<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 December 27, 1996
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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
----------------
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 January 24, 1997
- ---------------------------- -------------------------------------
Common $.24 Par Value 8,201,301
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BARRISTER INFORMATION SYSTEMS CORPORATION
<TABLE>
<CAPTION>
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
<S> <C>
Item 1. Financial Statements
Condensed Balance Sheets at
December 27, 1996 and March 31, 1996.........................................................3
Condensed Statements of Operations -
Three and Nine Months Ended
December 27, 1996 and December 29, 1995......................................................4
Statement of Shareholders' Equity -
Nine Months Ended December 27, 1996..........................................................5
Condensed Statements of Cash Flows -
Nine Months Ended December 27, 1996
and December 29, 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................................................10
</TABLE>
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PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
Dec. 27 March 31
1996 1996
-------- --------
ASSETS
<S> <C> <C>
Cash $ 192 $ 1,198
Accounts receivable 2,611 1,578
Inventories:
Service parts 2,848 3,238
Other 157 132
Prepaid expenses 28 32
-------- --------
Total current assets 5,836 6,178
-------- --------
Equipment and leasehold
improvements, at cost 4,084 4,003
Less accumulated depreciation 3,631 3,617
Net equipment and leasehold -------- --------
improvements 453 386
-------- --------
533 381
Software production costs 36 33
-------- --------
Other assets $ 6,858 $ 6,978
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Current installments of long term debt 717 726
Accounts payable 797 799
Accrued compensation and benefits 588 549
Customer advances and unearned revenue 1,157 841
Other liabilities 123 84
-------- --------
Total current liabilities 3,632 3,249
-------- --------
Long-term debt, excluding current installments
($839 in December and $1,343 in March to a
related party) 879 1,392
Shareholders' equity:
Preferred stock -- --
Common stock ($.24 par value) 1,968 1,968
Additional paid-in capital 21,551 21,550
Accumulated deficit (21,172) (21,181)
-------- --------
Total shareholders' equity 2,347 2,337
-------- --------
$ 6,858 $ 6,978
======== ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Dec. 27 Dec. 29 Dec. 27 Dec. 29
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 833 $ 366 $ 1,952 $ 1,115
Services 2,944 2,840 8,494 9,050
------ ------- ------- --------
Total revenues 3,777 3,206 10,446 10,165
------ ------- ------- --------
Costs and expenses:
Cost of product sales 258 148 698 523
Cost of services 2,458 2,488 6,904 7,599
------ ------- ------- --------
Total cost of revenues 2,716 2,636 7,602 8,122
Selling, general and
administrative expenses 916 653 2,467 1,973
Product development and
engineering 107 117 341 308
------ ------- ------- --------
Total costs and expenses 3,739 3,406 10,410 10,403
------ ------- ------- --------
Operating income (loss) 38 (200) 36 (238)
Interest expense:
Related party -- -- -- 108
Other 11 14 27 41
------ ------- ------- --------
Total interest 11 14 27 149
------ ------- ------- --------
Net income (loss) $ 27 $ (214) $ 9 $ (387)
====== ======= ======= ========
Net income (loss) per common and
and common equivalent share $ 0.00 $ (0.03) $ 0.00 $ (0.06)
====== ======= ======= ========
Weighted average number of
common and common equivalent
shares outstanding 8,788 6,190 8,954 6,227
====== ======= ======= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
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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, 1996 $1,968 $21,550 $(21,181) $2,337
Sale of 3,332 common shares
under stock option plan -- -- 1 1
Net income -- -- 9 9
------ ------- -------- ------
Balance at December 27, 1996 $1,968 $21,551 $(21,172) $2,347
====== ======= ======== ======
<FN>
Common stock - 8,201,301 and 8,197,970 shares issued and outstanding at
December 27, 1996 and March 31, 1996, respectively.
See accompanying notes to condensed financial statements.
</TABLE>
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<PAGE> 6
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Dec. 27 Dec. 29
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 9 $(387)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amoritzation 238 231
Loss on equipment disposal 9 --
Changes in current assets and liabilities:
Accounts receivable (1,033) 57
Inventories 365 412
Prepaid expenses 4 (6)
Accounts payable (2) (173)
Accrued compensation and benefits 39 (58)
Customer advances and unearned revenues 316 76
Other liabilities 39 54
------- -----
Net cash provided (used)
by operating activities (16) 206
------- -----
Cash flows from investing activities:
Additions to equipment and leasehold improvements (262) (78)
Proceeds on equipment disposal 34 --
Capitalized software (238) (229)
Other (3) 16
------- -----
Net cash used in investing activities (469) (291)
------- -----
Cash flows from financing activities:
Net repayment of debt (522) (87)
Proceeds from stock 1 10
------- -----
Net cash used by financing activities (521) (77)
------- -----
Net decrease in cash (1,006) (162)
Cash at beginning of period 1,198 184
------- -----
Cash at end of period $ 192 $ 22
======= =====
Supplemental disclosure of cash flow information:
Interest paid $ 27 $ 213
======= =====
Non-cash financing activities:
Debt forgiven by BIS Partners, L.P. $ -- $ 282
======= =====
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
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<PAGE> 7
BARRISTER INFORMATION SYSTEMS CORPORATION
Notes to Condensed Financial Statements
1. In the opinion of Management, the accompanying financial statements present
fairly the financial position, results of operations and cash flows for the
periods shown. The third quarter results for each year represent 13 weeks of
operations ended Friday, December 27, 1996 and December 29, 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 nine month period ended December 27,
1996 are not necessarily indicative of the results expected for the full year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
- -------------------
The Company experienced a net decrease in cash for the first nine months of
fiscal 1997. During this period, $469,000 was spent on investing activities and
net repayments of debt amounted to $522,000. Cash of $16,000 was used by
operating activities as an increase in accounts receivable was mostly offset by
the positive impact of depreciation and amortization, lower inventory levels,
and an increase in customer advances and other liability accounts. As a result,
the Company's cash balance decreased from $1,198,000 at March 31, 1996 to
$192,000 at December 27, 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
has 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 will seek 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.
Results of Operations
- ---------------------
For the quarter ended December 27, 1996, total revenues increased 17.8% from the
same quarter in 1995, with net income of $27,000 compared to a net loss of
$214,000 in the third quarter of the prior year. For the nine month period ended
December 27, 1996, total revenues increased 2.8% compared with the nine months
ended December 29, 1995. The nine month net income was $9,000 compared to a net
loss of $387,000 incurred in the comparable period for the prior year. The
principal reason for the improved results was higher sales of Javelan, the
Company's Windows-based management software product.
Product sales increased 127.6% for the comparable third quarters and 75.1% for
the comparable first nine months based on the increase in Javelan sales. A
decline in the sale of low margin (10%-15%) commodity products was incurred for
the comparable third quarters and nine month 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 improved from 59.6% to 69.0% for the comparable third
quarters and from 53.1% to 64.2% for the comparable nine month periods.
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<PAGE> 9
Services revenues increased 3.7% for the comparable third quarters, but
decreased 6.1% for the comparable nine month periods. The third quarter increase
was primarily due to increased time and material billings for hardware
maintenance services and from increased installation and training revenues
associated with the Javelan product. The increase in hardware time and materials
billings was a direct result of the contract signed in October, 1996, with CIC
Systems Inc. to be CIC's primary supplier of computer hardware maintenance
services for CIC's customers nationwide. These increases were sufficient to
offset a decrease in revenues from hardware maintenance contracts. This decrease
in revenues from hardware maintenance contracts is the principal reason for the
decline in services revenues for the comparable nine month periods. Contract
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 the total
revenues in fiscal 1996, will drop as a percentage of total revenues in fiscal
1997. IBM's contract with the Company has a provision that stipulates that IBM
is able to terminate any of its contracts by providing 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. The percentage of margin on
services revenues increased for the comparable third quarters and nine month
periods as the cost of providing services decreased 1.2% and 9.1%, respectively.
Selling, general and administrative expenses increased from 20.4% to 24.3% of
total revenues for the comparable quarters and from 19.4% to 23.6% for the
comparable nine month periods. This result was primarily due to an increase in
selling expenses associated with enhanced efforts to obtain new hardware
maintenance contracts and increased levels of Javelan sales. Expenditures for
product development and engineering, before taking into account amounts
capitalized and amoritzed for software productions costs, were approximately the
same for the comparable periods.
The decrease in interest expense for the comparable nine month periods 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. Therefore, 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
comparative 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 third quarter and
first nine months of the current year includes approximately 586,000 and 754,000
of common equivalent shares, respectively. These shares were computed as the net
effect of dilutive stock options and warrants based on the treasury stock
method.
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<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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<PAGE> 11
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 3, 1997 By: /s/ Henry P. Semmelhack
------------------------
Henry P. Semmelhack
President and
Chief Executive Officer
Date: February 3, 1997 By: /s/ Richard P. Beyer
---------------------
Richard P. Beyer
Vice President, Finance
(Principal Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-27-1996
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 2,611
<ALLOWANCES> 0
<INVENTORY> 3,005
<CURRENT-ASSETS> 5,836
<PP&E> 4,084
<DEPRECIATION> 3,631
<TOTAL-ASSETS> 6,858
<CURRENT-LIABILITIES> 3,632
<BONDS> 879
<COMMON> 1,968
0
0
<OTHER-SE> 379
<TOTAL-LIABILITY-AND-EQUITY> 6,858
<SALES> 1,952
<TOTAL-REVENUES> 10,446
<CGS> 698
<TOTAL-COSTS> 7,602
<OTHER-EXPENSES> 2,808
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 9
<INCOME-TAX> 0
<INCOME-CONTINUING> 9
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
