Securities and Exchange CommissionWashington, D.C. 20549

FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-21705

SANCHEZ COMPUTER ASSOCIATES, INC.(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania(State or other Jurisdiction of
Incorporation or Organization)

23-2161560(I.R.S. Employer Identification No.)40 Valley Stream Parkway, Malvern PA(Address of Principal Executive Offices)

19355(Zip Code)


Registrant's Telephone Number, Including Area Code:(610) 296-8877

N/A

---

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X        No

As
of March 31, 2002, there were 26,009,620 outstanding shares of the issuer's Common Stock, no par value.

---



SANCHEZ COMPUTER ASSSOCIATES, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2002

PART I:    FINANCIAL INFORMATION

|                                                       |  |                                                                                       |  | Page No.
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------- |  | --------
|ITEM 1:                                                |  | FINANCIAL STATEMENTS                                                                  |  |         
|CONSOLIDATED BALANCE SHEETS                            |  |                                                                                      
|                                                       |  | March 31, 2002 (Unaudited) and December 31, 2001                                      |  | 3       
|CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)      |  |                                                                                      
|                                                       |  | Three months ended March 31, 2002 and 2001                                            |  | 4       
|CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)      |  |                                                                                      
|                                                       |  | Three months ended March 31, 2002 and 2001                                            |  | 5       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |  | 6                                                                                    
|ITEM 2:                                                |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 10      
|ITEM 3:                                                |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 15      
|PART II: OTHER INFORMATION                            
|ITEM 6:                                                |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 15      
|SIGNATURE                                              |  | 16                                                                                   

2

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Sanchez Computer Associates, Inc.  Consolidated Balance Sheets  (in thousands, except per share amounts)

|ASSETS                                                                                                                                                                                            |                                       | March 31,
2002
(unaudited)                 |        | December 31,
2001
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------ | ------ | -----------------
|Current assets                                                                                                                                                                                    |                                       |                                            |        |                  
|                                                                                                                                                                                                  | Cash and cash equivalents             |                                            | $      | 37,489           
|                                                                                                                                                                                                  | Receivables, less allowance of $1,219 |                                            |        | 26,724           
|                                                                                                                                                                                                  | Contracts in process                  |                                            |        | 4,379            
|                                                                                                                                                                                                  | Recoverable income taxes              |                                            |        | 1,265            
|                                                                                                                                                                                                  | Deferred income taxes                 |                                            |        | 4,683            
|                                                                                                                                                                                                  | Prepaid and other current assets      |                                            |        | 3,557            
|                                                                                                                                                                                                  | Deferred product and service expense  |                                            |        | 9,556            
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total current assets                       |        |                  
|Property and equipment                                                                                                                                                                            |                                       |                                            |        |                  
|                                                                                                                                                                                                  | Equipment                             |                                            |        | 14,731           
|                                                                                                                                                                                                  | Furniture and fixtures                |                                            |        | 2,471            
|                                                                                                                                                                                                  | Leasehold improvements                |                                            |        | 3,087            
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       |                                            | 20,289 |                  
|Accumulated depreciation and amortization                                                                                                                                                         |                                       |                                            | 13,550 |                  
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  | Net property and equipment            |                                            |        | 6,739            
|Deferred product and service expense                                                                                                                                                              |                                       |                                            | 8,791  |                  
|Deferred income taxes                                                                                                                                                                             |                                       |                                            | 801    |                  
|Other non-current assets                                                                                                                                                                          |                                       |                                            | 4,437  |                  
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total assets                               |        | $                
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|LIABILITIES                                                                                                                                                                                       |                                       |                                            |        |                  
|Current liabilities                                                                                                                                                                               |                                       |                                            |        |                  
|                                                                                                                                                                                                  | Accounts payable, trade               |                                            | $      | 5,438            
|                                                                                                                                                                                                  | Accrued expenses                      |                                            |        | 8,787            
|                                                                                                                                                                                                  | Deferred product and service revenue  |                                            |        | 12,909           
|                                                                                                                                                                                                  | Deferred revenue                      |                                            |        | 8,323            
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total current liabilities                  |        |                  
|Deferred product and service revenue                                                                                                                                                              |                                       |                                            | 12,284 |                  
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total liabilities                          |        |                  
|SHAREHOLDERS' EQUITY                                                                                                                                                                              |                                       |                                            |        |                  
|Common stock stated value of $.01 per share, 75,000 shares authorized, 26,010 shares issued and outstanding as of March 31, 2002 and 25,963 shares issued and outstanding as of December 31, 2001 |                                       |                                            | 260    |                  
|Additional paid-in capital                                                                                                                                                                        |                                       |                                            | 45,501 |                  
|Retained earnings                                                                                                                                                                                 |                                       |                                            | 14,919 |                  
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total shareholders' equity                 |        |                  
|                                                                                                                                                                                                  |                                       |                                            |        |                  
|                                                                                                                                                                                                  |                                       | Total liabilities and shareholders' equity |        | $                
|                                                                                                                                                                                                  |                                       |                                            |        |                  

3

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Sanchez Computer Associates, Inc.  Consolidated Statements of Operations  (in thousands, except per share amounts)  (unaudited)

|                                                        |                                   | Three Months Ended
March 31,
|------------------------------------------------------- | --------------------------------- | ----------------------------
|
|Revenues                                                |                                   |                             
|                                                        | Products                          |                             
|                                                        | Services                          |                             
|                                                        | Processing                        |                             
|                                                        | Software maintenance and other    |                             
|                                                        |                                   |                             
|                                                        |                                   | Total revenues              
|Operating expenses                                      |                                   |                             
|                                                        | Product development               |                             
|                                                        | Product support                   |                             
|                                                        | Services                          |                             
|                                                        | Processing                        |                             
|                                                        | Sales and marketing               |                             
|                                                        | General, administrative and other |                             
|                                                        |                                   |                             
|                                                        |                                   | Total operating expenses    
|Earnings from operations                                |                                   |                             
|Interest income, net                                    |                                   |                             
|                                                        |                                   |                             
|Earnings before income taxes                            |                                   |                             
|Income tax provision                                    |                                   |                             
|                                                        |                                   |                             
|Net earnings                                            |                                   | $                           
|                                                        |                                   |                             
|Basic earnings per average common share                 |                                   | $                           
|Diluted earnings per average common share               |                                   | $                           
|Weighted-average common shares outstanding              |                                   |                             
|Weighted-average common and dilutive shares outstanding |                                   |                             

4

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Sanchez Computer Associates, Inc.  Consolidated Statements of Cash Flows  (in thousands)  (unaudited)

|                                                                    |                                                                                       | Three Months Ended March 31,                                                |       
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------
|
|Cash flows from operating activities                                |                                                                                       |                                                                             |       
|                                                                    | Net earnings                                                                          |                                                                             | $     
|                                                                    | Adjustments to reconcile net earnings to cash provided (used) by operating activities |                                                                             |       
|                                                                    |                                                                                       | Depreciation and amortization                                               |       
|                                                                    |                                                                                       | Deferred product and service revenue                                        |       
|                                                                    |                                                                                       | Deferred product and service expense                                        |       
|                                                                    |                                                                                       | Provision for doubtful accounts receivable                                  |       
|                                                                    |                                                                                       | Other                                                                       |       
|Cash provided (used) by changes in operating assets and liabilities |                                                                                       |                                                                             |       
|                                                                    |                                                                                       | Accounts receivable                                                         |       
|                                                                    |                                                                                       | Contracts in process                                                        |       
|                                                                    |                                                                                       | Income tax refund receivable/payable                                        |       
|                                                                    |                                                                                       | Prepaid and other current assets                                            |       
|                                                                    |                                                                                       | Accounts payable and accrued expenses                                       |       
|                                                                    |                                                                                       | Deferred revenue                                                            |       
|                                                                    |                                                                                       |                                                                             |       
|Net cash provided (used) by operating activities                    |                                                                                       |                                                                             | (2,867
|Cash flows from investing activities                                |                                                                                       |                                                                             |       
|                                                                    |                                                                                       | Investments                                                                 |       
|                                                                    |                                                                                       | Capital expenditures                                                        |       
|                                                                    |                                                                                       |                                                                             |       
|Net cash (used) by investing activities                             |                                                                                       |                                                                             | (931  
|Cash flows from financing activities                                |                                                                                       |                                                                             |       
|                                                                    |                                                                                       | Issuance of common stock for stock options                                  |       
|                                                                    |                                                                                       | Repurchase of stock in subsidiary                                           |       
|                                                                    |                                                                                       | Proceeds from the issuance of shares under the employee stock purchase plan |       
|                                                                    |                                                                                       |                                                                             |       
|Net cash provided (used) by financing activities                    |                                                                                       |                                                                             | 332   
|                                                                    |                                                                                       |                                                                             |       
|Net increase (decrease) in cash and cash equivalents                |                                                                                       |                                                                             | (3,466
|Cash and cash equivalents at beginning of period                    |                                                                                       |                                                                             | 40,955
|                                                                    |                                                                                       |                                                                             |       
|Cash and cash equivalents at end of period                          |                                                                                       | $                                                                           | 37,489
|                                                                    |                                                                                       |                                                                             |       
|Supplemental cash flow information                                  |                                                                                       |                                                                             |       
|                                                                    |                                                                                       | Interest paid                                                               |       
|                                                                    |                                                                                       | Income taxes paid                                                           |       

5

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Sanchez Computer Associates, Inc.        Notes to Unaudited Consolidated Financial Statements

(A.) Basis of Presentation

The accompanying consolidated financial statements of Sanchez Computer Associates, Inc. ("Sanchez" or the "Company") include the accounts of all of the
Company's wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with
current period presentation. In the opinion of management, the 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 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 Annual Report on Form 10-K for
additional disclosures, including a summary of the Company's critical accounting policies, which have not changed since our latest filing of the 10-K on March 28, 2002. The consolidated results
of operations for the three months ended March 31, 2002, are not necessarily indicative of results for the full year.

(B.) Client Revenue Data

Revenue derived from customers in various geographic regions is as follows (in thousands):

Three months ended
March 31,2002

2001U.S. and Caribbean

$
12,134

$
13,384Europe


6,159


8,451Other


1,033


655Total

$
19,326

$
22,490


(C.) Segments

The Company classifies its operations in two segments: Sanchez's software licensing business, including related services and maintenance and the e-PROFILE
outsourcing business. The Company evaluates the performance of its segments and allocates resources to them accordingly.

6

---

The
table below summarizes the business segments in thousands:

Three months ended
March 31,2002

2001RevenuesSanchez

$
10,704

$
16,902e-PROFILE


9,911


7,468Eliminations


(1,289
)

(1,880
)Total


19,326


22,490Earnings (loss) from operationsSanchez


(292
)

2,723e-PROFILE


426


(1,984
)Total

$
134

$
739


March 31,
2002

December 31,
2001Total AssetsSanchez

$
91,265

$
84,940e-PROFILE


41,128


34,210Eliminations


(23,972
)

(20,815
)Total

$
108,421

$
98,335


(D.) Earnings Per Share

Basic earnings per share has been calculated as net earnings divided by weighted-average common shares outstanding, while diluted earnings per share has been
computed as net earnings divided by weighted-average common and diluted shares outstanding which includes the dilutive effect of stock options and warrants. The following table provides a
reconciliation of weighted-average common shares outstanding to weighted-average common and diluted shares outstanding (in thousands).

Three months ended
March 31,2002

2001Weighted-average shares outstanding

25,997

25,342Dilutive effect of options

181

527Total weighted average common and diluted shares

26,178

25,869


At
March 31, 2002, potentially dilutive common stock equivalents include options to purchase 4,998,223 shares of common stock. As of March 31, 2001, potentially dilutive
common stock equivalents included options to purchase 2,950,646 shares of common stock.

(E.) Contingencies

In February 2001, e-PROFILE filed for arbitration in response to 1stWebbankdirect's, termination of its processing agreement in connection with the
consolidation of its e-banking platforms. e-PROFILE is seeking payment of all outstanding receivables from this customer ($1.4 million at

7

---

March 31, 2002), as well as certain fees due for minimum processing obligations. 1stWebbankdirect has counterclaimed and is seeking a refund of the implementation fees they paid
for the project. The Company has not recognized implementation revenue or direct costs related to this contract through March 31, 2002. As of this date, the Company is unable to estimate the
amount of any potential gain or loss related to this contingency.

During
the fourth quarter of 2001, an unannounced client that was in the final stages of implementing an outsourced solution on the e-PROFILE platform notified the Company of their
intent to discontinue their plans of launching a direct bank. As of March 31, 2002, e-PROFILE had a $2.9 million receivable balance from this customer. e-PROFILE is seeking payment of
all outstanding receivables from this customer as well as certain fees related to the customer's termination of the relationship. In accordance with SAB No. 101, the Company has recognized a
portion of the associated deferred revenue and costs during the period this client was live in a "friends and family" environment and prior to the client notifying the Company of their intent to
discontinue their plans. At this date, the Company is unable to estimate the amount of any potential gains or loss related to these contingencies.

(F.)  Recent Accounting Pronouncements

Effective January 1, 2002, the Company adopted Emerging Issues Task Force Number 01-14, "Income Statement Characterization of Reimbursement Received for
'Out-of-Pocket' Expenses Incurred" (EITF 01-14), which requires that the reimbursement received for out-of-pocket expenses be classified as revenues and not as cost reductions. Prior to the effective
date of EITF 01-14, the Company netted out-of-pocket reimbursements from customers with the applicable costs. These items include travel, meals, postage and certain telecommunication costs. While the
adoption of EITF 01-14 will not have any impact on income from operations or net income, it will reduce operating margins since both revenues and costs will increase by the same amount. Prior period
amounts were reclassified to conform to EITF 01-14.

On
June 29, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and other Intangible
Assets." SFAS No. 141 requires that all business combinations consummated after June 30, 2001 be accounted for under the purchase method of accounting. SFAS No. 142 provides for
the discontinuance of amortization of goodwill effective January 1, 2002 and establishes methodologies for determining the impairment of the carrying value of goodwill. The following table
illustrates adjusted net earnings and basic and diluted earnings per share as if these pronouncements were adopted as of January 1, 2001:

Three months ended
March 31,2002

2001Net earnings:Net earnings

$
218

$
849Add: goodwill amortization, net of tax





22Adjusted net earnings

$
218

$
871Basic and diluted earnings per share:Reported

$
.01

$
.03Goodwill amortization, net of tax





Adjusted basic and diluted earnings per share

$
.01

$
.03


8

---

Management
determined that goodwill is not impaired at January 1, 2001 and March 31, 2002 under SFAS No. 142.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which establishes a single accounting model, based on the
framework established in SFAS No. 121, for long-lived assets to be disposed of and resolves significant implementation issues related to SFAS No. 121. SFAS No. 144 supercedes SFAS
No. 121 and APB No. 30, "Reporting the Results of OperationsReporting the Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and transactions." The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 did not have a material impact on the Company's
financial condition or results of operations.

(G.) Related Party Transactions

During the quarter the Company made a loan to Mr. Michael Sanchez, the Company's Chairman of the Board, for $500,000. This loan brought the total amount of
loans to Mr. Sanchez to $1,050,000. Mr. Sanchez is personally liable for these loans, which are secured by collateral. This loan to
Mr. Sanchez bears interest at a rate of 2.73% per annum. We were advised that Mr. Sanchez used a portion of the loan proceeds to partially repay certain indebtedness obtained for
personal purposes and secured by his shares of Company stock. Mr. Sanchez' loans from the Company were ratified and approved by our board of directors, with Mr. Michael Sanchez and
Mr. Frank Sanchez abstaining in such actions. The loans with Mr. Sanchez are full recourse loans.

9

---



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

Overview

Sanchez Computer Associates, Inc. ("Sanchez" or "the Company") is a global leader in developing and marketing scalable and integrated software and services
solutions that provide retail banking, brokerage and customer integration for financial institutions. Approximately 350 financial institutions in 20 countries use Sanchez banking software products.
The Company's business generates revenue from two sourcessoftware application licenses and outsourcing. The Company maintains its corporate headquarters in Malvern, Pa., and an outsourced
data and operations center in Seven Fields, Pa., which is a suburb of Pittsburgh, Pa. The Company runs its international operations from Chester in the United Kingdom. The Company also maintains sales
offices in Madrid, Spain; Warsaw, Poland; Amsterdam, the Netherlands; and Singapore.

The
Sanchez integrated banking platform empowers financial institutions to accelerate business transformation and achieve a competitive advantage by lowering operating costs, reducing
technology risks and improving customer management. The Sanchez integrated banking platform has multi-currency and multi-language capabilities, and can accommodate the retail and commercial
requirements of financial service operations with global transaction requirements. An institution purchases a Sanchez banking solution by licensing one or more of Sanchez' application software
products. Those products include: Sanchez Profile®, the highly flexible, multi-currency, multi-language, customer-centric, core banking and transaction processing application; Sanchez
Xpress, an enterprise customer and transaction management system, which empowers customer relationship management (CRM) and delivers business integration; Sanchez Webclient,
a Web-based, Internet customer front-end processor; and Sanchez FMS, the Financial Management System, which is an online, real-time cost center-based accounting system with complete
multi-company and multi-currency support. In addition, Sanchez offers Profile for Windows®, the 32-bit, Windows-based, graphical user interface designed as the front-end to Profile's core
banking application, which is used by tellers, branch and call center personnel. Sanchez CRM, a Web-based customer relationship management system, is available as a stand-alone
application. It is the Company's intent to fully integrate Sanchez CRM with Sanchez' integrated banking platform. Software applications under development include Sanchez WebCSR, a
browser-based integrated customer servicing application that can be deployed across multiple retail delivery channels such as branches and call centers. Sanchez also uses its integrated banking
platform as the basis for a complete outsourced e-banking solution under the e-PROFILE® brand. The e-PROFILE solution provides an integrated, end-to-end operations and technology platform
that enables financial services companies to offer comprehensive, on-line financial services to their customers.

The
Company's success is heavily dependent upon the proprietary architecture and design of its Sanchez products, which are protected by a combination of copyright and trademark laws, as
well as various contractual provisions. Despite these efforts to protect its proprietary rights, there can be no assurances that the Company's means of protecting its proprietary rights will be
adequate or that the Company's competition will not develop similar technology independently. Similarly, while the Company is not aware that any of its products infringe upon the proprietary rights of
third parties, there can be no assurances that third parties do not claim such infringement.

The
Company derives its revenues from product fees, service fees, processing fees, and software maintenance and other fees. Product fees include software license and product enhancement
fees. Service fees include client implementation-related services and consulting fees. Processing fees consist primarily of monthly account-based fees for account maintenance and monthly servicing,
transaction fees associated with transaction volume in a given period and origination fees in conjunction with opening new customer accounts. For Sanchez' software license contracts, fees are
typically paid in stages upon the completion of defined deliverables or certain dates. The Company recognizes revenue from these fees using the percentage-of-completion contract accounting method, or
where applicable,

10

---

on a cash basis. Service fees are generally recognized and billed monthly on a time and material basis. Maintenance fees are normally billed annually in advance and recognized into revenue ratably
over the period covered. The Company's outsourced e-commerce projects generate implementation-related service revenues for e-PROFILE, which are largely deferred during the implementation phase along
with the related costs until the client begins processing its customer's accounts on e-PROFILE's outsourced platform. Once a client "goes live" the deferred revenue and costs are amortized over the
expected life of the processing arrangement. In lieu of up-front, one-time license fees, e-PROFILE contracts typically generate on-going processing fees, which include license and maintenance charges
for Sanchez' software on a per account/per month basis over the life of the processing contract after the client "goes live" with the solution. In addition, these projects generate on-going processing
fee related services revenue for e-PROFILE. Under this model, as a client institution's e-commerce account base grows, Sanchez increases its revenue stream.

Highlights

Revenues for the quarter ended March 31, 2002, were $19.3 million, compared to $22.5 million recorded for the same period in 2001. Net
earnings for the first quarter totaled $218,000 or $0.01 per share, compared to $849,000 and $0.03 per share for the same period in 2001. Staff Accounting Bulletin No. 101 (SAB No. 101)
resulted in a net deferral of $4.8 million of revenue and $1.1 million of pre-tax profits in the first quarter of 2002, as compared to a net deferral of $4.5 million of revenue
and $523,000 of pre-tax profits in the same period in 2001. The Company's deferred SAB No. 101 revenue balance at first quarter's end was at an all-time high of $25.2 million with a
deferred, pre-tax earnings balance of $6.8 million.

During
2002's first quarter, processing revenues generated from Sanchez' e-PROFILE outsourcing unit were up 105% from the same period a year ago. Also in the first quarter, the
outsourcing unit's open
account base grew 34% to 591,000 open accounts, up from 440,000 open accounts at year-ended Dec 31, 2001. Sanchez' revenues from outsourcing were $9.9 million for the first quarter as compared
to $7.5 million for the same period a year ago. The first quarter marked the seventh consecutive quarter of improved operating earnings for the outsourcing unit and was the first quarter in
which the unit posted an operating profit.

The
Company signed two significant agreements during the quarter. In the United Kingdom, Goldfish Bank Limited, a joint venture of Centrica plc and Lloyds TSB, has engaged Sanchez to
provide custom development and support services for a new banking product. In addition, Goldfish will utilize the Sanchez Profile processing application Sanchez developed for Evolvebank, the Internet
bank owned by Lloyds TSB, to support multi-channel banking transactions. In Poland, Invest-Bank S.A. has acquired a license for a Sanchez banking solution through ComputerLand Poland S.A., one of
Sanchez's strategic global technology and marketing partners. Invest-Bank will utilize Sanchez Profile processing and front-end applications to support a broad range of deposit and loan products. The
Company continued to grow its relationship with ING Group N.V. resulting in five license scope expansions during the quarter.

11

---

Results of Operations

The following table sets forth, for the periods indicated, selected statement of operations data:

Dollars in thousands

2002

2001RevenuesProducts

$
3,761

$
7,422Services


5,691


7,120Processing


4,720


2,298Software maintenance and other


5,154


5,650Total revenues

$
19,326

$
22,490Percentage Relationship to Total RevenuesRevenuesProducts


19.5
%

33.0
%Services


29.4


31.7Processing


24.4


10.2Software maintenance and other


26.7


25.1Total revenues


100.0


100.0Operating expensesProduct development


15.6


18.3Product support


6.8


5.8Services


17.2


24.0Processing


21.0


9.4Sales and marketing


19.3


16.8General, administrative and other


19.4


22.4Total operating expenses


99.3


96.7Earnings from operations


0.7


3.3Interest income, net


1.0


2.3Earnings before income taxes


1.7


5.6Income tax provision


0.6


1.8Net earnings


1.1
%

3.8
%


Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Revenues. Revenues decreased $3.2 million, or 14.1%, in the first quarter of 2002 as compared to the first quarter of 2001. Product revenue decreased by
$3.7 million or 49.3% from first quarter of 2001 to the first quarter of 2002. This decrease is reflective of a temporary slow down in signing new license contracts, expansions and product
enhancements as a result of difficult market conditions. In addition, the requirement to defer product revenue under SAB No. 101 for a contract involving products combined with on-going processing
services, negatively impacted our reported product revenue. Service revenue decreased $1.4 million or 20.1%. This reduction is primarily a result of fewer in-process application clients as well
as the lengthening of the expected contractual life of certain outsourcing client relationships. The lengthening of the expected contractual life of certain outsourcing clients resulted in an increase
in our deferred services balance which will contribute to revenue in future periods. Processing revenues increased by $2.4 million or 105% in the quarter ended March 31, 2002, as
compared to the same period in 2001. The increase is primarily attributable to the increase in the number of clients and an increase in the number of accounts being processed on our outsourcing
platform. As of March 31, 2002, the Company was processing approximately 591,000 open accounts. Software maintenance and other revenue decreased by $798,000 or 37.0%, in the first quarter of
2002.

12

---

This decrease is primarily attributable to a decrease in rebilled expenses. This decrease is partially offset by an increase in software maintenance fees generated from annual increases and
expansions for existing clients.

PRODUCT
DEVELOPMENT. Product development expenses decreased $1.1 million, or 26.7%, in the first quarter of 2002 as compared to the same period in 2001, primarily due to the
deferral of development costs in accordance with SAB No. 101 related to one client. The revenue associated with these license costs was also deferred in line with SAB No. 101. Also
contributing to the lower expenses was a decrease in outside consulting expense in 2002 versus 2001.

SERVICES.
Service expenses decreased by $2.1 million, or 38.4%, during the first quarter of 2002 compared to the first quarter of 2001. Service expenses decreased in conjunction
with the associated revenue decrease. Margins for the first quarter of 2002 were 41.5% compared to 24.1% for the first quarter of 2001. The improved margins realized are primarily a result of a
significant reduction in the use of third party service providers, higher utilization rates of internal resources and the costs deferred related to implementations on our outsourcing platform.

PROCESSING.
Processing expenses increased $1.9 million, or 91.2%, in the first quarter of 2002 versus the first quarter of 2001. This increase is primarily attributable to higher
third party processing fees and
increased staffing needed to support the additional clients that have gone live. The gross margin relative to processing was 14.1% in the first quarter of 2002 compared to 7.7% in the same quarter
last year. The 14.1% margin in the first quarter of 2002 is reflective of the continued efficiencies beginning to be realized from processing a larger account base as well as a one time revenue item
related to year end processing. This business line is still in its early stages and therefore margins are subject to some variability.

SALES
AND MARKETING. Sales and marketing expenses decreased by $48,000, or 1.3%, in the 2002 period as compared to the same period in 2001. Expenses were down due to lower compensation
costs offset by an increase in third party commissions.

GENERAL,
ADMINISTRATIVE AND OTHER. These expenses decreased by $1.3 million, or 25.6%, in 2002. The decrease was primarily a result of lower rebilled expenses, lower incentive
compensation and tighter controls on discretionary expenditures.

Liquidity and Capital Resources

Cash and cash equivalents were $37.5 million at March 31, 2002. Cash used by operating activities for the three months ended March 31, 2002,
was $2.9 million as compared to $1.4 million provided by operating activities during the same period in 2001. This decrease in cash was primarily the result of an increase in accounts
receivable, contracts in process and prepaid expenses. This decrease was partially offset by an increase in deferred revenues and accounts payable and accrued expenses. Accounts receivable and
contracts in process increased by $5.4 million in the first three months of 2002 primarily as a result of a significant license milestone and the timing of collections which moved into April.
The Company continues to expect a certain amount of variability in the payment timing for major contract milestones, which will impact cash flow from operations during any given period.

During
the first three months of 2002, the Company used $931,000 for investing activities, the purchase of fixed assets and investments made in a venture fund. The fixed asset purchases
were primarily for software licenses used across the Company.

In
April of 2001, the Company agreed to commit up to $10 million of capital contributions to a newly formed venture fund that invests in early stage technology infrastructure
companies whose products and services can be utilized by financial services institutions. As of March 31, 2002, the Company has invested $2.0 million in the fund.

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Financing
activities contributed $333,000 of cash during the three months ended March 31, 2002, principally from the exercise of stock options and the proceeds from the employee
stock purchase plan.

The
Company currently anticipates that cash generated from operations and existing cash balances will be sufficient to satisfy its operating and capital cash needs for the foreseeable
future and at a minimum through the next year. Should the Company's business expand more rapidly than expected, the Company believes that additional capital, if necessary, would be available to fund
such operating and capital requirements.

The
Company believes that its business is generally not seasonal; however, the Company has historically experienced, and can be expected to continue to experience, a certain degree of
variability in its quarterly revenue, earnings and cash flow patterns. This variability is typically driven by significant events, which directly impact the recognition and billing of project-related
revenues. Examples of such events include the timing of new business contract closings and the initiation of product and service fee revenue recognition, one-time payments from existing clients
relative to license expansion rights (required to process a greater number of customer accounts or expand the number of permitted users) and completion of implementation project roll-outs and the
related revenue recognition. Because a high percentage of the Company's expenses are relatively fixed, a variation in the timing of the initiation or the completion of client projects, particularly at
or near the end of any quarter, can cause significant variations in operating results from quarter to quarter. The Company believes that over the course of time the ongoing monthly revenue stream
associated with the e-PROFILE outsourcing alternative will contribute toward more predictable quarter-to-quarter revenues.

Forward-looking Statements

This Management's Discussion and Analysis contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including, but not limited to, statements concerning the Company's revenues, expenses and earnings, future operating and financial
performance, growth rates, acquisition opportunities, and other similar forecasts and expectations. The words "anticipate," "estimate," "believe," "expect," "intend," "plan," "project" and variations
of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on operating budgets, forecasts, beliefs and assumptions of management
and, as such, are subject to risks and uncertainties and are not guarantees of future performance. Actual outcomes could differ materially from those expressed in any such forward-looking statement
due to a variety of factors including, but not limited to, the demand for products and services in the financial services industry, competition among software and technology companies serving that
industry, the timing of new contract closings, potential delays in the implementation of products and services, the success of the Company's e-PROFILE business model, the extent to which the Internet
will be used for financial services and products, the development of banking markets, market acceptance of the Company's products and services within these markets, the Company's ability to protect
its intellectual property rights, the potential adverse impact of security breaches, and the Company's ability to continue to improve its products and services. In addition to these factors, actual
performance, outcomes and results may differ materially because of other, more general factors including, without limitation, general industry and market conditions and growth rates, domestic and
international economic conditions, governmental and public policy changes and the
availability of financing in the amounts, at the terms and on the conditions necessary to support the Company's potential future needs.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates relate primarily to the Company's cash equivalents. The Company does not have any derivative
financial instruments in its portfolio. The Company is averse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment
risk. The Company does not expect any material loss with respect to its cash equivalents.

Foreign Currency Risk

The Company does not use foreign exchange forward contracts. Substantially all contractual arrangements with international customers are denominated in U.S.
dollars.

PART IIOTHER INFORMATION

ITEM 6:    Exhibits and reports on Form 8-K



No
other applicable items.

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SIGNATURES

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

| |  | SANCHEZ COMPUTER ASSOCIATES, INC.                                                  
| |  | -----------------------------------------------------------------------------------
| |  | /s/TODD A. PITTMANTodd A. Pittman Senior Vice President and Chief Financial Officer

Date
May 15, 2002

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