<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
BARRISTER INFORMATION SYSTEMS CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BARRISTER INFORMATION SYSTEMS CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
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<PAGE> 2
BARRISTER INFORMATION SYSTEMS CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 6, 1996
A Special Meeting of Shareholders of Barrister Information Systems Corporation
(the "Company") will be held at the Company's headquarters, 465 Main Street,
Suite 700, Buffalo, New York 14203, on March 6, 1996 at 10:00 a.m., local
time, for the following purpose:
1. To approve an Amendment to the Company's Certificate of
Incorporation and By-Laws to increase the Company's authorized Common
Stock from 10,000,000 to 20,000,000 shares.
2. Contingent upon the adoption of Proposal No. 1, for approval
to sell or issue Common Stock equal to 20% or more of the then
presently outstanding stock for less than the market value of the
stock.
3. To transact such other business as may properly come before
the meeting.
The close of business on February 7, 1996 has been fixed as the record date for
determining the Shareholders entitled to notice, and to vote at the Special
Meeting.
By order of the Board of Directors,
Mark C. Donadio
Secretary
February 16, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 3
BARRISTER INFORMATION SYSTEMS CORPORATION
465 MAIN STREET
BUFFALO, NEW YORK 14203
(716) 845-5010
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
MARCH 6, 1996
GENERAL
This Proxy Statement and accompanying form of proxy have been mailed on or
about February 21, 1996 to all holders of record on February 7, 1996 of Common
Stock, par value $.24 per share ("Common Stock") of Barrister Information
Systems Corporation, a New York corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use at
a Special Meeting of Shareholders to be held on March 6, 1996 and at any
adjournment or postponements thereof.
Shares represented by an effective proxy in the accompanying form, unless
contrary instructions are specified in the proxy, will be voted FOR the
proposals set forth in the accompanying Notice of Special Meeting of
Shareholders. Proxies marked as abstaining (including proxies containing
broker non-votes) on the proposals will be treated as present at the Special
Meeting for the purpose of determining a quorum, but will not be counted as
votes cast on such matter. Any proxy may be revoked at any time before it is
voted. A Shareholder may revoke his/her proxy by executing another proxy at a
later date, by notifying the Secretary of the Company in writing of his/her
revocation, or by attending and voting at the Special Meeting. Revocation is
effective only upon receipt of notice by the Secretary.
The Company will bear the cost of soliciting proxies by the Board of Directors.
The Board of Directors may use the services of the Company's executive officers
and certain directors to solicit proxies from Shareholders in person and by
mail, telegram and telephone, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing. In addition, the Company
will request brokers, nominees and others to forward proxy materials to their
principals and to obtain authority to execute proxies. The Company will
reimburse such brokers, nominees and others for their reasonable out-of-pocket
and clerical expenses incurred by them in so doing.
2
<PAGE> 4
The securities entitled to vote at the Special Meeting are shares of Common
Stock. Each share of Common Stock is entitled to one vote. The close of
business on February 7, 1996 has been fixed as the record date for the
determination of Shareholders entitled to notice of and to vote at the Special
Meeting and any adjournment or postponement thereof. At that date 6,197,972
shares of Common Stock were outstanding.
PROPOSAL NO. 1
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK
The Company is seeking to raise additional capital. In order to raise capital,
the Company expects that it will be required to issue or sell Common Stock or
securities convertible into Common Stock.
On January 26, 1996, the Board of Directors approved, subject to Shareholder
approval, an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from the present
10,000,000 to 20,000,000 and to obtain shareholder approval for the Company to
sell or issue Common Stock (or securities convertible into Common Stock) equal
to 20% or more of the then presently outstanding stock for less than the
greater of book or market value of the stock.
Of the 10,000,000 shares of Common Stock presently authorized, as of January
26, 1996, there were 6,197,972 shares issued and outstanding and 569,500 shares
reserved for issuance upon the exercise or grant of stock options under the
Company's 1989 Stock Incentive Plan.
The Board of Directors believes that the number of shares of Common Stock
available for issuance is insufficient for possible future transactions, such
as acquisitions, mergers, stock sales or other financing arrangements.
The proposed amendment, if adopted, would make an additional 10,000,000 shares
of Common Stock available for issuance from time to time without further
shareholder approval, unless such approval is required by law or by rules and
regulations of the American Stock Exchange. The Company has long believed that
a stronger balance sheet is important to its strategic objectives. Accordingly,
the Company is exploring with its financial advisors the existence of
opportunities for the Company in the securities markets. Should an opportunity
emerge which Management of the Company believes should be realized upon, any
delay resulting from the need to obtain Shareholder approval for an increase in
the Company's authorized Common Stock at that time may preclude the Company
from taking advantage of such opportunity. Accordingly, the Company seeks
Shareholder approval of the increase in the amount of authorized Common Stock
at this time. There are no present agreements, commitments or undertakings
with regard to the issuance of such proposed additional shares. Shareholders
do not have and, if the
3
<PAGE> 5
proposed amendment to the Certificate of Incorporation is approved, will not
have pre-emptive rights to purchase any of such additional shares.
If the amendment is approved, the first paragraph of the FOURTH paragraph of
the Certificate of Incorporation, as amended and restated, will be amended to
read as follows:
"FOURTH. The total number of shares which the corporation shall have
authority to issue is 22,000,000 of which 20,000,000 shares shall be
designated Common Stock, par value $.24 per share, and 2,000,000
shares shall be designated Preferred Stock, par value of $1.00 per
share...."
The remainder of Paragraph FOURTH shall be unaffected by the
amendment and shall remain in full force and effect.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE COMMON
STOCK OF THE COMPANY PRESENT OR REPRESENTED AT THE MEETING IS REQUIRED TO
APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION. AN
AFFIRMATIVE VOTE IS RECOMMENDED BY MANAGEMENT.
PROPOSAL NO. 2
APPROVAL TO SELL OR ISSUE COMMON STOCK
EQUAL TO 20% OR MORE OF THE OUTSTANDING STOCK
FOR LESS THAN MARKET VALUE OF THE STOCK
While the Company has no present agreement, commitment or undertaking relative
to selling or issuing Common Stock at less than market value, the Company
believes that, in order to effectuate a financing transaction to raise
additional capital that will benefit the shareholders, it may have to sell or
issue Common Stock at less than market value. The Company is seeking
shareholder approval at this time in order to have the flexibility to complete
such a transaction, should it be necessary in light of the then prevailing
market conditions, and without having to call another shareholder meeting for
approval.
Section 713 of the American Stock Exchange Rules and Policies requires
shareholder approval as a prerequisite to approval of applications to list
additional shares to be issued in connection with a transaction involving:
"(i) the sale or issuance by the Company of Common Stock
(or securities convertible into Common Stock) at a price less than the greater
of book or market value which together with sales by
4
<PAGE> 6
officers, directors or principal shareholders of the company equals 20% or more
of presently outstanding Common Stock; or
(ii) the sale or issuance by the Company of Common Stock
(or securities convertible into Common Stock) equal to 20% or more of presently
outstanding stock for less than the greater of book or market value of the
stock".
While there is no present agreement, commitment or undertaking to sell or issue
Common Stock at less than market value which may not be the same as the price
of Common Shares trading on the American Stock Exchange, pursuant to Proposal
No. 2 the Company is at this time seeking approval from the shareholders to
sell or issue Common Stock for a discount of no greater than 20% from market
value in order to facilitate the timely completion of such a transaction should
it be necessary.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE COMMON
STOCK OF THE COMPANY PRESENT OR REPRESENTED AT THE MEETING IS REQUIRED TO
APPROVE THE SALE OR ISSUANCE BY THE COMPANY OF COMMON STOCK EQUAL TO 20% OR
MORE OF THE THEN PRESENTLY OUTSTANDING STOCK FOR LESS THAN THE MARKET VALUE OF
THE STOCK. AN AFFIRMATIVE VOTE IS RECOMMENDED BY MANAGEMENT.
OTHER BUSINESS
Representatives of the Company's accountants for the current year and for the
most recently completed fiscal year, KPMG Peat Marwick LLP, is not expected to
be present at the Special Meeting.
As of the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the Special
Meeting is that hereinabove set forth. If any other matter or matters are
properly brought before the Special Meeting, or any adjournment or postponement
thereof, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy on such matters in accordance with their judgment. The
Company's financial statements for its year ended March 31, 1995 are included
on pages A-1 through A-15 and the Company's Form 10Q for the quarter ended
December 29, 1995 is included on pages B-1 through B-12.
By the Order of the Board of Directors,
Mark C. Donadio
Secretary
Dated: February 16, 1996
5
<PAGE> 7
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA Year Ended March 31
----------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 15,327 $ 17,772 $ 16,165 $ 17,154 $ 24,399
Net loss (159) (1,334) (62) (2,180) (8,152)
Net loss per common share(1) (.03) (.53) (.14) (1.92) (15.98)
BALANCE SHEET DATA AT YEAR END:
Working capital 2,880 2,733 3,204 3,254 (605)
Total assets 6,544 7,447 7,711 8,566 12,898
Long-term debt(2) 3,329 3,406 3,330 3,693 6,543
Shareholders' equity (deficit) 298 197 478 534 (4,006)
</TABLE>
_______________________________________________________________________________
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial data for the fiscal years
ended March 31, 1995 and March 31, 1994.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1st 2nd 3rd 4th Total
Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1995
Revenues $ 3,965 $ 3,837 $3,792 $ 3,733 $15,327
Net earnings (loss) (265) 35 36 35 (159)
Net earnings (loss) per common share (.06) .01 .01 .01 (.03)
1994
Revenues $ 4,400 $ 5,241 $ 4,714 $ 3,417 $ 17,772
Net loss(3) (84) (55) (35) (1,160) (1,334)
Net loss per common share(1) (.03) (.02) (.01) (.46) (.53)
<FN>
__________________________________
(1) The earnings (loss) per share gives effect to the cumulative unpaid dividends on preferred stock for 1992 and
1993 only, since these dividends were waived at the time the preferred stock was converted on March 31, 1994.
The net loss per common share for the first three quarters for 1994 has been restated to reflect this waiver.
Amounts originally reported were $(.06), $(.05), and $(.04) respectively. See note 2 to the financial
statements. The sum of the quarterly net earnings (loss) per common share will not necessarily equal
the annual net loss per share amount because of the effect of the quarterly weighting of shares outstanding.
(2) See notes 2 and 3 to the financial statements.
(3) The fourth quarter net loss includes an additional inventory write off of $624,000.
</TABLE>
A-1
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table sets forth for the periods indicated (i) the percentage
which each item reflected in the statements of operations bears to total
revenues and (ii) the percentage change of such items as compared with the
indicated prior period.
<TABLE>
<CAPTION>
------------------------------------------------------------------
Period to Period
Percentage of Total Revenues Percentage
Year Ended March 31 Increase (Decrease)
------------------------------------------------------------------
1995 1994
vs. vs.
1995 1994 1993 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales 16.8 % 32.6 % 28.2 % (55.4%) 27.2 %
Services 83.2 67.4 71.8 6.4 3.2
------ ------ ------
Total revenues 100.0 100.0 100.0 (13.8) 9.9
------ ------ ------
Costs and expenses:
Cost of product sales(1) 73.5 82.9 79.7 (60.4) 32.3
Cost of services(2) 80.4 83.8 78.1 2.1 10.8
------ ------ ------
Total cost of revenues 79.2 83.5 78.5 (18.1) 16.9
Selling, general, and
administrative 16.7 18.3 15.4 (21.5) 30.4
Product development and
engineering 3.5 4.2 5.0 (29.1) (5.7)
------ ------ ------
Total costs and expenses 99.4 106.0 98.9 (19.2) 17.9
------ ------ ------
Operating earnings (loss) 0.6 (6.0) 1.1
Interest expense 1.6 1.5 1.5 (3.1) 7.4
------ ------ ------
Net loss (1.0) (7.5) (.4)
====== ====== ======
<FN>
__________________________________
(1) Percentage of product sales
(2) Percentage of services revenues
</TABLE>
A-2
<PAGE> 9
RESULTS OF OPERATIONS
The decrease in product sales for fiscal 1995 as compared to
1994 was due primarily to a de-emphasis on the sale of low margin
commodity products. However, the percentage of margin realized on
product sales increased based on increased sales of the Company's
Javelan software product which has only a small associated cost of
sales. Javelan is a Windows-based financial management software
package for law firms that complies with industry standards and uses
client/server technology. The Company expects increased Javelan sales
in fiscal 1996 which should have a further favorable affect on margins
in that year.
The increase in product sales for fiscal 1994 as compared to
1993 was the result of increased sales to a growing base of customers
outside the legal market and the initial shipments in fiscal 1994 of
Javelan. The percentage of margin obtained on these sales was reduced
since these sales were comprised principally of industry standard
personal computers (PCs) and network products which have low gross
margins because of intense competitive pressures.
The increase in service revenues for fiscal 1995 as compared to
1994 and for fiscal 1994 as compared to 1993 resulted from new hardware
maintenance contracts outside the legal market which exceeded expiring
maintenance contracts. In both years, approx-imately 70% of these new
contracts were obtained from subcontracts awarded by a major customer.
Margins on service revenues increased for fiscal 1995 as compared to
1994 primarily by controlling overhead expenses at or below 1994 levels
on the increased level of revenues. Margins on service revenues
decreased for fiscal 1994 as compared to 1993 as a result of higher
costs for parts consumed in the repair process and increased costs
associated with services subcontracted to others. The Company expects
to realize an increase in services revenues for fiscal 1996 by focusing
on the sale of maintenance contracts, the further pursuit of
outsourcing opportunities from major companies and by providing
installation and training services related to expected increased levels
of Javelan sales.
The decrease in selling, general and administrative expenses as
a percentage of total revenues for fiscal 1995 as compared to 1994 was
due essentially to reductions in selling and marketing expenses based
on the decision to de-emphasize the sale of low-margin commodity
products. When fiscal 1994 is compared to 1993, an increase in selling
general and administrative expenses as a percentage of revenues was
incurred based on higher selling expenses associated with the hiring of
additional sales staff to sell hardware maintenance services and a
settlement gain of $317,000 realized in 1993 on the termination of the
Company's pension plan.
Product development and engineering expenses in fiscal 1995 were
reduced over levels incurred in the prior two fiscal years based on
additional cost cutting measures implemented by management. In
addition, $132,000 of costs incurred in 1995 were capitalized as
software production costs related to the Javelan product. The Company
A-3
<PAGE> 10
expects to incur an increase in capitalized software for 1996
for the development of advanced features in the Javelan product.
Interest expense as a percentage of revenues increased for
fiscal 1995 as compared to 1994 based on lower levels of revenues in
1995. The amount of interest expense incurred in 1995 was slightly
lower than 1994 based on interest savings resulting from the conversion
of $300,000 of debt by BIS Partners, L.P. into equity on March 31, 1994
and $250,000 of additional debt into equity on July 1, 1994. Interest
savings from these lower debt levels were mostly offset by higher
interest rates. Interest expense as a percentage of revenue remained
the same for fiscal 1994 and 1993 based on approximately the same
levels of borrowing and stable interest rates.
No income tax benefits were recorded in fiscal 1995, 1994 or
1993. These benefits will be recorded in future periods as they are
realized or as their realization becomes predictable.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a net decrease in cash of $620,000 during
fiscal 1995. The principal reasons for this decrease were the
use of $280,000 of cash by operating activities, the investment of
$80,000 in additions to equipment and leasehold improvements and
$132,000 in capitalized software and the net repayment of $163,000 of
debt. In fiscal 1994, the Company experienced a net increase in cash
of $376,000. Cash of $700,000 raised from the sale of common shares in
a private placement and an increase of $335,000 in borrowings were
partially offset by $306,000 of cash used by operating activities and
$369,000 invested in additions to equipment and leasehold
improvements. In fiscal 1993, the Company experienced a net decrease
in cash of $435,000, principally, $309,000 in long-term debt
repayments and $152,000 in additions to equipment and leasehold
improvements.
The Company plans to meet its cash requirements for fiscal 1996 by
generating positive cash from operating activities. The Company has
earned a profit in each of the last three quarters and believes that it
is properly positioned to improve upon last year's results by achieving
additional growth in both services revenues and Javelan sales. In
recognition of the importance of Javelan sales on future cash flows and
the potential for sales volatility, the Company has obtained an
agreement with BIS Partners, L.P. (BIS) to provide a $500,000 line of
credit through June 30, 1996. In addition, the Company plans to
minimize investments in new assets and debt repayment. While the
Company plans to incur an increase in capitalized software in fiscal
1996, it also expects a further decrease in the net amount of equipment
and leasehold improvements and a reduction in the level of
inventories. BIS has also agreed to receive interest only payments on
its current debt during fiscal 1996, which will further minimize cash
used to reduce debts. Finally, the Company believes that additional
financing sources will become available as its operational
performance improves.
A-4
<PAGE> 11
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31
----------------------------
1995 1994
----------------------------
<S> <C> <C>
ASSETS (note 3)
CURRENT ASSETS:
Cash $ 184 $ 804
Accounts receivable, less allowance for doubtful
accounts of $150 in 1995 and 1994 1,565 1,853
Inventories:
Service parts 3,823 3,670
Other 182 209
------- -------
Total inventories 4,005 3,879
------- -------
Prepaid expenses 43 41
------- -------
Total current assets 5,797 6,577
------- -------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Computer and other equipment 2,895 3,216
Furniture and fixtures 997 1,049
Leasehold improvements 292 292
------- -------
4,184 4,557
Less accumulated depreciation 3,619 3,752
------- -------
Net equipment and leasehold improvements 565 805
------- -------
SOFTWARE PRODUCTION COSTS 132 --
OTHER ASSETS 50 65
------- -------
$ 6,544 $ 7,447
======== ========
</TABLE>
A-5
<PAGE> 12
<TABLE>
<CAPTION>
March 31
--------------------------
1995 1994
--------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank (note 3) $ 250 $ 500
Current installments of long-term debt (note 3) 96 182
Accounts payable 933 1,149
Accrued compensation and benefits 572 817
Customer advances and unearned revenue 956 1,015
Other accrued expenses 110 181
------- -------
Total current liabilities 2,917 3,844
------- -------
LONG-TERM DEBT, EXCLUDING
CURRENT INSTALLMENTS ($2,357 in 1995 and
$2,492 in 1994 to a related party, notes 2 and 3) 3,329 3,406
SHAREHOLDERS' EQUITY (notes 2 through 5):
Preferred stock, at stated value.
Authorized 2,000,000 shares -- 3,060
Common stock, $.24 par value.
Authorized 10,000,000 shares at March 31, 1995;
6,189,972 and 4,139,974 shares issued and
outstanding in 1995 and 1994 1,486 994
Additional paid-in capital 19,788 16,960
Accumulated deficit (20,976) (20,817)
------- -------
Total shareholders' equity 298 197
------- -------
COMMITMENTS (note 8)
$6,544 $ 7,447
======= =======
</TABLE>
See accompanying notes to financial statements.
A-6
<PAGE> 13
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended March 31
----------------------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
REVENUES:
Product sales $ 2,580 $ 5,787 $ 4,551
Services 12,747 11,985 11,614
--------- --------- -------
Total revenues 15,327 17,772 16,165
--------- --------- -------
COSTS AND EXPENSES:
Cost of product sales 1,897 4,796 3,625
Cost of services 10,249 10,043 9,065
--------- --------- -------
Total cost of revenues 12,146 14,839 12,690
Selling, general and
administrative expenses 2,552 3,251 2,493
Product development and engineering 535 755 801
--------- --------- -------
Total costs and expenses 15,233 18,845 15,984
--------- --------- -------
OPERATING EARNINGS (LOSS) 94 (1,073) 181
INTEREST EXPENSE:
Related party (note 3) 200 217 238
Other 53 44 5
--------- --------- -------
Total Interest 253 261 243
--------- ------- -------
NET LOSS $ (159) $ (1,334) $ (62)
========== ========= ==========
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS (NOTE 2) $ (159) $ (1,334) $ (359)
========== ========= =========
NET LOSS PER COMMON AND
COMMON EQUIVALENT SHARE $ (.03) $ (.53) $ (.14)
========== ========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 5,663 2,495 2,482
========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
A-7
<PAGE> 14
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended March 31
----------------------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
SERIES A PREFERRED STOCK
Beginning balance $ -- $ 1,300 $ 1,300
Conversion into 1,300 shares of Series D preferred stock -- (1,300) --
--------- ---------- ----------
Ending balance -- -- 1,300
--------- ---------- ----------
SERIES C PREFERRED STOCK
Beginning balance -- 1,760 1,760
Conversion into 1,760 shares of Series D preferred stock -- (1,760) --
--------- ---------- ----------
Ending balance -- -- 1,760
--------- ---------- ----------
SERIES D PREFERRED STOCK
Beginning balance 3,060 -- --
Issued 3,060 shares on conversion
of Series A and Series C preferred stock -- 3,060 --
Issued 1,000 shares on conversion of long-term debt 250 -- --
Conversion into 2,030,000 shares of common stock (3,310) -- --
--------- ---------- ----------
Ending balance -- 3,060 --
--------- ---------- ----------
COMMON STOCK
Beginning balance 994 569 564
Issued 389,700 shares on conversion of debentures -- -- 5
Issued 100,000 shares and reclassified 120,000 shares on
cancellation of redemption feature of common stock -- 53 --
Issued 150,000 shares on conversion of long-term debt -- 36 --
Sale of 20,000 shares and 1,400,000 shares
in 1995 and 1994 respectively 5 336 --
Issued 2,030,000 shares on conversion of Series D
preferred stock 487 -- --
--------- ---------- ----------
Ending balance 1,486 994 569
--------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL
Beginning balance 16,960 16,332 16,331
Increase in redeemable common stock -- (41) (38)
Conversion of debentures -- -- 39
Cancellation of redemption feature of common stock -- 266 --
Conversion of long-term debt -- 39 --
Sale of common shares 5 364 --
Conversion of Series D preferred stock 2,823 -- --
--------- ---------- ----------
Ending balance 19,788 16,960 16,332
--------- ---------- ----------
ACCUMULATED DEFICIT
Beginning balance (20,817) (19,483) (19,421)
Net loss (159) (1,334) (62)
--------- --------- ----------
Ending balance (20,976) (20,817) (19,483)
--------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 298 $ 197 $ 478
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
A-8
<PAGE> 15
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31
-----------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (159) $ (1,334) $ (62)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 309 358 465
Loss on disposal of equipment 1 4 8
Gain on termination of pension plan -- -- (317)
Changes in current assets and liabilities:
Accounts receivable 288 95 (62)
Inventories (126) 489 207
Prepaid expenses (2) 47 (54)
Accounts payable (216) 22 254
Accrued compensation and benefits (245) (53)
Customer advances and unearned revenue (59) 144 (101)
Other accrued expenses (71) (131) (283)
---------- --------- ---------
Net cash provided (used) by operating activities (280) (306) 2
---------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold improvements (80) (369) (152)
Proceeds on sale of equipment 10 2 9
Additions to software production costs (132) -- --
Other 15 14 (1)
---------- --------- --------
Net cash used by investing activities (187) (353) (144)
---------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayment) on note payable to bank (250) 500 --
Proceeds from long-term debt 273 183 16
Repayment of long-term debt (186) (348) (309)
Proceeds from sale of common stock 10 700 --
---------- --------- --------
Net cash provided (used) by financing activities (153) 1,035 (293)
---------- --------- --------
NET INCREASE (DECREASE) IN CASH (620) 376 (435)
CASH AT BEGINNING OF YEAR 804 428 863
---------- --------- --------
CASH AT END OF YEAR $ 184 $ 804 $ 428
========== ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION (note 9)
</TABLE>
See accompanying notes to financial statements.
A-9
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
March 31, 1995, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION - The financial statements include the
accounts of Barrister Information Systems Corporation (the
Company). In 1995, the Company liquidated its wholly-owned
subsidiary which had minimal activity in the prior two years.
The inter-company balances related to this subsidiary have been
eliminated up to the date of liquidation.
(b) REVENUE RECOGNITION - The Company's operations consist
primarily of providing computer software, hardware, and related
services under contractual arrangements. Revenues are recognized
in accordance with customer contracts and agreements, primarily
upon shipment of computer hardware or upon performance of
services. Software license revenue (included in Product sales) is
recognized upon delivery of the software product to the customer,
unless the Company has significant related obligations remaining.
When obligations remain after delivery, revenue is recognized
when such obligations are no longer significant.
(c) INVENTORIES - Inventories are stated at the lower of cost
(first-in, first-out) or market.
(d) EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Depreciation is recorded
on the straight-line method based on the estimated useful lives of
the assets. Computer and other equipment and furniture and fixtures
are depreciated over estimated useful lives of three to ten years.
Improvements to leased property are depreciated over the lesser of
the term of the lease or the life of the improvements.
(e) SOFTWARE PRODUCTION AND DEVELOPMENT COSTS - Capitalized software
production costs are carried at the lower of unamortized
cost or net realizable value, and are amortized based on current
and estimated future revenue for each product with minimum
amortization on the straight-line method over the estimated
economic life of the product. Capitalization ceases and
amortization commences when the product is available for general
release. All costs to establish the technological feasibility of
computer software products are charged to operations when incurred.
(f) PER SHARE DATA - Net loss per share amounts are based on the
weighted average number of common and common equivalent shares
outstanding. The net loss is increased by unpaid cumulative
preferred stock dividends where applicable in calculating the net
loss attributable to the common shareholders.
(g) RECLASSIFICATIONS - Certain 1994 and 1993 amounts have been
reclassified to conform to the 1995 presentation.
(2) RECAPITALIZATIONS
(a) On March 31, 1994, the Company completed a $700,000 private
placement offering of 1,400,000 shares of common stock.
Additionally, the following transactions were completed:
(i) Each share of Series A and C cumulative preferred stock was
converted into one share of Series D preferred stock. As part
of the conversion, all rights to cumulative unpaid dividends
($692,000) on the Series A and C preferred stock were waived.
Accordingly, the net loss attributable to the common
shareholders for 1994 has been computed without regard to
preferred stock dividends. If these dividends had been
included, the net loss per common share would have been $(.65).
A-10
<PAGE> 17
(ii) BIS Partners, L.P. (BIS) converted $300,000 of long-term debt
into 150,000 common shares, and agreed to interest only payments
at prime rate plus 3 percent on its revised debt for one year,
with repayment in 48 equal installments thereafter. These terms
were subsequently revised as described in note 3. The fair
value of the 150,000 common shares ($75,000) was used to measure
the debt reduction and stock issued. The remaining debt
reduction ($225,000) is included in long-term debt and is being
recognized as reduced interest expense on the level yield method
over the remaining term of the debt. Ninety percent of BIS is
owned either directly or beneficially by certain officers and
directors of the Company.
(iii) The redemption provision on 120,000 common shares was waived by
the shareholder in exchange for 100,000 additional common
shares.
(b) On April 4, 1994, BIS increased its working capital loan by $250,000
which was used to repay $250,000 of the note payable to bank.
(c) On July 1, 1994, BIS converted $250,000 of its term note into 1,000
shares of Series D preferred stock. As part of the agreement, the
Company agreed to increase the interest rate on the remaining debt
owed to BIS from the prime rate plus three percent to the prime rate
plus four percent.
On October 4, 1994, the shareholders approved an amendment to the
Company's Certificate of Incorporation providing for an increase in
authorized common stock to 10,000,000 shares and for the automatic
conversion of each share of Series D preferred stock into 500 common
shares. The 1995 financial statements reflect this required
conversion although the Company has not yet issued the common share
certificates to all affected shareholders.
(3) NOTE PAYABLE AND LONG-TERM DEBT
The note payable to bank is on a demand basis and bears interest at
the prime rate plus 2 1/2 percent (11.5% at March 31, 1995). On June
27, 1995, BIS provided the Company with a $500,000 line of credit
available through June 30, 1996. The line of credit shares a
security interest in the collateral pledged under the existing BIS
loan and bears interest at the prime rate plus four percent.
A summary of long-term debt follows:
<TABLE>
<CAPTION>
March 31
------------------------
1995 1994
------------------------
(in thousands)
<S> <C> <C>
Working capital note with BIS Partners, L.P.(a)$ 285 $ 35
Term note with BIS Partners, L.P.(a) 2,108 2,425
Other(b) 1,032 1,128
-------- ---------
Total long-term debt 3,425 3,588
Less current installments 96 182
--------- ---------
Long-term debt, excluding current installments $ 3,329 $ 3,406
========= =========
</TABLE>
A-11
<PAGE> 18
(a) The working capital and term notes bear interest at the prime rate
plus 4 percent (13% at March 31, 1995). On March 31, 1995, BIS agreed
to interest only payments for one year with principal repayment in 60
equal installments (including interest) thereafter. Principal
repayments are to be applied first to the working capital note.
Both notes are supported by an agreement granting a security interest
in all equipment, inventories and receivables to BIS. The agreement,
among other things, requires the Company to maintain certain financial
ratios, prohibits dividend payments, and restricts capital
expenditures, lease obligations and executive compensation. The
Company was in compliance with all covenants in the agreement except
for the interest coverage covenant which was waived by BIS for 1995.
(b) Includes a non-interest bearing obligation of $886,000, payable to a
strategic business partner, upon the Company reaching certain
profitability levels. Payments are based on a percentage of net
income not to exceed $200,000 per year with no payments required after
2001. Since the amount and timing of repayments are not presently
determinable, they have not been included in the following table.
Payments on long-term debt are due as follows:
<TABLE>
<S> <C>
Year Ending March 31 Amount (in thousands)
-------------------- ---------------------
1996 $ 96
1997 423
1998 446
1999 479
2000 518
Thereafter 577
=======
</TABLE>
(4) CAPITAL STOCK
The Series A preferred stock is non-voting, has liquidation preference
rights over the Series C preferred stock and the common stock and is
redeemable by the Company at any time for $1,000 per share. Each
share of Series A preferred stock is convertible into 500 shares of
common stock. The rights to cumulative dividends totaling $410,000
were waived on March 31, 1994 (note 2). Cumulative unpaid dividends
at March 31, 1993 were $254,000.
The Series C preferred stock is non-voting, has liquidation preference
rights over the common stock, but has no redemption or conversion
rights. The rights to cumulative dividends totaling $282,000 were
waived on March 31, 1994 (note 2). Cumulative unpaid dividends at
March 31, 1993 were $141,000.
Each share of Series D preferred stock carries voting rights equal to
500 common shares, participates equally and ratably in payment of
dividends with the common shares, and automatically converted into
common stock upon shareholder approval of the increase in the
authorized number of common shares (note 2).
Prior to March 31, 1994, 120,000 shares of common stock had a
redemption provision (note 2).
(5) STOCK INCENTIVE PLAN
The Company has a stock incentive plan to which it currently has
allocated 600,000 shares of its authorized common stock to be offered
to key employees and directors. Under the plan, options are granted
at prices determined by the Compensation Committee of the Board of
Directors but not at a price less than the stock's market value at
date of grant. The options granted may qualify as incentive stock
options and are exercisable over a period of ten years. Options for
151,000 shares were exercisable at March 31, 1995.
A-12
<PAGE> 19
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Shares Under Option at March 31
--------------------------------------
1995 1994 1993
--------------------------------------
(in thousands)
<S> <C> <C> <C>
Outstanding, beginning of year 189 157 168
Granted 361 40
Canceled (38) (8) (11)
Exercised at $.50 per share (20) -- --
---- ---- ----
Outstanding, end of year (at prices
ranging from $.50 to $.875) 492 189 157
==== ==== ====
Reserved for grant, end of year 85 108 140
==== ==== ====
</TABLE>
(6) PENSION AND SAVINGS PLAN
The Company has a defined contribution retirement plan covering all
eligible employees. The Company partially matches employee
contributions to the Plan. Expense under the plan was $20,000 in
1995, $21,000 in 1994 and $23,000 in 1993.
In March 1991, the Company terminated its non-contributory defined
benefit pension plan and all plan assets were distributed to
participants upon dissolution of the plan during fiscal 1993.
Participants did not accrue benefits under the Plan for services
performed after March 31, 1991. The Company recognized a settlement
gain of $317,000 in fiscal 1993.
(7) INCOME TAXES
There were no tax benefits established in the statements of operations
for any of the years in the three year period ended March 31, 1995
since the Company has fully reserved for the tax effect of net
deductible temporary differences and operating loss carryforwards as
the likelihood of realization of the tax benefits cannot be
established.
The components of deferred tax assets fully reserved are as follows:
<TABLE>
<CAPTION>
-------------------------
1995 1994
-------------------------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards $ 470 $ 409
Inventory write downs 280 272
Inventory costs capitalized 32 20
Software revenue 15 26
Vacation pay 74 73
Bad debt allowance 51 51
Software production costs (45) --
Other 3 (8)
------- --------
$ 880 $ 843
------- --------
</TABLE>
A-13
<PAGE> 20
The issuance of new shares as part of the March 31, 1994
recapitalization resulted in an ownership change as defined under
section 382 of the Internal Revenue Code. The ownership change limits
the future use of the net operating loss and credit carryforwards
created prior to the ownership change. The pre-ownership change loss
carryforward can be utilized at the rate of $80,000 per year. After
application of this limitation, $1,379,000 of tax loss carryforward is
available through 2010.
(8) LEASE COMMITMENTS
The Company conducts its operations from leased facilities and uses
certain equipment primarily under operating lease arrangements. Real
estate taxes, insurance, and maintenance expenses are obligations of
the Company. It is expected that in the normal course of business,
leases that expire will be renewed or replaced. Total rental expense
was $818,000 in 1995, $855,000 in 1994 and $814,000 in 1993.
Future minimum rental payments required under leases that have initial
or remaining noncancellable lease terms in excess of one year are:
$488,000 in 1996, $216,000 in 1997, $97,000 in 1998, $60,000 in 1999,
and $60,000 in 2000.
(9) SUPPLEMENTAL CASH FLOW INFORMATION
The following provides supplemental cash flow data:
<TABLE>
<CAPTION>
------------------------------------------
1995 1994 1993
-------------------------------------------
(in thousands)
<S> <C> <C> <C>
Interest paid $ 170 $ 261 $ 243
======== ======= ========
Non-cash financing activities:
Conversion of long-term debt to common
and preferred stock $ 250 $ 75 $ 44
Conversion of preferred stock to common stock 3,310 --
Cancellation of redemption rights on
redeemable common stock -- 319 --
======== ======= ========
</TABLE>
(10) MAJOR CUSTOMER
Sales to the Company's largest customer accounted for 28% and 11% of
total revenues for 1995 and 1994 respectively. At no time prior to
1994 did any one customer exceed 10% of total revenues.
(11) BUSINESS OUTLOOK
Although the Company continues to experience difficult financial
conditions as evidenced by its consumption of operating cash and net
loss generated in fiscal 1995, it was profitable in each of the last
three quarters of the year. These results also reflected an
improvement over fiscal 1994. The Company expects to achieve improved
financial performance in fiscal 1996 based primarily on the
release and initial success of its Javelan software product. The
Company expects a significant increase in Javelan sales in fiscal
1996. Together with additional growth in its service business,
management believes the Company is well positioned to return to
profitability and realize improved cash flows. As described in note
3, on June 27, 1995, BIS unconditionally provided a $500,000 line of
credit to the Company that will be available through June 30, 1996.
Management believes, based in part on the BIS line of credit, that it
has sufficient credit availability and cost reduction opportunities to
operate in the event that profits do not materialize at the
anticipated pace in accordance with its plans.
A-14
<PAGE> 21
(12) UPDATED BUSINESS OUTLOOK (UNAUDITED)
For the first nine months of fiscal 1996, the Company experienced a
loss of $105,000 ($387,000 before extraordinary gain) primarily
because of a decrease in services revenues and lower than anticipated
software sales. The services revenues were down because of the
non-renewal of several large subcontracts from the Company's major
service customer. A newly hired National Services Sales Manager is now
leading sales efforts to obtain new services contracts. Current
expectations are that services revenues will stabilize in the fourth
quarter. Javelan sales revenues grew in the first nine months of the
year compared to the same period last year. Based on a high degree of
interest, current levels of prospects, and ongoing contract
negotiations, expectations are that Javelan sales will be strongest in
the last quarter of the year. As a result the Company expects to
achieve improved results in its fourth quarter. The Company's ability
to meet its cash requirements is dependent on the continued support of
its major debtholder, BIS Partners, L.P. (BIS) and its ability to
operate on a profitable basis which, in large measure, must come from
increased sales of Javelan. There can be no assurances that BIS will
continue to support the Company's cash requirements or that the
Company will operate on a profitable basis.
The Company is currently seeking additional capital to strengthen its
balance sheet, to provide longer term liquidity and to enhance its
selling and marketing efforts in both the Javelan and the services
business. If efforts to obtain capital are successful, expectations
are that additional revenue increases will occur in the future,
especially in sales of the Javelan product, since the Company's long
term stability is a important factor in a prospect's decision to
purchase Javelan.
INDEPENDENT AUDITORS REPORT
The Board of Directors and Shareholders
Barrister Information Systems Corporation:
We have audited the accompanying balance sheets of Barrister Information
Systems Corporation as of March 31, 1995 and 1994, and the related statements
of operations, shareholders' equity, and cash flows for each of the years in
the three-year period ended March 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Barrister Information Systems
Corporation at March 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the years in the three-year period ended March 31,
1995, in conformity with generally accepted accounting principles.
/S/ KPMG PEAT MARWICK LLP
Buffalo, New York
June 2, 1995, except as to note 3
which is as of June 27, 1995
A-15
<PAGE> 22
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 December 29, 1995
---------------------
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 February 2, 1996
- ---------------- -------------------------------
Common $.24 Par Value 6,197,972 Shares
B-1
<PAGE> 23
BARRISTER INFORMATION SYSTEMS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at
December 29, 1995 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Operations -
Three and Nine Months Ended
December 29, 1995 and December 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Shareholders' Equity -
Nine Months Ended December 29, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Statements of Cash Flows -
Nine Months Ended December 29, 1995
and December 30, 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
</TABLE>
B-2
<PAGE> 24
PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 29 March 31
1995 1995
------- ------
<S> <C>
ASSETS
Cash $ 22 $ 184
Accounts receivable 1,508 1,565
Inventories:
Service parts 3,421 3,823
Other 172 182
Prepaid expenses 49 43
-------- --------
Total current assets 5,172 5,797
-------- --------
Equipment and leasehold
improvements, at cost 4,088 4,184
Less accumulated depreciation 3,641 3,619
-------- --------
Net equipment and leasehold
improvements 447 565
-------- --------
Software production costs 326 132
Other assets 34 50
-------- --------
$ 5,979 $ 6,544
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Current installments of long term debt 601 96
Accounts payable 760 933
Accrued compensation and benefits 514 572
Customer advances and unearned revenue 1,032 956
Other liabilities 164 110
-------- --------
Total current liabilities 3,321 2,917
-------- --------
Long-term debt,excluding current installments
($1,510 in December and $2,357 in March
to a related party) 2,455 3,329
Shareholders' equity:
Preferred stock - -
Common stock ($.24 par value) 1,488 1,486
Additional paid-in capital 19,796 19,788
Accumulated deficit (21,081) (20,976)
-------- -------
Total shareholders' equity 203 298
-------- --------
$ 5,979 $ 6,544
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
B-3
<PAGE> 25
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Dec. 29 Dec. 30 Dec. 29 Dec. 30
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C>
Revenues:
Product sales $ 366 $ 515 $ 1,115 $ 1,948
Services 2,840 3,277 9,050 9,646
------ ------ ------ ------
Total revenues 3,206 3,792 10,165 11,594
------ ------ ------ ------
Costs and expenses:
Cost of product sales 148 421 523 1,556
Cost of services 2,488 2,493 7,599 7,574
------ ------ ------ ------
Total cost of revenues 2,636 2,914 8,122 9,130
------ ------ ------ ------
Selling, general and
administrative expenses 653 623 1,973 1,990
Product development and
engineering 117 156 308 492
------ ------ ------ ------
Total costs and expenses 3,406 3,693 10,403 11,612
------ ------ ------ ------
Operating income (loss) (200) 99 (238) (18)
Interest expense :
Related party - 49 108 138
Other 14 14 41 38
------ ------ ------ ------
Total interest 14 63 149 176
------ ------ ------ ------
Income (loss) before
extraordinary item $ (214) $ 36 $ (387) $ (194)
Extraordinary gain on
reduction of debt - - 282 -
------ ------ ------ ------
Net income (loss) $ (214) $ 36 $ (105) $ (194)
====== ====== ====== ======
Per common and common
equivalent share:
Income (loss) before
extraordinary item $ (0.03) $ 0.01 $ (0.06) $ (0.04)
Extraordinary item - - 0.04 -
Net income (loss) $ (0.03) $ 0.01 $ (0.02) $ (0.04)
====== ====== ====== ======
Weighted average number of
common and common
equivalent shares
outstanding 6,190 6,170 6,239 5,493
====== ====== ====== ======
</TABLE>
See accompanying notes to condensed financial statements.
B-4
<PAGE> 26
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
Sale of 8,000 Common shares 2 8 - 10
Net loss - - (105) (105)
----- ------ ------ -----
Balance at December 29, 1995 $ 1,488 $ 19,796 $ (21,081) $ 203
===== ====== ====== =====
</TABLE>
Common stock - 6,197,972 and 6,189,972 shares issued and outstanding at
December 29, 1995 and March 31, 1995.
See accompanying notes to condensed financial statements.
B-5
<PAGE> 27
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Dec. 29 Dec. 30
1995 1994
------ ------
<S> <C>
Cash flows from operating activities:
Net loss $ (105) $ (194)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 231 231
Loss on disposal of equipment - 1
Extraordinary gain on debt reduction (282) -
Changes in current assets and liabilities:
Accounts receivable 57 185
Inventories 412 (259)
Prepaid expenses (6) (15)
Accounts payable (173) (153)
Accrued compensation and benefits (58) (301)
Customer advances and unearned revenues 76 (106)
Other liabilities 54 14
Net cash provided (used)
----- -----
by operating activities 206 (597)
----- -----
Cash flows from investing activities:
Additions to equipment and leasehold
improvements (78) (68)
Additions to software production costs (229) -
Proceeds on sale of equipment 8
Other 16 16
----- -----
Net cash used in investing activities (291) (44)
----- -----
Cash flows from financing activities:
Net repayment of debt (87) (117)
Proceeds from sale of Common stock 10 -
Net cash used by ----- -----
financing activities (77) (117)
----- -----
Net decrease in cash (162) (758)
Cash at beginning of period 184 804
----- -----
Cash at end of period $ 22 $ 46
===== =====
Supplemental disclosure of cash flow information:
Interest paid $ 213 $ 127
===== =====
Non-cash financing activities:
Conversion of long term debt to
preferred stock $ - $ 250
Conversion of preferred stock to
common stock $ - $ 3,310
===== =====
</TABLE>
See accompanying notes to condensed financial statements.
B-6
<PAGE> 28
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 third quarter results for each year represent 13 weeks
of operations ended Friday, December 29, 1995 and December 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 nine month period ended December 29,
1995 are not necessarily indicative of the results expected for the full year.
2. A summary of long-term debt follows:
<TABLE>
<CAPTION>
Dec. 29 March 31
1995 1995
------ ------
(In thousands)
--------------
<S> <C> <C>
Working capital note with
BIS Partners, L.P. $ 285 $ 285
Term note with BIS Partners, L.P. 1,764 2,108
Other 1,007 1,032
------ ------
Total long-term debt 3,056 3,425
Less current installments 601 96
------ ------
Long term debt, excluding
current installments $ 2,455 $ 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.
B-7
<PAGE> 29
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 $162,000 for the first nine
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 $206,000. The positive cash from
operations was principally realized from depreciation and amortization, and
lower levels of inventories. These amounts were sufficient to offset the loss
before extraordinary item and reductions in accounts payable. This result also
compared very favorably to a decrease of $758,000 in cash for the first nine
months of the prior year.
The Company's ability to meet its cash requirements is currently dependent on
its ability to operate on a profitable basis and on the continued support of
its major debtholder, BIS Partners, L.P.(BIS). The Company has experienced
growth in Javelan sales which has resulted in higher gross profits from product
revenues. Based on increased levels of interest and prospects, current
expectations are that continued growth in Javelan sales and margins will occur.
In the services business, revenues have decreased based primarily on a
reduction in revenue from the Company's major service customer. The Company has
recently enhanced its selling and marketing capacity in the services area to
capture new business to replace what has been lost and for future business
growth. BIS has continued to support the Company by agreeing to cancel $450,000
of its debt in August 1995, to reduce the interest rate on its remaining debt
outstanding and to receive interest only payments during fiscal 1996. BIS
previously agreed to provide a $500,000 line of credit through June 30, 1996.
There was no borrowing under this line of credit at December 29, 1995. There
can be no assurances that the Company will operate on a profitable basis or
that BIS will continue to support the Company's cash requirements. The Company
is currently seeking additional sources of capital to strengthen its balance
sheet, to provide longer term liquidity and to enhance its selling and
marketing resources in both Javelan and the services business. To that effect,
in order that there be sufficient shares available for possible future
transactions, a Proxy has been filed with the SEC to increase the number of
authorized common shares from 10,000,000 to 20,000,000. The Proxy calls for a
Special Meeting of Shareholders to be held in March 1996.
B-8
<PAGE> 30
Results of Operations
- ---------------------
For the quarter ended December 29, 1995, total revenues decreased 15.5% from
the same quarter in 1994, with a net loss of $214,000 compared to a net profit
of $36,000 in the third quarter of the prior year. For the nine month period
ended December 29, 1995, total revenues decreased 12.3% compared with the
nine months ended December 30, 1994. The nine month net loss before
extraordinary item was $387,000 compared to a net loss of $194,000 incurred in
the comparable period for the prior year. After taking the extraordinary item
into account, a net loss of $105,000 was incurred for the first nine months.
The principal reason for the loss incurred in the third quarter was lower
services revenues at the same time services expenses were constant.
Product sales decreased 28.9% for the comparable third quarters, and 42.8% for
the comparable first nine 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 18.3% to 59.6% for the comparable third quarters
and from 20.1% to 53.1% for the comparable nine month period.
Services revenues decreased 13.3% for the comparable third quarters and 6.2%
for the comparable nine month periods. These decreases were principally the
result of decreased revenues from hardware time and material billings and
hardware and software maintenance contracts. Effective August 1, 1995, two
large hardware maintenance contracts did not renew, 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 and from the second to the third quarter
of this fiscal year. The Company has recently hired a National Sales Manager
to head the marketing and sales effort for the services business. Focus is
being placed on direct sales of service contracts to prospects with large local
and wide area networks. Current expectations are that services revenues will
stabilize in the fourth quarter. Margins on services revenues decreased for the
comparable third quarters and nine month periods as the cost of providing
services remained about the same on lower service revenues. Savings in labor
costs have been offset by increased costs for parts utilized to maintain
equipment.
Due to lower levels of revenues, selling, general, and administrative expenses
increased from 16.4% to 20.4% of total revenue for the comparable quarters and
from 17.2% to 19.4% for the comparable nine 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.
B-9
<PAGE> 31
Interest expense decreased from 1.7% to 0.4% of total revenues for the
comparable third quarters and remained the same at 1.5% for the comparable nine
month periods. This was the result of BIS Partners, L.P. cancellation of debt
in August 1995 which eliminated the requirement to record any interest expense
on this debt in the future.
The $282,000 of extraordinary gain (recorded in the second quarter) resulted
from an agreement with 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 and third quarters and will continue to have a favorable
impact in future quarters.
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 before extraordinary item of $.06 per share was incurred in the first
nine months of this year compared to a loss of $.04 per share in the first nine
months of last year. The extraordinary gain amounted to $.04 per share
resulting in a net loss of $.02 per share for the first nine 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.
B-10
<PAGE> 32
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
B-11
<PAGE> 33
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: February 12, 1996 By: /s/ Henry P. Semmelhack
--------------------------
Henry P. Semmelhack
President and
Chief Executive Officer
Date: February 12, 1996 By: /s/ Richard P. Beyer
--------------------
Richard P. Beyer
Vice President, Finance
(Principal Financial Officer)
B-12
<PAGE> 34
BARRISTER INFORMATION SYSTEMS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS, MARCH 6, 1996
The undersigned hereby appoints HENRY P. SEMMELHACK and MARK C. DONADIO as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the
shares of Common Stock of Barrister Information Systems Corporation held of
record by the undersigned on February 7, 1996 at the Special Meeting of
Shareholders to be held on March 6, 1996, or any adjournments thereof, upon the
matters set forth in the Proxy Statement and, in their judgment and discretion,
upon such other business as may properly come before the meeting. THIS PROXY
WILL BE VOTED FOR PROPOSALS NO. 1 AND NO. 2, UNLESS A CONTRARY INSTRUCTION IS
GIVEN, IN WHICH CASE IT WILL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTION.
PLEASE FILL IN, DATE AND SIGN ON THE REVERSE SIDE AND RETURN
THIS PROXY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 35
PROXY BALLOT CARD
BARRISTER INFORMATION SYSTEMS CORPORATION
COMMON STOCK
Account Number Common
The Board of Directors recommends that you vote FOR Proposal 1 and FOR Proposal
2.
1. PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK TO 20,000,000 FROM 10,000,000.
FOR AGAINST ABSTAIN
2. CONTINGENT UPON THE ADOPTION OF PROPOSAL NO. 1, FOR APPROVAL TO SELL
OR ISSUE COMMON STOCK EQUAL TO 20% OR MORE OF THE THEN PRESENTLY
OUTSTANDING STOCK FOR LESS THAN THE MARKET VALUE OF THE STOCK AS MORE
FULLY DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT
FOR AGAINST ABSTAIN
____________________________________
[ ]
Please sign here
exactly as name appears to left.
Dated: ______________________________, 1996
[ ]
Signature of Shareholder
Signature of Shareholder
Persons signing in a representative capacity
should indicate their capacity
