<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 29, 1995
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Commission file number 0-14063
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BARRISTER INFORMATION SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
New York 16-1176561
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
465 Main Street, Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (716) 845-5010
Not Applicable
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(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 _____
Class Outstanding at November 3, 1995
- ------------------------------------------------------------------------------
Common $.24 Par Value 6,189,972 Shares
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BARRISTER INFORMATION SYSTEMS
CORPORATION INDEX
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Balance Sheets at
September 29, 1995 and March 31, 1995 . . . . . . . . . . . . 3
Condensed Statements of Operations -
Three and Six Months Ended
September 29, 1995 and September 30, 1994 . . . . . . . . . . . 4
Statement of Shareholders' Equity -
Six Months Ended September 29, 1995 . . . . . . . . . . . . . . 5
Condensed Statements of Cash Flows -
Six Months Ended September 29, 1995
and September 29, 1994 . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Financial Statements . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
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<PAGE> 3
PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 29 March 31
1995 1995
------------ --------
<S> <C> <C>
ASSETS
Cash $ 49 $ 184
Accounts receivable 1,505 1,565
Inventories:
Service parts 3,551 3,823
Other 195 182
Prepaid expenses 45 43
------ ------
Total current assets 5,345 5,797
------ ------
Equipment and leasehold
improvements, at cost 4,093 4,184
Less accumulated depreciation 3,594 3,619
------ ------
Net equipment and leasehold
improvements 499 565
------ ------
Software production costs 269 132
Other assets 44 50
------ ------
$ 6,157 $ 6,544
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Current installments of long-term debt 470 96
Accounts payable 689 933
Accrued compensation and benefits 383 572
Customer advances and unearned revenue 1,161 956
Other liabilities 159 110
------ ------
Total current liabilities 3,112 2,917
------ ------
Long-term debt, excluding current installments
($2,085 in September and $2,392 in March
to a related party) 2,638 3,329
Shareholders' equity:
Preferred stock - -
Common stock ($.24 par value) 1,486 1,486
Additional paid-in capital 19,788 19,788
Accumulated deficit (20,867) (20,976)
------ ------
Total shareholders' equity 407 298
------ ------
$ 6,157 $ 6,544
====== ======
</TABLE>
See accompanying notes to condensed financial statements.
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Sept.29 Sept.30 Sept.29 Sept.30
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 340 $ 580 $ 749 $ 1,433
Services 2,992 3,257 6,210 6,369
------ ------ ------ ------
Total revenues 3,332 3,837 6,959 7,802
------ ------ ------ ------
Costs and expenses:
Cost of product sales 197 443 375 1,135
Cost of services 2,538 2,506 5,111 5,081
------ ------ ------ ------
Total cost of revenues 2,735 2,949 5,486 6,216
------ ------ ------ ------
Selling, general and
administrative expenses 622 639 1,320 1,367
Product development and
engineering 94 154 191 336
------ ------ ------ ------
Total costs and expenses 3,451 3,742 6,997 7,919
------ ------ ------ ------
Operating income (loss) (119) 95 (38) (117)
Interest expense:
Related party 43 48 108 89
Other 15 12 27 24
------ ------ ------ ------
Total interest 58 60 135 113
------ ------ ------ ------
Income (loss) before
extraordinary item $ (177) $ 35 $ (173) $ (230)
Extraordinary gain on
reduction of debt 282 - 282 -
------ ------ ------ ------
Net income (loss) $ 105 $ 35 $ 109 $ (230)
====== ====== ====== ======
Per common and common
equivalent share:
Income (loss) before
extraordinary item $ (0.03) $ 0.01 $ (0.03) $ (0.04)
Extraordinary item 0.05 - 0.05 -
Net income (loss) $ 0.02 $ 0.01 $ 0.02 $ (0.04)
====== ====== ====== ======
Weighted average number of
common and common
equivalent shares
outstanding 6,292 6,170 6,264 5,155
====== ====== ====== ======
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 5
BARRISTER INFORMATION SYSTEMS CORPORATION
Statement of Shareholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated
Stock capital deficit Total
------ --------- --------- -----
<S> <C> <C> <C> <C>
Balance at March 31, 1995 $ 1,486 $ 19,788 $ (20,976) $ 298
Net income - - 109 109
_____ ______ ______ _____
Balance at September 29, 1995 $ 1,486 $ 19,788 $ (20,867) $ 407
===== ====== ====== =====
</TABLE>
Common stock - 6,189,972 shares issued and outstanding at
September 29, 1995 and March 31, 1995.
See accompanying notes to condensed financial statements.
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
Sept.29 Sept.30
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 109 $ (230)
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization 149 154
Loss on disposal of equipment - (4)
Extraordinary gain on reduction of debt (282) -
Changes in current assets and liabilities:
Accounts receivable 60 59
Inventories 259 (253)
Prepaid expenses (2) (2)
Accounts payable (244) (204)
Accrued compensation and benefits (189) (414)
Customer advances and unearned revenues 205 211
Other liabilities 49 20
----- -----
Net cash provided (used)
by operating activities 114 (663)
----- -----
Cash flows from investing activities:
Additions to equipment and leasehold
improvements (65) (60)
Additions to software production costs (155) -
Proceeds on sale of equipment 6
Other 6 14
----- -----
Net cash used in investing activities (214) (40)
----- -----
Cash flows from financing activities:
Net repayment of debt (35) (61)
Net cash used by ----- -----
financing activities (35) (61)
----- -----
Net decrease in cash (135) (764)
Cash at beginning of period 184 804
----- -----
Cash at end of period $ 49 $ 40
===== =====
Supplemental disclosure of cash flow information:
Interest paid $ 199 $ 113
===== =====
Non-cash financing activities:
Conversion of long-term debt to
preferred stock $ - $ 250
===== =====
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 7
BARRISTER INFORMATION SYSTEMS CORPORATION
Notes to Condensed Financial Statements
1. In the opinion of management, the accompanying financial statements
present fairly the financial position, results of operations and cash flows for
the periods shown. The second quarter results for each year represent 13 weeks
of operations ended Friday, September 29, 1995 and September 30, 1994. The
financial data included herein was compiled in accordance with the same
accounting policies applied to the Company's audited annual financial
statements. Any adjustments made were of a normal recurring nature.
The results of operations for the six month period ended September 29,
1995 are not necessarily indicative of the results expected for the full year.
2. A summary of long-term debt follows:
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<CAPTION>
Sept. 29 March 31
1995 1995
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(In thousands)
--------------
<S> <C> <C>
Working capital note with
BIS Partners, L.P. $ 285 $ 285
Term note with BIS Partners. L.P. 1,800 2,108
Other 1,023 1,032
------ ------
Total long-term debt 3,108 3,425
Less current installments 470 96
------ ------
Long term debt, excluding
current installments $ 2,638 $ 3,329
====== ======
</TABLE>
On August 31, 1995, BIS Partners, L.P. (BIS) agreed to cancel $450,000 of
long-term debt and to reduce the interest rate on the remaining debt to 8
percent. In addition, the repayment terms were modified to interest-only
through March 31, 1996, with repayment in 36 equal installments thereafter.
In accordance with this agreement, the Company reduced the amount of debt owed
to BIS to equal the total cash to be repaid to BIS for both principal and
interest. This resulted in a second quarter extraordinary gain of $282,000.
All future payments to BIS will be recorded as a reduction in the debt balance.
In connection with this transaction, the Company issued warrants to BIS to
purchase 450,000 shares of its capital stock at $1.9375 per share (the fair
market value at issue date), exercisable through August 31, 2005.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
- -------------------
The Company experienced a net decrease in cash of $135,000 for the first six
months of fiscal 1996. Cash used for investing activities (additions to
equipment and software production costs) and financing activities exceeded the
cash provided by operating activities of $114,000. The positive cash from
operations was realized from depreciation and amortization, lower levels of
inventories and receivables and increased customer advances and unearned
revenues. These amounts were sufficient to offset the loss before
extraordinary item and reductions in accounts payable and other accrued
expenses. This result also compared very favorably to a decrease of $764,000
in cash for the first six months of the prior year.
The Company plans to meet its cash requirements for fiscal 1996 by continuing
to generate positive cash flow from operating activities. The Company has
earned a profit before extraordinary item in four out of the last five quarters
and believes it is properly positioned to achieve growth in Javelan sales which
have high profit margins. In addition, the Company plans to minimize
investments in new assets and debt repayment during 1996. While
the Company plans to incur an increase in capitalized software, it also
expects a further decrease in the net amount of equipment and leasehold
improvements and a reduction in the level of inventories. BIS Partners, L.P.
agreed to cancel $450,000 of its debt in August, 1995, to receive interest-only
payments on its debt during fiscal 1996, and to provide a $500,000 line of
credit through June 30, 1996. There has been no borrowing under this line of
credit. Finally, the Company believes that additional financing sources will
become available as its operational performance improves.
Results of Operations
- ---------------------
For the quarter ended September 29, 1995, total revenues decreased 13.2% from
the same quarter in 1994, with a net loss before extraordinary item of $177,000
compared to a net profit of $35,000 in the second quarter of the prior year.
For the six month period ended September 29, 1995, total revenues decreased
10.8% compared with the six months ended September 30, 1994. The six month net
loss before extraordinary item was $173,000 compared to a net loss of $230,000
incurred in the comparable period for the prior year. After taking the
extraordinary item into account, a net profit of $105,000 was incurred in the
second quarter of the current year and a net profit of $109,000 was incurred
for the first six months. The principal reason for the loss before
extraordinary item incurred in the second quarter was lower services revenues
at the same time an increase in services expenses was incurred.
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<PAGE> 9
Product sales decreased 41.4% for the comparable second quarter, and 47.7% for
the comparable first six months. This was primarily due to a de-emphasis of
the sale of low margin commodity products. However, an increase was realized
in the sale of Javelan, the Company's windows-based management software
product which has only a small associated cost of sales. As a result, margins
on product sales improved from 23.6% to 42.1% for the comparable second quarter
and from 20.8% to 49.9% for the comparable six month period.
Services revenues decreased 8.1% for the comparable second quarter and 2.5% for
the comparable six month periods. These decreases were principally the result
of decreased revenues from hardware time and material billings and software
maintenance contracts. In addition, two large hardware maintenance contracts
did not renew effective August 1, 1995 based on customer decisions to do self
maintenance. This was the primary reason for the drop in services revenues
from the first to the second quarter of this fiscal year. The Company is
actively pursuing new contracts to replace those that did not renew. Margins
on services revenues decreased for the comparable second quarters and six month
periods as the cost of providing services increased by 1.3% and 0.6%,
respectively. Savings in labor costs have been offset by increased costs for
parts utilized to maintain equipment.
The Company experienced a small decrease in the amount of selling, general and
administrative expenses it incurred in the comparable second quarters and first
six month periods. However, due to lower levels of revenues, these expenses
increased from 16.7% to 18.7% of total revenue for the comparable quarters and
from 17.5% to 19.0% for the comparable six month periods. Expenditures for
product development and engineering, before taking into account amounts
capitalized and amortized for software production costs, were approximately the
same for the comparable periods.
Interest expense increased from 1.6% to 1.7% of total revenues for the
comparable second quarters and from 1.4% to 1.9% for the comparable six month
periods. These increases were the result of lower levels of revenues and
higher interest rates.
The $282,000 of extraordinary gain recorded in the second quarter resulted from
an agreement with BIS Partners, L.P. (BIS) to cancel $450,000 of its debt with
the Company. The gain was computed by reducing the amount of debt recorded on
the Company's books to an amount equal to the total cash to be repaid to BIS
for both principal and interest. As a result, all future payments on the
current notes outstanding to BIS will be recorded as a reduction in the debt
balance with no interest expense being recognized. This had a favorable impact
on interest expense in the second quarter and will continue to have a favorable
impact in future quarters.
-9-
<PAGE> 10
No income taxes were recognized in the statements of operations since the
Company has use of net operating loss carryforwards to offset any taxes.
A loss of $.03 per share was incurred in the first six months of this year
compared to a loss of $.04 per share in the first six months of last year. The
extraordinary gain amounted to $.05 per share resulting in net income of $.02
per share for the first six months of this year. The increase in the weighted
average number of common shares outstanding for the comparable periods resulted
primarily from the issuance of 2,030,000 common shares upon the conversion of
the Company's Series D preferred stock which was not included in the number of
shares until the second quarter of last year.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
-11-
<PAGE> 12
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.
BARRISTER INFORMATION SYSTEMS CORPORATION
Date: November 10, 1995 By: /s/ Henry P. Semmelhack
--------------------------------
Henry P. Semmelhack
President and
Chief Executive Officer
Date: November 10, 1995 By: /s/ Richard P. Beyer
--------------------------------
Richard P. Beyer
Vice President, Finance
(Principal Financial Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-29-1995
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 1,505
<ALLOWANCES> 0
<INVENTORY> 3,746
<CURRENT-ASSETS> 5,345
<PP&E> 4,093
<DEPRECIATION> 3,594
<TOTAL-ASSETS> 6,157
<CURRENT-LIABILITIES> 3,112
<BONDS> 2,638
<COMMON> 1,486
0
0
<OTHER-SE> (1,079)
<TOTAL-LIABILITY-AND-EQUITY> 6,157
<SALES> 749
<TOTAL-REVENUES> 6,959
<CGS> 375
<TOTAL-COSTS> 5,486
<OTHER-EXPENSES> 1,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> (173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (173)
<DISCONTINUED> 0
<EXTRAORDINARY> 282
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
