.
The borrowing base under the existing revolving loan was increased by
approximately $3.7 million by virtue of adding Remtechs accounts receivable to
the Companys borrowing base.

On February 10, 2003, the Company issued a press release announcing it has
entered into a non-binding letter of intent to acquire another government
information technology professional services company. The acquisition is
subject to completion of due diligence, negotiation of a definitive agreement,
and obtaining board approval.

Working Capital.At January 31, 2003, the Company had working capital of
$5.0 million (including $45,000 in cash and cash equivalents), an 11% decrease
from $5.6 million at April 30, 2002. The decrease in working capital is
attributable primarily to the Companys use of available cash to reduce the
outstanding balance of the revolving loan.

12



---



##### 



The Company generated net cash from operating activities of $9.9 million
in the first nine months of fiscal 2003, a 40% increase from $7.1 million in
the first nine months of fiscal 2002. The increase in net cash provided by
operating activities was mainly attributable to an increase in payments
received for accounts receivable and income tax refunds, as well as a decrease
in cash due to a pay down of accrued expenses.

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

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

During the three and nine month periods ended January 31, 2003, the
Company purchased 44,900 and 553,900 shares of its common stock, respectively,
for a combined cost of $33,400 and $373,464, respectively. The cost of the
shares purchased was recorded as treasury stock, which reduces the amount of
total shareholders equity.

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

As discussed under Stock Repurchase Program, the Company will
potentially repurchase shares of its common stock from time to time in the open
market and through privately negotiated transactions based on the prevailing
market conditions, the availability of cash to fund the repurchases, and other
relevant factors. At the beginning of each quarter, based upon the prior
quarters financial performance, the Company will assess its ability to
repurchase shares. Based upon current information, the Company cannot
repurchase more than $214,000 in common stock during the fourth quarter ended
April 30, 2003.

As discussed under Capital Expenditures, the Company is currently
negotiating an extension to an outsourcing contract, which could result in a
significant capital expenditure of $6-8 million during the remainder of fiscal
2003. The Company believes that this potential capital expenditure will be
financed through equipment leasing arrangements.

As discussed under Acquisitions, since the end of the third quarter the
Company has acquired Remtech and has entered into a non-binding letter of
intent to acquire another government information technology professional
services company. The Company financed the acquisition of Remtech through
borrowings under the Companys existing credit facility. If the proposed
additional acquisition is consummated, the Company intends to finance the
acquisition through its existing credit facility.

Significant Accounting Policies

The following accounting policies could have the most significant impact
on the Companys operations from period to period.

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, or fixed fee per project basis.

13



---



##### 



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 the 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 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.

Currently, less than 10% 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. 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.

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

14



---



##### 



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). Substantially all of the Companys $5.0 million in outstanding debt
at January 31, 2003, relates to credit facilities with commercial lending
institutions. Interest on the outstanding balances is charged based on variable
rates related to the prime rate. The rates are 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 $50,000 in pre-tax net income assuming no further
changes in the amount of borrowings subject to variable rate interest from the
amounts outstanding at January 31, 2003. The Company does not trade in
derivative financial instruments.

Item 4.   Controls and Procedures

Within the 90 days prior to the date of the filing of 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, as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c). 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.

15



---



##### 



PART II  OTHER INFORMATION

Item 1.   Legal Proceedings

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

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

No report on Form 8-K was filed by the Company during the fiscal quarter ended
January 31, 2003.

16



---



##### 



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: March 12, 2003SCB COMPUTER TECHNOLOGY, INCBy:
        
        /s/ Michael J. BolingMichael J. BolingExecutive Vice President,Chief Financial Officer, and Treasurer


17



---



##### 



CERTIFICATIONS

Certification
pursuant to and in connection with the
Quarterly Reports on Form 10Q
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended

I, T. Scott Cobb, President and Chief Executive Officer, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of SCB Computer
Technology, Inc.;

2.    Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.    Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;

4.    The registrants other certifying officers and I are responsible
for reestablishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c)      presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.    The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a)      all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)       any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.    The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 12, 2003
        
        /s/ T. Scott CobbT. Scott Cobb
President and Chief Executive Officer


18



---



##### 



Certification
pursuant to and in connection with the
Quarterly Reports on Form 10Q
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended

I, Michael J. Boling, Executive Vice President, Chief Financial Officer, and
Treasurer certify that:

1.     I have reviewed this quarterly report on Form 10-Q of SCB Computer
Technology, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;

4.     The registrants other certifying officers and I are responsible
for reestablishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c)      presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a)      all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b)       any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 12, 2003
        
        /s/ Michael J. BolingMichael J. Boling
Executive Vice President,
Chief Financial Officer, and Treasurer


19



---



##### 



EXHIBIT INDEX

ExhibitNumber
        
        Description of Exhibit11
        
        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).99.1*
        
        Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.2*
        
        Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




---

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

E1-1