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


Commission File No. 0-27694

SCB COMPUTER TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)


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


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

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

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

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

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

At September 3, 2003, there were 25,294,954 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 6.   Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                        
|EXHIBIT INDEX                                     
|EX-10.1  FOURTH AMEND TO LOAN & SECURITY AGREEMENT
|EX-10.2  LOAN AGREEMENT                           
|EX-10.3  INTERCREDITOR AGREEMENT                  
|EX-31.1  SECTION 302 CEO CERTIFICATION            
|EX-31.2  SECTION 302 CFO CERTIFICATION            
|EX-32.1  SECTION 906 CEO CERTIFICATION            
|EX-32.2  SECTION 906 CFO CERTIFICATION            



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SCB COMPUTER TECHNOLOGY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PageCautionary Note About Forward-Looking Statements
    
    
    1Part I  Financial InformationItem 1.
    
    Financial Statements
    
    
    2Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risks
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    16Part II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    17Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    17Signatures
    
    
    18CertificationsCertification 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 amendedCertification 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 amendedExhibit Index






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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

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

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

July 31, 2003
    
    April 30, 2003(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    115
    
    
    $
    1,112Accounts receivable, net of allowance of $165 and $160, respectively
    
    
    16,517
    
    
    
    15,969Refundable income taxes
    
    
    594
    
    
    
    574Deferred income taxes
    
    
    2,013
    
    
    
    2,028Prepaid expenses and other current assets
    
    
    1,354
    
    
    
    1,590Total current assets
    
    
    20,593
    
    
    
    21,273Fixed assets:Furniture, fixtures and equipment
    
    
    37,155
    
    
    
    37,059Accumulated depreciation
    
    
    (26,226
    )
    
    
    (25,248
    )Net
    
    
    10,929
    
    
    
    11,811Goodwill
    
    
    5,158
    
    
    
    5,150Other intangible assets, net of accumulated amortization of $580 and
$290, respectively
    
    
    4,410
    
    
    
    4,700Deferred income taxes  long-term
    
    
    8,422
    
    
    
    8,991Other long-term assets
    
    
    1,445
    
    
    
    1,310Total assets
    
    $
    50,957
    
    
    $
    53,235LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,023
    
    
    $
    2,161Accrued expenses
    
    
    6,909
    
    
    
    7,364Current portion of long-term debt
    
    
    6,212
    
    
    
    5,907Deferred revenue
    
    
    471
    
    
    
    1,296Total current liabilities
    
    
    15,615
    
    
    
    16,728Long-term debt
    
    
    13,861
    
    
    
    15,975Shareholders equity:Common stock
    
    
    251
    
    
    
    250Treasury stock, at cost
    
    
    (487
    )
    
    
    (487
    )Additional paid-in capital
    
    
    40,806
    
    
    
    40,807Retained earnings (deficit)
    
    
    (19,089
    )
    
    
    (20,038
    )Total shareholders equity
    
    
    21,481
    
    
    
    20,532Total liabilities and shareholders equity
    
    $
    50,957
    
    
    $
    53,235


See accompanying notes to condensed consolidated financial statements.

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SCB COMPUTER TECHNOLOGY, INC.

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

Three MonthsEndedJuly 31,2003
    
    2002Revenue
    
    $
    28,582
    
    
    $
    21,796Cost of services
    
    
    21,447
    
    
    
    16,359Gross profit
    
    
    7,135
    
    
    
    5,437Selling, general and administrative expenses
    
    
    5,218
    
    
    
    4,725Income from operations

    
    1,917
    
    
    
    712Net interest expense
    
    
    420
    
    
    
    288Other income
    
    
    71
    
    
    
    113Income before income taxes
    
    
    1,568
    
    
    
    537Income tax expense
    
    
    619
    
    
    
    212Net income
    
    $
    949
    
    
    $
    325Net income per share  basic
    
    $
    0.04
    
    
    $
    0.01Net income per share  diluted
    
    $
    0.04
    
    
    $
    0.01Weighted average number of common
shares  basic
    
    
    24,347
    
    
    
    24,985Weighted average number of common
shares  diluted
    
    
    25,039
    
    
    
    25,228


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)

Three Months Ended July 31,2003
    
    2002Operating ActivitiesNet income
    
    $
    949
    
    
    $
    325Adjustments to reconcile net income to net cash provided by operating activities:Provision (recovery) for bad debts
    
    
    4
    
    
    
    (72
    )Depreciation and amortization
    
    
    1,288
    
    
    
    1,347Deferred income taxes
    
    
    583
    
    
    
    212Changes in operating assets and liabilities:Accounts receivable
    
    
    (552
    )
    
    
    2,611Refundable income taxes
    
    
    (19
    )
    
    
    741Prepaid expenses and other assets
    
    
    93
    
    
    
    443Accounts payable
    
    
    (144
    )
    
    
    19Accrued expenses and other liabilities
    
    
    (1,274
    )
    
    
    (1,375
    )Net cash provided by operating activities
    
    
    928
    
    
    
    4,251Investing ActivitiesPurchases of fixed assets
    
    
    (117
    )
    
    
    (105
    )Net cash used in investing activities
    
    
    (117
    )
    
    
    (105
    )Financing Activities
    
    
    
    
    
    
    Borrowings on long-term debt
    
    
    741
    
    
    
    Payments on long-term debt
    
    
    (1,738
    )
    
    
    (1,929
    )Net borrowings (repayments) under revolving loan
    
    
    (811
    )
    
    
    (2,116
    )Net cash used in financing activities
    
    
    (1,808
    )
    
    
    (4,045
    )Net increase (decrease) in cash and cash equivalents
    
    
    (997
    )
    
    
    101Cash and cash equivalents at beginning of period
    
    
    1,112
    
    
    
    354Cash and cash equivalents at end of period
    
    $
    115
    
    
    $
    455Supplemental Disclosures of Cash FlowInterest paid
    
    $
    476
    
    
    $
    327Income taxes paid
    
    $
    71
    
    
    $
    37


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 July 31, 2003, and the results of operations and
cash flows for the three-month periods ended July 31, 2003 and July 31, 2002.
Operating results for the period ended July 31, 2003, are not necessarily
indicative of the results that may be expected for the fiscal year ending April
30, 2004. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Companys annual report on
Form 10-K for the fiscal year ended April 30, 2003, filed with the Securities
and Exchange Commission.



|2. |  | EARNINGS PER SHARE
|-- |  | ------------------

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

Three MonthsEndedJuly 31,2003
    
    2002Net income
    
    $
    949
    
    
    $
    325Denominator for basic earnings per share  weighted average shares
    
    
    24,347
    
    
    
    24,985Effect of dilutive securities-stock options
    
    
    691
    
    
    
    243Denominator for diluted earnings per share  adjusted weighted
average shares and assumed conversions
    
    
    25,039
    
    
    
    25,228Net income per share  basic
    
    $
    0.04
    
    
    $
    0.01Net income per share  diluted
    
    $
    0.04
    
    
    $
    0.01




|3. |  | INTANGIBLE ASSETS
|-- |  | -----------------

Intangible assets resulted from the Companys acquisition of Remtech Services,
Inc. (RSI) during the year ended April 30, 2003. The intangible assets
identified during the Companys valuation of RSIs assets at the date of
acquisition include purchased customer contracts and non-compete agreements.
These intangible assets are being amortized over 3 to 6 years with 5.9 years
being the weighted average amortization period. No residual value has been
assigned to these identifiable intangible assets. Amortization expense was
$290,000 for the quarter ended July 31, 2003. Amortization expense for all of
the Companys intangible assets including goodwill is deductible for

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Federal income tax purposes using the straight-line method over a fifteen-year
amortization period. Intangible assets
consisted of the following at July 31, 2003 (in thousands):

Goodwill
    
    $
    5,158Accumulated amortization
    
    
    $
    5,158Other intangible assets:Covenant not to compete agreements
    
    $
    500Accumulated amortization
    
    
    (84
    )$
    416Purchased customer contracts
    
    $
    4,490Accumulated amortization
    
    
    (496
    )$
    3,994Total other intangible assets
    
    $
    4,990Total accumulated amortization
    
    
    (580
    )$
    4,410




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

The Company has a $27.5 million credit facility (the Credit Facility) that
consists of a $17.5 million revolving loan (the Revolving Loan) and a $10.0
million term loan (Term Loan A). Additionally, the Company has a three-year,
$4.0 million term loan (Term Loan B) with another financial institution. 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 July 31, 2003.

The interest rate on borrowings under the Revolving Loan is prime plus a margin
of 1.0%. At July 31, 2003, the effective annual interest rate under the
Revolving Loan was 5.0%. The amount available for borrowing under the
Revolving Loan is limited to 85% of billed accounts receivable plus 70% of
unbilled accounts receivable. At July 31, 2003, approximately $4.8 million was
available for borrowing under the Revolving Loan.
The interest rate on borrowings under Term Loan B is prime plus a margin of
2.0%. At July 31, 2003, the effective annual interest rate under the Term Loan
B was 6.0%. The Company is amortizing Term Loan B at the rate of $70,000 of
principal plus accrued interest per month.

On February 6, 2003, the Company amended the Credit Facility to allow for an
additional $7,700,000 term loan (Term Loan C) to be used to finance part of
the purchase price of the RSI acquisition. The interest rate on borrowings
under Term Loan C is prime plus a margin of 2.25%. At July 31, 2003, the
effective annual interest rate under Term Loan C was 6.25%. The Company is
amortizing Term Loan C at the rate of $192,500 of principal plus accrued
interest per month for forty months.

In April 2003, the Company purchased approximately $7.3 million of computer
equipment to be used on one of its outsourcing projects. The vendor financed
this equipment until the Company finalized its long-term financing with a
financial institution. On June 15, 2003, the Company entered into a
forty-month term loan (Term Loan D) and used the proceeds to pay the computer
equipment vendor. The vendor liability was reflected as a note payable in the
Companys April 30, 2003 financial statements. Term Loan D bears interest at a
fixed rate of 4.625% and is secured by the computer equipment purchased with
the proceeds of the loan.

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

Revolving Loan
    
    $
    5,466Term Loan B
    
    
    857Term Loan C
    
    
    6,101Term Loan D
    
    
    6,349Notes payable to former RSI shareholders
    
    
    1,30020,073Less: current portion
    
    
    (6,212
    )$
    13,861


As discussed in Note 9, the Companys debt increased by approximately
$13,000,000 on September 3, 2003 due to the Companys purchase of all the
outstanding stock of National Systems & Research Co. Also, as discussed in
Note 9, on August 29, 2003, the Company obtained a new senior credit facility,
the proceeds of which were used to refinance the existing Credit Facility, Term
Loans C and D, and to finance the cash portion of the acquisition of NSR.



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

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

Three Months Ended July 31,2003
    
    2002Revenue:State and Local Government
    
    $
    12,090
    
    
    $
    13,518Federal Government
    
    
    10,462
    
    
    
    Commercial
    
    
    6,030
    
    
    
    8,278Total
    
    $
    28,582
    
    
    $
    21,796Income from Operations:State and Local Government
    
    $
    2,000
    
    
    $
    1,771Federal Government
    
    
    957
    
    
    
    Commercial
    
    
    1,220
    
    
    
    1,406Corporate
    
    
    (2,260
    )
    
    
    (2,465
    )Total
    
    $
    1,917
    
    
    $
    712


The accounting policies of the reportable segment 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 segment from a centralized location. In addition, substantially
all the sales and recruiting workforce are contained in the core operations
segment.



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

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

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

In the first quarter of fiscal 2004, the Company paid IT Resources
Solutions.net, Inc. (ITRS), a minority owned business, $12,000 for marketing
and management services in the northeastern United States, $4,000 for the lease
of an office to house an SCB sales account representative and storage
facilities which SCB uses to store furniture and miscellaneous office items
from a closed SCB office in New York, and $3,172 for contract labor used on the
Companys projects. Kenneth J. Cobb, the son of T. Scott Cobb, is a shareholder
of ITRS.



|8. |  | LITIGATION AND LEGAL PROCEEDINGS
|-- |  | --------------------------------

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



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

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

On August 29, 2003, the Company obtained a new senior credit facility (the
Senior Credit Facility) with another financial institution, the proceeds of
which were used to refinance the existing Credit Facility, Term Loans C and D,
and to partially finance the cash consideration for the acquisition of NSR.
The remainder of the cash consideration was funded by acquired cash of
approximately $1,000,000 and sales proceeds of NSR assets of approximately
$950,000.

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

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

Overview

In fiscal 2001, management re-evaluated the Companys strategic direction
and concluded that while the acquisition and diversification strategy followed
by the Company since fiscal 1997 had grown revenues at a robust rate, the
Companys net income had declined over the same period. Accordingly, management
changed the Companys business development strategy to focus on its historical
core competencies of providing IT consulting, outsourcing, and professional
staffing services (the core operations). A portion of that change in
strategic direction included focusing on the Companys strengths with
government customers and adding agencies of the U.S. Federal government as
customers. As a result of the change in strategic direction, beginning in
fiscal 2001 and continuing through fiscal 2002, the Company disposed of several
underperforming business units. These non-core business units were engaged in
specialized policy consulting, computer hardware and specialty software sales,
enterprise resource planning, and computer equipment leasing (the non-core
operations). All of the Companys non-core operations were disposed as of
April 1, 2002. Beginning in fiscal 2003, the Company implemented a strategic
acquisition plan focused on growing its core operations through acquiring
companies with heavy concentrations in the government market, primarily the
U.S. Federal government market. The Company completed its first acquisition
under its plan with the purchase of Remtech Services, Inc. (RSI) on February
6, 2003. On May 28, 2003, the Company entered into a definitive agreement to
acquire a second company, National Systems & Research Co. (NSR). This
acquisition closed on August 29, 2003 and was funded on September 4, 2003,
subsequent to the end of the first fiscal quarter.

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

Three Months EndedJuly 31,SERVICES
    
    2003
    
    2002Professional Staffing
    
    
    44
    %
    
    
    75
    %Outsourcing
    
    
    46
    %
    
    
    15
    %Consulting
    
    
    10
    %
    
    
    10
    %


The Companys strategy of expanding its business in the government
consulting sector into Federal contracting has produced both benefits and risks
to the Company. Management believes that the success of the strategy is
demonstrated by increased shareholder value and further definition of the
Company as a market leader in the area of government information technology
consulting and solutions. This has produced a much greater concentration of the
business of the Company in the government consulting sector, and increased the
Companys reliance on contracts cancelable on short notice with federal, state
and local government customers which are subject to budgetary restraints.
Because a portion of this strategy utilized acquisitions, the Companys long
term debt level under its current facility has increased from $5,031,000 as of
January 31, 2003, prior to the RSI acquisition, to $20,073,000 as of July 31,
2003. Subsequent to the end of the first fiscal quarter, debt was increased
further by $13,000,000 on September 4, 2003 in connection with the Companys
acquisition of NSR. Management is aggressively managing each of these areas.
As an example, a senior member of Company Management is assigned to each large
customer of the Company in order to give personal attention to management of
the relationship. Management believes that its aggressive management of these
and other risks will enable the Company to realize the full value attainable
from its government contracting strategy.

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During the first quarter of fiscal 2004, the Company performed IT services
for customers in three distinct markets as discussed above: state and local
governments, agencies of the U.S. Federal government and commercial
enterprises. In the first quarter of fiscal 2004 and 2003, the Companys
revenue from these three markets accounted for the following percentages of
total revenue:

Three Months EndedJuly 31,MARKETS
    
    2003
    
    2002State & Local Government
    
    
    42
    %
    
    
    62
    %Federal Government
    
    
    37
    %
    
    
    Commercial enterprises
    
    
    21
    %
    
    
    38
    %


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

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

Results of Operations

Comparison of First Quarter of Fiscal 2004 to First Quarter of Fiscal 2003

REVENUE AND INCOME FROM OPERATIONS. The Companys revenue increased 31.1% to
$28.6 million in the first quarter of fiscal 2004 from $21.8 million in the
first quarter of fiscal 2003. The Companys revenue in the first quarter of
fiscal 2004 was increased $10.5 million from the first quarter of fiscal 2003
due to the acquisition of RSI. Absent the acquisition of RSI, revenue
decreased $3.7 million due to the general decline in the information technology
market, employees hired by clients, increased competition for state and local
government proposals, and a slight shift in commercial customers outsourcing
services to offshore companies.

Excluding the employees that were added as a result of the RSI acquisition, the
Companys average billable headcount decreased 22.2% to 501 from 644 in the
first quarter of fiscal 2004 and 2003, respectively. The RSI acquisition added
587 billable employees. The Companys average hourly billing rate for the
operations, excluding RSI, decreased 0.9% to $60.39 in fiscal 2004 from $60.92
in fiscal 2003.

The Companys gross margin improved from 24.9% for the first quarter of fiscal
2003 to 25.0% for the first quarter of fiscal 2004 due in part to managements
ongoing effort to reduce direct cost or increase bill rates for less profitable
accounts. Excluding RSI gross profit increased to 28.1% during the first
quarter of 2004 from 24.9% during the first quarter of fiscal 2003. RSIs
gross profit was 19.6%, an increase from %16.6 for the same three month period
a year earlier when it was a privately owned company.

The Companys income from operations increased from 3.3% of revenue in the
first quarter of fiscal 2003 to 6.7% of revenue in the first quarter of fiscal
2004 due to several cost reduction measures, including salary and benefit
reductions, downsizing facilities and reducing other general field overhead
costs, and the acquisition of RSI.

CORPORATE EXPENSES. The Companys corporate expenses decreased 8.3% to $2.3
million in the first quarter of fiscal 2004 from $2.5 million in the first
quarter of fiscal 2003. The decrease in corporate expenses was due to
managements cost-reduction efforts, which primarily focused on salaries and
travel-related expenses, and reduced professional fees.

NET INTEREST EXPENSE. The Companys net interest expense increased 45.8% to
$0.4 million in the first quarter of fiscal 2004 from $0.3 million in the first
quarter of fiscal 2003 due primarily to the debt incurred in connection with
the acquisition of RSI offset by a general decline in interest rates.

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

Reliance Upon Government Contracting and Significant Customers

The Company earns a significant portion of its revenue from relatively few
customers. In the first quarter of fiscal 2004 and 2003, the Companys five
largest revenue-generating customers accounted for 42% and 57% of its revenue,
respectively. The decrease from fiscal 2003 to fiscal 2004 was mainly as a
result of the increased revenue from the acquisition of RSI. In the first
quarter of fiscal 2004, the following customers each accounted for 10% or more
of the Companys revenue: State of Kentucky (11%) and State of Tennessee (10%).

Generally, the Companys contracts with its top ten clients, in accordance with
industry practice, are cancelable on short notice and without penalty (except
with respect to the Companys larger outsourcing contracts), provide for
monthly payment of fees, and establish other basic terms such as the hourly
billing rates for each type of Company professional who performs work pursuant
to the contract. Some contracts specifically define the services to be
performed pursuant to the contract, while other contracts, particularly
professional staffing contracts, merely establish the basic parameters of the
work (i.e., the system to be evaluated, designed or maintained) and require
that additional work orders be submitted for services to be performed. The
Company is the exclusive service provider under certain contracts, while other
contracts, particularly professional staffing contracts, specifically allow the
client to engage other vendors for the projects covered by the contract. The
Company had orders at July 31, 2003 of approximately $184 million, in
comparison to orders of approximately $16 million at July 31, 2002. Because the
Companys clients can cancel or reduce the scope of their engagements on short
notice, the Company does not believe that backlog is a reliable indication of
future business. The backlog set forth above excludes any contracts and open
work orders the Company has for its Professional Staffing business (which
represents approximately 44% of revenue).

Liquidity and Capital Resources

DEBT. The Company has a $27.5 million credit facility (the Credit Facility)
that consists of a $17.5 million revolving loan (the Revolving Loan) and a
$10.0 million term loan (Term Loan A).The Company has a three-year, $4.0
million term loan (Term Loan B) with another financial institution. 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 July 31, 2003.

The interest rate on borrowings under the Revolving Loan is prime plus a margin
of 1.0%. At July 31, 2003, the effective annual interest rate under the
Revolving Loan was 5.0%. The amount available for borrowing under the
Revolving Loan is limited to 85% of billed accounts receivable plus 70% of
unbilled accounts receivable. At July 31, 2003, approximately $4.8 million was
available for borrowing under the Revolving Loan.
The interest rate on borrowings under Term Loan B is prime plus a margin of
2.0%. At July 31, 2003, the effective annual interest rate under Term Loan B
was 6.0%. The Company is amortizing Term Loan B at the rate of $70,000 of
principal plus accrued interest per month.

On February 6, 2003, the Company amended the Credit Facility to allow for an
additional $7.7 million term loan (Term Loan C) to be used to finance part of
the purchase price of the RSI acquisition. The interest rate on borrowings
under Term Loan C is prime plus a margin of 2.25%. At July 31, 2003, the
effective annual interest rate under Term Loan C was 6.25%. The Company is
amortizing the Term Loan C at the rate of $192,500 of principal plus accrued
interest per month for forty months.

In April 2003, the Company purchased approximately $7.3 million of computer
equipment to be used on one of its outsourcing projects. This equipment was
financed by the vendor until the Company finalized its long-term financing with
a financial institution. On June 15, 2003, the Company entered into a
forty-month term loan (Term Loan D) which was used to pay the computer
equipment vendor. This vendor liability was reflected as a note payable in the
Companys April 30, 2003 financial statements. Term Loan D bears interest at a
fixed rate of 4.625% and is secured by the computer equipment purchased with
the proceeds of the loan.

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In connection with obtaining Term Loan C, the Company granted to the lender
warrants to purchase 80,000 shares of common stock at an exercise price of
$0.68 per share with an expiration date of July 23, 2007 and modified 80,000
warrants issued to the lender at origination of the Credit Facility. The
modification decreased the exercise price from $1.00 to $0.68 and extended to
the expiration date to July 23, 2007. On July 3, 2003, outstanding warrants to
purchase 220,000 shares of common stock at an exercise price of $1.00 were
exercised in a non-cash transaction. The Company issued 87,230 shares of its
common stock in exchange for the warrants to purchase 220,000 shares of common
stock. At July 31, 2003, the Company has outstanding warrants to purchase
250,000 shares of common stock, at an exercise price of $0.31 per share, which
expire on January 1, 2004 and 160,000 shares at an exercise price of $0.68,
which expire on July 23, 2007.

The following is a summary of long-term debt at July 31, 2003 (in thousands):

Revolving Loan
    
    $
    5,466Term Loan B
    
    
    857Term Loan C
    
    
    6,101Term Loan D
    
    
    6,349Notes payable to former RSI shareholders
    
    
    1,300$
    20,073


On August 29, 2003, the Company obtained a new senior credit facility (the
Senior Credit Facility) with another financial institution, the proceeds of
which were used to refinance the existing Credit Facility, Term Loans C and D,
and to partially finance the cash portion of the acquisition of NSR. In
connection with obtaining the Senior Credit Facility, the Company amended
warrants to purchase 250,000 shares of common stock previously granted to one
of the participating lenders in the Senior Credit Facility by extending the
expiration date of these warrants from January 1, 2004 to January 2007.

OPERATING CASH FLOW. In addition to the above credit facilities, the Company
funds its operations from cash generated by operations. The Companys operating
activities provided net cash of approximately $0.9 million and $4.3 million for
the first quarter of fiscal year 2004 and 2003, respectively. The primary
reason for the decrease from fiscal 2003 to 2004 was $0.7 million in income tax
refunds received during fiscal 2003 and $3.2 million less in cash from accounts
receivable.

CAPITAL EXPENDITURES. The Companys capital expenditures primarily relate to
computer equipment purchases for use by the Companys professionals and on
outsourcing projects. Capital expenditures was $0.1 million in the first
quarter of fiscal 2004 and 2003. The Company does not expect to incur
substantial capital expenditures in fiscal 2004 except to the extent required
for new or revised outsourcing engagements.

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

WORKING CAPITAL. At July 31, 2003, the Company had working capital of $5.0
million (including $0.1 million in cash and cash equivalents), a 10.0% increase
from $4.5 million at April 30, 2003. The increase in working capital was
primarily due to a $0.8 million decrease in deferred revenue as a result of a
contractual change in the timing of billings on one of the Companys
outsourcing agreements.

STOCK REPURCHASE PROGRAM. The Companys board of directors approved a stock
repurchase program that authorizes the Company to repurchase up to $2.0 million
of common stock. The stock repurchase program authorizes the Company to
repurchase shares of its common stock from time to time in the open market and
through

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

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

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

As discussed under Stock Repurchase Program, the Company will potentially
repurchase shares of its common stock from time to time in the open market and
through privately negotiated transactions based on the prevailing market
conditions, the availability of cash to fund the repurchases, and other
relevant factors. At the beginning of each quarter, based upon the prior
quarters financial performance, the Company will assess its ability to
repurchase shares. Based upon current information, the Company cannot
repurchase more than $501,000 in common stock during the second quarter ended
October 31, 2003.

As discussed under Business Acquisition, since the end of the first quarter
of fiscal 2004 the Company has completed a stock purchase agreement and
financed the acquisition through its new credit facility and seller notes.

CRITICAL ACCOUNTING POLICIES

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

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

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

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

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The majority of the Companys revenue, approximately 83%, is billed on a time
and materials basis. Some time and materials contracts contain a cap on the
number of hours to be worked, in which case the hours are monitored to help
prevent exceeding the cap.

Approximately 2% of the Companys revenue is performed on a fixed fee per
project basis. In instances where the Company accepts an engagement on a fixed
fee per project basis, the Company records revenue on a percentage of
completion basis based upon performance milestones. The Companys agreement
with the client calls for the billing of fees at specified increments not
directly related to the timing of costs incurred. The Company records deferred
revenue for payments received from certain customers on service contracts prior
to the performance of services required under the service contract. Estimated
losses are recorded when identified.

Approximately 15% of the Companys revenue is performed on a cost-plus basis.
Revenue on cost-plus-fee contracts is recognized to the extent of costs
incurred plus a proportionate amount of the fee earned. Revenue on
time-and-material contracts is recognized to the extent of billable rates times
hours delivered plus expenses incurred.

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

The Companys U.S. Government contracts (approximately 37% of total revenue in
the first quarter of fiscal 2004) are subject to subsequent government audit of
direct and indirect costs. The majority of such audits have been completed
through December 2000. Management does not anticipate any material adjustment
to the consolidated financial statements in subsequent periods for audits not
yet completed.

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

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

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS 4, Reporting Gains and Losses from Extinguishment of
Debt, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of the
related income tax effect. As a result, the criteria in Accounting Principles
Board Opinion No. 30 will now be used to classify those gains and losses. SFAS
145 amends SFAS No. 13, Accounting for Leases, to require that certain lease
modifications that have economic effects similar to sales-leaseback
transactions be accounted for in the same manner as sale-leaseback
transactions. The provisions of SFAS 145 are effective for financial statements
for fiscal years beginning after May 15, 2002. The adoption of SFAS 145 did not
have a material effect on the Companys financial position or results of
operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to

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certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is applicable immediately for variable
interest entities created after January 31, 2003. For variable interest
entities created prior to January 31, 2003, the provisions of FIN 46 are
applicable no later than July 1, 2003. The Company does not expect this
interpretation to have a material effect on its financial position or results
of operations.

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

In May 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, that improves
the accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS 150 requires that three instruments
be classified as liabilities in the statement of financial position. This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective for the Companys quarter beginning
August 1, 2003. The Company does not believe adoption of this statement will
have a material effect on the Companys financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. The statement nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). The statement changes the measurement and
timing of recognition for exit costs, including restructuring charges. The
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. A fundamental
conclusion reached by the Board in this Statement is that an entitys
commitment to a plan, by itself, does not create a present obligation to others
that meets the definition of a liability. The Statement is effective for any
such activities initiated after December 31, 2002. It has no effect on charges
recorded for exit activities begun prior to this date. The adoption of this
statement is not anticipated to have a material effect on the Companys
financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. FIN 45 also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN 45 are effective for the
Companys fiscal 2003 financial statements. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The adoption of FIN 45
did not have a material effect on the Companys financial position or results
of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosures  an amendment of FASB Statement No.
123. SFAS 148 amends SFAS 123 to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
adoption of SFAS 148 did not have a material effect on financial position or
results of operations.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risks

The Companys primary market risks include fluctuations in interest rates
and variability in interest rate spread relationships (i.e., prime or LIBOR
spreads). Substantially all of the Companys $20.1 million in outstanding debt
at July 31, 2003, relates to credit facilities with commercial lending
institutions. Interest on the outstanding balance is charged based on a
variable rate related to the prime rate. The rate is incremented for margins in
the form of fluctuations in interest rates. The effect of a hypothetical one
percentage point increase across all maturities of variable rate debt would
result in a decrease of $201,000 in pre-tax net income assuming no further
changes in the amount of borrowings subject to variable rate interest from the
amounts outstanding at July 31, 2003. The Company does not trade in derivative
financial instruments.




Item 4.  Controls and Procedures

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

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PART II  OTHER INFORMATION




Item 1.    Legal Proceedings

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




Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

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

(b)  Reports on Form 8-K

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



|i. |  | Current Report on Form 8-K filed with the SEC on May 30, 2003, announcing
the agreement to purchase 100% of the common stock of National Systems &
Research Co. (NSR) by the Company.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Current Report on Form 8-K filed with the SEC on June 3, 2003, which
announced that the Company made available a presentation regarding the
Company on its website. Such information in the presentation related to
financial information about completed fiscal periods.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|iii. |  | Current Report on Form 8-K filed with the SEC on June 19, 2003, which
attached and incorporated by reference the Companys press release
regarding financial results for its fourth quarter and fiscal year ending
April 30, 2003.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

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

Date: September 11, 2003SCB COMPUTER TECHNOLOGY, INCBy:
    
    /s/ Michael J. BolingMichael J. Boling
Executive Vice President,
Chief Financial Officer, and Treasurer


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EXHIBIT INDEX

ExhibitNumber
    
    Description of Exhibit10.1*
    
    Loan and Security Agreement dated as of July 23, 2001, among the Company, SCB
Computer Technology of Alabama, Inc., Partners Resources Inc., 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, among the parties (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), as amended by Second Amendment to Loan and
Security Agreement dated as of September 19, 2002, among the parties
(incorporated herein by reference to Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the fiscal quarter ended October 31, 2002, as amended by
Third Amendment to Loan and Security Agreement dated as of February 6, 2003,
among the parties, (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, 2003),
and as amended by Fourth Amendment to Loan and Security Agreement dated as of
June 15, 2003, 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 Commission upon request.10.2*
    
    Loan Agreement dated as of June 15, 2003, by and between the Company and First
Tennessee Bank National Association.10.3*
    
    Intercreditor Agreement dated as of June 15, 2003, by and between the Company,
Wells Fargo Foothill, Inc., f/k/a/ Foothill Capital Corporation, The State Bank
and Trust Company, and First Tennessee Bank National Association.11
    
    Computation of earnings per share (included in Note 2 of the Notes to Condensed
Consolidated Financial Statements (unaudited) in Item 1 of Part I of this report)31.1*
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification by the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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