<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number:
March 31, 1997 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
============================================
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None.
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, $.24 par value
(Title of Class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X.
--
The aggregate market value of Common Stock held by non-affiliates of
the registrant, based upon the closing price of the Common Stock on June 13,
1997, was approximately $3.6 million.
The number of shares outstanding of the Registrant's common stock,
$.24 par value, was 8,201,300 at June 13, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate by reference portions of the Barrister
Information Systems Corporation Annual Report to Shareholders for the fiscal
year ended March 31, 1997 (the "Company's 1997 Annual Report"). Part III
incorporates by reference portions of the Barrister Information Systems
Corporation Proxy Statement for the Annual Meeting of Shareholders to be held on
September 4, 1997 (the "Company's definitive Proxy Statement to be dated July
24, 1997").
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Barrister Information Systems Corporation (the "Company") is a
national supplier of Windows-based client server software for law firms,
accounting firms, consultants and departments of Fortune 1000 companies. In
addition, the Company provides equipment maintenance services on a nationwide
basis.
The Company was formed in 1972 as the Office Automation Division
of Comptek Research, Inc. ("Comptek"). On March 26, 1982, the division was
incorporated under the laws of New York as Barrister Information Systems
Corporation and was spun off to the Comptek shareholders as a separate company.
In July 1985, the Company sold shares of its common stock in its initial public
offering. The Company's shares are currently traded on the American Stock
Exchange.
The Company's headquarters are at 465 Main Street, Buffalo, New
York 14203, telephone 716-845-5010. In addition, the Company has a number of
sales and services offices throughout the United States.
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.
SOFTWARE MARKET
The Company was the first to offer and install an all
Window's-based firm management software for medium to large sized law firms. The
Company now sells its Windows-based client server software product, Javelan, and
software support services principally to the U.S. law firm market and to law
firms in Canada and the Caribbean. Javelan software is used by law firms for
firm management and to keep track of the time of attorneys and paralegals to
enable them to bill their clients. In addition, the software provides the law
firm with other applications such as executive information, collections, general
ledger and accounts payable. Javelan is also being sold in the accounting,
consulting and corporate markets for organizations seeking time and billing or
time and cost allocation capability. The Company currently expects that the
majority of sales will come from the legal market.
The markets pursued by the Company are concentrated in major
cities throughout the United States. There are numerous competitors which are
primarily U.S. companies and the technology barriers to enter the market are
low. However, the requirement for sophisticated functionality demands
substantial investment to develop products which can compete effectively in
these markets. Because of competition and market demands, there is a continuing
requirement to enhance the software to remain a viable competitor. Currently,
the Company believes that its product is distinguished from its competitors'
products by its performance, functionality, product design and architecture.
In its software marketing efforts for the legal market, the
Company conducts seminars in cities throughout the United States, advertises in
professional publications and provides demonstrations at its corporate
headquarters,
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<PAGE> 3
regional offices, client locations and trade shows. The Company also markets the
systems to consultants to advise them of the system's features and new product
developments and to gain increased market acceptance.
Marketing to the accounting, consulting and corporate segments to
date has consisted of follow through on leads and interest shown by prospects
attending legal trade shows and reading legal market literature. The Company
expects to expand marketing in this area by attending trade shows and group
conferences in those markets and by establishing strategic relationships which
will enhance sales in those segments.
The Company believes that its existing clients present significant
opportunities for sales of additional software and services. Approximately 34%
of Javelan contracts to date have come from these clients. It is marketing to
and communicating with approximately 175 of its existing clients which have
licensed software in the past in order to license Javelan as replacement
software. Further, service efforts are directed to ensuring client satisfaction
and facilitating additional sales. The Company has sponsored the organization of
a national users group, comprised of representatives of clients, who meet with
Company personnel to exchange ideas and techniques for the use of the Company's
systems, provide training and offer suggestions for product development and
enhancements. The Company believes it has the staff with the necessary technical
and market knowledge to advance the product, to install the product and train
clients in its use and to support the client afterward.
The Company has made a substantial investment in the Javelan
product and protects its intellectual property rights by licensing the software
by contract. Pricing is based on the size of the system and the functions
licensed. Clients pay recurring monthly license fees and, in return, receive
telephone support and periodic software enhancements. Investments are expected
to continue to enhance the features and functions of the Javelan software
package. The choice of features will be driven by clients through bi-annual user
group meetings. These investments are expected to increase the sales
opportunities in the existing client base and to improve sales in the markets
for Javelan.
Historically, software product life cycles have been five to ten
years. With the markets moving to Windows and client/server architecture, there
may be a lengthening of the cycle. This effect is expected to intensify the
investment in features and functions and reduce investments in the underlying
technology and architecture of the product, which will be available in the open
market.
Sales of Javelan software may occur from time to time and are not
predictable. As a result, the Company's performance from quarter to quarter can
change dramatically. Performance in a given quarter cannot predict results in
subsequent periods.
The Company provides its systems and services under various
hardware purchase contracts, software license agreements, systems installation
and training agreements and hardware and software service contracts. Law office
personnel, often inexperienced in computer programming or operations, are
trained by the Company to use its systems. The Company's systems are capable of
communicating with computers and personal computers of other manufacturers.
PRODUCTS
The principal product of the Company is Javelan, a
state-of-the-art software package, which can operate on either Windows 3.1,
Windows 95 or NT Workstation and provides the functions necessary for law firm
management using desktop computing and client server architecture. Javelan
software operates on the law firm's local area network (LAN) and uses PC work
stations on the LAN for data processing. A server using Microsoft SQL-Server 6.0
or 6.5 contains the law firm's data base and supports the work stations. Javelan
was introduced to the market in November 1992 through an extensive series of
seminars. In December 1994, the Company announced that Javelan would operate
with Microsoft NT and SQL-Server 6.0. Currently, Javelan is delivered with NT
and SQL-Server 6.5. As a result, Javelan is expected to contribute significantly
to the Company's revenues in the future.
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<PAGE> 4
In the past, the Company has developed or purchased several
products which it currently supports:
EAGLE Law firm management software which
operates on IBM AS-400 computers.
TIME MANAGER Time and billing, accounting and
accounts payable software which operates
on DOS for smaller firms.
CFMS Law firm management software which
operates on Barrister manufactured
mini-computers.
In addition to software which the Company has developed, the
Company resells software which functions compatibly with its products. Further,
the Company resells equipment such as database servers to clients who license
Javelan software. From time to time, the Company sells personal computers and
AS-400 upgrades in support of clients.
It is anticipated that most minicomputer, AS-400 and DOS-based
clients will migrate to systems using Windows and local area networks (LANs).
The Company's Javelan product, the first Window's based management system for
law firms, is being offered to these clients.
BACKLOG
Because the Company typically ships products within a relatively
short period of time after a contract is signed, the backlog varies, is not
meaningful at any date and is not indicative of intermediate or long-term future
sales.
SOFTWARE DEVELOPMENT
The markets for the Company's software products are characterized
by rapid technical changes which have required and will continue to require the
Company to engage in ongoing development, and evaluations, the future costs of
which are expected to be significant and the economic benefits of which are not
readily predictable. Before taking into account amounts capitalized as software
production costs, the Company incurred $700,000, $693,000 and $667,000 of
product development and engineering expenses in fiscal 1997, 1996, and 1995,
respectively. For fiscal 1998, the Company expects to increase its level of
spending in this area.
INVENTORY
Customers generally require rapid delivery and orders are usually
filled within 30 days. Most of the systems the Company provides use equipment
and software developed by third parties, which is generally available and in
many cases shipped directly by the vendors,. Software developed by the Company
does not require large amounts of inventory. Consequently, the Company does not
keep significant amounts of product inventory in order to meet customer
requirements. The Company does not generally provide rights of return or
extended payment terms to customers.
RELATIONSHIP WITH MICROSOFT
The Company is a Solutions Channel provider for Microsoft
Corporation. This relationship provides the Company with cooperative marketing
arrangements.
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<PAGE> 5
SOFTWARE COMPETITION
The business of providing software and services to law offices is
highly competitive. The Company believes that the principal competitive factors
affecting a law office's choice of data processing systems are product quality,
performance and reliability, compatibility with industry standards, the ability
to provide ongoing, long-term customer service and support, hardware and
software features, ease of use, upgrading capabilities, customer training,
system flexibility, company financial stability, name recognition of product and
company. Price, while important, is not the dominant factor in client's buying
decisions.
The Company competes with more than ten companies who are
developers of specialized software for law offices, many of which are
substantially larger and have substantially greater name recognition and
financial, marketing, technical and personnel resources than the Company.
SERVICES MARKET
The Company provides equipment maintenance services nationwide for
PCs and other equipment which attach to LANs. Using its staff of hardware
technicians and LAN specialists, the Company provides comprehensive maintenance
services for such equipment. In addition, the Company occasionally uses third
parties as subcontractors to provide maintenance services in certain
geographical locations.
The Company provides a nationwide toll-free number for customer
service and provides a seven-day, twenty-four hour maintenance capability. The
Company also provides a facility management service for customers involved in
relocation of their data centers or offices.
Since 1972, the Company has established a field service
organization located in a number of cities throughout the United States. To
support them, a depot repair facility located in Buffalo, New York performs
repairs on equipment shipped to Buffalo. These resources have enabled the
Company to sell equipment maintenance service contracts outside the legal
market, to sell depot repair services and to offer system integration services.
Currently, more than 90% of hardware maintenance revenues are generated outside
the legal market.
Sales of services and systems integration are the result of a
direct sales force focused on this market. A variety of service plans are
offered which cover Barrister's proprietary equipment to a long list of OEM
micro-computer products. In addition, the Company has established business
relationships with companies such as IBM Corporation, CIC Systems, U.S.
Computer, Grumman Systems Support Corporation and MRK Technologies, Ltd. to
provide services on a contractual basis.
Since product life cycles for hardware are relatively short, the
Company provides updated training to its service technicians and continuously
reviews its spare parts inventory for potential obsolescence. The Company
believes there are sufficient technicians available to meet its business needs
and that adequate sources of parts will be available to meet technological and
product life cycle changes.
SERVICES COMPETITION
Providing maintenance and repair depot services to clients is also
a highly competitive business. The principal competitive factors are price,
expertise, reputation and geographic location of staff. The Company competes
with numerous organizations which can provide similar maintenance services, many
of which are substantially larger, better known and have substantially greater
name recognition and financial, marketing, technical and personnel resources
than the Company. The Company believes it distinguishes itself by providing
services on a dependable and cost effective basis to customers with multiple
locations throughout the U.S.
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<PAGE> 6
RELATIONSHIP WITH IBM
The Company has received a number of hardware maintenance
subcontracts from IBM. These subcontracts are generally renewable on an annual
basis with 30 day cancellation rights. During fiscal 1997, revenues from the
subcontracts were approximately 20% of total revenues.
EMPLOYEES
As of June 13, 1997, the Company had 204 full-time employees and 6
part-time employees. None of the Company's employees is represented by a labor
union and the Company has had no work stoppages. The Company believes that
employee relations are good.
PROTECTION OF PROPRIETARY INFORMATION
The Company believes its proprietary software and hardware
technology is adequately protected by trade secret and copyright laws and
contracts with its customers, employees and suppliers. The Company has a
registered trademark and service mark in the names "BARRISTER" and "JAVELAN" and
trademarks in certain other names used in its business. The Company has no
patents or patent applications pending.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as of June 13, 1997, the names and
ages of the executive officers of the Company and the positions held by each
such person.
NAME AGE POSITION
Richard P. Beyer 50 Vice President-Finance, Treasurer
and a Director
Mark C. Donadio 41 Secretary and General Counsel
Mark J. Phillips 42 Vice President-Sales
Jose Rivero 48 Vice President-Service Division and
a Director
Henry P. Semmelhack 60 President, Chairman of the Board of
Directors, Chief Executive Officer
MR. BEYER became Vice President-Finance, Treasurer and a Director
of the Company in 1982 following its incorporation. He joined Comptek in 1974
and served as its Vice President-Finance and Treasurer.
MR. DONADIO joined the Company in January, 1991 as its Secretary
and General Counsel. Prior to his joining the Company he was a partner at
Saperston & Day, P.C. in Buffalo, New York.
MR. PHILLIPS joined the Company in March, 1995 as its Vice
President of Sales. Prior to joining the Company, he was a sales and marketing
executive with Digital Equipment Corporation.
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<PAGE> 7
MR. RIVERO became Vice President of the Company in December, 1984
after serving as National Customer Operations Manager and as National Product
Service Manager. Mr. Rivero joined Comptek in 1974 and served in various
positions including National Customer Operations Manager. In May, 1991, he
became Vice President of the Service Division. In October, 1991, Mr. Rivero was
elected as a Director by the shareholders of the Company.
MR. SEMMELHACK has served as the Company's Chairman of the Board
of Directors, Chief Executive Officer and President since its incorporation in
1982. He was one of the founders of Comptek, and currently serves as a Director
of, and consultant to, Comptek. Previously, he served as Comptek's Chairman of
the Board, Chief Executive Officer and President.
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<PAGE> 8
ITEM 2. PROPERTIES
REAL PROPERTY
The Company currently leases all the facilities used in its
business. The Company is headquartered in Buffalo, New York and currently leases
approximately 57,000 square feet in two separate facilities in Buffalo. Other
office locations, which are used for regional sales offices and for servicing
activities, are as follows:
San Diego, California Manchester, New Hampshire
Denver, Colorado Cherry Hill, New Jersey
Hartford, Connecticut New York, New York
Miami, Florida Charlotte, North Carolina
Atlanta Georgia Cleveland, Ohio
Chicago, Illinois Arlington, Virginia
Boston, Massachusetts
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The Company's equipment and leasehold improvements include:
computer equipment, components and tools used in the design, development,
testing and maintenance of its systems; office furniture and fixtures; and
leasehold improvements undertaken to accommodate computers and other equipment.
ITEM 3. LEGAL PROCEEDINGS.
In the opinion of management, there are no claims or litigation
pending to which the Company is a party which could have a material adverse
effect on the Company's financial condition or statement of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The item is not applicable.
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<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this item is incorporated by reference
to the Company's 1997 Annual Report under the caption "Stock
Market and Dividend Information".
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is incorporated by reference
to the Company's 1997 Annual Report under the caption "Selected
Financial Data".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is incorporated by reference
to the Company's 1997 Annual Report under the caption
"Management's Discussion and Analysis".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated by reference
to the Company's 1997 Annual Report under the caption "Quarterly
Financial Data" and under the captions as listed in Item 14(a)(1)
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Item is not applicable.
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<PAGE> 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information under the caption "ELECTION OF DIRECTORS" in the
Company's definitive Proxy Statement to be dated July 24, 1997, is
incorporated herein by reference. Also see Part I of this Report,
under the caption "Executive Officers of the Registrant" for
additional information relating to the Company's executive
officers.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the caption "COMPENSATION AND RELATED
MATTERS" in the Company's definitive Proxy Statement to be dated
July 24, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the caption "PRINCIPAL SHAREHOLDERS" in the
Company's definitive Proxy Statement to be dated July 24, 1997, is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.
The information under the sub-caption "Certain Transactions" in
the Company's definitive Proxy Statement to be dated July 24,
1997, is incorporated herein by reference.
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<PAGE> 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following are filed as a part of this Report:
(1) FINANCIAL STATEMENTS. The following Financial Statements of
Barrister Information Systems Corporation are incorporated
by reference to the Company's 1997 Annual Report:
Balance Sheets -
March 31, 1997 and March 31, 1996
Statements of Operations -
Years ended March 31, 1997, 1996 and 1995
Statements of Shareholders' Equity -
Years ended March 31, 1997, 1996 and 1995
Statements of Cash Flows -
Years ended March 31, 1997, 1996 and 1995
Notes to Financial Statements
Independent Auditors' Report
(2) FINANCIAL STATEMENT SCHEDULE. The following financial
statement schedule of Barrister Information Systems
Corporation for the three years ended March 31, 1997 is
being filed with this Report. Schedules not listed below
have been omitted because they are not applicable or are
not required under the instructions or the information is
included in the "Notes to Financial Statements" of the
Company's 1997 Annual Report.
Schedule Title Page
-------- ----- ----
II Valuation and Qualifying Accounts 14
The Independent Auditors' Report on the Financial Statement
Schedule appears on page 13 of this report.
(3) EXHIBITS. See Exhibit Index filed herewith on pages 15
through 16 of this Report.
(b) Reports on Form 8-K: None.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: June 25, 1997 BY: /s/ Henry P. Semmelhack
------------- -----------------------
Henry P. Semmelhack, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
the report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Henry P. Semmelhack President, Chief Executive June 25, 1997
- -------------------------- Officer and Chairman of the
Henry P. Semmelhack Board of Directors
/s/ Richard P. Beyer Vice President and Chief June 25, 1997
- -------------------------- Financial Officer
Richard P. Beyer
/s/ Franklyn S. Barry, Jr. Director June 25, 1997
- --------------------------
Franklyn S. Barry, Jr.
/s/ Warren E. Emblidge, Jr. Director June 25, 1997
- --------------------------
Warren E. Emblidge, Jr.
/s/ Richard E. McPherson Director June 25, 1997
- --------------------------
Richard E. McPherson
/s/ James D. Morgan Director June 25, 1997
- --------------------------
James D. Morgan
Director June 25, 1997
- --------------------------
James Page
/s/ Jose Rivero Director June 25, 1997
- --------------------------
Jose Rivero
</TABLE>
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<PAGE> 13
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
--------------------------------
Board of Directors
Barrister Information Systems Corporation:
Under date of June 20, 1997, we reported on the balance sheets of Barrister
Information Systems Corporation as of March 31, 1997 and 1996, and the related
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended March 31, 1997, as contained in the 1997
annual report to shareholders. These financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
ended March 31, 1997. In connection with our audits of the aforementioned
financial statements, we also have audited the related financial statement
schedule as listed in item 14(a)(2) of this the annual report on Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Buffalo, New York
June 20, 1997
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<PAGE> 14
Schedule II
BARRISTER INFORMATION SYSTEMS CORPORATION
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Write-Offs Balance
beginning charged to costs charged at end
Description of period and expenses to allowance of period
- ----------- --------- ------------ ------------ ---------
Allowance for doubtful
accounts:
<S> <C> <C> <C> <C>
Year ended March 31, 1995 $ 150 $ - $ - $ 150
------- ------- ------ -----
Year ended March 31, 1996 $ 150 $ - $ 50 $ 100
------- ------- ------ -----
Year ended March 31, 1997 $ 100 $ 25 $ - $ 125
------- ------- ------ -----
Allowance for inventory
obsolescence:1
Year ended March 31, 1995 $ 800 $ 689 $ 664 $ 825
------ ------- ------ -----
Year ended March 31, 1996 $ 825 $ 1,045 $ 1,110 $ 760
------ ------- ------ -----
Year ended March 31, 1997 $ 760 $ 900 $ 779 $ 881
------ ------- ------ -----
<FN>
- --------
1 The allowance is included in inventory in the balance sheets.
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Page No.
No. Description or Location
--- ----------- ----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation (b)
3.2 Bylaws, as amended (b)
3.3 Amendment to the Certificate of Incorporation (c)
dated July 11, 1991
3.4 Amendment to the Bylaws effective (c)
October 9, 1991
3.5 Amendment to the Certificate of Incorporation (c)
dated October 15, 1991
3.6 Amendment to the Certificate of Incorporation (d)
dated March 30, 1992
3.7 Amendment to the Certificate of Incorporation (e)
dated November 3, 1994
3.8* Amendment to the Certificate of Incorporation (f)
dated March 6, 1996
10.1 1989 Stock Incentive Plan, as amended (e)
10.2 Retirement Savings Plan and Trust (a)
10.3 Employee Stock Purchase Plan (b)
10.4 Loan Agreement between Registrant and BIS Partners, (d)
L.P. dated March 31, 1992
13* Annual Report to Shareholders for the fiscal year ended
March 31, 1996 (to be deemed filed only to the extent
required by the instructions to exhibits for reports on
Form 10-K)
23* KPMG Peat Marwick LLP consent regarding forms S-8
27* Financial Data Schedule
</TABLE>
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<PAGE> 16
[FN]
- -------------------------------
* Each exhibit marked with an asterisk is a previously unfiled document
under Category 19 of Regulation S-K, Item 601.
(a) Designates Exhibits annexed to the Registration Statement filed by
the Company with the Securities and Exchange Commission on June 25,
1986 (Registration No. 33-6250), and which are incorporated herein by
reference.
(b) Designates Exhibit annexed to the Registrant's Report on Form 10-Q
for the quarter ended July 1, 1988.
(c) Designates Exhibit annexed to the Registrant's Report on Form 10-Q
for the quarter ended September 27, 1991.
(d) Designates Exhibit annexed to the Registrant's Report on Form 10-K
for the year ended March 31, 1992.
(e) Designates Exhibit annexed to the Registrant's Report on Form 10-Q
for the quarter ended September 30, 1994.
(f) Designates Exhibit annexed to the Registrant's Report on Form 10-K
for the year ended March 31, 1996.
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<PAGE> 1
EXHIBIT 13
BARRISTER INFORMATION SYSTEMS CORPORATION
has served law firms as its principal market for 25 years. As a result,
the Company has developed deep-rooted expertise in meeting the needs of
law firms for products and services. This experience has heavily
influenced the Company in its development, has provided the foundation
for its current strategies, and will guide its vision for the future.
The Company has made a substantial investment in its Windows(TM)-based
Javelan(R) software package which enables law firms, professional
service organizations, legal departments, and other groups in Fortune
1000 companies to operate effectively in the competitive environment of
the 90's and to meet the computing requirements of the new millennium.
Javelan is making its reputation in the market as a product which is
feature rich, very fast and highly cost effective. The Company seeks to
increase market share by providing a superior product, by continuing
investment in both the product and the software organization, by
aggressive marketing, and by providing excellent service and support.
Special emphasis is being directed to organizations which must change
their software prior to the year 2000, when many software systems will
fail.
The Company, which initially provided equipment maintenance services
only to law firms, has become a nationwide service provider to
customers in many different businesses. Substantial investments have
been made to achieve growth and improved profitability. We seek to grow
this business by direct sales and by establishing relationships with
resellers, distributors and manufacturers. Our reputation for
delivering nationwide services as a reliable and cooperative partner
facilitates these efforts.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 2
TO OUR SHAREHOLDERS:
In Fiscal 1997, the Company reported a net loss of $386,000 compared to
a net loss of $205,000 the previous year, which included an
extraordinary gain of $486,000. Total revenues for 1997 increased to
$14,177,000 from the $13,729,000 achieved in 1996. Revenues grew due to
increases in product sales resulting from sales of Javelan, the
Company's Windows-based software product. Margins increased from both
product and services revenues.
The profits from product sales grew substantially in Fiscal 1997.
Product revenues in the year reached $2,486,000, a 39% growth over the
$1,784,000 achieved the previous year. Cost of goods were 35.5% in
Fiscal 1997 compared to 43.2% the previous year. As a result, product
margins grew 58% compared to the 39% product sales growth. While
service revenues declined 2.1% from $11,945,000 to $11,691,000, margins
increased approximately 12%.
Although the Company had earned a small profit through the end of its
third quarter, losses in the fourth quarter caused the year to be
unprofitable. In the fourth quarter of Fiscal 1997, revenues increased
to $3,731,000 from $3,564,000 the previous year. Product revenues for
the same period were $534,000, compared to the $669,000 achieved in the
period in 1996. Service revenues for the fourth quarter were
$3,197,000, an increase over the $2,895,000 in the previous period. The
net loss for the quarter was $395,000 compared to a profit the previous
period of $182,000 which included an extraordinary gain of $486,000.
Expenses for the quarter grew primarily due to increases in field
service expenses. Service contracts with annualized revenues of over
$1,500,000 were signed at the end of the fourth quarter. These
contracts were received too late to affect the fourth quarter.
With the capital received from the March 1996 sale of Common Stock, the
Company began aggressive marketing and sales activities in order to
increase revenues from both Javelan software and equipment maintenance
services. Software product revenues and margins did increase
substantially during the year. Service revenues began to increase in
the third and fourth quarters, but not enough to offset the increases
in marketing and field service expenses. The substantial service
contract awards received in the fourth quarter are expected to have a
positive effect on revenues in the coming year.
Looking at the entire year, there are encouraging signs. Every quarter,
except the fourth quarter, showed improvement over the previous year.
Software sales grew substantially and service revenues began growing in
the third and fourth quarters. The marketing investments made in the
year should yield a payoff in Fiscal 1998.
In Fiscal 1998, the Company expects to achieve profitability. Forecasts
call for continued growth in Javelan sales with improving margins and
continued growth in service revenues and margins through strategic
partnerships and through improved expense management.
2
<PAGE> 3
SOFTWARE
- --------
Javelan sales grew significantly during the year as satisfied customers
spread the word about its excellent features and outstanding
performance. Interest in Javelan is strong in its traditional law firm
market and is developing in other markets including consulting firms,
accounting firms and corporations. Further, we expect an increase in
demand for the product as the year 2000 approaches. Many law firms and
other organizations must change their computers and software prior to
the year 2000 because their legacy software products will not operate
properly using dates in the new century. Because Javelan will satisfy
that need, and because of its increasing product recognition, it is
expected to continue to capture market share.
During Fiscal 1997, Javelan added a number of distinguished clients to
its customer base. Manatt, Phelps & Phillips of Los Angeles and
Anderson Kill & Olick of New York, which are in the top 250 law firms
in the United States, selected Javelan. Goldstein Golub Kessler &
Company, P.C., the largest independent accounting firm in New York
City, became a Javelan client. Banc One Corporation selected Javelan
for use by its corporate legal department. Javelan has been purchased
by clients located throughout the United States, including Hawaii,
Canada and the Caribbean.
During the year, significant development occurred to enhance Javelan
for its clients. Task Based Billing, Data Warehouse and Executive
Information Systems modules were developed to extend the decision
supporting capability Javelan provides its clients. These features make
Javelan more attractive in sales to new clients and also provides
additional sales opportunities to existing clients.
As in previous years, the Time Manager and Barrister/Eagle product
groups continue to support their clients and, in 1998, will continue
their efforts on behalf of these clients. Many of these clients have
chosen to move to the Javelan product and more are expected to make the
change in the future. The choice of Javelan gives clients the
technology and software they can use going into the new century.
SERVICE
- -------
Fiscal Year 1997 was a transition year for our equipment maintenance
business. Revenues fell primarily due to continued reductions of
contract renewals from our largest service-outsourcing partner IBM.
Revenue reductions were offset by increases in end-user contract sales
and the development of many new outsource partnerships, which have
positioned this business for revenue growth in Fiscal Year 1998. As
several of our major end-user contract sales occurred in late 1997,
most of these revenues will be recognized in Fiscal 1998.
By increasing its service reseller channels by over 300% in 1997, the
equipment maintenance business began to rely less on the subcontracts
from IBM. As IBM continued to shift some of its Multi-Vendor -Services
("MVS") contracts to its subsidiary throughout 1997, we established
partnering agreements with dozens of other U.S. companies to perform
similar services. These companies include computer equipment resellers
and other MVS companies.
========================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 4
In addition, this business will increase its focus on the sale of
Warranty-Upgrade services, which are often multi-year contracts with
prepayment provisions. We have been seeking relationships with various
electronic equipment manufacturers to provide on-site warranty service.
Such new distribution partnerships will allow us to further leverage
Service Warranty Authorizations on a nationwide basis.
In addition to our investments made in the increased marketing of our
equipment maintenance capabilities in Fiscal 1997, this business
procured and began the installation of a new automation system. The
anticipated benefits from this system, which is expected to be
completed in 1998, are improved operating management, service
productivity, expanded dispatch functions, improved parts logistics,
contract management, and customer billings. These benefits will lead to
improved delivery of service, better utilization of service staff and
further increase in customer satisfaction.
PROSPECTS FOR THE COMPANY
- -------------------------
The growing sales of Javelan, the increased market awareness of the
product, and improving margins encourage us a great deal. The capture
of new contracts and the establishment of strategic partnerships is a
positive sign for our equipment maintenance service business. Employee
morale continues to be high, and the organization is committed to
improving performance.
The progress made in Fiscal 1997 and the investments made in marketing,
people and products are expected to lead to improved performance in the
coming year. Our commitment and total focus is on rewarding the
shareholders for their investment and perseverance.
Sincerely,
H. P. Semmelhack
President
4
<PAGE> 5
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended March 31
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 14,177 $ 13,729 $ 15,327 $ 17,772 $ 16,165
Net loss (386) (205) (159) (1,334) (62)
Net loss per common share (.05) (.03) (.03) (.53) (.14)
BALANCE SHEET DATA AT YEAR END:
Working capital 2,367 2,929 2,880 2,733 3,204
Total assets 6,953 6,978 6,544 7,447 7,711
Long-term debt(1) 1,504 1,392 3,329 3,406 3,330
Shareholders' equity 1,952 2,337 298 197 478
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial data for the fiscal years
ended March 31, 1997 and March 31, 1996.
---------------------------------------------------------------------------
1st 2nd 3rd 4th Total
Quarter Quarter Quarter Quarter Year
---------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1997
Revenues $ 3,415 $ 3,254 $ 3,777 $ 3,731 $ 14,177
Net earnings (loss) 15 (33) 27 (395) (386)
Net earnings (loss) per common share -- -- -- (.05) (.05)
1996
Revenues $3,627 $ 3,332 $ 3,206 $ 3,564 $ 13,729
Earnings (loss) before extraordinary item 4 (177) (214) (304) (691)
Net earnings (loss) 4 (177) (214) 182 (205)
Earnings (loss) before extraordinary item
per common share -- (.03) (.03) (.05) (.11)
Net earnings (loss) per common share -- (.03) (.03) .03 (.03)
<FN>
- ----------------------
(1) See note 2 to the financial statements.
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 6
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)
----------------------------------------------------------------------
1997 1996
vs. vs.
1997 1996 1995 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales 17.5% 13.0% 16.8% 39.3% (30.9%)
Services 82.5 87.0 83.2 (2.1) (6.3)
----- ----- -----
Total revenues 100.0 100.0 100.0 3.3 (10.4)
----- ----- -----
Costs and expenses:
Cost of product sales(1) 35.5 43.2 73.5 14.5 (59.4)
Cost of services(2) 83.0 85.8 80.4 (5.3) 0.0
----- ----- -----
Total cost of revenues 74.7 80.2 79.2 (3.9) (9.3)
Selling, general, and
administrative 24.3 20.4 16.7 23.4 9.6
Product development and
engineering 3.4 3.2 3.5 9.5 (17.0)
----- ----- -----
Total costs and expenses 102.4 103.8 99.4 1.9 (6.4)
----- ----- -----
Operating earnings (loss) (2.4) (3.8) 0.6 (34.3) --
Interest expense 0.3 1.2 1.6 (75.6) (35.2)
----- ----- -----
Loss before extraordinary item (2.7) (5.0) (1.0) (44.1) 334.6
Extraordinary item -- 3.5 -- -- --
----- ----- -----
Net loss (2.7) (1.5) (1.0) 88.3 28.9
===== ===== =====
<FN>
- --------
(1) Percentage of product sales
(2) Percentage of services revenues
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 7
OVERVIEW
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. The discussion should be read in
conjunction with the financial statements and accompanying notes. The Company
operates predominantly in the computer services industry. Its principal source
of revenues is derived from hardware maintenance services on PC related
equipment provided to a broad base of customers throughout the United States.
The Company also derives significant revenues from the licensing of software and
software support services predominantly to the legal industry. The Company's
major product, Javelan, is a time and billing and practice management system
based on Microsoft Windows and client/server technology.
Recently, the Company has also sold Javelan to accounting firms, consultants and
departments of Fortune 1000 companies. The Company expects to expand marketing
in these areas by attending trade shows and group conferences in these markets
and by establishing strategic relationships with others to enhance sales. If
successful, this will reduce the Company's concentration in the legal market and
reduce potential volatility of sales. The market for Javelan is characterized as
having: potential customers concentrated in major cities throughout the United
States; little foreign competition; high barriers of entry based on the
substantial investment required to develop the sophisticated functionality of
the software; product life cycles between 5 and 10 years; and price elasticity.
Pricing for Javelan is based on the size of the system and functions licensed.
Since individual sales can be for sizable amounts and are characterized by high
margins, and because the timing of when contracts are signed is unpredictable,
operating results for any given period can vary significantly. Because of
competition, market demands and changing technology, there is a continuing
requirement to invest in product features and functions to remain a viable
competitor. The Company believes that it has the technological expertise to
maintain a state-of-the-art product and that the trend of increasing sales of
Javelan will provide the financing for its product development needs.
The hardware maintenance business has been generated through direct sales to end
users and subcontracts from other companies. In addition, a number of
contractual relationships have been established with computer resellers and
value added resellers to provide maintenance services to their customers.
Marketing focus is being placed on obtaining new business partners, as well as
increasing the level of business with established business partners. The market
for hardware maintenance services is very large; it encompasses all businesses,
is highly price competitive, has low technological barriers to entry and the
equipment serviced has short product life cycles.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 8
RESULTS OF OPERATIONS
The increase in product sales for fiscal 1997 as compared to 1996 resulted from
increased sales of the Company's Javelan software product. A decline in the sale
of low margin (10%-15%) commodity products also occurred for the comparable
annual periods. The decrease in product sales for fiscal 1996 as compared to
1995 resulted from a de-emphasis on the sale of commodity products. The
percentage of margin realized on product sales increased for both years based on
the increased percentage of product sales that were comprised of the Javelan
software product which has a smaller associated cost of 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. Based on the increased level of
Javelan sales, higher levels of qualified prospects and sales outside the legal
market, the Company expects to achieve further increases in Javelan sales in
fiscal 1998, which should have a favorable effect on margins in that year.
The decrease in services revenues for fiscal 1997 as compared to 1996 and for
fiscal 1996 as compared to 1995 was principally due to decreased revenues from
hardware maintenance services. These revenues were affected by the non-renewal
of two large subcontracts from IBM in August, 1995, a third large subcontract in
May, 1996 and a reduction in contracts for the Company's older minicomputer
equipment. Revenues from IBM accounted for 20%, 30% and 28% of total revenues
for fiscal years 1997, 1996 and 1995, respectively. The Company expects that
revenues from this customer will once again drop as a percentage of total
revenues in fiscal 1998. 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 increased its efforts to obtain
business by signing additional contracts from its existing business partners, by
establishing new business partners and through direct sales. In this regard, the
Company, in October, 1996, contracted with CIC Systems Inc. to be CIC's primary
supplier of computer hardware maintenance services for CIC's customers
nationwide. Increased hardware maintenance revenues in the third and fourth
quarters of fiscal 1997 were a direct result of this contract. Additional
contracts with other companies have been signed recently which are expected to
produce increased services revenues in fiscal 1998. In addition, services
revenues (installation and training services, conversion services and custom
programming) associated with the sale of Javelan increased in fiscal 1997 and
are expected to increase again in 1998. However, if IBM were to cancel a major
portion of its 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 1998 could occur. Margins on services revenues
increased for fiscal 1997 as compared to 1996 as labor and parts costs were
reduced at a higher rate than the drop in revenues. When fiscal 1996 is compared
to 1995, margins on services revenues decreased primarily due to increased costs
for parts utilized to maintain equipment which offset savings in labor costs.
Cost of services includes a provision for service parts inventory deemed to be
no longer repairable or excess to the Company's needs based on actual and
projected service revenues. The amount of such charges were
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 9
$900,000, $1,045,000 and $689,000 for 1997, 1996 and 1995, respectively. The
increase in selling, general and administrative expenses as a percentage of
total revenues for fiscal 1997 as compared to 1996 resulted primarily from
increases in selling expenses associated with enhanced efforts to obtain new
hardware maintenance contracts and increased levels of Javelan sales. The
increase in these expenses when fiscal 1996 is compared to 1995 resulted from an
increase in selling expenses associated with the Javelan product, increased
corporate expenses and lower levels of revenues.
Expenditures for product development and engineering, before taking into account
amounts capitalized and amortized for software production costs, increased a
small amount in each of the comparative fiscal periods. Costs capitalized as
software production costs amounted to $330,000, $308,000 and $132,000 in 1997,
1996 and 1995, respectively. Amortization, which commenced in 1996, amounted to
$116,000 in 1997 and $59,000 in 1996.
Interest expense as a percentage of revenues decreased for fiscal 1997 as
compared to 1996 and for fiscal 1996 as compared to 1995 based on reductions in
interest expense to BIS Partners, L.P. This resulted from the effect of the debt
forgiveness by BIS Partners in August, 1995 (see note 2 to the financial
statements). BIS Partners, L.P. is ninety percent owned, either directly or
indirectly by certain officers and directors of the Company. The accounting
treatment of this transaction stipulates that the debt forgiveness must first be
considered a reduction of all future interest expense before any restructuring
gain is measured. The restructuring gain ultimately determined in fiscal 1996
was credited directly to additional paid-in capital due to its related party
nature. Loan payments after August, 1995 are accordingly being recorded as
reductions in the principal balance of the loan. Based on a further
restructuring of this loan in March, 1997, which extended the period of
repayment and modified the interest rate from a fixed 8% to a variable rate
based on prime plus 3.5%, approximately $150,000 of interest expense is expected
to be recorded on this loan in 1998.
The Company realized an extraordinary gain of $486,000 from the repayment in
March, 1996 of a recorded third party obligation of $886,000 for a one-time
payment of $400,000. Previously, repayment of this obligation was contingent,
based on a percentage of net income not to exceed $200,000 per year with no
payments required after 2001. Due to the Company's series of losses, no
repayment had been made on the contingent debt. Before this extraordinary gain,
the Company incurred a loss of $691,000 in 1996.
Based on the consideration of the weight of both positive and negative evidence
as required by Statement of Financial Accounting Standards No. 109, management
has determined that it is more likely than not that the deferred tax assets will
not be realized. Therefore, no tax benefits were established in the statements
of operations for any of the years in the three-year period ended March 31,
1997, since the Company has fully reserved for the tax effect of net deductible
temporary differences and operating loss carry forwards. These benefits will be
recorded in future periods as they are realized or as their realization becomes
predictable.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a net decrease in cash of $972,000 during fiscal 1997.
Principal uses of cash during the year were additions to equipment and leasehold
improvements of $332,000, additions to capitalized software of $330,000 and
repayment of long-term debt of $544,000. These uses were partially offset by net
cash provided by operating activities of $167,000. In fiscal 1996, the Company
experienced a net increase in cash of $1,014,000. Net proceeds of $1,952,000
received from the sale of 2,000,000 shares of common stock were used to repay
$564,000 of long-term debt and for additions to capitalized software of $308,000
and additions to equipment and leasehold improvements of $82,000. In fiscal
1995, the Company experienced a net decrease in cash of $620,000. The principal
reasons for this decrease were the use of $280,000 of cash by operating
activities, the investment of $132,000 in capitalized software and $80,000 in
additions to equipment and leasehold improvements and the net repayment of
$163,000 of debt.
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
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 11
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.
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.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 12
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31
------------------------------
1997 1996
------------------------------
<S> <C> <C>
ASSETS (Note 2)
CURRENT ASSETS:
Cash $ 226 $1,198
Accounts receivable, less allowance for doubtful
accounts of $125 in 1997 and $100 in 1996 2,598 1,578
Inventories:
Service parts 2,826 3,238
Other 146 132
------ ------
Total inventories 2,972 3,370
------ ------
Prepaid expenses 67 32
------ ------
Total current assets 5,863 6,178
------ ------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Computer and other equipment 2,873 2,730
Furniture and fixtures 968 989
Leasehold improvements 284 284
------ ------
4,125 4,003
Less accumulated depreciation 3,666 3,617
------ ------
Net equipment and leasehold improvements 459 386
------ ------
SOFTWARE PRODUCTION COSTS 595 381
OTHER ASSETS 36 33
------ ------
$6,953 $6,978
====== ======
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 13
<TABLE>
<CAPTION>
March 31
-------------------------------
1997 1996
-------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank (note 2) $ 250 $ 250
Current installments of long-term debt ($55 in 1997
and $671 in 1996 to a related party, note 2) 99 726
Accounts payable 1,119 799
Accrued compensation and benefits 642 549
Customer advances and unearned revenue 1,320 841
Other accrued expenses 67 84
------- -------
Total current liabilities 3,497 3,249
------- -------
LONG-TERM DEBT, EXCLUDING
CURRENT INSTALLMENTS ($1,475 in 1997 and
$1,343 in 1996 to a related party, note 2) 1,504 1,392
SHAREHOLDERS' EQUITY (notes 2 through 4):
Preferred stock, authorized 2,000,000 shares -- --
Common stock, $.24 par value.
Authorized 20,000,000 shares;
8,201,300 and 8,197,970 shares issued and
outstanding in 1997 and 1996, respectively 1,968 1,968
Additional paid-in capital 21,551 21,550
Accumulated deficit (21,567) (21,181)
------- -------
Total shareholders' equity 1,952 2,337
------- -------
COMMITMENTS AND CONTINGENCIES (notes 7 and 10)
$6,953 $ 6,978
======= =======
See accompanying notes to financial statements.
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 14
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended March 31
----------------------------------------------
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
REVENUES:
Product sales $ 2,486 $ 1,784 $ 2,580
Services 11,691 11,945 12,747
-------- -------- --------
Total revenues 14,177 13,729 15,327
-------- -------- --------
COSTS AND EXPENSES:
Cost of product sales 883 771 1,897
Cost of services 9,703 10,245 10,249
-------- -------- --------
Total cost of revenues 10,586 11,016 12,146
Selling, general and
administrative expenses 3,451 2,796 2,552
Product development and engineering 486 444 535
-------- -------- --------
Total costs and expenses 14,523 14,256 15,233
-------- -------- --------
OPERATING EARNINGS (LOSS) (346) (527) 94
INTEREST EXPENSE:
Related party (note 2) 2 108 200
Other 38 56 53
-------- -------- --------
Total Interest 40 164 253
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM (386) (691) (159)
EXTRAORDINARY GAIN ON EXTINGUISHMENT
OF DEBT (NOTE 2) -- 486 --
-------- -------- --------
NET LOSS $ (386) $ (205) $ (159)
======== ======== ========
PER COMMON SHARE:
LOSS BEFORE EXTRAORDINARY ITEM $ (.05) $ (.11) $ (.03)
EXTRAORDINARY ITEM -- .08 --
-------- -------- --------
NET LOSS $ (.05) $ (.03) $ (.03)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,567 6,320 5,663
======== ======== ========
See accompanying notes to financial statements.
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 15
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended March 31
-----------------------------------------------
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
SERIES D PREFERRED STOCK
Beginning balance $ -- $ -- $ 3060
Issued 1,000 shares on conversion of long-term debt -- -- 250
Conversion into 2,030,000 shares of common stock -- -- (3,310)
-------- -------- --------
Ending balance -- -- --
-------- -------- --------
COMMON STOCK
Beginning balance 1,968 1,486 994
Sale of 3,332 shares, 2,008,000 shares and 20,000
shares in 1997, 1996 and 1995, respectively -- 482 5
Issued 2,030,000 shares on conversion of Series D
preferred stock -- -- 487
-------- -------- --------
Ending balance 1,968 1,968 1,486
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Beginning balance 21,550 19,788 16,960
Debt forgiven by BIS Partners, L.P. (note 2) -- 282 --
Sale of common shares 1 1,480 5
Conversion of Series D preferred stock -- -- 2,823
-------- -------- --------
Ending balance 21,551 21,550 19,788
-------- -------- --------
ACCUMULATED DEFICIT
Beginning balance (21,181) (20,976) (20,817)
Net loss (386) (205) (159)
-------- -------- --------
Ending balance (21,567) (21,181) (20,976)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY $ 1,952 $ 2,337 $ 298
======== ======== ========
See accompanying notes to financial statements.
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 16
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31
-------------------------------------------
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (386) $ (205) $(159)
Adjustments to reconcile loss to net cash
provided (used) by operating activities:
Depreciation 207 259 309
Amortization 116 59 --
Loss (gain) on disposal of equipment 12 (3) 1
Extraordinary gain on extinguishment of debt -- (486) --
Changes in current assets and liabilities:
Accounts receivable (1,020) (13) 288
Inventories 398 635 (126)
Prepaid expenses (35) 11 (2)
Accounts payable 320 (134) (216)
Accrued compensation and benefits 93 (23) (245)
Customer advances and unearned revenue 479 (115) (59)
Other accrued expenses (17) (26) (71)
------- ------- -----
Net cash provided (used) by operating activities 167 (41) (280)
------- ------- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold improvements (332) (82) (80)
Proceeds on sale of equipment 40 5 10
Additions to software production costs (330) (308) (132)
Other (3) 17 15
------- ------- -----
Net cash used by investing activities (625) (368) (187)
------- ------- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment on note payable to bank -- -- (250)
Proceeds from long-term debt 29 25 273
Repayment of long-term debt (544) (564) (186)
Proceeds from sale of common stock 1 1,962 10
------- ------- -----
Net cash provided (used) by financing activities (514) 1,423 (153)
------- ------- -----
NET INCREASE (DECREASE) IN CASH (972) 1,014 (620)
CASH AT BEGINNING OF YEAR 1,198 184 804
------- ------- -----
CASH AT END OF YEAR $ 226 $ 1,198 $ 184
======= ======= =====
SUPPLEMENTAL CASH FLOW INFORMATION (note 8)
See accompanying notes to financial statements.
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF ORGANIZATION - Barrister Information Systems
Corporation (the "Company") is a national supplier of
Windows-based client/server software for law firms, accounting
firms, consultants and departments of Fortune 1000 companies.
In addition, the Company provides equipment maintenance
services on a nationwide basis.
(b) BASIS OF PRESENTATION - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(c) REVENUE RECOGNITION - Product sales include the licensing of
Javelan software and, to a lesser extent, the sale of computer
hardware. Software license revenue is recognized upon delivery
of the software product to the customer, unless the Company has
significant related obligations remaining or the probability of
collection is in doubt. When obligations remain after delivery,
revenue is recognized when such obligations are no longer
significant. Sales of hardware are recorded upon shipment.
Services revenues include hardware maintenance services, which
are primarily under contractual arrangements, and software
related services such as system conversions, installation and
training. Revenues from hardware maintenance contracts are
recognized on a monthly basis over the term of the contract.
Software service revenue, which is priced separately from the
software, is recognized as the service is provided.
(d) INVENTORIES - Inventories are stated at the lower of cost
(first-in, first-out) or market. Service parts inventory is
charged to cost of services when the part is no longer
repairable or becomes excess to the Company's needs based on
actual and projected service revenues.
(e) 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.
(f) 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. Technological feasibility is defined
through the existence of a detailed program design or, in the
absence of such, a working model.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 18
(g) STOCK-BASED COMPENSATION - Stock options are accounted for
using Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations,
whereby compensation is measured as the difference between an
option's exercise price and the market value of the underlying
stock at the grant date. See note 4 for the pro forma effect on
net loss and net loss per share as if the fair value-based
method of accounting prescribed by Statement of Financial
Accounting Standard (SFAS) No. 123 "Accounting for Stock-based
Compensation" had been applied.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company follows the
disclosure requirements of Statement of Financial Accounting
Standards No. 107. The carrying amount of all financial
instruments is a reasonable estimate of their fair value,
except for the debt due BIS Partners, L.P. which, due to its
nature, is not practicable to estimate its fair value.
(i) LONG-LIVED ASSETS - The Company follows the accounting
requirements of SFAS No. 121 "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of",
which requires impairment losses to be recorded on long-lived
assets used in operations or are expected to be disposed of,
when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less
than the carrying value of the assets.
(j) PER SHARE DATA AND EARNINGS PER SHARE - Net earnings (loss) per
share amounts are based on the weighted average number of common
and dilutive common equivalent shares outstanding. The Company
will adopt SFAS 128 "Earnings per Share" in 1998. The statement
specifies the computation, presentation, and disclosure
requirements for earnings per share and requires restatement of
all prior period earnings per share data presented after its
effective date. The Company has determined that the statement
will have no impact on currently disclosed loss per share data.
(2) 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 (10.75% at March 31, 1997).
A summary of long-term debt follows:
<TABLE>
<CAPTION>
March 31
--------------------------
1997 1996
--------------------------
(in thousands)
<S> <C> <C>
Working capital note with BIS Partners, L.P. $ -- $ 285
Term note with BIS Partners, L.P. 1,530 1,729
Other 73 104
------ ------
Total long-term debt 1,603 2,118
Less current installments 99 726
------ ------
Long-term debt, excluding current installments $1,504 $1,392
====== ======
</TABLE>
BIS Partners, L.P. ("BIS") is ninety percent owned either directly or
beneficially by certain officers and directors of the Company. These
same officers and directors own approximately 42% of the Company's
common stock. On August 31, 1995, 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
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 19
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 debt
reduction of $282,000 which, due to the related party nature of the
transaction, was reflected as a contribution to capital. All future
payments to BIS were to be recorded as a reduction in the debt balance
with no interest expense. In connection with this transaction, the
Company issued warrants to BIS to purchase 450,000 shares of its
capital stock at $1.93 per share (the fair market value at issue date),
exercisable through August 31, 2005.
During the fourth quarter of fiscal 1997, the Company again
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, the Company again
expects to recognize interest expense in future years based on an
effective estimated rate.
The BIS note is supported by an agreement granting a security interest
in all equipment, inventories and receivables. 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 1997 and 1996.
In March 1996, an unrelated creditor agreed to a one-time payment of
$400,000 as full settlement on debt with a recorded value of $886,000.
This transaction created an extraordinary gain of $486,000 in the
fourth quarter of 1996.
Payments on long-term debt are estimated to be due as follows:
Year Ending March 31 Amount (in thousands)
-------------------- ---------------------
1998 $ 99
1999 118
2000 167
2001 251
2002 339
2003-2004 629
=====
(3) CAPITAL STOCK
On March 29, 1996, the Company completed a private placement offering
of 2,000,000 shares of common stock, resulting in net proceeds of
$1,952,000. As part of the offering, 1,750,000 warrants for the
purchase of additional common stock were also issued (note 4). Prior to
the offering, a special meeting of shareholders was held on March 6,
1996, in which the shareholders approved an amendment to the Company's
Certificate of Incorporation increasing the Company's authorized common
stock from 10,000,000 to 20,000,000 shares and approved the sale of
common stock equal to 20% or more of the Company's then outstanding
stock for less than market value.
All shares of Series D preferred stock were owned by individual
partners of BIS and were converted into common stock in fiscal 1995.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 20
(4) STOCK OPTIONS AND WARRANTS
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.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1997 1996 1995
----------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(thousands) Price (thousands) Price (thousands) Price
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 536 $ 0.55 510 $ 0.55 207 $ 0.65
Granted - 79 0.50 361 0.50
Canceled (8) 0.50 (45) 0.56 (38) 0.65
Exercised (3) 0.50 (8) 1.25 (20) 0.50
------- -------- --------
Outstanding end of year 525 0.56 536 0.55 510 0.55
======= ======== ========
Exercisable at year end 342 0.55 232 0.56 144 0.56
======= ======== ========
Reserved for grant, end of year 41 33 67
======= ======== ========
</TABLE>
At March 31, 1997, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $.50 - $1.25 and
7.5 years, respectively.
The per share weighted average fair value of stock options granted
during 1996 was $0.38 on the date of grant using the Black Scholes
option-pricing model with the following assumptions:
Risk-free interest rate 6.35%
Price volatility 49.8%
Dividend yield 0%
Expected term in years 7
The Company applies APB Opinion No. 25 in accounting for the Plan and,
since options have been granted with exercise prices equal to the
market value per share, no compensation cost has been recognized in the
financial statements. Had the Company determined compensation cost
based on the fair value of options at the grant date, the reported net
loss for 1997 and 1996 would be increased by $17,000 and $6,000,
respectively, with no change in the reported loss per share. The full
impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro forma effect on the net loss
because compensation cost is reflected over the options' vesting period
of 3 years and compensation cost for options granted prior to April 1,
1995 is not considered.
The following warrants are outstanding at March 31, 1997:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
<S> <C> <C>
750,000 $ 1.75 March 29, 1998
750,000 2.25 March 29, 1998
250,000 1.36 March 29, 2001
450,000 1.93 August 31, 2005
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 21
The $1.75 and $2.25 warrants were issued in conjunction with the sale
of 2,000,000 shares of common stock which occurred on March 29, 1996
(note 3). The exercise price is subject to adjustment in certain
circumstances, and the Company can call the warrants at any time after
the market price exceeds the exercise price by approximately 40% for a
period of 20 consecutive days. The $1.36 warrants were issued to the
placement agent in conjunction with the stock offering and contain
certain antidilution provisions as well as certain registration rights.
The $1.93 warrants were issued on August 31, 1995 when the Company
entered into a modification agreement in which BIS agreed to forgive
$450,000 in debt (note 2).
(5) 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 $25,000 in 1997,
$21,000 in 1996 and $20,000 in 1995.
(6) 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, 1997
since the Company has fully reserved for the tax effect of net
deductible temporary differences and operating loss carryforwards as
management has determined that, under the criterion of FAS No. 109, it
is more likely than not that the deferred tax assets will not be
realized.
The components of deferred tax assets fully reserved (computed using an
expected effective tax rate) are as follows:
<TABLE>
<CAPTION>
--------------------------
1997 1996
--------------------------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards $ 851 $ 635
Inventory write downs 352 304
Inventory costs capitalized 30 56
Depreciation 90 81
Vacation pay 91 76
Bad debt allowance 50 40
Software production costs (238) (152)
Debt extinguishment 42 91
Other 17 16
------- -------
$ 1,285 $ 1,147
======= =======
</TABLE>
A prior year 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,
$2,127,000 of tax loss carryforward is available through 2012.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 22
(7) 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 $703,000 in 1997, $744,000 in 1996 and $818,000 in 1995.
Future minimum rental payments required under leases that have initial
or remaining noncancellable lease terms in excess of one year are:
$358,000 in 1998, $68,000 in 1999, $61,000 in 2000, and $5,000 in 2001.
(8) SUPPLEMENTAL CASH FLOW INFORMATION
The following provides supplemental cash flow data:
<TABLE>
<CAPTION>
------------------------------------------
1997 1996 1995
------------------------------------------
(in thousands)
<S> <C> <C> <C>
Interest paid $ 40 $ 245 $ 170
======= ======= ========
Non-cash financing activities (BIS Partners, L.P.):
Debt forgiven $ - $ 282 $ -
Conversion of long-term debt to common
and preferred stock - - 250
Conversion of preferred stock to common stock - - 3,310
======= ======= ========
</TABLE>
(9) MAJOR CUSTOMER
Sales to the Company's largest customer accounted for 20%, 30% and 28%
of total revenues for 1997, 1996 and 1995, respectively. The Company
performs hardware maintenance services for end users under various
subcontracts from this customer. These subcontracts can be canceled
with 30 days notice.
(10) CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. Management believes that none of these legal proceedings will
have a material adverse effect on the Company's financial position,
results of operations or liquidity.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 23
- -------------------------------------------------------------------------------
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, 1997 and 1996, and the related statements
of operations, shareholders' equity, and cash flows for each of the years in
the three-year period ended March 31, 1997. 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 as of March 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended March
31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Buffalo, New York
June 20, 1997
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 24
STOCK MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded on the American Stock Exchange
under the symbol "BIS". For the periods indicated below, the following
table sets forth the high and low closing bid or last trade prices as
reported by AMEX.
<TABLE>
<CAPTION>
Price Range
--------------------------
Quarter Ended High Low
<S> <C> <C>
June 30, 1995 1-7/16 7/16
September 29, 1995 2 1-1/16
December 29, 1995 1-3/4 1-1/8
March 31, 1996 1-15/16 1-1/4
June 28, 1996 3-13/16 1-3/4
September 27, 1996 3 1-7/8
December 27, 1996 2-3/4 1-3/8
March 31, 1997 2-3/8 1-3/8
</TABLE>
The Company's common stock was held by approximately 541 shareholders
of record as of June 18, 1997.
The Company has not paid any cash dividends on its common stock and the
board of directors intends to follow a policy of retaining earnings for
use in the business. Under the Company's loan agreement, the payment of
dividends is prohibited without the lender's consent. Accordingly, it
is not anticipated that cash dividends will be paid to holders of
common stock in the foreseeable future.
TRANSFER AGENT, REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (718)921-8200
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 25
ANNUAL MEETING
The annual meeting of shareholders will take place at 10:00 a.m. on
Thursday, September 4, 1997 at:
Buffalo and Erie County Public Library Auditorium
Clinton and Ellicott Streets
Buffalo, New York 14203
SHAREHOLDERS INQUIRIES
Address all shareholder inquiries to:
Secretary
Barrister Information Systems Corporation
465 Main Street
Buffalo, New York 14203
Telephone: (716)845-5010
<TABLE>
<CAPTION>
<S> <C>
DIRECTORS
Henry P. Semmelhack Richard E. McPherson
Chairman and President Retired Vice President
Barrister Information Systems Corporation Barrister Information Systems Corporation
Franklyn S. Barry, Jr. James D. Morgan
Private Investor Vice President and Chief Scientist
Comptek Research, Inc.
Richard P. Beyer
Vice President, Finance James Page
Barrister Information Systems Corporation Director, Enlightened TV, Ltd.
Warren E. Emblidge, Jr. Jose Rivero
President Vice President, Services Division
S. J. McCullagh, Inc Barrister Information Systems Corporation
OFFICERS
Henry P. Semmelhack Mark J. Phillips
President and Chairman Vice President, Sales
Richard P. Beyer Jose Rivero
Vice President, Finance and Treasurer Vice President, Services Division
Mark C. Donadio
Secretary and General Counsel
</TABLE>
================================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1997
<PAGE> 1
Exhibit 24
Independent Auditors' Consent
- -----------------------------
The Board of Directors
Barrister Information Systems Corporation:
We consent to incorporation by reference in the registration statements (No.
33-8749 and 33-23309) on Form S-8 and (No. 333-3701) on Form S-3 of Barrister
Information Systems Corporation of our reports dated June 20, 1997 relating to
the balance sheets of Barrister Information Systems Corporation as of March 31,
1997 and 1996, and the related statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended March 31,
1997, and the related schedule which reports appear in or are incorporated by
reference in the March 31, 1997 annual report on Form 10-K of Barrister
Information Systems Corporation.
KPMG Peat Marwick LLP
Buffalo, New York
June 24, 1997
Page -23-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 226
<SECURITIES> 0
<RECEIVABLES> 2,598
<ALLOWANCES> 0
<INVENTORY> 2,972
<CURRENT-ASSETS> 5,863
<PP&E> 4,125
<DEPRECIATION> 3,666
<TOTAL-ASSETS> 6,953
<CURRENT-LIABILITIES> 3,497
<BONDS> 1,504
<COMMON> 1,968
0
0
<OTHER-SE> 16
<TOTAL-LIABILITY-AND-EQUITY> 6,953
<SALES> 2,486
<TOTAL-REVENUES> 14,177
<CGS> 883
<TOTAL-COSTS> 10,586
<OTHER-EXPENSES> 3,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> (386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (386)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
