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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 26, 1998
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Commission File Number 0-14063
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BARRISTER INFORMATION SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
New York 16-1176561
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
465 Main Street, Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 845-5010
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<S> <C>
Not Applicable
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Former name, former address and former fiscal year, if changed since last report.)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- --------
Class Outstanding at August 4, 1998
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Common $.24 Par Value 8,223,737 Shares
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BARRISTER INFORMATION SYSTEMS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
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<S> <C>
Item 1. Financial Statements
Condensed Balance Sheets at
June 26, 1998 and March 31, 1998........................................................ 3
Condensed Statements of Operations -
Three Months Ended June 26, 1998
and June 27, 1997....................................................................... 4
Statement of Shareholders' Equity -
Three Months Ended June 26, 1998........................................................ 5
Condensed Statements of Cash Flows -
Three Months Ended June 26, 1998
and June 27, 1997....................................................................... 6
Notes to Condensed Financial Statements................................................. 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................ 11
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PART I. FINANCIAL INFORMATION
BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
June 26 March 31
1998 1998
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ASSETS
<S> <C> <C>
Cash $ 95 $ 210
Accounts receivable 3,035 3,084
Inventories:
Service parts 2,729 2,853
Other 79 83
Prepaid expenses 24 30
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Total current assets 5,962 6,260
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Equipment and leasehold
improvements, at cost 4,123 4,089
Less accumulated depreciation 3,710 3,673
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Net equipment and leasehold
improvements 413 416
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Software production costs 709 658
Other assets 43 43
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$ 7,127 $ 7,377
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 250 $ 250
Note payable (to a related party) 100 100
Current installments of long term debt 141 127
Accounts payable 795 1,274
Accrued compensation and benefits 801 722
Customer advances and unearned revenue 1,431 1,461
Other liabilities 143 55
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Total current liabilities 3,661 3,989
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Long-term debt, excluding current installments
($1,339 in June and $1,377 in March
to a related party) 1,367 1,395
Shareholders' equity:
Preferred stock -- --
Common stock ($.24 par value) 1,973 1,972
Additional paid-in capital 21,567 21,565
Accumulated deficit (21,441) (21,544)
-------- --------
Total shareholders' equity 2,099 1,993
-------- --------
$ 7,127 $ 7,377
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
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June 26 June 27
1998 1997
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<S> <C> <C>
Revenues:
Product sales $ 537 $ 511
Services 3,376 3,716
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Total revenues 3,913 4,227
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Costs and expenses:
Cost of product sales 98 132
Cost of services 2,605 2,922
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Total cost of revenues 2,703 3,054
Selling, general and
administrative expenses 900 948
Product development and
engineering 157 172
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Total costs and expenses 3,760 4,174
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Operating income 153 53
Interest expense
Related party 40 38
Other 10 10
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Total interest 50 48
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Net income $ 103 $ 5
========= =========
Net income per common share
basic and diluted $ 0.01 $ 0.00
========= =========
Weighted average number of common shares outstanding:
Basic 8,222 8,201
========= =========
Diluted 8,467 8,576
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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BARRISTER INFORMATION SYSTEMS CORPORATION
Statement of Shareholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Capital Deficit Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at March 31, 1998 $ 1,972 $ 21,565 $(21,544) $ 1,993
Sale of 7,375 common shares 1 2 - 3
Net income - - 103 103
-------- -------- -------- --------
Balance at June 26, 1998 $ 1,973 $ 21,567 $(21,441) $ 2,099
======== ======== ======== ========
</TABLE>
Common stock - 8,223,737 and 8,216,362 shares issued and outstanding at June 27,
1997 and March 31, 1998 respectively.
See accompanying notes to condensed financial statements.
5
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BARRISTER INFORMATION SYSTEMS CORPORATION
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
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June 26 June 27
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 103 $ 5
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 112 87
Changes in current assets and liabilities:
Accounts receivable 49 (306)
Inventories 128 64
Prepaid expenses 6 36
Accounts payable (479) 149
Accrued compensation and benefits 79 99
Customer advances and unearned revenues (30) (112)
Other liabilities 88 55
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Net cash provided (used)
by operating activities 56 77
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Cash flows from investing activities:
Additions to equipment and leasehold
improvements (34) (17)
Capitalized software (126) (80)
Other - (2)
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Net cash used in investing activities (160) (99)
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Cash flows from financing activities:
Net repayment of debt (14) (25)
Proceeds from sale of common stock 3 -
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Net cash used by financing activities (11) (25)
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Net decrease in cash (115) (47)
Cash at beginning of period 210 226
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Cash at end of period $ 95 $ 179
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 52 $ 23
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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BARRISTER INFORMATION SYSTEMS CORPORATION
Notes to Condensed Financial Statements
1. In the opinion of Management, the accompanying financial statements
present fairly the financial position, results of operations and cash flows for
the periods shown. The first quarter results for each year represent thirteen
weeks of operations ended Friday, June 26, 1998 and Friday, June 27, 1997. The
financial data included herein was compiled in accordance with the same
accounting policies applied to the Company's audited annual financial
statements. Any adjustments made were of a normal recurring nature.
The results of operations for the three month period ended June 26,
1998 are not necessarily indicative of the results to be expected for the full
year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
- -------------------
The Company experienced a net decrease in cash of $115,000 for its first quarter
ended June 26, 1998. Cash used in investing activities of $160,000 and for debt
repayment of $11,000 were partially offset by net cash provided by operating
activities of $56,000. The net cash provided by operating activities was
realized after taking into account a reduction in accounts payable of $479,000.
As a result, the Company's cash balance decreased from $210,000 at March 31,
1998 to $95,000 at June 26, 1998.
The principal cash requirements for fiscal 1999 are investments in capitalized
software 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(TM), 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 and to replace contracts that expire during the year.
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.
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.
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended June 26, 1998, total revenues decreased approximately 7.4%
from the same quarter in 1997. However, net profit grew to $103,000 compared to
a net profit of $5,000 in the first quarter of the prior year. Improved margins
on product sales and expense reductions were the primary reasons for the
improvement in the net profit.
Product sales increased 5.1% for the comparable quarters based on increases in
the sale of Javelan, the Company's Windows(TM) based management software
product. A further decline occurred in the sale of low margin commodity products
with the result that sales of these
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products were less than 10% of total product sales. Margins improved to 81.8% of
product sales from 74.2% for the comparable quarter in the prior year based on a
more favorable mix of Javelan sales. Margins on Javelan sales, which can include
various hardware and third party software in addition to the Company developed
software, generally amount to between 60% and 100% depending on the
configuration of the sale.
Services revenues decreased 9.1% for the comparable quarters primarily as a
result of lower revenues from hardware time and material services. The drop in
these revenues was a direct result of halting all work for CIC Systems Inc. in
March 1998. Revenues from CIC represented 7% of total revenues (approximately
$1,200,000) in fiscal 1998. CIC was subsequently acquired by CompuCom Systems,
Inc. in May 1998. The Company's marketing efforts did not replace the CIC
revenues in the first quarter. In addition, a number of hardware services
contracts expired on June 30, 1998 on which the Company was realizing
approximately $100,000 in monthly revenues. While the Company is actively
pursuing a number of large contract opportunities to replace these revenues,
there can be no assurance that the Company will be successful which would result
in lower services revenues occurring in the second quarter. Although a decrease
in services revenues was incurred in the comparable first quarters, an increase
from 21.4% to 22.8% in the percentage of margin on those revenues was realized.
Reductions in the high level of expenses being incurred to provide the time and
material services under the CIC contract and improved operational efficiencies
were the principal reasons for the improved margins.
Selling, general and administrative expenses were 23.0% of total revenues for
the first quarter of this year compared to 22.4% for the comparable quarter last
year. The decrease in the amount of expenses incurred resulted from lower
commission expenses.
The amount incurred for product development and engineering expenses, before
taking into account amounts capitalized and amortized for software production
costs, was approximately the same for the comparable first quarters. The
increase in these expenses from 4.8% of total revenues to 5.3% of total revenues
is due to the lower amounts of revenues recorded in the first quarter of the
current year.
Interest expense was approximately the same for the comparable first quarters
as the level of debt outstanding and the rate of interest remained constant.
The weighted average number of common shares outstanding in the computation of
diluted earnings per share includes the impact of stock options and warrants
assumed to be exercised using the treasury stock method. The first quarter of
the current year includes approximately 245,000 common equivalent shares which
were computed using an average market price of $1.14 per share. The comparable
numbers for the first quarter last year were 375,000 common equivalent shares
computed using an average market price of $1.58 per share.
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.
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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 cost associated with year 2000 issues will have a
material adverse impact on its financial position, results of operations, or
liquidity.
FORWARD-LOOKING STATEMENT
- -------------------------
When used in this report, the words "expects", "believes" and "intends" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrences of unanticipated events. Readers are also
urged to carefully review and consider the various disclosures made by the
Company which attempt to advise interested parties of the factors which affect
the Company's business in the Company's periodic reports on Form 10K and 10Q
filed with the Securities and Exchange Commission.
10
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K: None
11
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BARRISTER INFORMATION SYSTEMS CORPORATION
Date: August 4, 1998 By: /s/ Henry P. Semmelhack
------------------------ --------------------------------
Henry P. Semmelhack
President
and
Chief Executive Officer
Date: August 4, 1998 By: /s/ Richard P. Beyer
------------------------ ---------------------------------
Richard P. Beyer
Vice President, Finance
(Principal Financial Officer)
12
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-26-1998
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 3,035
<ALLOWANCES> 0
<INVENTORY> 2,808
<CURRENT-ASSETS> 5,962
<PP&E> 4,123
<DEPRECIATION> 3,710
<TOTAL-ASSETS> 7,127
<CURRENT-LIABILITIES> 3,661
<BONDS> 1,367
0
0
<COMMON> 1,973
<OTHER-SE> 126
<TOTAL-LIABILITY-AND-EQUITY> 7,127
<SALES> 537
<TOTAL-REVENUES> 3,913
<CGS> 98
<TOTAL-COSTS> 2,703
<OTHER-EXPENSES> 1,057
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
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<EPS-PRIMARY> .01
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