<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, 1998 0-14063
BARRISTER INFORMATION SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 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 15,
1998, was approximately $3.3 million.
The number of shares outstanding of the Registrant's common stock,
$.24 par value, was 8,223,737 at June 15, 1998.
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, 1998. Part III incorporates by reference portions of the
Barrister Information Systems Corporation definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on September 3, 1998.
<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. In December, 1997 the Company reincorporated under the laws of
Delaware.
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
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<PAGE> 3
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, 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 35%
of Javelan contracts to date have come from these clients. It is marketing to
and communicating with approximately 130 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
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<PAGE> 4
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
6.5 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. During the year a version of Javelan, called Javelan Select,
a product aimed at smaller firms was released. Javelan and Javelan Select are
expected to contribute significantly to the Company's revenues in the future.
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
printers 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. Before taking into account amounts
capitalized as software production costs, the Company incurred $842,000,
$700,000 and $693,000 of product development and engineering expenses in fiscal
1998, 1997, and 1996, respectively. For fiscal 1999, the Company expects its
level of spending in this area to remain approximately the same as the prior
year.
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
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<PAGE> 5
to customers.
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.
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
and to sell depot repair services. Currently, more than 90% of hardware
maintenance revenues are generated outside the legal market.
Sales of services 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, U.S. Computer, Amherst Computer Products 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 1998, revenues from the
subcontracts were approximately 17% of total revenues.
EMPLOYEES
As of June 15, 1998, the Company had 185 full-time employees and 7
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 15, 1998, the names and
ages of the executive officers of the Company and the positions held by each
such person.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard P. Beyer 51 Vice President-Finance, Treasurer
and a Director
David L. Blankenship 41 Vice President-Services Operations
Mark C. Donadio 42 Secretary and General Counsel
Mark J. Phillips 43 Vice President-Sales
Susan T. Robinson 51 Vice President-Software Operations
Henry P. Semmelhack 60 President, Chairman of the Board of Directors, Chief
Executive Officer
</TABLE>
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. BLANKENSHIP joined the Company in October, 1997 as its Vice
President of Services Operations. Previously, he was President of Mill Street
Recycling, Inc., a division of SCS Group, L.C. He also has been involved in
companies which he founded, involving construction, mining and trucking.
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<PAGE> 7
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.
MS. ROBINSON became a Vice President of the Company in April, 1998
after serving in a number of management positions within the Company in the
installation, support and sales/marketing areas. She has been employed by the
Company and previously by Comptek since 1977.
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 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 New York, New York
Hartford, Connecticut 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 1998 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 1998 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 1998 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 1998 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 filed with the
Commission pursuant to Regulation 14A of the 1934 Act in
connection with the 1998 annual meeting of shareholders of the
Company (the "Proxy Statement") 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 Proxy Statement 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 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.
The information under the sub-caption "Certain Transactions" in
the Company's Proxy Statement 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 1998 Annual Report:
Balance Sheets -
March 31, 1998 and March 31, 1997
Statements of Operations -
Years ended March 31, 1998, 1997 and 1996
Statements of Shareholders' Equity -
Years ended March 31, 1998, 1997 and 1996
Statements of Cash Flows -
Years ended March 31, 1998, 1997 and 1996
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, 1998 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 1998 Annual
Report.
<TABLE>
<CAPTION>
Schedule Title Page
-------- ----- ----
<S> <C> <C>
II Valuation and Qualifying Accounts 14
</TABLE>
The Independent Auditors' Report on the Financial Statement
Schedule appears on page 13 of this report.
(3) EXHIBITS. See Exhibit Index filed herewith on page 15 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 26, 1998 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 26, 1998
- ------------------------------- Officer and Chairman of the
Henry P. Semmelhack Board of Directors
/s/ Richard P. Beyer Vice President and Chief June 26, 1998
- ------------------------------- Financial Officer
Richard P. Beyer
/s/ Brent D. Barid Director June 26, 1998
- --------------------------------
Brent D. Baird
/s/ Franklyn S. Barry, Jr. Director June 26, 1998
- -------------------------------
Franklyn S. Barry, Jr.
/s/ Warren E. Emblidge, Jr. Director June 26, 1998
- -------------------------------
Warren E. Emblidge, Jr.
/s/ Richard E. McPherson Director June 26, 1998
- -------------------------------
Richard E. McPherson
/s/ James D. Morgan Director June 26, 1998
- -------------------------------
James D. Morgan
Director June 26, 1998
- -------------------------------
James Page
</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 22, 1998, we reported on the balance sheets of Barrister
Information Systems Corporation as of March 31, 1998 and 1997, and the related
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended March 31, 1998, as contained in the 1998
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, 1998. 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 22, 1998
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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
- ----------- --------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended March 31, 1996 $ 150 $ - $ 50 $ 100
------- ------- ------- -----
Year ended March 31, 1997 $ 100 $ 25 $ - $ 125
------- ------- ------- -----
Year ended March 31, 1998 $ 125 $ 85 $ - $ 210
------- ------- ------- -----
Allowance for inventory
obsolescence:(1)
Year ended March 31, 1996 $ 825 $ 1,045 $ 1,110 $ 760
------- ------- ------- -----
Year ended March 31, 1997 $ 760 $ 900 $ 779 $ 881
------- ------- ------- -----
Year ended March 31, 1998 $ 881 $ 900 $ 1056 $ 725
------- ------- ------- -----
</TABLE>
- --------
(1) The allowance is included in inventory in the balance sheets.
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<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page No.
No. Description or Location
--- ----------- -----------
<S> <C> <C>
3.1 Certificate of Incorporation (e)
3.2 Bylaws (e)
10.1 1989 Stock Incentive Plan, as amended (d)
10.2 Retirement Savings Plan and Trust (a)
10.3 Employee Stock Purchase Plan (b)
10.4 Loan Agreement between Registrant and BIS Partners, (c)
L.P. dated March 31, 1992
13* Annual Report to Shareholders for the fiscal year ended
March 31, 1998 (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>
- ----------------------------------
* Each exhibit marked with an asterisk is a previously unfiled
document under Category 19 of Regulation S-K, Item 601.
(a) Designates Exhibit 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 is
incorporated herein by reference.
(b) Designates Exhibit annexed to the Company's Report on Form
10-Q for the quarter ended July 1, 1988.
(c) Designates Exhibit annexed to the Company's Report on Form
10-K for the year ended March 31, 1992.
(d) Designates Exhibit annexed to the Company's Report on Form
10-Q for the quarter ended September 30, 1994.
(e) Designates Exhibits annexed to the Company's Proxy Statement
dated August 29, 1997.
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<PAGE> 1
BARRISTER INFORMATION SYSTEMS CORPORATION
EXHIBIT 13 - ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
<PAGE> 2
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Year Ended March 31
----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 17,065 $ 14,177 $ 13,729 $ 15,327 $ 17,772
Net earnings (loss) 23 (386) (205) (159) (1,334)
Net earnings (loss) per common share - (.05) (.03) (.03) (.53)
BALANCE SHEET DATA AT YEAR END:
Working capital 2,271 2,367 2,929 2,880 2,733
Total assets 7,377 6,953 6,978 6,544 7,447
Long-term debt(1) 1,395 1,504 1,392 3,329 3,406
Shareholders' equity 1,993 1,952 2,337 298 197
</TABLE>
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial data for the fiscal years
ended March 31, 1998 and March 31, 1997.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1st 2nd 3rd 4th Total
Quarter Quarter Quarter Quarter Year
-------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1998
Revenues $ 4,227 $ 4,249 $ 4,293 $ 4,296 $ 17,065
Net earnings (loss) 5 (91) 107 2 23
Net earnings (loss) per common share - (.01) .01 - -
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)
</TABLE>
(1) See note 2 to the financial statements.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 1
<PAGE> 3
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)
---------------------------------------------------------------------
1998 1997
vs. vs.
1998 1997 1996 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales 11.3 % 17.5 % 13.0 % (22.5%) 39.3%
Services 88.7 82.5 87.0 29.5 (2.1)
------ ------ ------
Total revenues 100.0 100.0 100.0 20.4 3.3
------ ------ ------
Costs and expenses:
Cost of product sales(1) 20.3 35.5 43.2 (55.6) 14.5
Cost of services(2) 77.0 83.0 85.8 20.1 (5.3)
------ ------ ------
Total cost of revenues 70.6 74.7 80.2 13.8 (3.9)
Selling, general, and
administrative 23.6 24.3 20.4 16.6 23.4
Product development and
engineering 4.6 3.4 3.2 60.3 9.5
------ ------ ------
Total costs and expenses 98.8 102.4 103.8 16.0 1.9
------ ------ ------
Operating earnings (loss) 1.2 (2.4) (3.8) - (34.3)
Interest expense 1.1 0.3 1.2 377.5 (75.6)
Earnings (loss) before
extraordinary item .1 (2.7) (5.0) - (44.1)
------ ------ ------
Extraordinary item - - 3.5 - -
------ ------ ------
Net earnings (loss) .1 (2.7) (1.5) - 88.3
====== ====== ======
</TABLE>
(1) Percentage of product sales
(2) Percentage of services revenues
- --------------------------------------------------------------------------------
PAGE 2 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 4
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's
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.
The Company has also licensed 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; barriers to 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 future 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 1998 PAGE 3
<PAGE> 5
RESULTS OF OPERATIONS
The decrease in product sales for fiscal 1998 as compared to 1997 primarily
resulted from a decrease in the sale of low margin (10% - 15%) hardware related
products. Sales of the Company's Javelan software product were approximately the
same for the comparative years. These sales did not meet expectations due to
staff changes in the sales organization. The increase in product sales for
fiscal 1997 as compared to 1996 resulted from increased Javelan sales. 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. The Company expects to achieve
an increase in Javelan sales in fiscal 1999 because of market demand to replace
software that is not year 2000 compatible, the recent release of a new product,
Javelan Select, for the smaller law firm, enhancements made to Javelan during
the past year, and a reorganized sales department.
The increase in services revenues for fiscal 1998 as compared to 1997 resulted
from increased revenues from hardware maintenance contracts, hardware time and
material services and installation, training and conversion services associated
with the sale of Javelan. The increases in hardware maintenance contracts
resulted from two large contracts sold at the end of fiscal 1997 directly to end
users and contracts received from newly established business partners. The
Company has signed a number of business partnerships arrangements with equipment
resellers to provide hardware maintenance services to their customers.
Expectations are that these arrangements will provide additional contracts in
subsequent years. The increase in hardware time and material services was
primarily the result of a contract signed with CIC Systems Inc. in the third
quarter of fiscal 1997 to provide computer hardware maintenance services for CIC
customers nationwide and, more recently, in the use of a new computer system to
more thoroughly capture billable work. All work under the CIC contract was
halted in March 1998 and CIC was subsequently acquired by CompuCom Systems, Inc.
in May 1998. Revenues from CIC represented 7% of total revenues in 1998. The
Company expects to replace these revenues with new business from other sources
in 1999, but does not expect any appreciable growth in hardware maintenance
revenues in 1999.The increase in Javelan associated services is a direct result
of the increase in Javelan sales realized in fiscal 1997 and to services
realized from the growing base of customers. Installation and conversion
services will normally follow the product sales by one to six months or more
depending on the size of the sale and the pace of the installation desired by
the customer. Additional increases in these services are expected in fiscal
1999.
The decrease in services revenues for fiscal 1997 as compared to 1996 was
principally due to decreased revenues from hardware maintenance contracts. These
revenues were affected by the non-renewal of three large subcontracts from IBM
and a reduction in contracts for the Company's older minicomputer equipment.
Revenues from IBM dropped from 30% of total revenues in 1996 to 20% of total
revenues in 1997. (Revenues from IBM remained approximately the same in fiscal
1998 but dropped to
- --------------------------------------------------------------------------------
PAGE 4 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 6
17% of total revenues based on an increase in total revenues.) 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. 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 1999 could occur.
Margins on services revenues increased for fiscal 1998 as compared to 1997
primarily from margins generated from the increase in Javelan associated
services and from the capture of additional hardware time and material billings.
The increase in margins on services revenues when fiscal 1997 is compared to
1996 was realized by reductions in labor and parts costs at a higher rate than
the drop in revenues. 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
$900,000, $900,000 and $1,045,000 for 1998, 1997, and 1996, respectively.
The decrease in selling, general and administrative expenses as a percentage of
total revenues for fiscal 1998 as compared to 1997 was based on achieving a
higher percentage growth in revenues then the increase in expenses. Expense
increases came principally from additional selling expenses including higher
commissions associated with the new business generated. The increase in these
expenses as a percentage of total revenues when fiscal 1997 is 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.
Expenditures for product development and engineering, before taking into account
amounts capitalized and amortized for software production costs, were
approximately the same percentage of revenues for each of the comparative fiscal
periods. The increase in the amount of expenses incurred came from planned
increases in this area to further enhance Javelan and from higher amortization
of software production costs. Costs capitalized as software production costs
amounted to $304,000, $330,000 and $308,000 in 1998, 1997 and 1996,
respectively. Amortization amounted to $241,000, $116,000 and $59,000 for these
same three years.
Interest expense as a percentage of revenues increased for fiscal 1998 as
compared to 1997 based on a restructuring of a loan with BIS Partners, L.P. 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%. BIS Partners,
L.P. is ninety percent owned, either directly or indirectly by certain officers
and directors of the Company. The decrease in interest expenses as a percentage
of revenues when fiscal 1997 is compared to 1996 was based on reductions in
interest expense to BIS Partners. This resulted from the effect of the debt
forgiveness by BIS Partners in August, 1995. The accounting treatment of that
transaction stipulated that the debt forgiveness must first be considered a
reduction of all future interest expense before any restructuring gain was
measured. Accordingly, loan payments made after August, 1995 through March, 1997
were recorded as reductions in the principal balance of the loan.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 5
<PAGE> 7
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,
1998, 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a net decrease in cash of $16,000 during fiscal 1998.
The principal source of cash was provided by operating activities of $458,000.
Principal uses of cash during the year were additions to capitalized software of
$304,000 and additions to equipment and leasehold improvements of $131,000. In
fiscal 1997, the Company experienced a net decrease in cash of $972,000.
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.
The principal cash requirements for fiscal 1999 are investments in capitalized
software at levels that approximate those in fiscal 1998 and additions to
equipment and leasehold improvements that are expected to be somewhat higher
than amounts spent in 1998. Scheduled debt repayments should approximate
$127,000. The Company expects to meet its 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 carry forwards of approximately
$2,246,000 at March 31, 1998. The Company expects a return to growth in Javelan
sales in 1999. This expectation is based on market demand to replace software
that is not year 2000 compatible, the recent release of a new product, Javelan
Select, for the smaller law firm, enhancements made to Javelan during the past
year and a reorganized sales department. Increased Javelan sales should also
lead to an increase of associated installation, training and conversion
services. While the Company expects additional hardware maintenance contracts to
be obtained from its business partners and direct selling efforts, most of this
revenue will be required to replace the work done for CIC Systems in 1998.
However, profitability is expected to improve since the costs of performing the
work for CIC were high and the implementation of a new computer system has led
to a more thorough capture of billable work. The Company continues to pursue the
sale of warranty upgrade contracts which generally have terms up to three years
and are prepaid at the time the contract is signed.
- --------------------------------------------------------------------------------
PAGE 6 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 8
The Company continues its efforts to obtain additional working capital from
banks and asset-based lenders. 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 banks or asset-based lenders or that other sources of
cash will be available.
YEAR 2000 COMPLIANCE
The Company's Javelan product is year 2000 compliant. Older software products
previously licensed by the Company are not year 2000 compliant and there is no
contractual obligation to bring them into compliance. Customers using these
products have been notified that they are not year 2000 compliant. Third party
software and hardware products that are integrated with Javelan continue to be
tested for year 2000 issues. While no material issues have been found to date,
the Company cannot fully predict the effects of the year 2000 with respect to
these third party products.
The Company is continuing the evaluation of its internal information technology
systems to determine those systems which are not year 2000 compliant.
Accordingly, the costs of addressing any year 2000 problems are unknown at this
time. However, based on the results of this evaluation to date, the Company does
not anticipate that the costs associated with year 2000 issues will have a
material adverse impact on its financial position, results of operations, or
liquidity.
ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related information," which requires financial information to be
reported on the basis that is used internally for evaluating segment performance
and deciding how to allocate resources to segments. The standard must be adopted
by fiscal 1999. The Company is currently evaluating the disclosures required
under the new standard.
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 1998 PAGE 7
<PAGE> 9
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31
--------------------------
1998 1997
--------------------------
<S> <C> <C>
ASSETS (Note 2)
CURRENT ASSETS:
Cash $ 210 $ 226
Accounts receivable, less allowance for doubtful
accounts of $210 in 1998 and $125 in 1997 3,084 2,598
Inventories:
Service parts 2,853 2,826
Other 83 146
------- -------
Total inventories 2,936 2,972
------- -------
Prepaid expenses 30 67
------- -------
Total current assets 6,260 5,863
------- -------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Computer and other equipment 2,859 2,873
Furniture and fixtures 946 968
Leasehold improvements 284 284
------- -------
4,089 4,125
Less accumulated depreciation 3,673 3,666
------- -------
Net equipment and leasehold improvements 416 459
------- -------
SOFTWARE PRODUCTION COSTS 658 595
OTHER ASSETS 43 36
------- -------
$ 7,377 $ 6,953
======= =======
</TABLE>
- --------------------------------------------------------------------------------
PAGE 8 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 10
<TABLE>
<CAPTION>
March 31
--------------------------
1998 1997
--------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank (note 2) $ 250 $ 250
Note payable (to a related party, note 2) 100 -
Current installments of long-term debt ($98 in 1998
and $55 in 1997 to a related party, note 2) 127 99
Accounts payable 1,274 1,119
Accrued compensation and benefits 722 642
Customer advances and unearned revenue 1,461 1,320
Other accrued expenses 55 67
------- -------
Total current liabilities 3,989 3,497
------- -------
LONG-TERM DEBT, EXCLUDING
CURRENT INSTALLMENTS ($1,377 in 1998 and
$1,475 in 1997 to a related party, note 2) 1,395 1,504
SHAREHOLDERS' EQUITY (notes 2 and 3):
Preferred stock, authorized 2,000,000 shares,
terms set at issuance - -
Common stock, $.24 par value.
Authorized 20,000,000 shares;
8,216,362 and 8,201,300 shares issued and
outstanding in 1998 and 1997, respectively 1,972 1,968
Additional paid-in capital 21,565 21,551
Accumulated deficit (21,544) (21,567)
------- -------
Total shareholders' equity 1,993 1,952
------- -------
COMMITMENTS AND CONTINGENCIES (notes 6 and 9)
$7,377 $ 6,953
======= =======
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 9
<PAGE> 11
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended March 31
-------------------------------------
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
REVENUES:
Product sales $ 1,927 $ 2,486 $ 1,784
Services 15,138 11,691 11,945
-------- -------- --------
Total revenues 17,065 14,177 13,729
-------- -------- --------
COSTS AND EXPENSES:
Cost of product sales 392 883 771
Cost of services 11,657 9,703 10,245
-------- -------- --------
Total cost of revenues 12,049 10,586 11,016
Selling, general and
administrative expenses 4,023 3,451 2,796
Product development and engineering 779 486 444
-------- -------- --------
Total costs and expenses 16,851 14,523 14,256
-------- -------- --------
OPERATING EARNINGS (LOSS) 214 (346) (527)
INTEREST EXPENSE:
Related party (note 2) 149 2 108
Other 42 38 56
-------- -------- --------
Total Interest 191 40 164
-------- -------- --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM 23 (386) (691)
EXTRAORDINARY GAIN ON EXTINGUISHMENT
OF DEBT (NOTE 2) - - 486
-------- -------- --------
NET EARNINGS (LOSS) $ 23 $ (386) $ (205)
======== ======== ========
PER COMMON SHARE - BASIC AND DILUTED:
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM $ - $ (.05) $ (.11)
EXTRAORDINARY ITEM - - .08
-------- -------- --------
NET EARNINGS (LOSS) $ - $ (.05) $ (.03)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 8,207 8,201 6,209
======== ======== ========
DILUTED 8,478 8,567 6,320
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
PAGE 10 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 12
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended March 31
--------------------------------------
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning balance $ 1,968 $ 1,968 $ 1,486
Sale of 15,066 shares, 3,332 shares and 2,008,000
shares in 1998, 1997 and 1996, respectively 4 - 482
-------- -------- --------
Ending balance 1,972 1,968 1,968
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Beginning balance 21,551 21,550 19,788
Debt forgiven by BIS Partners, L.P. (note 2) - - 282
Sale of common shares 14 1 1,480
-------- -------- --------
Ending balance 21,565 21,551 21,550
-------- -------- --------
ACCUMULATED DEFICIT
Beginning balance (21,567) (21,181) (20,976)
Net income (loss) 23 (386) (205)
-------- -------- --------
Ending balance (21,544) (21,567) (21,181)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY $ 1,993 $ 1,952 $ 2,337
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 11
<PAGE> 13
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31
------------------------------------
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 23 $ (386) $ (205)
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation 173 207 259
Amortization 241 116 59
Loss (gain) on disposal of equipment (2) 12 (3)
Extraordinary gain on extinguishment of debt - - (486)
Changes in current assets and liabilities:
Accounts receivable (486) (1,020) (13)
Inventories 36 398 635
Prepaid expenses 37 (35) 11
Accounts payable 227 320 (134)
Accrued compensation and benefits 80 93 (23)
Customer advances and unearned revenue 141 479 (115)
Other accrued expenses (12) (17) (26)
------- ------- -------
Net cash provided (used) by operating activities 458 167 (41)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold improvements (131) (332) (82)
Proceeds on sale of equipment 3 40 5
Additions to software production costs (304) (330) (308)
Other (7) (3) 17
------- ------- -------
Net cash used by investing activities (439) (625) (368)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 17 29 25
Repayment of long-term debt (70) (544) (564)
Proceeds from sale of common stock 18 1 1,962
------- ------- -------
Net cash (used) by financing activities (35) (514) 1,423
------- ------- -------
NET INCREASE (DECREASE) IN CASH (16) (972) 1,014
CASH AT BEGINNING OF YEAR 226 1,198 184
------- ------- -------
CASH AT END OF YEAR $ 210 $ 226 $ 1,198
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION (note 7)
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
PAGE 12 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
March 31, 1998, 1997 and 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF ORGANIZATION - Barrister Information Systems Corporation
(the "Company") is a national developer and seller of
Windows-based client/server software for law firms, accounting
firms, consultants and departments of Fortune 1000 companies. A
typical software transaction will consist of an initial license
fee for the delivery of the software, an ongoing monthly
support/license fee, and separately priced fees for software
conversion, installation and training. In addition, the Company
provides equipment maintenance and warranty service on a
contractual and time and materials basis. These services are
provided through a network of service locations throughout the
United States.
(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 consist of initial Javelan
licensing fees and, to a lesser extent, the sale of third party
software and 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 third party software and
hardware are recorded upon shipment.
Services revenues include hardware maintenance services, which are
primarily under contractual arrangements, and software related
services such as monthly support/license fees, system conversions,
installation and training. Revenues from hardware maintenance
contracts are recognized on a monthly basis over the term of the
contract which generally corresponds to the timing of cost
incurred. Software service revenue, which is priced separately
from the software license, is recognized as the service is
provided.
The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee (AcSEC) has issued Statements of
Position (SOP) 97-2 "Software Revenue Recognition" and 98-4
"Deferral of Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition". The SOP's specify the accounting
requirements for software revenue recognition, including the
methods used to allocate revenues among elements (licensing,
support, services, etc.) in a multiple-element software
arrangement. The SOP's are expected to be implemented by the
Company in fiscal 1999. Pending further guidance being deliberated
by AcSEC, the Company believes that its present revenue
recognition practices are consistent with the requirements of the
SOP's. Accordingly no significant impact on the Company's
financial statements is expected.
(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.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 13
<PAGE> 15
(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 (3 years). 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.
(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 3 for the pro forma effect on operations 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 carrying amount of
financial instruments is a reasonable estimate of their fair
value, except for the debt due BIS Partners, L.P. (note 2) for
which it is not practicable to estimate its fair value.
(i) PER SHARE DATA AND EARNINGS PER SHARE - The Company adopted 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
statement had no impact on earnings (loss) per share. Basic net
earnings (loss) per share amounts are based on the weighted
average number of common shares outstanding. Diluted earnings per
share includes the impact of stock options and warrants assumed to
be exercised using the treasury stock method.
(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 (11.0% at March 31, 1998). In March 1998
BIS Partners, L.P. agreed to convert certain past due amounts from the
Company into a demand note. This demand note expires on March 31, 2002
and bears interest at prime plus 3 1/2 percent ( 12.0% at March 31,
1998).
A summary of long-term debt follows:
<TABLE>
<CAPTION>
March 31
-------------------------
1998 1997
-------------------------
(in thousands)
<S> <C> <C>
Term note with BIS Partners, L.P. $ 1,475 $ 1,530
Other 47 73
--------- --------
Total long-term debt 1,522 1,603
Less current installments 127 99
--------- --------
Long-term debt, excluding current installments $ 1,395 $ 1,504
========= ========
</TABLE>
- --------------------------------------------------------------------------------
PAGE 14 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 16
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 40% 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
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, in fiscal
1998, reinstated the recognition of interest expense 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 1998, 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:
<TABLE>
<CAPTION>
Year Ending March 31 Amount (in thousands)
-------------------- ---------------------
<S> <C>
1999 $ 127
2000 176
2001 251
2002 339
2003 374
2004 255
=====
</TABLE>
(3) STOCK OPTIONS AND WARRANTS
The Company has a stock incentive plan to which it currently has
allocated 900,000 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.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 15
<PAGE> 17
A summary of stock option activity follows:
<TABLE>
<CAPTION>
--------------------- -------------------- ---------------------
1998 1997 1996
--------------------- -------------------- ---------------------
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 525 $ 0.56 536 $ 0.55 510 $ 0.55
Granted 266 1.25 - 79 0.50
Canceled (4) 0.50 (8) 0.50 (45) 0.56
Exercised (15) 0.50 (3) 0.50 (8) 1.25
------- -------- --------
Outstanding end of year 772 0.78 525 0.56 536 0.55
======= ======== ========
Exercisable at year end 501 0.62 342 0.55 232 0.56
======= ======== ========
Reserved for grant, end of year 79 41 33
======= ======== ========
Weighted-average fair value of
options granted during year $ 0.69 $ - $ 0.38
======= ======= ========
</TABLE>
At March 31, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $.50 - $1.63 and
6.9 years, respectively. The per share weighted average fair values of
stock options granted was computed using the Black Scholes
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
-----------------
1998 1996
-----------------
<S> <C> <C>
Risk-free interest rate 5.45% 6.35%
Price volatility 5.4% 49.8%
Dividend yield 0% 0%
Expected term in years 7 7
</TABLE>
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
earnings for 1998 would be decreased and the reported net loss for 1997
and 1996 would be increased by $50,000, $17,000 and $6,000,
respectively, with no change in the reported per share amounts. 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
earnings (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, 1998:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Expiration Date
---------------- -------------- --------------------
<S> <C> <C>
March 29, 1998
250,000 1.36 March 29, 2001
450,000 1.93 August 31, 2005
</TABLE>
The $1.36 warrants were issued to the placement agent in conjunction
with a stock offering which occurred in March, 1996 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).
- --------------------------------------------------------------------------------
PAGE 16 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 18
(4) 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 $29,000 in 1998,
$25,000 in 1997 and $21,000 in 1996.
(5) INCOME TAXES
There were no tax benefits established in the statements of operations
for either of the years in the two year period ended March 31, 1997
since the Company had fully reserved for the tax effect of net
deductible temporary differences and operating loss carryforwards as
management had determined that, under the criterion of FAS No. 109, it
is more likely than not that the deferred tax assets will not be
realized. Similarly the absence of a tax provision for 1998 results
from a reduction in the reserve for deferred tax assets.
The components of deferred tax assets fully reserved (computed using an
expected effective tax rate) are as follows:
<TABLE>
<CAPTION>
---------------------------
1998 1997
---------------------------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards $ 898 $ 851
Inventory write downs 290 352
Inventory costs capitalized 15 30
Depreciation 85 90
Vacation pay 93 91
Bad debt allowance 84 50
Software production costs (263) (238)
Debt extinguishment 34 42
Other 17 17
------ ------
$ 1,253 $ 1,285
====== ======
</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,
$2,246,000 of tax loss carryforward is available through 2013.
(6) 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 $682,000 in 1998, $703,000 in 1997 and $744,000 in 1996.
Future minimum rental payments required under leases that have initial
or remaining noncancellable lease terms in excess of one year are:
$557,000 in 1999, $319,000 in 2000, and $15,000 in 2001.
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 17
<PAGE> 19
(7) SUPPLEMENTAL CASH FLOW INFORMATION
The following provides supplemental cash flow data:
<TABLE>
<CAPTION>
-----------------------------------------
1998 1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C> <C>
Interest paid $ 120 $ 40 $ 245
====== ====== ======
Non-cash financing activities (BIS Partners, L.P.):
Debt forgiven $ - $ - $ 282
====== ====== ======
</TABLE>
(8) MAJOR CUSTOMER
Sales to the Company's largest customer accounted for 17%, 20% and 30%
of total revenues for 1998, 1997 and 1996, 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.
(9) 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.
- --------------------------------------------------------------------------------
PAGE 18 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 20
- --------------------------------------------------------------------------------
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, 1998 and 1997, and the related statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended March 31, 1998. 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, 1998 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended March 31,
1998, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Buffalo, New York
June 22, 1998
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 19
<PAGE> 21
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 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
June 27, 1997 2 15/16
September 26, 1997 1 11/16 15/16
December 26, 1997 2 15/16
March 31, 1998 1 1/2 1 1/16
</TABLE>
The Company's common stock was held by approximately 400 shareholders of
record as of June 18, 1998.
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
- --------------------------------------------------------------------------------
PAGE 20 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 22
ANNUAL MEETING
The annual meeting of shareholders will take place at 10:00 a.m. on
Thursday, September 3, 1998 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
- --------------------------------------------------------------------------------
DIRECTORS
Henry P. Semmelhack Warren E. Emblidge, Jr.
Chairman and President President
Barrister Information Systems Corporation S.J. McCullagh, Inc.
Brent D. Baird Richard E. McPherson
Private Investor Retired Vice President
Barrister Information Systems Corporation
Franklyn S. Barry, Jr. James D. Morgan
President and CEO Vice President and Chief Scientist
Hemex, Inc. Comptek Research, Inc.
Richard P. Beyer
Vice President, Finance James Page
Barrister Information Systems Corporation Director, Enlightened TV, Ltd.
OFFICERS
Henry P. Semmelhack Mark C. Donadio
President and Chairman Secretary and General Counsel
Richard P. Beyer Mark J. Phillips
Vice President, Finance and Treasurer Vice President, Sales
David L. Blankenship Susan T. Robinson
Vice President, Services Operations Vice President, Software Operations
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998 PAGE 21
<PAGE> 23
- --------------------------------------------------------------------------------
BARRISTER INFORMATION SYSTEMS CORPORATION OFFICES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORPORATE CHICAGO NEW HAMPSHIRE
465 Main Street 55 East Monroe 500 Harvey Road
Buffalo, NY 14203 Mezzanine Level P.O. Box 4015
716-845-5010 Chicago, IL 60603 Manchester, NH 03108
FAX: 716-845-5033 312-782-0563 603-645-4430
Website: www.barrister.com
CLEVELAND NEW YORK CITY
ATLANTA The Atrium Office Plaza 253 West 35th Street
1597 Phoenix Ctr Office Park 668 Euclid Avenue New York, NY 10004
Suite 1 Suite 310A 212-564-7187
Phoenix Blvd Cleveland, OH 44114
College Park, GA 30308 216-575-7570 SAN DIEGO
770-997-4300 6046 Cornerstone Ct. W.
DENVER Suite 102
BOSTON 518 17th Street San Diego, CA 92121
45 Pond Street Suite 913 619-535-9294
Norwell, MA 02061 Denver, CO 80202
781-681-7070 303-534-5819 WASHINGTON/
ARLINGTON
CHARLOTTE HARTFORD 3426 N. Washington Blvd.
5624 Executive Center Dr. 701 Hebron Ave. Arlington, VA 22201
Suite 140 Glastonbury, CT 06033 703-524-9400
Charlotte, NC 28212 860-659-1178
704-569-0280
</TABLE>
TimeManager and Barrister/Eagle are
trademarks, Javelan and Barrister
are registered trademarks and
Barrister is a service mark of
Barrister Information Systems
Corporation. Windows, Windows NT,
and SQL Server are trademarks and
Microsoft is a registered trademark
of Microsoft Corporation.
Copyright(C) 1998 Barrister
Information Systems Corporation.
All rights reserved.
- --------------------------------------------------------------------------------
PAGE 22 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1998
<PAGE> 1
BARRISTER INFORMATION SYSTEMS CORPORATION
EXHIBIT 24 - KPMG PEAT MARWICK LLP
CONSENT REGARDING FORMS S-8
<PAGE> 2
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 22, 1998 relating to
the balance sheets of Barrister Information Systems Corporation as of March 31,
1998 and 1997, and the related statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended March 31,
1998, and the related schedule which reports appear in or are incorporated by
reference in the March 31, 1998 annual report on Form 10-K of Barrister
Information Systems Corporation.
KPMG Peat Marwick LLP
Buffalo, New York
June 26, 1998
Page -23-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000754128
<NAME> BARRISTER INFORMATION SYSTEMS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 210
<SECURITIES> 0
<RECEIVABLES> 3,084
<ALLOWANCES> 0
<INVENTORY> 2,936
<CURRENT-ASSETS> 6,260
<PP&E> 4,089
<DEPRECIATION> 3,673
<TOTAL-ASSETS> 7,377
<CURRENT-LIABILITIES> 3,989
<BONDS> 1,395
0
0
<COMMON> 1,972
<OTHER-SE> 21
<TOTAL-LIABILITY-AND-EQUITY> 1,993
<SALES> 1,927
<TOTAL-REVENUES> 17,065
<CGS> 392
<TOTAL-COSTS> 12,049
<OTHER-EXPENSES> 4,802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191
<INCOME-PRETAX> 23
<INCOME-TAX> 0
<INCOME-CONTINUING> 23
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
