<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 June 28, 1996
-----------------------------
Commission file number 0-14063
------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
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)
Registrant's telephone number, including area code (716) 845-5010
----------------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Class Outstanding at August 2, 1996
- --------------------- -----------------------------
Common $.24 Par Value 8,197,970 Shares
<PAGE> 2
BARRISTER INFORMATION SYSTEMS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at
June 28, 1996 and March 31, 1996 ..... 3
Condensed Statements of Operations -
Three Months Ended June 28, 1996
and June 30, 1995 ................... 4
Statement of Shareholders' Equity -
Three Months Ended June 28, 1996 .... 5
Condensed Statements of Cash Flows -
Three Months Ended June 28, 1996
and June 30, 1995 ................... 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
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 28 March 31
1996 1996
-------- --------
ASSETS
<S> <C> <C>
Cash $ 395 $ 1,198
Accounts receivable 1,900 1,578
Inventories:
Service parts 3,089 3,238
Other 125 132
Prepaid expenses 20 32
-------- --------
Total current assets 5,529 6,178
-------- --------
Equipment and leasehold
improvements, at cost 4,126 4,003
Less accumulated depreciation 3,665 3,617
-------- --------
Net equipment and leasehold
improvements 461 386
-------- --------
Software production costs 444 381
Other assets 34 33
-------- --------
$ 6,468 $ 6,978
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Current installments of long term debt 726 726
Accounts payable 668 799
Accrued compensation and benefits 542 549
Customer advances and unearned revenue 561 841
Other liabilities 133 84
-------- --------
Total current liabilities 2,880 3,249
-------- --------
Long-term debt,excluding current installments
($1,175 in June and $1,343 in March
to a related party) 1,236 1,392
Shareholders' equity:
Preferred stock -- --
Common stock ($.24 par value) 1,968 1,968
Additional paid-in capital 21,550 21,550
Accumulated deficit (21,166) (21,181)
-------- --------
Total shareholders' equity 2,352 2,337
-------- --------
$ 6,468 $ 6,978
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
------------------
June 28 June 30
1996 1995
------- -------
<S> <C> <C>
Revenues:
Product sales $ 610 $ 409
Services 2,805 3,218
------ ------
Total revenues 3,415 3,627
------ ------
Costs and expenses:
Cost of product sales 201 178
Cost of services 2,292 2,573
------ ------
Total cost of revenues 2,493 2,751
Selling, general and
administrative expenses 793 698
Product development and
engineering 108 97
------ ------
Total costs and expenses 3,394 3,546
------ ------
Operating income 21 81
Interest expense
Related party -- 65
Other 6 12
------ ------
Total interest 6 77
------ ------
Net income $ 15 $ 4
====== ======
Net income per common and
common equivalent share $ 0.00 $ 0.00
====== ======
Weighted average number of
common and common equivalent
shares outstanding 9,067 6,317
====== ======
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<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, 1996 $ 1,968 $ 21,550 $ (21,181) $ 2,337
Net income - - 15 15
-------- --------- --------- --------
Balance at June 28, 1996 $ 1,968 $ 21,550 $ (21,166) $ 2,352
======== ========= ========= ========
</TABLE>
Common stock - 8,197,970 shares issued and outstanding at June 28, 1996
and March 31, 1996.
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
June 28 June 30
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15 $ 4
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 74 71
Changes in current assets and liabilities:
Accounts receivable (322) 115
Inventories 156 139
Prepaid expenses 12 21
Accounts payable (131) (234)
Accrued compensation and benefits (7) 60
Customer advances and unearned revenues (280) (65)
Other liabilities 49 25
Net cash provided (used) ------- -----
by operating activities (434) 136
------- -----
Cash flows from investing activities:
Additions to equipment and leasehold
improvements (124) (46)
Capitalized software (88) (76)
Other -- 6
------- -----
Net cash used in investing activities (213) (116)
------- -----
Cash flows from financing activities:
Net repayment of debt (156) (1)
Net cash used by ------- -----
financing activities (156) (1)
------- -----
Net increase (decrease) in cash (803) 19
Cash at beginning of period 1,198 184
------- -----
Cash at end of period $ 395 $ 203
======= =====
Supplemental disclosure of cash flow information:
Interest paid $ 6 $ 84
======= ======
</TABLE>
See accompanying notes to condensed financial statements.
-6-
<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 first quarter results for each year represent thirteen
weeks of operations ended Friday, June 28, 1996 and June 30, 1995. 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 three month period ended June 28,
1996 are not necessarily indicative of the results to be expected for the full
year.
-7-
<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 $803,000 for its first quarter
ended June 28, 1996. The $434,000 of cash used by operating activities primarily
resulted from an increase in accounts receivable and decreases in accounts
payable and customer advances and unearned revenues. In addition, $213,000 was
spent on investing activities and net repayments of debt amounted to $156,000.
As a result, the Company's cash balance decreased from $1,198,000 at March 31,
1996 to $395,000 at June 28, 1996.
The principal cash requirements for fiscal 1997 are scheduled repayments of
$726,000 of long-term debt, investment in capitalized software at levels that
approximate those in fiscal 1996 and an increase in additions to equipment and
leasehold improvements over amounts spent in the prior two years. The Company
expects to meet these cash requirements by generating positive cash from
operating activities for the balance of the fiscal year and by using its cash
balance as required. Any income earned should not bear taxes since the Company
had use of net deductible temporary differences and operating loss carryforwards
of approximately $2,868,000 at March 31, 1996. Another potential source of cash
would be the exercise of the $1.75 and/or the $2.25 Warrants that were issued in
connection with the sale of common stock in March, 1996. If all the Warrants
were exercised, the Company would realize $3,000,000 in additional cash. The
Warrants are callable by the Company upon the occurrence of certain conditions.
In addition, the Company continues to explore additional sources of borrowings
to provide cash as required.
If the Company is unsuccessful in returning to profitability, there can be no
assurance that it will be able to generate positive cash flow from operations or
that its cash balance will be sufficient to meet required debt repayments and
capital expenditures for software and equipment. Further, there can be no
assurance that additional capital or lines of credit will be available to the
Company in those circumstances.
-8-
<PAGE> 9
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended June 28, 1996, total revenues decreased approximately 5.8%
over the same quarter in 1995. A net profit of $15,000 was incurred compared to
a net profit of $4,000 in the first quarter of the prior year. Improved margins
on product sales and lower interest expenses were offset by lower margins on
services revenues and higher selling, general and administrative expenses.
Product sales increased 49.1% for the comparable quarter based on an increase in
the sale of Javelan, the Company's Windows(TM)-based management software
product. The Company experienced a further decline in the sale of low margin
(10%-15%) commodity products for the comparable periods. Margins on Javelan
sales, which can include various hardware and third party software in addition
to the Company developed software, generally amount to between 60% and 100%
depending on the configuration of the sale. As a result of the increased Javelan
sales, margins on product sales increased to 67.0% from 56.5% for the comparable
quarter in the prior year.
The decline of 12.8% in services revenues for the quarter ended June 28, 1996,
as compared to the same quarter in the previous year, was principally due to the
decreased revenues from hardware maintenance contracts. These revenues were
affected by the non-renewal of two large subcontracts from IBM in August, 1995,
a third large subcontract in May, 1996 and a reduction in contracts for the
Company's older minicomputer equipment. Since IBM is reducing the amount of
subcontracting it does in the PC equipment market, the Company expects that
revenues from this customer, which amounted to 30% of total revenues in fiscal
1996, will drop as a percentage of total revenues in fiscal 1997. IBM may
terminate its contracts with the Company with 30 days advance notice. As a
result, the Company has increased its efforts to obtain business by signing new
contracts from additional outsourcing opportunities, from recently established
business partners and through direct sales. If IBM were to cancel a major
portion of its existing subcontracts to the Company, or if the Company's sales
and marketing efforts are unsuccessful, an adverse impact on the Company's
results of operations for fiscal 1997 could occur. Margins on services revenues
decreased from 20.0% to 18.3% for the comparable period as the amount of cost
reductions realized were less than the decrease in associated revenues since
certain fixed costs could not be reduced.
-9-
<PAGE> 10
The Company experienced an increase in the amount of selling, general and
administrative expenses it incurred in the comparable first quarter from 19.2%
to 23.2% of total revenues. This result was primarily due to an increase in
selling expenses associated with enhanced efforts to obtain new hardware
maintenance contracts and to lower revenue levels. 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.
The decrease in interest expense for the comparable quarter resulted from
reductions in interest expense to BIS Partners, L.P. The accounting treatment of
certain debt forgiveness by BIS Partners, L.P. in August, 1995, stipulated that
the debt forgiveness must first be considered a reduction of all future interest
expense. As a result, all payments after August, 1995, are being recorded as
reductions in the principal balance of the loans.
The increase in the weighted average number of common shares outstanding for the
comparable periods resulted principally from the issuance of 2,000,000 common
shares in a private placement offering that was completed on March 29, 1996. In
addition, the weighted average number of common shares for the first quarter of
the current year includes approximately 869,000 of common equivalent shares.
These shares were computed as the net effect of dilutive stock options and
warrants based on the treasury stock method using an average market price of
$2.55 for the first quarter.
-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
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: August 6, 1996 By: /s/ Henry P. Semmelhack
--------------------------------
Henry P. Semmelhack
President and
Chief Executive Officer
Date: August 6, 1996 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-28-1996
<CASH> 395
<SECURITIES> 0
<RECEIVABLES> 1,900
<ALLOWANCES> 0
<INVENTORY> 3,214
<CURRENT-ASSETS> 5,529
<PP&E> 4,126
<DEPRECIATION> 3,665
<TOTAL-ASSETS> 6,468
<CURRENT-LIABILITIES> 2,880
<BONDS> 1,236
<COMMON> 1,968
0
0
<OTHER-SE> 384
<TOTAL-LIABILITY-AND-EQUITY> 6,468
<SALES> 610
<TOTAL-REVENUES> 3,415
<CGS> 201
<TOTAL-COSTS> 2,493
<OTHER-EXPENSES> 901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 15
<INCOME-TAX> 0
<INCOME-CONTINUING> 15
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
