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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, 2002                                  
|  |  |                                                                                                                                                                          
|  |  | 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



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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 December 9,
2002, there were 24,506,324 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                                      
|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
|                                                 | 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
|EXHIBIT INDEX                                   
|Amended and Restated Charter                    
|Loan and Security Agreement                     
|Employment Agreement with T. Scott Cobb         
|Section 906 Certification of the CEO            
|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                                                                              |      |      | 9  | 
|                                                 | Item 3.    Quantitative and Qualitative Disclosures About Market Risks                                                                                                        |      |      | 14 | 
|                                                 | Item 4.    Controls and Procedures                                                                                                                                            |      |      | 14 | 
|Part II  Other Information                      |                                                                                                                                                                               |      |      |   
|                                                 | Item 1.   Legal Proceedings                                                                                                                                                   |      |      | 15 | 
|                                                 | Item 4.
  Submission of Matters to a Vote of Security Holders                                                                                                                 |      |      | 15 | 
|                                                 | Item 6.   Exhibits and Reports on Form 8-K                                                                                                                                    |      |      | 15 | 
|Signatures                                       |                                                                                                                                                                               |      | 16   |   
|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 |      |      | 17 | 
|                                                 | 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 |      |      | 18 | 
|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 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;
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.





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PART I  FINANCIAL INFORMATION




Item 1.    Financial Statements

SCB COMPUTER TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                     |                                                                     |                                            |                      |         |        |                  |        |                |        |        |  | 
|------------------------------------ | ------------------------------------------------------------------- | ------------------------------------------ | -------------------- | ------- | ------ | ---------------- | ------ | -------------- | ------ | ------ |  | 
|                                     |                                                                     |                                            |                      |         |        | October 31, 2002 |        | April 30, 2002
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     |                                            |                      |         |        | (unaudited)      |        |                |        |       
|ASSETS                              
|Current assets:                      |                                                                     |                                            |                      |         |        |                  |        |               
|                                     | Cash and cash equivalents                                           |                                            | $                    | 784     |        |                  | $      | 354            |       
|                                     | Accounts receivable, net of allowance of $87 and $165, respectively |                                            |                      | 11,773  |        |                  |        | 14,412         |       
|                                     | Refundable income taxes                                             |                                            |                      | 2,337   |        |                  |        | 3,088          |       
|                                     | Deferred income taxes                                               |                                            |                      | 823     |        |                  |        | 1,106          |       
|                                     | Other current assets                                                |                                            |                      | 1,291   |        |                  |        | 1,874          |       
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     |                                            | Total current assets |         |        | 17,008           |        |                |        | 20,834 | 
|Fixed assets:                        |                                                                     |                                            |                      |         |        |                  |        |               
|                                     | Furniture, fixtures and equipment                                   |                                            |                      | 29,643  |        |                  |        | 29,513         |       
|                                     | Accumulated depreciation                                            |                                            |                      | (22,920 | )      |                  |        | (20,384        | )     
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     |                                            | Net                  |         |        | 6,723            |        |                |        | 9,129  | 
|Deferred income taxes  long-term    |                                                                     |                                            | 9,913                |         |        |                  | 10,253 |               
|Other long-term assets               |                                                                     |                                            | 1,158                |         |        |                  | 1,161  |               
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     | Total assets                               |                      | $       | 34,802 |                  |        | $              | 41,377 |       
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current liabilities:                 |                                                                     |                                            |                      |         |        |                  |        |               
|                                     | Accounts payable                                                    |                                            | $                    | 1,114   |        |                  | $      | 1,578          |       
|                                     | Accrued expenses                                                    |                                            |                      | 4,666   |        |                  |        | 5,990          |       
|                                     | Current portion of long-term debt                                   |                                            |                      | 5,141   |        |                  |        | 6,585          |       
|                                     | Deferred revenue                                                    |                                            |                      | 1,250   |        |                  |        | 1,066          |       
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     | Total current liabilities                  |                      |         | 12,171 |                  |        |                | 15,219 |       
|                                     | Long-term debt                                                      |                                            |                      | 3,888   |        |                  |        | 7,993          |       
|                                     | Other long-term liabilities                                         |                                            |                      |        |        |                  |        | 50             |       
|                                     | Shareholders equity                                                |                                            |                      | 18,743  |        |                  |        | 18,115         |       
|                                     |                                                                     |                                            |                      |         |        |                  |        |               
|                                     |                                                                     | Total liabilities and shareholders equity |                      | $       | 34,802 |                  |        | $              | 41,377 |       
|                                     |                                                                     |                                            |                      |         |        |                  |        |               

See accompanying notes to condensed consolidated financial statements.

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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,
|                                                   |  |              |        |            
|                                                   |  | 2002         |        | 2001        |  | 2002 |        | 2001
|                                                   |  |              |        |             |  |      |        |     
|Revenue                                            |  | $            | 21,548 |             |  | $    | 27,693 |      |  | $ | 43,344 |  |  | $ | 56,319 | 
|Cost of services                                   |  |              | 16,102 |             |  |      | 20,529 |      |  |   | 32,461 |  |  |   | 41,518 | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Gross profit                                       |  |              | 5,446  |             |  |      | 7,164  |      |  |   | 10,883 |  |  |   | 14,801 | 
|Selling, general and administrative expenses       |  |              | 4,177  |             |  |      | 5,792  |      |  |   | 8,902  |  |  |   | 12,221 | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Income from operations                             |  |              | 1,269  |             |  |      | 1,372  |      |  |   | 1,981  |  |  |   | 2,580  | 
|Other income (expense)                             |  |              | 32     |             |  |      | (86    | )    |  |   | 145    |  |  |   | 332    | 
|Net interest expense                               |  |              | 261    |             |  |      | 453    |      |  |   | 549    |  |  |   | 1,037  | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Income before income taxes                         |  |              | 1,040  |             |  |      | 833    |      |  |   | 1,577  |  |  |   | 1,875  | 
|Income tax expense                                 |  |              | 411    |             |  |      | 329    |      |  |   | 623    |  |  |   | 741    | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income                                         |  | $            | 629    |             |  | $    | 504    |      |  | $ | 954    |  |  | $ | 1,134  | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income per share
 basic                       |  | $            | 0.03   |             |  | $    | 0.02   |      |  | $ | 0.04   |  |  | $ | 0.05   | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income per share
 diluted                     |  | $            | 0.03   |             |  | $    | 0.02   |      |  | $ | 0.04   |  |  | $ | 0.05   | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Weighted average number of common shares
 basic   |  |              | 24,741 |             |  |      | 24,985 |      |  |   | 24,845 |  |  |   | 24,985 | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Weighted average number of common shares
 diluted |  |              | 24,979 |             |  |      | 25,190 |      |  |   | 25,118 |  |  |   | 25,148 | 
|                                                   |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 

See accompanying notes to condensed consolidated financial statements.

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SCB COMPUTER TECHNOLOGY, INC.

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

|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |        |  
|--------------------------------------------------------------------------------- | --------------------------------------------------------- | -------------------------------------- | --- | ---------------------------- | ------ | ---- | ---- | ------- | ------ | -
|                                                                                  |                                                           |                                        |     | Six Months Ended October 31,
|                                                                                  |                                                           |                                        |     |                             
|                                                                                  |                                                           |                                        |     | 2002                         |        | 2001
|                                                                                  |                                                           |                                        |     |                              |        |     
|Operating Activities                                                              |                                                           |                                        |     |                              |        |      |      |        
|                                                                                  | Net income                                                |                                        | $   | 954                          |        |      | $    | 1,134   |       
|Adjustments to reconcile net income to net cash
provided by operating activities: |                                                           |                                        |     |                              |        |      |      |        
|                                                                                  | Provision (recovery) for bad debts                        |                                        |     | (439                         | )      |      |      | 89      |       
|                                                                                  | Depreciation                                              |                                        |     | 2,570                        |        |      |      | 4,536   |       
|                                                                                  | Deferred income taxes                                     |                                        |     | 623                          |        |      |      | 740     |       
|                                                                                  | Gain on sale of assets                                    |                                        |     |                             |        |      |      | (246    | )     
|                                                                                  | Changes in operating assets and liabilities:              |                                        |     |                              |        |      |      |         |       
|                                                                                  |                                                           | Accounts receivable                    |     |                              | 2,717  |      |      |         | 2,096  |  
|                                                                                  |                                                           | Refundable income taxes                |     |                              | 751    |      |      |         | (176   | )
|                                                                                  |                                                           | Prepaid expenses and other assets      |     |                              | 947    |      |      |         | (320   | )
|                                                                                  |                                                           | Accounts payable                       |     |                              | (465   | )    |      |         | 955    |  
|                                                                                  |                                                           | Accrued expenses and other liabilities |     |                              | (1,190 | )    |      |         | (3,449 | )
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|                                                                                  | Net cash provided by operating activities                 |                                        |     | 6,468                        |        |      |      | 5,359   |       
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|Investing Activities                                                              |                                                           |                                        |     |                              |        |      |      |        
|                                                                                  | Purchases of fixed assets                                 |                                        |     | (164                         | )      |      |      | (106    | )     
|                                                                                  | Payments received from leasing activities                 |                                        |     |                             |        |      |      | 1,164   |       
|                                                                                  | Proceeds from sale of businesses, net of liabilities paid |                                        |     |                             |        |      |      | 9,420   |       
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|                                                                                  | Net cash provided by (used in) investing activities       |                                        |     | (164                         | )      |      |      | 10,478  |       
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|Financing Activities                                                              |                                                           |                                        |     |                              |        |      |      |        
|                                                                                  | Borrowings on long-term debt                              |                                        |     |                             |        |      |      | 10,000  |       
|                                                                                  | Payments on long-term debt                                |                                        |     | (3,202                       | )      |      |      | (29,416 | )     
|                                                                                  | Payments on non-recourse debt                             |                                        |     |                             |        |      |      | (2,716  | )     
|                                                                                  | Net borrowings (repayments) under revolving loan          |                                        |     | (2,346                       | )      |      |      | 5,984   |       
|                                                                                  | Purchases of common stock for treasury                    |                                        |     | (340                         | )      |      |      |        |       
|                                                                                  | Proceeds from exercise of stock options                   |                                        |     | 14                           |        |      |      |        |       
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|                                                                                  | Net cash used in financing activities                     |                                        |     | (5,874                       | )      |      |      | (16,148 | )     
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|Net increase (decrease) in cash and cash equivalents                              |                                                           |                                        | 430 |                              |        |      | (311 | )      
|Cash and cash equivalents at beginning of period                                  |                                                           |                                        | 354 |                              |        |      | 575  |        
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|Cash and cash equivalents at end of period                                        |                                                           | $                                      | 784 |                              |        | $    | 264  |        
|                                                                                  |                                                           |                                        |     |                              |        |      |      |         |       
|Supplemental Disclosures of Cash Flow                                             |                                                           |                                        |     |                              |        |      |      |        
|                                                                                  | Interest paid                                             |                                        | $   | 591                          |        |      | $    | 1,417   |       
|                                                                                  | Income taxes paid                                         |                                        | $   | 45                           |        |      | $    | 176     |       

See accompanying notes to condensed consolidated financial statements.

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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, 2002, and the results of operations
and cash flows for the three and six-month periods ended October 31, 2002 and
October 31, 2001. Operating results for the period ended October 31, 2002, 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.

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,
|                                                                                                      |  |              |        |            
|                                                                                                      |  | 2002         |        | 2001        |  | 2002 |        | 2001
|                                                                                                      |  |              |        |             |  |      |        |     
|Net income                                                                                            |  | $            | 629    |             |  | $    | 504    |      |  | $ | 954    |  |  | $ | 1,134  | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Denominator for basic earnings per share 
weighted average shares                                    |  |              | 24,741 |             |  |      | 24,985 |      |  |   | 24,845 |  |  |   | 24,985 | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Effect of dilutive securities-stock options                                                           |  |              | 238    |             |  |      | 205    |      |  |   | 273    |  |  |   | 163    | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Denominator for diluted earnings per share 
adjusted weighted average shares and
assumed conversions |  |              | 24,979 |             |  |      | 25,190 |      |  |   | 25,118 |  |  |   | 25,148 | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income per share
 basic                                                                          |  | $            | 0.03   |             |  | $    | 0.02   |      |  | $ | 0.04   |  |  | $ | 0.05   | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 
|Net income per share
 diluted                                                                        |  | $            | 0.03   |             |  | $    | 0.02   |      |  | $ | 0.04   |  |  | $ | 0.05   | 
|                                                                                                      |  |              |        |             |  |      |        |      |  |   |        |  |  |   |        | 

3.     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 October 31, 2002.
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 originally is
prime plus a margin of 1.0%. At October 31, 2002, the effective annual interest
rate under the revolving loan was 5.75%. At October 31, 2002, $3.2 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 October 31, 2002, $4.1 million was available
for borrowing under the revolving loan.

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The interest rate on borrowings under the primary term loan is prime plus
a margin of 2.25%. At October 31, 2002, the effective annual interest rate
under the primary term loan was 7.0%. The Company is amortizing the primary
term loan at the rate of $350,000 of principal plus accrued interest per month.
At October 31, 2002, $3.8 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 October 31, 2002, the effective annual interest rate
under the secondary term loan was 6.75%. The Company is amortizing the
secondary term loan at the rate of $70,000 of principal plus accrued interest
per month. At October 31, 2002, $2.0 million was outstanding under the
secondary term loan.

At October 31, 2002, the Company had $50,898 outstanding under a
promissory note that bears interest at 11.0% and is due in fiscal 2004. The
loan is secured by computer software.

4.     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 October 31, 2002 and 2001, and for each of the
fiscal quarters and six month periods then ended (in thousands):

|                        |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|----------------------- | ----------------------- | - | ------------------------------ | ------ | ---------------------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                        |                         |   | Three Months Ended October 31, |        | Six Months Ended October 31,
|                        |                         |   |                                |        |                             
|                        |                         |   | 2002                           |        | 2001                         |   | 2002   |        | 2001
|                        |                         |   |                                |        |                              |   |        |        |     
|Revenue:                |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        | Core operations         |   | $                              | 21,548 |                              |   | $      | 26,515 |      |   | $      | 43,344 |   |   | $      | 52,286 |  
|                        | Non-core operations (a) |   |                                |       |                              |   |        | 1,178  |      |   |        |       |   |   |        | 4,033  |  
|                        | Corporate               |   |                                |       |                              |   |        |       |      |   |        |       |   |   |        |       |  
|                        |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|                        |                         | $ | 21,548                         |        |                              | $ | 27,693 |        |      | $ | 43,344 |        |   | $ | 56,319 |       
|                        |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|Income from operations: |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |       
|                        | Core operations         |   | $                              | 3,025  |                              |   | $      | 4,199  |      |   | $      | 6,203  |   |   | $      | 8,161  |  
|                        | Non-core operations (b) |   |                                |       |                              |   |        | (29    | )    |   |        |       |   |   |        | 10     |  
|                        | Corporate               |   |                                | (1,756 | )                            |   |        | (2,798 | )    |   |        | (4,222 | ) |   |        | (5,591 | )
|                        |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  
|                        |                         | $ | 1,269                          |        |                              | $ | 1,372  |        |      | $ | 1,981  |        |   | $ | 2,580  |       
|                        |                         |   |                                |        |                              |   |        |        |      |   |        |        |   |   |        |        |  



|(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 six 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.

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

|                                 |                              |   |                   |   |      |   |       |       | 
|-------------------------------- | ---------------------------- | - | ----------------- | - | ---- | - | ----- | ----- | 
|                                 |                              |   | As of October 31,
|                                 |                              |   |                  
|                                 |                              |   | 2002              |   | 2001
|                                 |                              |   |                   |   |     
|Investment in leasing activities |                              | $ |                  |   |      | $ | 6,867 |      
|Other assets                     |                              |   |                  |   |      |   | 22    |      
|                                 |                              |   |                   |   |      |   |       |      
|                                 | Total assets                 |   | $                 |  |      |   | $     | 6,889 | 
|                                 |                              |   |                   |   |      |   |       |      
|Non-recourse debt                |                              | $ |                  |   |      | $ | 7,010 |      
|Other liabilities                |                              |   |                  |   |      |   | 163   |      
|Retained deficit                 |                              |   |                  |   |      |   | (284  | )    
|                                 |                              |   |                   |   |      |   |       |      
|                                 | Total liabilities and equity |   | $                 |  |      |   | $     | 6,889 | 
|                                 |                              |   |                   |   |      |   |       |      

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.

5.     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 quarter ended October 31, 2002, the Company purchased 509,000
shares of its common stock for a combined cost of $0.3 million. The cost of
the shares purchased was recorded as treasury stock, which reduces the amount
of total shareholders equity.

6.     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.

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In the second quarter of fiscal 2003, the Company paid IT Resources
Solutions.net, Inc. (ITRS), a minority owned business, $18,000 for marketing
and management services in the northeastern United States, $6,840 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 $7,560 for contract labor used on the
Companys projects. Kenneth J. Cobb, the son of T. Scott Cobb, is a
shareholder of ITRS.

7.     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.

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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

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 six 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 second quarter and the first six months of fiscal 2003, the Companys
revenue from core operations, on which the Companys management intends to
focus its future efforts, was $21.5 million and $43.3 million, respectively.
Professional staffing, outsourcing, and consulting accounted for 75%, 14%, and
11%, respectively, of the Companys revenue from core operations in the second
quarter and the first six months of fiscal 2003.

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 six 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 Second Quarter of Fiscal 2003 to Second Quarter of Fiscal
2002

Revenue and Income from Operations.The Companys operations in the
second 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 $21.5 million in the second quarter of fiscal 2003 from $27.7
million in the second quarter of fiscal 2002. Overall income from operations
decreased 8% to $1.3 million in the second quarter of fiscal 2003 from $1.4
million in the second quarter of fiscal 2002.

Revenue from core operations decreased 19% to $21.5 million in the second
quarter of fiscal 2003 from $26.5 million in the second quarter of fiscal 2002.
Professional staffing revenue decreased $3.4 million for the quarter due
primarily to a 21% decrease in average billable headcount, which was partially
offset by a 1% increase in average billing rate. Revenue from consulting and
outsourcing declined $1.4 million and $0.2 million for the quarter,
respectively, due mainly to fewer consulting projects. Income from core
operations decreased 28% to $3.0 million in the second quarter of fiscal 2003
from $4.2 million in the second quarter of fiscal 2002.

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Revenue from non-core operations decreased to zero in the second quarter
of fiscal 2003 from $1.2 million in the second quarter of fiscal 2002. The
revenue from non-core operations in the second quarter of fiscal 2002 consisted
of $0.1 million from the Delta Software business unit, which was sold on
February 28, 2002 and $1.1 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 37% to $1.8 million in
the second quarter of fiscal 2003 from $2.8 million in the second quarter of
fiscal 2002. The decrease in corporate expenses is due principally to 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 24% excluding the $361,000 bad debt
recovery.

Interest Expense.Net interest expense decreased 42% to $0.3 million in
the second quarter of fiscal 2003 from $0.5 million in the second 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 second quarters of fiscal 2003
and 2002 was 39.5%.

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

Revenue and Income from Operations.The Companys operations in the first
six 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 $43.3 million in the first six months of fiscal 2003 from $56.3 million
in the first six months of fiscal 2002. Overall income from operations
decreased 23% to $2.0 million in the first six months of fiscal 2003 from $2.6
million in the first six months of fiscal 2002.

Revenue from core operations decreased 17% to $43.3 million in the first
six months of fiscal 2003 from $52.3 million in the first six months of fiscal
2002. Professional staffing revenue decreased $5.8 million for the first six
months due primarily to a 18% decrease in average billable headcount 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 2% increase in average billing
rate. Revenue from consulting and outsourcing declined $2.7 million and $0.4
million for the first six months, respectively, due primarily to fewer
consulting projects. Income from core operations decreased 24% to $6.2 million
in the first six months of fiscal 2003 from $8.2 million in the first six
months of fiscal 2002.

Revenue from non-core operations decreased to zero in the first six months
of fiscal 2003 from $4.0 million in the first six months of fiscal 2002. The
revenue from non-core operations in the first six 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 $2.2 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 24% to $4.2 million in
the first six months of fiscal 2003 from $5.6 million in the first six months
of fiscal 2002. The decrease in corporate expenses is due principally to 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 18% excluding the $361,000 bad debt
recovery.

Interest Expense.Net interest expense decreased 47% to $0.5 million in
the first six months of fiscal 2003 from $1.0 million in the first six 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 six months of fiscal 2003 and
2002 was 39.5%.

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Reliance Upon Government Contracting and Significant Customers

The Company performs IT services for customers in two distinct markets:
state and local governments, and commercial enterprises. In the first six
months of fiscal 2003 and 2002, approximately 63% and 61%, respectively, of the
Companys revenue was attributable to state and local governments, with the
balance being attributable to commercial enterprises. The increase in the
percentage of revenue obtained from state and local governments is mainly due
to the disposition of the enterprise resource planning business unit, which was
highly concentrated in contracts with commercial enterprises, in the first six
months of fiscal 2002. 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 six months of
fiscal 2003 accounted for 55% of its revenue, an increase from 54% in the first
six months of fiscal 2002. In the first six months of fiscal 2003, the
following customers accounted for 10% or more of the Companys revenue: State
of Tennessee (17%), 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 88% of
outsourcing revenue in the first six 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 six months of fiscal 2003, the Company reduced its
debt 38% to $9.0 million at October 31, 2002 from $14.6 million at April 30,
2002. Since October 31, 2001, the Company has reduced its debt 64%, from $25.1
million. The debt reduction reflects the Companys ongoing repayment of its
funded debt as well as the elimination of the Companys non-recourse debt
associated with the computer leasing business of its former Partners Capital
Group business unit in the fourth quarter of fiscal 2002.

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 October 31, 2002. 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 originally is
prime plus a margin of 1.0%. At October 31, 2002, the effective annual interest
rate under the revolving loan was 5.75%. At October 31, 2002, $3.2 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 October 31, 2002, $4.1 million was available
for borrowing under the revolving loan.

The interest rate on borrowings under the primary term loan originally is
prime plus a margin of 2.25%. At October 31, 2002, the effective annual
interest rate under the primary term loan was 7.0%. The Company is amortizing
the primary term loan at the rate of $350,000 of principal plus accrued
interest per month. At October 31, 2002, $3.8 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 October 31, 2002, the effective annual interest rate
under the secondary term loan was 6.75%. The Company is amortizing the
secondary term loan at the rate of $70,000 of principal plus accrued interest
per month. At October 31, 2002, $2.0 million was outstanding under the
secondary term loan.

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At October 31, 2002, the Company had $50,898 outstanding under a
promissory note that bears interest at 11.0% and is due in fiscal 2004. The
loan is secured by computer software.

Capital Expenditures.The Companys capital expenditures in the first six
months of fiscal 2003 primarily relate to computer equipment purchases for use
by the Companys professionals and on outsourcing projects. Capital
expenditures increased 55% to $164,000 in the first six months of fiscal 2003
from $106,000 in the first six 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 $6-11 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.

Working Capital.At October 31, 2002, the Company had working capital of
$4.8 million (including $0.8 million in cash and cash equivalents), a 14%
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.

The Company generated net cash from operating activities of $6.5 million
in the first six months of fiscal 2003, a 21% increase from $5.4 million in the
first six 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.

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During the quarter ended October 31, 2002, the Company purchased 509,000
shares of its common stock for a combined cost of $0.4 million. 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 can not
repurchase more than $475,000 in common stock during the third quarter ended
January 31, 2002.

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 $6-11 million during the remainder of fiscal
2003. The Company believes that this potential capital expenditure will be
financed through equipment leasing arrangements.

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.

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.

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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.




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 $9.0 million in outstanding debt
at October 31, 2002, 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 $90,000 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, 2002. 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.

14



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##### Table of Contents






PART II  OTHER INFORMATION




Item 1.    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.

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 4.Submission of Matters to a Vote of Security Holders

On September 10, 2002, the Company held its 2002 Annual Meeting of Shareholders
at which the shareholders of the Company considered and voted on the following
two matters: The shareholders elected the following two people to serve as
Class I directors of the Company for a term expiring at the 2005 annual meeting
of shareholders. The results of the shareholder vote were as follows:

|                 |  |       |            |                    |  |  |  |  |  |  |           |  |  |  |  | 
|---------------- |  | ----- | ---------- | ------------------ |  |  |  |  |  |  | --------- |  |  |  |  | 
|                 |  | Votes
|                 |  |      
|                 |  | For   |            | Withhold Authority
|                 |  |       |            |                   
|James E. Harwood |  |       | 20,459,960 |                    |  |  |  |  |  |  | 2,247,932 | 
|Jim Rout         |  |       | 22,404,067 |                    |  |  |  |  |  |  | 303,825   | 

The shareholders ratified the appointment of BDO Seidman, LLP as the Companys
independent accountants for the fiscal year ending April 30, 2003. The results
of the shareholder vote were as follows:

|           |  |         |        |         |  |  |       |  |  |  |  | 
|---------- |  | ------- | ------ | ------- |  |  | ----- |  |  |  |  | 
|Votes     
|          
|For        |  | Against |        | Abstain
|           |  |         |        |        
|22,669,521 |  |         | 34,263 |         |  |  | 4,108 | 




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

On September 3, 2002, the Company filed a current report on Form 8-K
disclosing the settlement of the SEC administrative proceeding. See Item 1.
Legal Proceedings in Part II  Other Information of this report for further
information on this matter. On September 11, 2002, the Company filed a current
report on Form 8-K disclosing that its board of directors had approved a stock
repurchase program that authorizes the Company to repurchase up to $3 million
of common stock.

15



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##### Table of Contents






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 13, 2002 |  |                              |  |                                                                                   
|                        |  |                              |  |                                                                                   
|                        |  | SCB COMPUTER TECHNOLOGY, INC
|                        |  |                              |  |                                                                                   
|                        |  |                              |  |                                                                                   
|                        |  | By:                          |  | /s/ Michael J. Boling                                                             
|                        |  |                              | 
|                        |  |                              |  | Michael J. Boling
Executive Vice President, Chief
Financial Officer, and Treasurer

16



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##### Table of Contents






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: December 13, 2002 |  |                                                    
|                        |  |                                                    
|                        |  | /s/ T. Scott Cobb                                  
|                        |  |                                                    
|                        |  | T. Scott Cobb
President and Chief Executive Officer

17



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##### Table of Contents






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: December 13, 2002 |  |                                                                                   
|                        |  |                                                                                   
|                        |  | /s/ Michael J. Boling                                                             
|                        |  |                                                                                   
|                        |  | Michael J. Boling
Executive Vice President, Chief
Financial Officer, and Treasurer

18



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1*    |  | Amended and Restated Charter of the Company (incorporated herein by
reference to Exhibit 3 to the Companys quarterly report on Form 10-Q for
the fiscal year quarter ended October 31, 1998), as amended by (1)
Articles of Merger of SCB Software Services, Inc., a Tennessee
corporation, with and into the Company, filed with the office of the
Secretary of State for the State of Tennessee on June 28, 2001, (2)
Articles of Merger of Proven Technology, Inc., a Tennessee corporation,
with and into the Company, filed with the office of the Secretary of State
for the State of Tennessee on June 28, 2001, (3) Articles of Amendment to
Amended and Restated Charter of the Company, filed with the office of the
Secretary of State for the State of Tennessee on September 21, 2001, (4)
Articles of Merger of Technology Management Resources, Inc., a Tennessee
corporation, with and into the Company, filed with the office of the
Secretary of State for the State of Tennessee on July 10, 2002, (5)
Articles of Merger of Delta Software Systems, Inc., a Tennessee
corporation, with and into the Company filed with the office of the
Secretary of State for the State of Tennessee on November 18, 2002, and
(6) Articles of Merger of Partners Capital Group, a California
corporation, with and into the Company, filed with the Secretary of State
for the State of Tennessee on December 2, 2002 (Items (1), (2), (3) are
incorporated herein by reference to Exhibit 3.1 to the Companys quarterly
report on Form 10-Q for the fiscal quarter ended October 31, 2001). (Item
4 is incorporated herein by reference to Exhibit 3.1 to the Companys
annual report on Form 10-K for the year ended April 30,
2002).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.1*   |  | Loan and Security Agreement dated as of July 23, 2001, among the
Company, certain of its subsidiaries, and Foothill Capital Corporation, as
agent and lender (incorporated herein by reference to Exhibit 10.1 to the
Companys annual report on Form 10-K for the fiscal year ended April 30,
2001), as amended by First Amendment to Loan and Security Agreement dated
as of March 27, 2002 (incorporated herein by reference to
Exhibit 10 to the Companys quarterly report on Form 10-Q for the
fiscal quarter ended July 31, 2002), and as amended by Second
Amendment to Loan and Security Agreement dated as of September 19,
2002, among the parties. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.2*+  |  | Employment Agreement with T. Scott Cobb dated November 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.                                                                                                     
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|+ |  | This is a management contract or compensatory plan or arrangement
that is required to be filed as an exhibit pursuant to Item 14(c) of this
report.

E1-1