<PAGE>

================================================================================
                                 UNITED STATES
                      SECURITIES  AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                _______________
                                   FORM 10-Q
                                _______________
(Mark One)

   [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 2001

                                      OR

   [_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                              __________________

                       Commission file number 000-23195

                            TIER TECHNOLOGIES, INC.
            (Exact name of Registrant as specified in its charter)
                              __________________

                 California                                 94-3145844
        (State or other jurisdiction                     (I.R.S. Employer
      of incorporation or organization                  Identification No.)

                        1350 Treat Boulevard, Suite 250
                        Walnut Creek, California 94596
                   (Address of principal executive offices)
                                  (Zip Code)

                                (925) 937-3950
             (Registrant's telephone number, including area code)
                                _______________

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.

            (1) Yes [X] No [_]              (2) Yes [X] No [_]

As of August 6, 2001, the number of shares outstanding of the Registrant's Class
A Common Stock was 967,754 and the number of shares outstanding of the
Registrant's Class B Common Stock was 12,110,394.

This report contains a total of 27 pages of which this page is number 1.
================================================================================
<PAGE>

                            TIER TECHNOLOGIES, INC.

                                   FORM 10-Q

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                  Part I -- FINANCIAL INFORMATION

                                                                                                                                Page
                                                                                                                                ----
<S>                                                                                                                             <C>
Item 1.      Condensed Consolidated Financial Statements (unaudited)

             Condensed Consolidated Balance Sheets as of June 30, 2001 and September 30, 2000...............................       3

             Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2001 and 2000.....       4

             Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2001 and 2000...............       5

             Notes to Condensed Consolidated Financial Statements...........................................................       6

  Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations..........................      12

  Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....................................................      25

                                                   Part II -- OTHER INFORMATION

  Item 6.    Exhibits and Reports on Form 8-K...............................................................................      26

  Signatures................................................................................................................      27
</TABLE>

Private Securities Litigation Reform Act Safe Harbor Statement

  Certain statements contained in this report, including statements regarding
the development of the Company's services, markets and future demand for the
Company's services, and other statements regarding matters that are not
historical facts, are "forward-looking statements" within the meaning of federal
securities laws. When used in this report, the words "believes", "expects",
"anticipates", "intends", "estimates", "shows", "will likely" and similar
expressions are intended to identify such forward-looking statements. Such
forward-looking statements include risks and uncertainties; consequently, actual
results may differ materially from those expressed or implied thereby. Factors
that could cause actual results to differ materially from those set forth herein
include, but are not limited to, those factors listed in ''Factors that May
Affect Future Results'' section, as set forth beginning on page 18 of this
report. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this report. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements or factors to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events.

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                            TIER TECHNOLOGIES, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (unaudited)
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                                   June 30,      September 30,
                                                                                                     2001            2000
                                                                                                   --------      -------------
<S>                                                                                                <C>            <C>
                                          ASSETS
                                          ------
Current assets:
  Cash and cash equivalents...............................................................         $ 14,343       $ 10,256
  Short-term investments..................................................................            8,230          9,657
  Accounts receivable, net................................................................           25,039         24,718
  Prepaid expenses and other current assets...............................................            3,756          3,322
                                                                                                   --------       --------
     Total current assets.................................................................           51,368         47,953
Equipment and software, net...............................................................            5,046          5,914
Notes and accrued interest receivable from related parties................................            1,980          1,924
Acquired intangible assets, net...........................................................           36,816         40,126
Other assets..............................................................................            4,624          5,245
                                                                                                   --------       --------
     Total assets.........................................................................         $ 99,834       $101,162
                                                                                                   ========       ========

                           LIABILITIES AND SHAREHOLDERS' EQUITY
                           ------------------------------------
Current liabilities:
  Accounts payable........................................................................         $  1,700       $  4,314
  Accrued liabilities.....................................................................            1,855          2,389
  Accrued subcontractor expenses..........................................................            1,156          1,597
  Accrued compensation and related liabilities............................................            3,959          4,321
  Purchase price payable..................................................................            4,704         12,345
  Other current liabilities...............................................................            1,258          1,642
                                                                                                   --------       --------
     Total current liabilities............................................................           14,632         26,608
Borrowings and capital lease obligations, less current portion............................            8,740          1,385
Purchase price payable....................................................................            1,775          3,892
                                                                                                   --------       --------
     Total liabilities....................................................................           25,147         31,885
                                                                                                   --------       --------

Commitments and contingent liabilities

Shareholders' equity:
  Common stock, no par value..............................................................           68,726         65,937
  Notes receivable from shareholders......................................................           (1,773)        (1,773)
  Deferred compensation...................................................................               --           (117)
  Accumulated other comprehensive loss....................................................           (4,739)        (3,571)
  Retained earnings.......................................................................           12,473          8,801
                                                                                                   --------       --------
     Total shareholders' equity...........................................................           74,687         69,277
                                                                                                   --------       --------
     Total liabilities and shareholders' equity...........................................         $ 99,834       $101,162
                                                                                                   ========       ========
</TABLE>

           See Notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>

                            TIER TECHNOLOGIES, INC.

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



<TABLE>
<CAPTION>
                                                                            Three Months              Nine Months
                                                                                Ended                   Ended
                                                                               June 30,                 June 30,
                                                                         -------------------      ----------------------
                                                                           2001         2000         2001         2000
                                                                        ---------     --------     --------     --------
<S>                                                                     <C>           <C>          <C>          <C>
Revenues............................................................      $26,956      $27,657      $88,747      $79,760
Cost of revenues....................................................       15,642       16,976       55,337       48,918
                                                                          -------      -------      -------      -------
Gross profit........................................................       11,314       10,681       33,410       30,842
Costs and expenses:
  Selling and marketing.............................................        2,220        2,003        6,002        5,369
  General and administrative........................................        5,520        5,599       16,659       17,362
  Other nonrecurring charges........................................           --          644           --        2,195
  Depreciation and amortization.....................................        1,786        1,665        5,337        4,350
                                                                          -------      -------      -------      -------
Income from operations..............................................        1,788          770        5,412        1,566
Interest income (expense), net......................................          179          206          608          640
                                                                          -------      -------      -------      -------
Income before income taxes..........................................        1,967          976        6,020        2,206
Provision for income taxes..........................................          747          405        2,348        1,531
                                                                          -------      -------      -------      -------
Net income..........................................................      $ 1,220      $   571      $ 3,672      $   675
                                                                          =======      =======      =======      =======
Basic net income per share..........................................      $  0.10      $  0.05      $  0.29      $  0.05
                                                                          =======      =======      =======      =======
Shares used in computing basic net income per share.................       12,701       12,374       12,576       12,306
                                                                          =======      =======      =======      =======
Diluted net income per share........................................      $  0.09      $  0.05      $  0.28      $  0.05
                                                                          =======      =======      =======      =======
Shares used in computing diluted net income per share...............       13,603       12,527       13,177       12,755
                                                                          =======      =======      =======      =======
</TABLE>




            See Notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>

                            TIER TECHNOLOGIES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                           Nine Months
                                                                                              Ended
                                                                                             June 30,
                                                                                     ---------------------------
                                                                                         2001           2000
                                                                                      ----------     ----------
<S>                                                                                  <C>             <C>
Net cash provided by operating activities..........................................    $  6,243       $ 6,107
                                                                                       --------       -------
Investing activities:
Purchases of equipment and software................................................      (1,993)       (1,702)
Notes and accrued interest receivable from related parties.........................        (410)         (597)
Repayment on notes and accrued interest receivable from related parties............         276           408
Business combinations, net of cash acquired........................................      (9,867)       (9,747)
Subsidiary disposal, net of cash...................................................          --         3,497
Restricted cash....................................................................          --           410
Purchases of available-for-sale securities.........................................      (7,947)       (3,646)
Sales of available-for-sale securities.............................................       3,696         2,619
Maturities of available-for-sale securities........................................       5,678         2,888
Other assets.......................................................................          (2)          122
                                                                                       --------       -------
Net cash used in investing activities..............................................     (10,569)       (5,748)
                                                                                       --------       -------
Financing activities:
Borrowings under bank lines of credit..............................................       7,500         1,727
Payments on borrowings.............................................................          --          (271)
Repurchase of common stock.........................................................          --        (1,606)
Net proceeds from issuance of common stock.........................................       1,332         1,265
Payments on capital lease obligations and notes payable to shareholders............        (186)         (238)
                                                                                       --------       -------
Net cash provided by financing activities..........................................       8,646           877
                                                                                       --------       -------
Effect of exchange rate changes on cash............................................        (233)         (142)
                                                                                       --------       -------
Net increase in cash and cash equivalents..........................................       4,087         1,094
Cash and cash equivalents at beginning of period...................................      10,256        10,121
                                                                                       --------       -------
Cash and cash equivalents at end of period.........................................    $ 14,343       $11,215
                                                                                       ========       =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
  Interest.........................................................................    $    414       $   306
                                                                                       ========       =======
  Income taxes paid (refunded), net................................................    $  2,119       $ 3,254
                                                                                       ========       =======
Supplemental disclosures of non-cash transactions:
Equipment acquired under capital lease obligations.................................    $     --       $    54
                                                                                       ========       =======
Assumed liabilities related to business combinations...............................    $     --       $ 1,393
                                                                                       ========       =======
Class B common stock issued in business combinations...............................    $  1,184       $   930
                                                                                       ========       =======
Conversion of Class A common stock to Class B common stock.........................    $    286       $    93
                                                                                       ========       =======
Class B common stock returned in disposal of business..............................    $     --       $ 1,328
                                                                                       ========       =======
</TABLE>




            See Notes to Condensed Consolidated Financial Statements

                                       5
<PAGE>

                            TIER TECHNOLOGIES, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

NOTE 1 -- BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements of Tier
Technologies, Inc. ("Tier" or the "Company") include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. In the opinion of management,
the condensed consolidated financial statements reflect all normal and recurring
adjustments which are necessary for a fair presentation of the Company's
financial position, results of operations and cash flows as of the dates and for
the periods presented. The condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Consequently, these statements do not include all the
disclosures normally required by generally accepted accounting principles for
annual financial statements nor those normally made in the Company's Annual
Report on Form 10-K. Accordingly, reference should be made to the Company's Form
10-K filed on December 7, 2000 and other reports the Company filed with the
Securities and Exchange Commission for additional disclosures, including a
summary of the Company's accounting policies, which have not materially changed.
The consolidated results of operations for the three months and nine months
ended June 30, 2001 are not necessarily indicative of results that may be
expected for the fiscal year ending September 30, 2001 or any future period, and
the Company makes no representations related thereto.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities and the results of operations
during the reporting period. Actual results could differ materially from those
estimates.

     Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.

NOTE 2 -- REVENUE RECOGNITION

     The majority of the Company's revenues are derived from professional
consulting and processing services billed to clients on either a time and
materials basis, a fixed price basis or a per-transaction basis. Time and
materials revenues are recognized as services are performed. Revenues from fixed
price contracts are recognized using the percentage-of-completion method of
contract accounting based on the ratio of incurred costs to total estimated
costs. Losses on contracts are recognized when they become known and reasonably
estimable. Actual results of contracts may differ from management's estimates
and such differences could be material to the consolidated financial statements.
Revenues from performance-based contracts are recognized based on fees charged
on a per-transaction basis. Most of the Company's contracts are terminable by
the client following limited notice and without significant penalty to the
client. The completion, cancellation or significant reduction in the scope of a
large project would have a material adverse effect on the Company's business,
financial condition and results of operations.  For the three months ended June
30, 2001, revenues from two clients totaled approximately $3,296,000 and
$2,860,000, which represented 12.2% and 10.6% of total revenues, respectively.
For the nine months ended June 30, 2001, revenues from another client totaled
approximately $13,517,000 which represented 15.2% of total revenues.

     Unbilled receivables represent revenue recognized in excess of amounts
billed in accordance with contractual billing terms. Unbilled receivables at
June 30, 2001 and September 30, 2000 were $10,420,000 and $9,567,000,
respectively, of which $1,371,000 and $2,145,000, respectively, were included in
non-current other assets as these amounts were not billable for more than one
year under the terms of the contracts. Unbilled receivable for one client
accounted for 21.3% of total net accounts receivable at June 30, 2001.



                                       6
<PAGE>

                            TIER TECHNOLOGIES, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (unaudited)

NOTE 2 - REVENUE RECOGNITION (continued)

     Worldwide revenues derived from sales to governmental agencies were
$16,019,000 and $16,415,000 for the three months ended June 30, 2001 and 2000,
respectively and $54,378,000 and $47,394,000 for the nine months ended June 30,
2001 and 2000, respectively.


NOTE 3 -- ACQUISITIONS

ADC Consultants Pty ("ADC")

     During the quarter ended June 30, 2001, the Company paid approximately
$395,000 (based on an exchange rate of AU $2.03 to US $1.00) for the achievement
of certain performance targets in accordance with the purchase agreement for
ADC.

Service Design Associates ("SDA")

     During the quarter ended June 30, 2001, the Company issued approximately
134,000 shares of Class B common stock valued at approximately $1,184,000 as
payment for the achievement of certain performance targets in accordance with
the purchase agreement for certain assets and liabilities of SDA.  The Company
also accrued approximately $1,416,000 as a result of the achievement of certain
performance targets in accordance with the purchase agreement for certain assets
and liabilities of SDA.

The SCA Group, Inc. and Harris Chapman (collectively "SCA")

     During the quarter ended June 30, 2001, the Company paid $1,833,000 for the
achievement of certain performance targets in accordance with the purchase
agreement for certain assets and liabilities of SCA.


NOTE 4 -- BANK LINES OF CREDIT

     At June 30, 2001, the Company had a $10 million revolving credit facility,
of which $2.5 million may be used for letters of credit. The credit facility has
a maturity date of August 26, 2002. The total commitment amount is limited to
85% of eligible accounts receivable plus 50% of up to $6 million of eligible
unbilled receivables. The credit facility is secured by first priority liens and
security interests in the Company's assets (excluding assets owned by Tier
Technologies (Australia) Pty Ltd., Simsion Bowles & Associates ("SBA") and ADC
Consultants Pty Ltd.), including a pledge of 65% of the stock of the Company's
subsidiaries excluding SBA. Interest is based on either the adjusted LIBOR rate
plus 2.5% or the lender's announced prime rate plus 0.25%, at the Company's
option and is payable monthly. As of June 30, 2001, the interest rate was
approximately 6.6% and the outstanding borrowings were $7.5 million. In
addition, standby letters of credit totaling approximately $346,000 were
outstanding at June 30, 2001. Among other provisions, the credit facility
requires the Company to maintain certain minimum financial ratios. As of June
30, 2001, the Company was in compliance with all financial ratios.

                                       7
<PAGE>

                            TIER TECHNOLOGIES, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (unaudited)

NOTE 4 -- BANK LINES OF CREDIT (continued)

     At June 30, 2001, the Company (through one of its Australian subsidiaries)
had a credit facility that included a $1.3 million revolving line of credit with
St. George Bank Limited of Australia (based on a June 30, 2001 exchange rate of
AU $1.95 to US $1.00). Under the terms of the amended credit facility, the
principal balance of the credit line will reduce during the quarter ending
September 30, 2001 to a maximum line of approximately $1.0 million. The line of
credit bears interest at fixed rates that are set at the time of each drawdown
on the line. In December 1999, the balance of the line of credit was converted
to a variable rate loan ("Loan"). The variable rate is based upon the bank's
prime rate less 1.25% and interest is payable monthly. As of June 30, 2001, the
interest rate was 8.0% and the outstanding balance of the Loan was approximately
$1.3 million. The credit facility also provides for the issuance of letters of
credit up to $148,000. Letters of credit totaling $141,000 were outstanding as
of June 30, 2001. Among other provisions, the credit facility requires the
Company's Australian subsidiary to maintain certain minimum financial ratios. As
of June 30, 2001, the Company's Australian subsidiary was not in compliance with
certain provisions of this credit facility; however, the bank waived such
noncompliance.

NOTE 5 -- NET INCOME PER SHARE

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

<TABLE>
<CAPTION>
                                                                                      Three Months           Nine Months
                                                                                         Ended                  Ended
                                                                                        June 30,               June 30,
                                                                                     -----------------   --------------------
                                                                                      2001      2000       2001       2000
                                                                                    --------   -------   -------    --------
                                                                                     (in thousands, except per share data)
<S>                                                                              <C>        <C>          <C>        <C>
  Numerator:
     Net income................................................................    $ 1,220      $   571    $ 3,672    $   675
                                                                                   =======      =======    =======    =======
  Denominator for basic net income per share-weighted average
           common shares outstanding    shares outstanding.....................     12,701       12,374     12,576     12,306
  Effects of dilutive securities:
     Common stock options......................................................        902          137        591        269
     Common stock contingently issuable........................................         --           16         10        180
                                                                                   -------      -------    -------    -------
  Denominator for diluted net income per share-adjusted weighted
           average common shares and assumed conversions.......................     13,603       12,527     13,177     12,755
                                                                                   =======      =======    =======    =======
  Basic net income per share...................................................    $  0.10      $  0.05    $  0.29    $  0.05
                                                                                   =======      =======    =======    =======
  Diluted net income per share.................................................    $  0.09      $  0.05    $  0.28    $  0.05
                                                                                   =======      =======    =======    =======
</TABLE>

     Options to purchase approximately 958,000 and 1,441,000 shares of Class B
common stock at exercise prices ranging from $10.88 to $17.81 per share and
$8.63 to $17.81 per share, respectively, were not included in the computation of
diluted net income per share for the three months and nine months ended June 30,
2001, respectively, because the options' exercise prices were greater than the
average market price of the shares for these periods.  Options to purchase
approximately 3,371,000 and 2,313,000 shares of Class B common stock at exercise
prices ranging from $5.78 to $17.81 per share and $6.81 to $17.81 per share,
respectively, were not included in the computation of diluted net income per
share for the three and nine months ended June 30, 2000, respectively, because
the options' exercise prices were greater than the average market price of the
shares for these periods.

                                       8
<PAGE>

                            TIER TECHNOLOGIES, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (unaudited)

NOTE 6 -- COMPREHENSIVE INCOME (LOSS)

  The Company's comprehensive income (loss) was as follows:

<TABLE>
<CAPTION>
                                                                                 Three Months Ended        Nine Months Ended
                                                                                       June 30,                 June 30,
                                                                                 ------------------        -----------------
                                                                                  2001       2000         2001        2000
                                                                                                (in thousands)
  <S>                                                                            <C>         <C>          <C>         <C>
  Net income...................................................................    $ 1,220     $  571     $  3,672    $    675
  Foreign currency translation adjustment......................................        793       (407)      (1,168)     (1,536)
                                                                                   -------     ------     --------    --------
  Total comprehensive income (loss)............................................    $ 2,013     $  164     $  2,504    $   (861)
                                                                                   =======     ======     ========    ========
</TABLE>

NOTE 7--OTHER NONRECURRING CHARGES

  In April 2000, the Company recorded $644,000 of expense for severance costs
related to a former officer.

  In March 2000, the Company completed the sale of its U.K. subsidiary, Midas
Computer Software Limited ("Midas").  The gross proceeds, including repayment of
intercompany debt of approximately $1.4 million, amounted to approximately $2.6
million in cash and $1.3 million attributable to a release of 51,074 shares of
the Company's Class B common stock and a share guarantee on the original
acquisition.  The Company recorded a nonrecurring loss of approximately $1.3
million as a result of the sale of Midas.

  In December 1999, the Company recorded $263,000 of expense for severance costs
related to a former officer.

NOTE 8--ALLIANCE AGREEMENT

  In September 1999, the Company entered into a long-term strategic alliance
("Alliance Agreement"), with Siemens Business Services Limited ("SBS").  Under
this Alliance Agreement, the Company has two existing contracts - the
Application Service Center ("ASC") contract and the Consulting contract.  Under
the amended ASC contract, effective August 31, 2001, the Company has committed
to utilizing a minimum amount of resources that SBS is obligated to mobilize
pursuant to the ASC contract. The Company will market the ASC's services
worldwide in exchange for fees based on the utilization of ASC resources by
third parties. To the extent there is a shortfall in utilization, the Company's
maximum obligation under the ASC contract for under-utilization shall not exceed
$15.3 million (based on the June 30, 2001 exchange rate of GBP 0.71 to US $1.00)
over the commitment period ending January 1, 2003. Through June 30, 2001, there
were no minimum utilization requirements under the ASC contract. Pursuant to the
Consulting contract, SBS guaranteed that it would engage the Company to provide
a minimum of $9.9 million (based on the June 30, 2001 exchange rate of GBP 0.71
to US $1.00) for consultancy services over the life of the Consulting contract.
From September 1999 through June 30, 2001, the Company has recognized a total of
$20.0 million in revenues under the Consulting contract (based on the June 30,
2001 exchange rate of GBP 0.71 to US $1.00).

                                       9
<PAGE>

                            TIER TECHNOLOGIES, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (unaudited)

NOTE 9--SEGMENT INFORMATION

  The Company is managed through four reportable segments:  U.S. Commercial
Services, U.S. Government Services, Australian Operations and United Kingdom
Operations.  The Company evaluates the performance of its operating segments
based on revenue and gross profit (net revenue less direct costs), while other
operating costs are evaluated on a geographic basis.  Accordingly, the Company
does not include selling and marketing expenses, general and administrative
expenses, depreciation and amortization expense not attributable to client
projects, interest income (expense), other income (expense) or income tax
expense in segment profitability.  The table below presents financial
information for the four reportable segments:

<TABLE>
<CAPTION>
                                                     U.S.        U.S.                    United
                                                  Commercial  Government   Australian   Kingdom
                                                   Services    Services    Operations  Operations    Total
                                                  ----------  -----------  ----------  ----------  ---------
                                                                        (in thousands)
<S>                                               <C>         <C>          <C>         <C>         <C>
Three Months Ended June 30, 2001:
  Revenues......................................    $  6,814     $ 13,751    $  5,137    $  1,254   $ 26,956
  Gross profit..................................       3,241        5,819       1,920         334     11,314

Three Months Ended June 30, 2000:
  Revenues......................................    $  5,676     $ 12,629    $  6,669    $  2,683   $ 27,657
  Gross profit..................................       2,435        4,985       2,390         871     10,681

Nine Months Ended June 30, 2001:
  Revenues......................................    $ 21,464     $ 38,042    $ 15,713    $ 13,528   $ 88,747
  Gross profit..................................       9,848       15,153       5,499       2,910     33,410

Nine Months Ended June 30, 2000:
  Revenues......................................    $ 13,049     $ 37,370    $ 20,313    $  9,028   $ 79,760
  Gross profit..................................       4,740       15,500       7,480       3,122     30,842
</TABLE>


NOTE 10--NEW ACCOUNTING PRONOUNCEMENTS

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101").  SAB 101 is effective no later than the fourth quarter of fiscal year
2001. The Company does not expect that the adoption of SAB 101 will have a
significant impact on the consolidated financial statements.

  In July 2001, the FASB issued two Statements, Statement No. 141, "Business
Combinations" ("SFAS No. 141"), and Statement No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142").  SFAS No. 141 revises accounting treatment
for business combinations requiring the use of purchase accounting and
prohibiting the use of pooling-of-interests method for all business combinations
initiated after June 30, 2001 and broadens the criteria for recording intangible
assets separate from goodwill for all business combinations completed after June
30, 2001.   SFAS No. 142 revises the accounting for goodwill and other
intangible assets by not allowing amortization of goodwill and establishing
accounting for impairment of goodwill and other intangible assets.  SFAS No. 142
will be effective for fiscal years beginning after December 15, 2001, with early
adoption allowed for companies with a fiscal year beginning after March 15,
2001.  The Company expects to adopt SFAS No. 142 as of October 1, 2002, the
beginning of its fiscal year 2003.  The Company has not yet evaluated the
effects of these changes on its consolidated financial statements.

                                       10
<PAGE>

                            TIER TECHNOLOGIES, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (unaudited)


NOTE 11--SUBSEQUENT EVENTS

  In August 2001, the Company amended its revolving credit facility increasing
the amount available for borrowing from $10.0 million to $15.0 million. The
amendment also removed the limit on the commitment amount based on accounts
receivable and unbilled receivables balances. In addition, the amendment added a
$2.5 million non-revolving equipment facility that can be drawn down through
February 28, 2002 and will bear interest at the lender's announced prime rate
plus 0.50% or the LIBOR rate plus 2.75%, at the Company's option.

  In July 2001, the Company acquired certain assets and liabilities of The Point
Group Companies, Inc. ("TPG"), a Massachusetts corporation that specializes in
the criminal justice, public safety, and health and human services state and
local vertical markets. The initial purchase price totaled approximately $1.9
million in cash and shares of Class B common stock, including $200,000 in
estimated acquisition costs. The acquisition will be accounted for using the
purchase method of accounting. Additional contingent payments of up to
approximately $2.8 million in cash and shares of Class B common stock may be
paid to TPG upon the achievement of certain revenue and earnings performance
targets over the three-year period ending May 31, 2004. Contingent payments will
be accrued when earned and recorded as additional purchase price.
Board Statement No. 142.

                                       11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Overview

  Tier is a vertically focused global consulting firm that delivers end-to-end
business solutions to its national and multinational clients.  The Company
provides business solutions utilizing a variety of delivery offerings that are
tailored to specific client industries and governmental agencies, and include
solutions that link systems and technology improvements to increased operating
efficiencies.  Through offices located in the United States, Australia and the
United Kingdom, the Company works closely with it's Fortune 1000, government and
other clients to determine, evaluate and implement strategies that allow it to
rapidly channel emerging technologies into business operations.  The Company's
revenues increased to $88.7 million in the nine months ended June 30, 2001 from
$79.8 million in the nine months ended June 30, 2000. A significant portion of
the Company's revenues are derived from sales to government agencies. For the
nine months ended June 30, 2001, approximately 61.3% of the Company's revenues
were derived from sales to government agencies, as compared to 59.4% for the
nine months ended June 30, 2000. The Company's workforce, comprised of
employees, independent contractors and subcontractors, has grown to 935 on June
30, 2001 from 916 on June 30, 2000.

  The Company's revenues are derived primarily from professional consulting and
processing services billed to clients on either a time and materials basis, a
fixed price basis, or a per-transaction basis. Time and materials revenues are
recognized as services are performed and expenses are incurred. Fixed price
revenues are recognized using the percentage-of-completion method, based upon
the ratio of costs incurred to total estimated project costs. Revenues from
performance-based contracts are recognized based on fees charged on a per-
transaction basis.  The percentage of the Company's revenues generated on a time
and materials basis was 53.7% and 52.2% for the nine months ended June 30, 2001
and 2000, respectively. The percentage of the Company's revenues generated on a
fixed price basis was  20.5% and 30.0% for the nine months ended June 30, 2001
and 2000, respectively. The percentage of revenues generated on a per-
transaction basis was 25.8% and 16.1% for the nine months ended June 30, 2001
and 2000, respectively.  The increase in revenues generated on a per-transaction
basis results from an increase in the number of Vertical ASP operations and
increased transaction volume at existing centers.  Substantially all of Tier's
contracts are terminable by the client following limited notice and without
significant penalty to the client. From time to time, in the regular course of
its business, the Company negotiates the modification, termination, renewal or
transition of time and materials, fixed price and per-transaction based
contracts that may involve an adjustment to the scope or nature of the project,
billing rates, percent complete or gross profit margins.  If the Company
significantly overestimates the volume for transaction-based contracts or
underestimates the resources or time required for fixed price and per-
transaction based contracts, its financial condition and results of operations
would be materially and adversely affected.  Unsatisfactory performance or
unanticipated difficulties or delays in completing projects may result in client
dissatisfaction and a reduction in payment to, or payment of damages (as a
result of litigation or otherwise) by the Company, which could have a material
adverse effect upon our business, financial condition and result of operations.

  The Company has derived a significant portion of its revenues from a small
number of large clients. For some of these clients, the Company performs a
number of different projects pursuant to multiple contracts or purchase orders.
For the three months ended June 30, 2001, State of Missouri and District of
Columbia accounted for 12.2% and 10.6% of the Company's revenues, respectively.
For the nine months ended June 30, 2001, Siemens Business Services Limited
("SBS") accounted for 15.2% of the Company's revenues.  The Company anticipates
that a substantial portion of its revenues will continue to be derived from a
small number of large clients. The completion, cancellation or significant
reduction in the scope of a large project would have a material adverse effect
on the Company's business, financial condition and results of operations.

  Personnel, facility and depreciation and amortization expenses represent a
significant percentage of the Company's operating expenses and are relatively
fixed in advance of any particular quarter. The Company manages its personnel
utilization rates by carefully monitoring its needs and anticipating personnel
increases based on specific project requirements. To the extent revenues do not
increase at a rate commensurate with these additional expenses, the Company's
results of operations could be materially and adversely affected. In addition,
to the extent that the Company is

                                       12
<PAGE>

unable to hire and retain salaried employees to staff new or existing client
engagements or retain hourly employees or contractors, the Company's business,
financial condition and results of operations would be materially and adversely
affected.

  From December 1996 through June 30, 2001, the Company made fifteen
acquisitions for a total cost of approximately $54.8 million in cash and shares
of Class B Common Stock, excluding future contingent payments. The Company also
incurred $2.5 million in compensation charges related to business combinations
resulting from these acquisitions. Generally, contingent payments are recorded
as additional purchase price at the time the payment can be determined beyond a
reasonable doubt. If a contingent payment is based, in part, on a seller's
continuing employment with the Company, the payments are recorded as
compensation expense over the vesting period when the amount is deemed probable.
These acquisitions helped the Company to expand its operations in the United
States, to establish its operations in Australia and the United Kingdom, to
broaden the Company's client base, delivery offerings and technical expertise
and to supplement its human resources.

  International operations accounted for 32.9% and 36.8% of revenues for the
nine months ended June 30, 2001 and June 30, 2000, respectively. The Company
believes that the percentage of total revenues attributable to international
operations will continue to be significant. International operations may subject
the Company to foreign currency translation adjustments and transaction gains
and losses for amounts denominated in foreign currencies.

Results of Operations

  The following summarizes the Company's operating results as a percentage of
revenues for each of the periods indicated:

<TABLE>
<CAPTION>
                                                                    Three Months                  Nine Months
                                                                   Ended June 30,                Ended June 30,
                                                                 -------------------          --------------------
                                                                 2001          2000           2001           2000
                                                                 -----         -----          -----          -----
<S>                                                              <C>           <C>            <C>           <C>
Revenues...............................................          100.0%        100.0%         100.0%         100.0%
Cost of revenues.......................................           58.0          61.4           62.4           61.3
                                                                 -----         -----          -----          -----
Gross profit...........................................           42.0          38.6           37.6           38.7
Costs and expenses:
  Selling and marketing................................            8.3           7.2            6.8            6.7
  General and administrative...........................           20.5          20.3           18.7           21.8
  Other nonrecurring charges...........................             --           2.3             --            2.8
  Depreciation and amortization........................            6.6           6.0            6.0            5.4
                                                                 -----         -----          -----          -----
Income from operations.................................            6.6           2.8            6.1            2.0
Interest income (expense), net.........................            0.7           0.7            0.7            0.8
                                                                 -----         -----          -----          -----
Income before income taxes.............................            7.3           3.5            6.8            2.8
Provision for income taxes.............................            2.8           1.4            2.7            1.9
                                                                 -----         -----          -----          -----
Net income.............................................            4.5%          2.1%           4.1%           0.9%
                                                                 =====         =====          =====          =====
</TABLE>

Three Months Ended June 30, 2001 and June 30, 2000

  Revenues. Revenues are generated primarily by providing professional
consulting and processing services on client engagements. Revenues decreased
2.5% to $27.0 million for the three months ended June 30, 2001 from $27.7
million for the three months ended June 30, 2000. This decrease resulted
primarily from a decrease in United Kingdom operation revenues resulting from
the completion of several projects under the Alliance Agreement with Siemens
Business Services Limited ("SBS").

  Gross Profit. Cost of revenues consists primarily of those costs directly
attributable to providing service to a client, including employee salaries and
incentive compensation, independent contractor and subcontractor costs, employee
benefits, payroll taxes, travel-related expenditures, and any project-related
equipment, hardware or software purchases.

                                       13
<PAGE>

For payment processing center operations, cost of revenues also include
facility, equipment and direct overhead costs. Included in cost of revenues is
$354,000 and $312,000 of depreciation and amortization for the three months
ended June 30, 2001 and 2000, respectively. Gross profit increased 5.9% to $11.3
million for the three months ended June 30, 2001 from $10.7 million in the three
months ended June 30, 2000. Gross profit as a percentage of revenues increased
to 42.0% for the three months ended June 30, 2001 as compared to 38.6% in the
three months ended June 30, 2000. This increase resulted primarily from the
decrease in United Kingdom operation revenues which had a higher use of
subcontractors and lower gross profit margins.

  Selling and Marketing. Selling and marketing expenses consist primarily of
personnel costs, sales commissions, advertising and marketing expenditures and
travel-related expenditures.  Selling and marketing expenses increased 10.8% to
$2.2 million for the three months ended June 30, 2001 from $2.0 million for the
three months ended June 30, 2000. As a percentage of revenues, selling and
marketing expenses increased to 8.3% for the three months ended June 30, 2001
from 7.2% for the three months ended June 30, 2000. The increase in selling and
marketing expenses in total dollars was primarily attributable to the cost of a
feasibility study performed in partnership with SBS. The Company expects selling
and marketing expenses to increase in total dollars in future quarters as the
Company continues to make investments in its marketing and branding initiatives
and its business development efforts.

  General and Administrative. General and administrative expenses consist
primarily of personnel costs related to general management, administrative and
other nonbillable functions, human resources, resource management, staffing,
accounting and finance, legal and information systems, as well as professional
fees related to legal, audit, tax, external financial reporting and investor
relations matters. General and administrative expenses decreased 1.4% to $5.5
million for the three months ended June 30, 2001 from $5.6 million for the three
months ended June 30, 2000. As a percentage of revenues, general and
administrative expenses increased to 20.5% for the three months ended June 30,
2001 from 20.3% for the three months ended June 30, 2000.  Over the longer term,
the Company expects general and administrative expenses as a percentage of
revenues to be in the range of 17% to 18% on a fiscal year basis.  Included in
general and administrative expenses is compensation charges related to business
combinations of $407,000 for the three months ended June 30, 2000.  This charge
resulted from the amortization of the value of shares that were released over a
three-year period in connection with the acquisition of Simpson Fewster & Co.
Pty Limited ("SFC") and contingent payments earned in accordance with the
acquisition agreements for SFC and Infact Pty Limited as Trustee of the Infact
Unit Trust.  The Company may incur compensation charges related to business
combinations in future quarters due to acquisition earnout payments becoming
probable.

  Other Nonrecurring Charges.  The other nonrecurring charge of $644,000 for the
three months ended June 30, 2000, resulted primarily from severance costs paid
to a former officer.

  Depreciation and Amortization. Depreciation and amortization consists
primarily of expenses associated with the depreciation of equipment and
improvements and amortization of intangible assets resulting from acquisitions
and other intellectual property. Depreciation and amortization increased 7.3% to
$1.8 million for the three months ended June 30, 2001 from $1.7 million for the
three months ended June 30, 2000. As a percentage of revenues, depreciation and
amortization increased to 6.6% for the three months ended June 30, 2001 from
6.0% for the three months ended June 30, 2000. The increase in depreciation and
amortization expense in total dollars was primarily attributable to the
amortization of increased intangible assets from business combinations.  The
Company expects depreciation and amortization will continue to increase in
total dollars.

  Interest Income (Expense), Net. Net interest income decreased 13.1% to
$179,000 for the three months ended June 30, 2001 compared to net interest
income of $206,000 for the three months ended June 30, 2000. This decrease was
primarily attributable to higher interest expense as a result of the outstanding
line of credit balance.

  Provision for Income Taxes. The provision for income taxes was $747,000 for
the three months ended June 30, 2001 compared to $405,000 for the three months
ended June 30, 2000. For the three months ended June 30, 2001 and 2000, the
Company's effective tax rate was 38.0% and 41.5%, respectively. The future tax
rate may vary due to a variety of factors, including, but not limited to, the
relative income contribution by domestic and foreign operations, changes in
statutory tax rates, the amount of tax exempt interest income generated during
the year, the ability to utilize foreign tax credits and any

                                       14
<PAGE>

non-deductible items related to acquisitions or other nonrecurring charges. The
Company will continue to closely monitor the effective tax rate on a quarterly
basis.

Nine Months Ended June 30, 2001 and June 30, 2000

  Revenues. Revenues increased 11.3% to $88.7 million for the nine months ended
June 30, 2001 from $79.8 million for the nine months ended June 30, 2000.
Revenues for the nine months ended June 30, 2000 include $3.1 million of
revenues from the Company's U.K. subsidiary, Midas Computer Software Limited
("Midas"), which was sold in March 2000. Excluding revenue from Midas, revenues
increased 15.7% to $88.7 million for the nine months ended June 30, 2001 from
$76.7 million in the nine months ended June 30, 2000. This increase resulted
primarily from growth in United Kingdom operations resulting from increased
revenues under the Alliance Agreement with SBS and growth in U.S. Commercial
Services revenues partially offset by a decrease in Australian operations
resulting from the general weakness in the Australian economy.

  Gross Profit. Gross profit increased 8.3% to $33.4 million for the nine months
ended June 30, 2001 from $30.8 million for the nine months ended June 30, 2000.
Gross profit margin decreased to 37.6% for the nine months ended June 30, 2001
from 38.7% for the nine months ended June 30, 2000. Excluding the results of
Midas, gross profit increased 12.0% to $33.4 million for the nine months ended
June 30, 2001 from $29.8 million in the nine months ended June 30, 2000. Gross
margin, excluding Midas, decreased to 37.6% for the nine months ended June 30,
2001 from 38.9% for the nine months ended June 30, 2000. The decrease in gross
profit margin, excluding the results of Midas, was primarily attributable to the
increased revenue from United Kingdom operations which had a higher use of
subcontractors and lower gross profit margins.

  Selling and Marketing. Selling and marketing expenses increased 11.8% to $6.0
million for the nine months ended June 30, 2001 from $5.4 million for the nine
months ended June 30, 2000. As a percentage of revenues, selling and marketing
expenses increased to 6.8% for the nine months ended June 30, 2001 from 6.7% for
the nine months ended June 30, 2000. Excluding the results of Midas, selling and
marketing expenses increased 25.0% to $6.0 million for the nine months ended
June 30, 2001 from $4.8 million for the nine months ended June 30, 2000. As a
percentage of revenues, selling and marketing expenses, excluding Midas,
increased to 6.8% of revenues for the nine months ended June 30, 2001 from 6.3%
in the nine months ended June 30, 2000. The increase in selling and marketing
expenses in total dollars, excluding the results of Midas, was primarily
attributable to the addition of sales and marketing personnel including labor
costs associated with the Company's increased use of "seller-doers", the cost of
a feasibility study performed in partnership with SBS and investments in the
Company's marketing and branding initiatives.

  General and Administrative. General and administrative expenses decreased 4.0%
to $16.7 million for the nine months ended June 30, 2001 from $17.4 million for
the nine months ended June 30, 2000. As a percentage of revenues, general and
administrative expenses decreased to 18.7% for the nine months ended June 30,
2001 from 21.8% for the nine months ended June 30, 2000. Excluding the results
of Midas, general and administrative expenses remained consistent at $16.7
million for the nine months ended June 30, 2001 compared to $16.6 million in the
nine months ended June 30, 2000. As a percentage of revenues, general and
administrative expenses, excluding Midas, decreased to 18.7% for the nine months
ended June 30, 2001 from 21.7% in the nine months ended June 30, 2000. Included
in general and administrative expenses is compensation charges related to
business combinations of $117,000 and $526,000 for the nine months ended June
30, 2001 and 2000, respectively. The charge for the nine months ended June 30,
2001 resulted from the amortization of the value of shares that were released
over a three-year period in connection with the acquisition of SFC. The charge
for the nine months ended June 30, 2000 resulted from the amortization of SFC
shares and contingent payments earned in accordance with the acquisition
agreements for SFC and Infact Pty Limited as trustee of the Infact Unit Trust.
The Company may incur compensation charges related to business combinations in
the future due to acquisition earnout payments becoming probable.

  Other Nonrecurring Charges. The other nonrecurring charges of $2.2 million for
the nine months ended June 30, 2000, resulted primarily from the write-down and
subsequent sale of Midas and severance costs for two former officers.

                                       15
<PAGE>

  Depreciation and Amortization. Depreciation and amortization increased 22.7%
to $5.3 million for the nine months ended June 30, 2001 from $4.4 million for
the nine months ended June 30, 2000. As a percentage of revenues, depreciation
and amortization increased to 6.0% for the nine months ended June 30, 2001 from
5.4% for the nine months ended June 30, 2000. Excluding the results of Midas,
depreciation and amortization expenses increased 27.9% to $5.3 million for the
nine months ended June 30, 2001 from $4.2 million in the nine months ended June
30, 2000. As a percentage of revenues, depreciation and amortization expenses,
excluding Midas, increased to 6.0% of revenues for the nine months ended June
30, 2001 from 5.4% in the nine months ended June 30, 2000. The increase in
depreciation and amortization expenses, excluding the results of Midas, was
primarily attributable to the amortization of increased intangible assets from
business combinations.

  Interest Income (Expense), Net. The Company had net interest income of
$608,000 for the nine months ended June 30, 2001 compared to net interest income
of $640,000 for the nine months ended June 30, 2000. Excluding the results of
Midas, net interest income decreased 5.6% to $608,000 for the nine months ended
June 30, 2001 from $644,000 in the nine months ended June 30, 2000. This
decrease was primarily attributable to higher interest expense as a result of
the outstanding line of credit balance.

  Provision for Income Taxes. Provision for income taxes was $2.3 million for
the nine months ended June 30, 2001 compared to $1.5 million for the nine months
ended June 30, 2000. For the nine months ended June 30, 2001, the Company's
effective tax rate was 39.0%. The provision for income taxes for the nine months
ended June 30, 2000 of 69.4% was impacted by other nonrecurring charges for
which no tax benefit could be recorded. Excluding these nonrecurring charges,
the Company's effective tax rate for the nine months ended June 30, 2000 would
have been 41.5%. The future tax rate may vary due to a variety of factors,
including, but not limited to, the relative income contribution by domestic and
foreign operations, changes in statutory tax rates, the amount of tax exempt
interest income generated during the year, the inability to utilize foreign tax
credits and any non-deductible items related to acquisitions or other
nonrecurring charges. The Company will continue to closely monitor the
effective tax rate on a quarterly basis.

Liquidity and Capital Resources

  The Company's principal capital requirement is to fund working capital to
support its growth, including potential future acquisitions, purchase price
installments due on previous acquisitions and potential contingent payments
related to prior acquisitions. The Company maintains a $10 million revolving
credit facility (the "Credit Facility"), of which $2.5 million may be used for
letters of credit. The Credit Facility expires on August 26, 2002. The Credit
Facility allows the Company to borrow the lesser of $10 million or an amount
equal to 85% of eligible accounts receivable plus 50% of up to $6 million of
eligible unbilled receivables. The Credit Facility bears interest at the
adjusted LIBOR rate plus 2.5% or the lender's announced prime rate plus 0.25%,
at the Company's option. The Credit Facility is secured by first priority liens
and security interests in the Company's assets (excluding assets owned by Tier
Technologies (Australia) Pty Ltd., Simsion Bowles & Associates ("SBA") and ADC
Consultants Pty Ltd.), including a pledge of 65% of the stock of the Company's
subsidiaries excluding SBA. The Credit Facility contains certain restrictive
covenants, including, but not limited to, limitations on the amount of loans the
Company may extend to officers and employees and the incurrence of additional
debt. The Credit Facility requires the maintenance of certain financial
covenants, including a minimum quarterly net income requirement, minimum
tangible net worth, a minimum ratio of debt to tangible net worth and a minimum
quick ratio. As of June 30, 2001, the Company was in compliance with all
financial ratios. As of June 30, 2001, the interest rate was approximately 6.6%,
outstanding borrowings totaled $7.5 million and outstanding standby letters of
credit totaled approximately $346,000.

  In August 2001, the Company amended its revolving credit facility increasing
the amount available for borrowing from $10.0 million to $15.0 million. The
amendment also removed the limit on the commitment amount based on accounts
receivable and unbilled receivables balances. In addition, the amendment added a
$2.5 million non-revolving equipment facility that can be drawn down through
February 28, 2002 and will bear interest at the lender's announced prime rate
plus 0.50% or the LIBOR rate plus 2.75%, at the Company's option.

                                       16
<PAGE>

  The Company (through one of it's Australian subsidiaries) also maintains a
credit facility that includes a $1.3 million revolving credit line with St.
George Bank Limited of Australia (based on a June 30, 2001 exchange rate of AU
$1.95 to US $1.00).  Under the terms of the amended credit facility, the
principal balance of the credit line will be reduced during the quarter ending
September 30, 2001 to a maximum line of approximately $1.0 million.  The line of
credit bears interest at fixed rates that are set at the time of each
drawdown on the line.  In December 1999, the balance of the line of credit was
converted to a variable rate loan ("Loan").  The variable rate is based upon the
bank's prime rate less 1.25% and interest is payable monthly.  As of June 30,
2001, the interest rate was 8.0% and the outstanding balance of the Loan was
approximately $1.3 million.  The credit facility also provides for the issuance
of letters of credit up to $148,000.  Standby letters of credit totaling
$141,000 were outstanding as of June 30, 2001. Among other provisions, the
credit facility requires the Company's Australian subsidiary to maintain certain
minimum financial ratios. As of June 30, 2001, the Company's Australian
subsidiary was not in compliance with certain provisions of this credit
facility; however, the bank waived such noncompliance.

  Net cash provided by operating activities was $6.2 million in the nine months
ended June 30, 2001 and $6.1 million in the nine months ended June 30, 2000. The
change is primarily attributable to increased profitability.

  Net cash used in investing activities was $10.6 million in the nine months
ended June 30, 2001 and $5.7 million in the nine months ended June 30, 2000. The
change is primarily attributable to an increase in business combination
expenditures and increased purchases of equipment and software. Capital
expenditures, including equipment acquired under capital lease, but excluding
assets acquired or leased through business combinations, were approximately $2.0
million in the nine months ended June 30, 2001 and $1.7 million in the nine
months ended June 30, 2000. The Company anticipates that it may have increased
capital expenditures depending on the number of future payment processing center
operations and other capital expenditure needs.

  Net cash provided by financing activities totaled $8.6 million in the nine
months ended June 30, 2001 and $877,000 in the nine months ended June 30, 2000.
The increase in net cash provided by financing activities resulted primarily
from the borrowings under the Credit Facility.

  The Company anticipates that its existing capital resources, including cash
provided by operating activities and available bank borrowings, will be adequate
to fund the Company's operations for at least the next 12 months. There can be
no assurance that changes will not occur that would consume available capital
resources before such time. The Company's capital requirements and capital
resources depend on numerous factors, including potential acquisitions,
contingent payments earned, new and existing contract requirements, the timing
of the receipt of accounts receivable and payments of accounts payable, the
Company's ability to draw on its bank facility and employee growth.  To the
extent that the Company's existing capital resources are insufficient to meet
its capital requirements, the Company will have to raise additional funds. There
can be no assurance that additional funding, if necessary, will be available on
favorable terms, if at all.

Recent Accounting Standards

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 is effective no later than the fourth quarter of fiscal year
2001. The Company does not expect that the adoption of SAB 101 will have a
significant impact on the consolidated financial statements.

  In July 2001, the FASB issued two Statements, Statement No. 141, "Business
Combinations" ("SFAS No. 141"), and Statement No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142").  SFAS No. 141 revises accounting treatment
for business combinations requiring the use of purchase accounting and
prohibiting the use of pooling-of-interests method for all business combinations
initiated after June 30, 2001 and broadens the criteria for recording intangible
assets separate from goodwill for all business combinations completed after June
30, 2001.   SFAS No. 142 revises the accounting for goodwill and other
intangible assets by not allowing amortization of goodwill and establishing
accounting for impairment of goodwill and other intangible assets.  SFAS No. 142
will be effective for fiscal years beginning after December 15, 2001, with early
adoption allowed for companies with a fiscal year beginning after March

                                       17
<PAGE>

15, 2001. The Company expects to adopt the pronouncement as of October 1, 2002,
the beginning of its fiscal year 2003. The Company has not yet evaluated the
effects of these changes on its consolidated financial statements.

Factors That May Affect Future Results

  The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements in this Form 10-Q.
Tier is referred to in this section as "we" or "us".

  Variability of Quarterly Operating Results. Our revenues and operating results
are subject to significant variation from quarter to quarter due to a number of
factors, including:

  .  the accuracy of estimates of resources required to complete ongoing
     projects,

  .  the number, size and scope of projects in which we are engaged,

  .  the contractual terms and degree of completion of such projects,

  .  start-up costs including software sublicense fees incurred in connection
     with the initiation of large projects,

  .  our ability to staff projects with salaried employees versus hourly
     employees, hourly independent contractors and subcontractors,

  .  competitive pressures on the pricing of our services,

  .  any delays or costs incurred in connection with, or early termination of, a
     project,

  .  any assessment of potential penalties or contingent obligations in
     connection with a project,

  .  employee utilization rates,

  .  the number of billable days in a particular quarter,

  .  the adequacy of provisions for losses,

  .  the accuracy of estimated transaction volume in computing transaction rates
     for payment processing center  operations,

  .  demand for our services generated by strategic partnerships and certain
     prime contractors,

  .  our ability to increase both the number and size of engagements from
     existing clients, and

  .  economic conditions in the vertical and geographic markets we serve.

  The timing and realization of opportunities in our sales pipeline make the
timing and variability of revenues difficult to forecast. In addition, the
achievement of anticipated revenues is substantially dependent on our ability to
attract, on a timely basis, and retain skilled personnel. A high percentage of
our operating expenses, particularly personnel, facility and depreciation and
amortization, are fixed in advance. In addition, we typically reach the annual
limitation on FICA contributions for many of our U.S. consultants before the end
of the calendar year. As a result, U.S. payroll taxes will vary significantly
from quarter to quarter during the fiscal year and will generally be higher at
the beginning of the calendar year. Revenues are impacted by the amount of
holidays and vacations taken both within our consultant base and by our clients.
As a result, revenues will vary from quarter to quarter during the fiscal year.
Because of the variability of our quarterly operating results, we believe that
period-to-period comparisons of our operating results are not necessarily

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<PAGE>

meaningful, should not be relied upon as indications of future performance and
may result in volatility in the price of our Class B Common Stock. In addition,
our operating results will from time to time be below the expectations of
analysts and investors.

     Potential Adverse Effect on Operating Results from Dependence on Large
Projects, Limited Clients or Certain Market Sectors. The completion,
cancellation, significant reduction in the scope or imposition of significant
penalties for the Company's failure to meet scheduled delivery requirements of a
large project or a project with certain clients would have a material adverse
effect on our business, financial condition and results of operations. Most of
our contracts are terminable by the client following limited notice and without
significant penalty to the client. We have derived, and believe that we will
continue to derive, a significant portion of our revenues from a limited number
of clients. For the nine months ended June 30, 2001, SBS accounted for 15.2% of
the Company's revenues. The volume of work performed for specific clients is
likely to vary from period to period, and a major client in one period may not
use our services in a subsequent period. In addition, as a result of our focus
in specific vertical markets, economic and other conditions that affect the
companies in these markets could have a material adverse effect on our business,
financial condition and results of operations.

     In addition, under a contract with SBS, the Company has committed to
utilizing a minimum number of full-time resources that SBS is obligated to
mobilize. To the extent there is a shortfall in utilization, the Company's
maximum obligation under the ASC contract for under utilization shall not exceed
$15.3 million (based on the June 30, 2001 exchange rate of GBP 0.71 to US $1.00)
over the commitment period ending January 1, 2003.

     Dependence on Contracts with Government Agencies. For the nine months ended
June 30, 2001, approximately 61.3% of our revenues were derived from sales to
government agencies. These government agencies may be subject to budget cuts or
budgetary constraints or a reduction or discontinuation of funding. A
significant reduction in funds available for government agencies to purchase
professional services would have a material adverse effect on our business,
financial condition and results of operations. In addition, the loss of a major
government client, or any significant reduction or delay in orders by such
client, would have a material adverse effect on our business, financial
condition and results of operations.

     Inability to Attract and Retain Professional Staff Necessary to Existing
and Future Projects. If we are unable to attract, retain and train skilled
employees, such inability could impair our ability to adequately manage and
staff our existing projects and to bid for or obtain new projects, which would
have a material adverse effect on our business, financial condition and results
of operation. In addition, the failure of our employees to achieve expected
levels of performance could adversely affect our business. Our success depends
in large part upon our ability to attract, retain, train, manage and motivate
skilled employees, particularly project managers and other senior technical
personnel. There is significant competition for employees with the skills
required to perform the services we offer. In particular, qualified project
managers and senior technical and professional staff are in great demand
worldwide. In addition, we require that many of our employees travel to client
sites to perform services on our behalf, which may make a position with us less
attractive to potential employees. There can be no assurance that a sufficient
number of skilled employees will continue to be available, or that we will be
successful in training, retaining and motivating current or future employees.

     Inability to Manage Growth. If we are unable to manage our growth
effectively, such inability would have a material adverse effect on the quality
of our services, our ability to retain key personnel, and our business,
financial condition and results of operations. Our growth has placed, and is
expected to continue to place, significant demands on our management, financial,
staffing and other resources. We have expanded geographically by opening new
offices domestically and abroad, and intend to open additional offices. Our
ability to manage growth effectively will require us to continue to develop and
improve our operational, financial and other internal systems, as well as our
business development capabilities, and to train, motivate and manage our
employees. In addition, as the average size and number of our projects continues
to increase, we must be able to manage such projects effectively. There can be
no assurance that our rate of growth will continue or that we will be successful
in managing any such growth.

     Failure to Estimate Accurately Fixed Price and Transaction-Based Contracts.
Our failure to estimate accurately the resources or time required for a fixed
price project or the expected volume of transactions under a

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<PAGE>

transaction-based contract could have a material adverse effect on our business,
financial condition and results of operations. Under fixed price contracts, we
receive our fee if we meet specified objectives such as completing certain
components of a system installation. For transaction-based contracts, we receive
our fee on a per-transaction basis, such as the number of child support payments
processed. To earn a profit on these contracts, we rely upon accurately
estimating costs involved and assessing the probability of meeting the specified
objectives or realizing the expected number of transactions within the
contracted time period. If we fail to estimate accurately the factors upon which
we base our contract pricing, we may incur losses on these contracts. During the
nine months ended June 30, 2001, 20.5% of our revenues were generated on a fixed
price basis and 25.8% of our revenues were generated from transaction-based
contracts. We believe that the percentage of revenues attributable to fixed
price and transaction-based contracts will continue to be significant.

     Potential Failure to Identify, Acquire or Integrate New Acquisitions. An
important component of our business strategy is to expand our presence in new or
existing markets by acquiring additional businesses. Since December 1996, we
have acquired fifteen businesses. There can be no assurance that we will be able
to identify, acquire or profitably manage additional businesses or to integrate
successfully any acquired businesses without substantial expense, delay or other
operational or financial problems. Acquisitions involve a number of special
risks, including:

     . diversion of management's attention,

     . failure to retain key personnel,

     . increased general and administrative expenses,

     . client dissatisfaction or performance problems with an acquired firm,

     . assumption of unknown liabilities, and

     . other unanticipated events or circumstances.

     Any of these risks could have a material adverse effect on our business,
financial condition and results of operations.

     Substantial Competition in the IT and Consulting Services Market. The IT
and consulting services markets are highly competitive and are served by
numerous international, national and local firms. There can be no assurance that
we will be able to compete effectively in these markets. Market participants
include systems consulting and integration firms, including national accounting
firms and related entities, the internal information systems groups of our
prospective clients, professional services companies, hardware and application
software vendors, and divisions of large integrated technology companies and
outsourcing companies. Many of these competitors have significantly greater
financial, technical and marketing resources, generate greater revenues and have
greater name recognition than we do. In addition, there are relatively low
barriers to entry into the IT and consulting services markets, and we have
faced, and expect to continue to face, additional competition from new entrants
into the IT and consulting services markets.

     We believe that the principal competitive factors in the IT and consulting
services markets include:

     . reputation,

     . project management expertise,

     . industry expertise,

     . speed of development and implementations,

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<PAGE>

     . technical expertise,

     . competitive pricing, and

     . the ability to deliver results on a fixed price and transaction basis as
       well as a time and materials basis.

     We believe that our ability to compete also depends in part on a number of
competitive factors outside our control, including:

     . the ability of our clients or competitors to hire, retain and motivate
       project managers and other senior technical staff,

     . the ownership by competitors of software used by potential clients,

     . the price at which others offer comparable services,

     . the ability of our clients to perform the services themselves, and

     . the extent of our competitors' responsiveness to client needs.

     Our inability to compete effectively on these competitive factors would
have a material adverse effect on our business, financial condition and results
of operations.

     Dependence on Key Personnel. Our success depends in large part upon the
continued services of a number of key employees. Although we have entered into
employment agreements with certain key employees, these employees and other key
employees who have not entered into employment agreements may terminate their
employment at any time. The loss of the services of any key employee could have
a material adverse effect on our business. In addition, if one or more of our
key employees resigns to join a competitor or to form a competing company, the
loss of such personnel and any resulting loss of existing or potential clients
to any such competitor could have a material adverse effect on our business,
financial condition and results of operations.

     Control of Company and Corporate Actions by Principal Shareholders.
Concentration of voting control could have the effect of delaying or preventing
a change in control of us and may affect the market price of our stock. All of
the holders of Class A Common Stock have entered into a Voting Trust with
respect to their shares of Class A Common Stock, which represents 44.5% of the
total common stock voting power at June 30, 2001. All power to vote shares held
in the Voting Trust has been vested in the Voting Trust's trustee, James L.
Bildner. The voting power held in the Voting Trust combined with Class B Common
Stock owned by Mr. Bildner and vested options to acquire both Class A and Class
B Common Stock held by Mr. Bildner represents 47.0% of the total common stock
voting power outstanding at June 30, 2001. As a result, Mr. Bildner may be able
to control the outcome of all corporate actions requiring shareholder approval,
including changes in our equity incentive plan, the election of a majority of
our directors, proxy contests, mergers, tender offers, open-market purchase
programs or other purchases of common stock that could give holders of our Class
B Common Stock the opportunity to realize a premium over the then-prevailing
market price for their shares of Class B Common Stock.

     Potential Costs or Claims Resulting from Project Performance. Many of our
engagements involve projects that are critical to the operations of our clients'
businesses and provide benefits that may be difficult to quantify. The failure
by us, or of the prime contractor on an engagement in which we are a
subcontractor, to meet a client's expectations in the performance of the
engagement could damage our reputation and adversely affect our ability to
attract new business, and could have a material adverse effect upon our
business, financial condition and results of operations. We have undertaken, and
may in the future undertake, projects in which we guarantee performance based
upon defined operating specifications or guaranteed delivery dates.
Unsatisfactory performance or unanticipated difficulties or delays in completing
such projects may result in client dissatisfaction and a reduction in payment
to us, or payment of damages (as a result of litigation

                                       21
<PAGE>

or otherwise) by us, which could have a material adverse effect upon our
business, financial condition and results of operations. In addition,
unanticipated delays could necessitate the use of more resources than we
initially budgeted for a particular project, which also could have a material
adverse effect upon our business, financial condition and results of operations.

     Delay or Failure to Develop New Solutions. Our success will depend in part
on our ability to develop solutions that keep pace with continuing changes in
technology, evolving industry standards and changing client preferences. There
can be no assurance that we will be successful in developing such solutions in a
timely manner or that if developed we will be successful in the marketplace.
Delay in developing or failure to develop new solutions would have a material
adverse effect on our business, financial condition and results of operations.

     Failure to Manage and Expand International Operations. For the nine months
ended June 30, 2001, international operations accounted for 32.9% of our total
revenues. We believe that the percentage of total revenues attributable to
international operations will continue to be significant. As a result, we may
expand our existing international operations and may enter additional
international markets, which will require significant management attention and
financial resources and could adversely affect our operating margins and
earnings. In order to expand international operations, we will need to hire
additional personnel and develop relationships with potential international
clients through acquisition or otherwise. To the extent that we are unable to do
so on a timely basis, our growth in international markets would be limited, and
our business, financial condition and results of operations would be materially
and adversely affected.

     Our international business operations are subject to a number of additional
risks, including, but not limited to:

     .  fluctuations in the value of foreign currencies,

     .  difficulties in building and managing foreign operations,

     .  difficulties in enforcing agreements and collecting receivables through
        foreign legal systems,

     .  longer payment cycles, and

     .  unexpected regulatory, economic or political changes in foreign markets.

     There can be no assurance that these factors will not have a material
adverse effect on our business, financial condition and results of operations.

     Potential Volatility of Stock Price. There can be no assurance that an
active public market for our Class B Common Stock will be sustained. The market
for securities of early stage companies has been highly volatile in recent
years, and our stock price could be volatile due to a number of factors,
including:

     .  quarterly variations in operating results,

     .  announcements of technological innovations or new products or services
        by us or our competitors,

     .  general conditions in the IT industry or the industries in which our
        clients compete,

     .  changes in earnings estimates by securities analysts or us, and

     .  general economic conditions such as recessions or high interest rates.

     Further, in the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against the issuing company. Such litigation could result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect on our business, financial

                                       22
<PAGE>

condition and results of operations. Any adverse determination in such
litigation could also subject us to significant liabilities. There can be no
assurance that such litigation will not be instituted in the future against us.

     Insufficient Insurance Coverage for Potential Claims. Any failure in a
client's system could result in a claim against us for substantial damages,
regardless of our responsibility for such failure. There can be no assurance
that the limitations of liability set forth in our service contracts will be
enforceable or will otherwise protect us from liability for damages. Although we
maintain general liability insurance coverage, including coverage for errors or
omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms, will be available in sufficient amounts to cover
one or more claims or that the insurer will not disclaim coverage as to any
future claim. The successful assertion for one or more claims against us that
exceed available insurance coverage or changes in our insurance policies,
including premium increases or the imposition of large deductible or co-
insurance requirements, would adversely affect our business, financial condition
and results of operations.

     Dependence on Third Parties in Performing Certain Client Engagements. We
sometimes perform client engagements using third parties. We often join with
other organizations to bid and perform an engagement. In these engagements, we
may engage subcontractors or we may act as a subcontractor to the prime
contractor of the engagement. We also use third party software or technology
providers to jointly bid and perform engagements. In these situations, we depend
on the software, resources and technology of these third parties in order to
perform the engagement. There can be no assurance that actions or failures
attributable to these third parties or to the prime contractor or subcontractor
will not also negatively affect our business, financial condition or results of
operations. In addition, the refusal or inability of these third parties to
permit continued use of their software, resources or technology by us, or the
discontinuance or termination by the prime contractor of our services or the
services of a key subcontractor, would have a material adverse effect on our
business, financial condition and results of operations.

     Inability to Protect Proprietary Intellectual Property. The steps we take
to protect our intellectual property rights may be inadequate to avoid the loss
or misappropriation of such information, or to detect unauthorized use of such
information. We rely on a combination of trade secrets, nondisclosure and other
contractual arrangements, and copyright and trademark laws to protect our
intellectual property rights. We also enter into confidentiality agreements with
our employees, generally require that our consultants and clients enter into
such agreements and limit access to our proprietary information.

     Issues relating to the ownership of, and rights to use, software and
application frameworks can be complicated, and there can be no assurance that
disputes will not arise that affect our ability to resell or reuse such software
and application frameworks. A portion of our business involves the development
of software applications for specific client engagements. Ownership of such
software is the subject of negotiation with each particular client and is
typically assigned to the client. We also develop software application
frameworks, and may retain ownership or marketing rights to these application
frameworks, which may be adapted through further customization for future client
projects. Certain clients have prohibited us from marketing the software and
application frameworks developed for them entirely or for specified periods of
time or to specified third parties, and there can be no assurance that clients
will not demand similar or other restrictions in the future.

     Although we believe that our services and products do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against us in the future, or that if asserted, any
such claim will be successfully defended. The loss or misappropriation of our
intellectual property or the unsuccessful defense of any claim of infringement
could have a material adverse effect on our business, financial condition and
results of operations.

     Facilities, Systems and Operations Interruption or Failure. Any system
failure, including network, software or hardware failure, whether caused by us,
a third party service provider, unauthorized intruders or hackers, computer
viruses, power outages or natural disasters, could cause interruptions or delays
in our business or loss of data. Although we maintain property insurance and
business interruption insurance, we cannot guarantee that our insurance will be
adequate to compensate us for all losses that may occur as a result of any
system failure.

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<PAGE>

     Power Shortages. California has experienced shortages in the available
power supply. We are currently exploring alternatives to ensure continuous and
reliable sources of power in the event of blackouts. Such alternatives may not
be implemented in a timely manner. Shortages may also affect our employees,
vendors and customers.

     Issuance of Preferred Stock May Prevent Change in Control and Adversely
Affect Market Price for Class B Common Stock. The Board of Directors has the
authority to issue preferred stock and to determine the preferences, limitations
and relative rights of shares of preferred stock and to fix the number of shares
constituting any series and the designation of such series, without any further
vote or action by our shareholders. The preferred stock could be issued with
voting, liquidation, dividend and other rights superior to the rights of our
Class B Common Stock. The potential issuance of preferred stock may delay or
prevent a change in control of us, discourage bids for the Class B Common Stock
at a premium over the market price and adversely affect the market price and the
voting and other rights of the holders of our Class B Common Stock.

     No Current Intention to Declare or Pay Dividends. We have never declared or
paid cash dividends on our capital stock and do not anticipate paying any cash
dividends in the foreseeable future.

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<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in market prices and rates. The Company is exposed to market risk
because of changes in foreign currency exchange rates as measured against the
U.S. dollar and currencies of the Company's subsidiaries and operations in
Australia and the United Kingdom.

     Foreign Currency Exchange Rate Risk. The Company has wholly owned
subsidiaries in Australia and conducts operations in the United Kingdom through
a U.S.-incorporated subsidiary. Revenues from these operations are typically
denominated in Australian Dollars or British Pounds, respectively, thereby
potentially affecting the Company's financial position, results of operations
and cash flows due to fluctuations in exchange rates. The Company does not
anticipate that near-term changes in exchange rates will have a material impact
on future earnings, fair values or cash flows of the Company and has not engaged
in foreign currency hedging transactions for the nine months ended June 30,
2001. There can be no assurance that a sudden and significant decline in the
value of the Australian Dollar or British Pound would not have a material
adverse effect on the Company's financial condition and results of operations.

     Interest Rate Sensitivity. The Company maintains a portfolio of cash
equivalents and investments in a variety of securities including: certificates
of deposit, money market funds and government and non-government debt
securities. These available-for-sale securities are subject to interest rate
risk and may fall in value if market rates increase. If market interest rates
increase immediately and uniformly by 10 percentage points from levels at June
30, 2001, the fair value of the portfolio would decline by $392,000. We
anticipate having the ability to hold our fixed income investments until
maturity, and therefore do not expect our operating results or cash flows to be
affected to any significant degree by the effect of a sudden change in market
interest rates on our securities portfolio.

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<PAGE>

                          PART II. OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.
          None.

     (b)  Reports on Form 8-K.

The Company did not file any reports on Form 8-K during the three months ended
June 30, 2001.

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<PAGE>

                                   SIGNATURE

     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.

                                  Tier Technologies, Inc.

Dated: August 10, 2001



                                  By:       /s/ LAURA B. DEPOLE
                                     ------------------------------------------
                                               Laura B. DePole
                                           Chief Financial Officer
                                   (Duly Authorized Officer and Principal
                                      Financial and Accounting Officer)

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