<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 27, 1997
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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)
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
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<TABLE>
<CAPTION>
<S> <C>
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report.)
</TABLE>
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 1, 1997
- --------------------------------------------------------------------------------
Common $.24 Par Value 8,201,300 Shares
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BARRISTER INFORMATION SYSTEMS CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
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<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Condensed Balance Sheets at
June 27, 1997 and March 31, 1997.............................................3
Condensed Statements of Operations -
Three Months Ended June 27, 1997
and June 28, 1996............................................................4
Statement of Shareholders' Equity -
Three Months Ended June 27, 1997.............................................5
Condensed Statements of Cash Flows -
Three Months Ended June 27, 1997
and June 28, 1996............................................................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
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PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
June 27 March 31
1997 1997
-------- --------
ASSETS
<S> <C> <C>
Cash $ 179 $ 226
Accounts receivable 2,904 2,598
Inventories:
Service parts 2,805 2,826
Other 103 146
Prepaid expenses 31 67
-------- --------
Total current assets 6,022 5,863
-------- --------
Equipment and leasehold
improvements, at cost 4,140 4,125
Less accumulated depreciation 3,704 3,666
Net equipment and leasehold -------- --------
improvements 436 459
-------- --------
Software production costs 628 595
Other assets 38 36
-------- --------
$ 7,124 $ 6,953
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Current installments of long term debt 106 99
Accounts payable 1,268 1,119
Accrued compensation and benefits 740 642
Customer advances and unearned revenue 1,208 1,320
Other liabilities 122 67
-------- --------
Total current liabilities 3,694 3,497
-------- --------
Long-term debt, excluding current installments
($1,452 in June and $1,475 in March
to a related party) 1,473 1,504
Shareholders' equity:
Preferred stock -- --
Common stock ($.24 par value) 1,968 1,968
Additional paid-in capital 21,551 21,551
Accumulated deficit (21,562) (21,567)
-------- --------
Total shareholders' equity 1,957 1,952
-------- --------
$ 7,124 $ 6,953
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
3
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
--------------------
June 27 June 28
1997 1996
-------- --------
<S> <C> <C>
Revenues:
Product sales $ 511 $ 610
Services 3,716 2,805
-------- --------
Total revenues 4,227 3,415
-------- --------
Costs and expenses:
Cost of product sales 132 201
Cost of services 2,922 2,292
-------- --------
Total cost of revenues 3,054 2,493
Selling, general and
administrative expenses 948 793
Product development and
engineering 172 108
-------- --------
Total costs and expenses 4,174 3,394
-------- --------
Operating income 53 21
Interest expense
Related party 38 --
Other 10 6
-------- --------
Total interest 48 6
-------- --------
Net income $ 5 $ 15
======== ========
Net income per common and
common equivalent share $ 0.00 $ 0.00
======== ========
Weighted average number of
common and common equivalent
shares outstanding 8,576 9,067
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
4
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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, 1997 $ 1,968 $ 21,551 $(21,567) $ 1,952
Net income 5 5
-------- -------- -------- --------
Balance at June 27, 1997 $ 1,968 $ 21,551 $(21,562) $ 1,957
======== ======== ======== ========
</TABLE>
Common stock - 8,201,300 shares issued and outstanding at June 27, 1997 and
March 31, 1997.
See accompanying notes to condensed financial statements.
5
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
June 27 June 28
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5 $ 15
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 87 74
Changes in current assets and liabilities:
Accounts receivable (306) (322)
Inventories 64 156
Prepaid expenses 36 12
Accounts payable 149 (131)
Accrued compensation and benefits 99 (7)
Customer advances and unearned revenues (112) (280)
Other liabilities 55 49
Net cash provided (used)
-------- --------
by operating activities 77 (434)
-------- --------
Cash flows from investing activities:
Additions to equipment and leasehold
improvements (17) (124)
Capitalized software (80) (88)
Other (2) --
-------- --------
Net cash used in investing activities (99) (213)
-------- --------
Cash flows from financing activities:
Net repayment of debt (25) (156)
-------- --------
Net cash used by financing activities (25) (156)
-------- --------
Net decrease in cash (47) (803)
Cash at beginning of period 226 1,198
-------- --------
Cash at end of period $ 179 $ 395
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 23 $ 6
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
6
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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 27, 1997 and Friday, June 28, 1996. 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 27, 1997
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 $47,000 for its first quarter
ended June 27, 1997. This compares to a net decrease of $803,000 in cash for the
first quarter of last year. Cash used in investing activities of $99,000 and for
debt repayment of $25,000 were partially offset by net cash provided by
operating activities of $77,000. As a result, the Company's cash balance
decreased from $226,000 at March 31, 1997 to $179,000 at June 27, 1997.
The principal cash requirements for fiscal 1998 are investments in capitalized
software at levels that approximate those in fiscal 1997 and additions to
equipment and leasehold improvements that are expected to be lower than amounts
spent in fiscal 1997. Debt repayments should approximate $100,000 which is a
significant reduction over amounts repaid in the prior two years. This reduction
is based on an agreement reached with BIS Partners, L.P. in March, 1997, to
lengthen the repayment period of their note with lower monthly repayments in the
earlier years. This agreement will result in an increase in interest expense in
fiscal 1998. The Company expects to meet these cash requirements by generating
positive cash flow from operating activities. Any income earned should not
require cash payments for taxes, since the Company has use of net deductible
temporary differences and operating loss carryforwards of approximately
$3,212,000 at March 31, 1997. The Company expects to achieve growth in both
product sales and services revenues in 1998. Javelan sales have grown in each of
the past three years and another year of growth is foreseen. This growth should
be aided by the need of companies to replace their current software before the
year 2000, since many software packages were not designed to handle the year
2000 in system calculations. Increased Javelan sales will also lead to an
increase of associated installation, training and conversion revenues.
Expectations are that the downward trend in services revenues will be reversed
in 1998. Recently, a number of agreements have been signed with new business
partners and an increase in new contracts have been realized in March, 1997, and
the beginning months of fiscal 1998. An added operating cash benefit to a number
of these agreements is the sale of warranty upgrade contracts which generally
have terms up to three years and are prepaid at the time the contract is signed.
Also, the Company is actively pursuing additional borrowings for working capital
from asset-based lenders. The Company believes that additional borrowing could
be available before the close of the second quarter. If the $1.75 and/or the
$2.25 warrants that were issued in connection with the sale of the common stock
in March, 1996, were exercised, the Company would realize $3,000,000 in
additional cash. However, these warrants expire in March, 1998, and the price of
the Company's stock is currently less than the exercise price of the warrants.
Even if the price of the Company's stock should increase, there can be no
assurance that the warrants would be exercised.
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 sufficient cash will be available to meet its required obligations.
Further, there can be no assurance that borrowing will be available from
asset-based lenders or that other sources of cash will be available.
8
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RESULTS OF OPERATIONS
- ---------------------
For the quarter ended June 27, 1997, total revenues increased approximately
23.8% over the same quarter in 1996. A net profit of $5,000 was incurred
compared to a net profit of $15,000 in the first quarter of the prior year.
Increased services revenues and improved margins on those revenues were offset
by lower product sales, increased product development and engineering expenses,
increased selling, general and administrative expenses and higher interest
expense.
Product sales decreased 16.2% for the comparable quarters based on decreases in
the sale of Javelan, the Company's Windows(TM)-based management software product
and a decline in the sale of low margin commodity products. Commodity products
are now less than 15% of total product sales. Javelan sales were less than the
previous comparable quarter due to a large sale made in the first quarter of the
prior year. Margins improved to 74.2% of product sales from 67.0% for the
comparable quarter in the prior year based on a more favorable mix of Javelan
sales. 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.
Services revenues increased 32.5% for the comparable quarters based on increased
revenues from hardware maintenance contracts, hardware time and material
services and installation, training, conversion and custom programming services
associated with the sale of Javelan. The increase in hardware maintenance
contracts resulted from two large contracts sold directly to end users and
initial contracts received from recently established business partners. The
Company has signed a number of business partnership arrangements with equipment
resellers to provide hardware maintenance services to their customers.
Expectations are that these arrangements will provide additional contracts in
subsequent quarters. The increase in hardware time and material services were
primarily a result of a contract signed with a large equipment reseller in the
third quarter of last fiscal year to provide hardware maintenance services on a
nationwide basis. The Company is currently reviewing this contract with its
customer based on the high level of expenses being incurred to provide the time
and material services under the contract. The increase in Javelan associated
services is a direct result of the increase in Javelan sales realized in fiscal
1997. These services will lag the product sales by one to six months or more
depending on the size of the sale and the pace of the installation desired by
the customer. Margins on services revenues increased from 18.3% to 21.4% for the
comparable periods primarily based on margins generated from the increase in
Javelan associated services.
Selling, general and administrative expenses were 22.4% of total revenues for
the first quarter of this year compared to the 23.2% for the comparable quarter
last year. The increase in the amount of expenses incurred resulted from
increased selling expenses associated with the Company's efforts to grow both
Javelan sales and hardware maintenance services.
Product development and engineering expenses, before taking into account amounts
capitalized and amortized for software production costs, approximated 5% of
total revenues in each of the comparable periods. The increase in the amount of
expenses incurred came about from planned increases in this area to further
enhance Javelan and from higher amortization of software production costs.
9
<PAGE> 10
The increase in interest expense for the comparable first quarters resulted from
a renegotiation of the repayment terms of the note with BIS Partners, L.P.
("BIS"). The accounting treatment of certain debt forgiveness by BIS in August,
1995, stipulated that the debt forgiveness must first be considered a reduction
of all future interest expense. As a result, all payments made from September,
1995, through March, 1997, were recorded as reductions in the principal balance
of the loan. In March, 1997, the Company renegotiated the terms of its agreement
with BIS, extending the repayment schedule through the year 2004 and,
accordingly, reducing cash payments otherwise scheduled in fiscal 1998 and 1999
and adjusting the interest rate to prime plus 3.5%. As a result of this
restructuring and the incremental cash flow it will require, a portion of each
payment is once again being recognized as interest expense.
The decrease in the weighted average number of common and common equivalent
shares outstanding for the comparable quarters resulted from a decrease in
common equivalent shares. These shares are computed as the net effect of
dilutive stock options and warrants based on the treasury stock method using an
average market price for the quarter. The first quarter of the current year
includes approximately 374,000 common equivalent shares which were computed
using an average market price of $1.58 per share. The comparable numbers for the
first quarter last year were 869,000 common equivalent shares computed using an
average market price of $2.55 per share.
FORWARD-LOOKING STATEMENT
- -------------------------
When used in this report, the words "expects", "believes", and "intends" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrences of unanticipated events. Readers are also
urged to carefully review and consider the various disclosures made by the
Company which attempt to advise interested parties of the factors which affect
the Company's business in the Company's periodic reports on Form 10K and 10Q
filed with the Securities and Exchange Commission.
10
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K: None
11
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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
<TABLE>
<CAPTION>
<S> <C>
Date: August 8, 1997 By: /s/ Henry P. Semmelhack
------------------------- ------------------------------
Henry P. Semmelhack
President
and
Chief Executive Officer
Date: August 8, 1997 By: /s/ Richard P. Beyer
------------------------- -------------------------------
Richard P. Beyer
Vice President, Finance
(Principal Financial Officer)
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-27-1997
<CASH> 179
<SECURITIES> 0
<RECEIVABLES> 2,904
<ALLOWANCES> 0
<INVENTORY> 2,908
<CURRENT-ASSETS> 6,022
<PP&E> 4,140
<DEPRECIATION> 3,704
<TOTAL-ASSETS> 7,124
<CURRENT-LIABILITIES> 3,694
<BONDS> 1,473
<COMMON> 1,968
0
0
<OTHER-SE> (11)
<TOTAL-LIABILITY-AND-EQUITY> 7,124
<SALES> 511
<TOTAL-REVENUES> 4,227
<CGS> 132
<TOTAL-COSTS> 3,054
<OTHER-EXPENSES> 1,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 5
<INCOME-TAX> 0
<INCOME-CONTINUING> 5
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
