<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, 1999 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 8,
1999, was approximately $10.3 million.
The number of shares outstanding of the Registrant's common stock, $.24
par value, was 9,047,500 at June 8, 1999.
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, 1999. 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 16, 1999.
<PAGE> 2
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.
PART I
ITEM 1. BUSINESS
GENERAL
Barrister Information Systems Corporation (the "Company") is a national
supplier of Windows-based and browser-based client server software for law
firms, accounting firms, consultants and departments of Fortune 1000 companies.
The Company is also a national provider of equipment maintenance services.
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.
In January 1999, the Company acquired the assets of Icon Technology
LLC, including its software product LegalHouse. This organization was made part
of the Company's software business.
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.
The Company segments discussed below are the Software Business Segment
and the Equipment Maintenance Services Business Segment which account for all of
the Company's revenues.
SOFTWARE BUSINESS
The Company's Software Business develops, markets, licenses and
installs software for law firms, accounting firms, consultants and departments
of Fortune 1000 companies. The organization of this operating segment includes
staff which provide the functions of marketing, sales, development,
installation, conversion, project management, training, hot line support and
consulting.
Approximately 78 people are employed in this business. The majority of
the staff are located in Buffalo, New York with a development office in San
Rafael, California. Some sales and customer support representatives reside
outside the principal offices.
SOFTWARE MARKET
The Company was the first to offer and install an all Window's-based
firm management software package for medium to large sized law firms. The
Company now sells its Windows-based client server software product, Javelan; its
browser-based JavelanX software product; Javelan Select, a scaled down version
of Javelan for smaller
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firms; LegalHouse, an Executive Information and budgeting package; and software
support services principally to the U.S. law firm market and to law firms in
Canada and the Caribbean. The Company's software products are used by law firms
for firm management and to track 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, budgeting, collections,
general ledger and accounts payable. Those products are 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
products are distinguished from its competitors' products by their performance,
functionality, product design and architecture.
In its software marketing efforts for the legal market, the Company
conducts seminars in cities throughout the United States, advertises in
professional publications and provides demonstrations at its corporate
headquarters, 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 the Company's legal market press
releases and advertising literature. The Company is expanding marketing by
establishing strategic relationships which will enhance sales in the legal
market in the United States and internationally. Further, staff has been added
to pursue sales opportunities in commercial markets..
The Company believes that its existing clients using older non-Javelan
software present significant opportunities for sales of additional software and
services. By marketing to and communicating with existing clients opportunities
are anticipated to license Javelan as replacement software. Further, efforts are
being directed to ensuring client satisfaction and facilitating additional sales
of services and add-on software to Javelan clients. 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 its product, to install
these products and train clients in its use and to support the client afterward.
The Company has made a substantial investment in the Javelan, JavelanX
and LegalHouse products and protects its intellectual property rights by trade
secret, by copyright and 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 software packages. The choice of features will be
driven by clients through periodic 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 and LegalHouse.
Historically, software product life cycles have been relatively short.
With the markets using Windows browser interfaces 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 the Company's software packages 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.
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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 products of the Company are Javelan, Javelan Select,
JavelanX and LegalHouse. Javelan is a state-of-the-art software package and can
operate on Windows 95, Windows 98 or NT Workstation and provides the functions
necessary for law firm management using desktop computing and client server
architecture. Javelan software operates on the law firm's local area network
(LAN) and uses PC work stations on the LAN for data processing. A server using
Microsoft SQL-Server 6.5 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. In the next year the product will
operate on SQL-Server 7.0. Javelan Select, a product aimed at smaller firms uses
a scaled down set of Javelan software for this market segment. JavelanX is the
newest version of Javelan. It will operate on the firms WAN or over the Internet
using standard browsers.
LegalHouse is a product that was developed by Icon Technology, LLC
which was acquired in January 1999. This software package uses a sophisticated
data warehouse to provide powerful and unique management reporting and
budgeting. It is being marketed through seminars, through the traditional sales
and marketing techniques of the Company and through strategic relationships. The
market potential for the product includes all larger law firms, professional
organizations and corporations in both the United States and international.
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.
Javelan, Javelan Select, JavelanX and LegalHouse 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 will support until December 1999:
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.
Clients have been notified that the Eagle, Time Manager, and CFMS
products are not Y2K compliant, that the Company has not invested in these
obsolete products to make them Y2K compliant and will not support them after
December 1999. 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 and Javelan Select products are being offered to these
clients.
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SOFTWARE SERVICES
Upon the sale of a license for any of the Company's software packages,
the client generally contracts for a number of services to aid with the
installation of the software. These services include project management,
training, data conversion, custom programming, consulting and installation
support and post installation services. These services are generally billed to
the client on an as-incurred basis.
The Company also schedules regular training classes for clients to
educate new employees or to teach advanced subjects. Finally, with the
acquisition of the assets and the hiring of the employees of Icon Technology
LLC, the Company expects to see an increase in general computer system
consulting to the legal and corporate markets.
Software services are an important and growing source of revenue in the
Company's Software Business.
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. Expenditures for product development and
engineering, before taking into account amounts capitalized and amortized for
software production costs, were $904,000, $842,000 and $700,000 in fiscal 1999,
1998, and 1997, respectively. For fiscal 2000, the Company expects its level of
spending in this area to increase over 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 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.
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EQUIPMENT MAINTENANCE SERVICES BUSINESS
From the mid-1970's to about 1989, the Company manufactured
mini-computers and other equipment as part of the Barrister System, sold
principally to the law firm market. A nationwide organization was established to
support these clients and maintain the Barrister equipment..
When the Company stopped the manufacture of mini-computers, the service
organization continued support of the Barrister customers and implemented a
strategy to diversify into the maintenance of desktop computer equipment. In
1989, 100% of service revenues came from the maintenance of Barrister
mini-computers and equipment. Today nearly 100% of equipment maintenance
services derive from desktop equipment.
SERVICES MARKET
The Company provides equipment maintenance services nationwide for
desktop equipment including personal computers and other equipment which attach
to LANs. Using its staff of hardware technicians and third party service
companies, the Company provides comprehensive maintenance services for such
equipment. The Company provides a nationwide toll-free number for customer
service and provides a seven-day, twenty-four hour maintenance capability.
In 1998, the Company took the initiative and developed and licensed
several software modules and integrated them into an Internet-based software
system which provides unique and innovative ways to provide and manage equipment
maintenance services to its clients. This integrated software system is called
Barrister Global Service Network (GSN) and allows for clients anywhere in the
world to view the status of service calls. Further the system provides
management information to client and company managers responsible for service
delivery. Finally, GSN provides a mechanism over the Internet to transmit
service requests to third party subcontractors, to monitor and manage those
service calls and to measure service delivery performance. The ability to manage
third party service providers and provide summary management information is a
unique and powerful capability. This capability has received favorable comment
as a valuable value-added service from clients and prospects. It is anticipated
this capability will lead to substantial positive changes in the national
service delivery process.
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 Pioneer-Standard Electronics, Inc., IBM Corporation, U.S. Computer, Amherst
Computer Products, Amdahl 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
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a dependable and cost effective basis to customers with multiple locations
throughout the U.S.
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 1999, revenues from the subcontracts were
approximately 10% of total revenues.
OFFICES
Maintenance services are provided by employees located in offices
throughout the United States and by subcontractors. The Services business
employs about 94 of the Company's staff of which 45 are in Buffalo, New York and
the balance in offices in New York City, Hartford, Washington, D.C., Atlanta and
Cleveland.
EMPLOYEES
As of June 8, 1999, the Company had 194 full-time employees and 8
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", "JAVELAN", JAVELANX" and "LEGALHOUSE"
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, 1999,
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 52 Vice President-Finance, Treasurer
and a Director
David L. Blankenship 42 Vice President-Services Operations
Mark C. Donadio 43 Vice President, Secretary and General Counsel
Thomas W. Jones 36 Vice President
Jay S. Moeller 35 President, Software Division,
and a Director
Mark J. Phillips 44 Vice President-Sales
Susan T. Robinson 52 Vice President-Software Operations
Henry P. Semmelhack 62 President, Chairman of the Board of Directors, Chief
Executive Officer
</TABLE>
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<PAGE> 8
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.
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. JONES joined the Company in January, 1999 as part of the Icon
Technology acquisition. He was responsible for LegalHouse product development
prior to the merger. Prior to joining Icon Technology in 1997, he was an
independent software consultant working in the Czech Republic.
MR. MOELLER joined the Company in January, 1999 as part of the Icon
Technology acquisition. He was President of Icon Technology prior to the
purchase by Barrister. He was the manager of Realogic's San Francisco consulting
office prior to starting Icon Technology in 1997.
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.
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 New York, New York
San Rafael, California Cleveland, Ohio
Hartford, Connecticut Arlington, Virginia
Atlanta, Georgia Richmond, 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.
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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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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 1999 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 1999 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 1999 Annual Report under the caption "Management's
Discussion and Analysis".
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Other than variable rate debt instruments, the Company did not
directly or benefically own any market rate sensitive instruments at
the end of fiscal 1999 or 1998. If the prime rate had changed by 10%
during fiscal 1999, the impact on interest expense would have been
approximately $12,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated by reference to
the Company's 1999 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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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 1999 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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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 1999 Annual Report:
Balance Sheets -
March 31, 1999 and March 31, 1998
Statements of Operations -
Years ended March 31, 1999, 1998 and 1997
Statements of Shareholders' Equity -
Years ended March 31, 1999, 1998 and 1997
Statements of Cash Flows -
Years ended March 31, 1999, 1998 and 1997
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, 1999 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 1999 Annual
Report.
Schedule Title Page
-------- ----- ----
II Valuation and Qualifying Accounts 14
The Independent Auditors' Report on the Financial Statement
Schedule appears on page 13 of this report.
(3) EXHIBITS. See Exhibit Index filed herewith on page 15 of this
Report.
(b) Reports on Form 8-K:
A report was filed on March 30, 1999 to satisfy the financial
statement requirements for the Form 8-K filed January 29, 1999 regarding the
acquisition of the assets of Icon Technology LLC.
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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 29, 1999 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 29, 1999
- ------------------------------- Officer and Chairman of the
Henry P. Semmelhack Board of Directors
/s/ Richard P. Beyer Vice President and Chief June 29, 1999
- ------------------------------- Financial Officer
Richard P. Beyer
/s/ Brent D. Baird Director June 29, 1999
- -------------------------------
Brent D. Baird
/s/ Franklyn S. Barry, Jr. Director June 29, 1999
- -------------------------------
Franklyn S. Barry, Jr.
/s/ Warren E. Emblidge, Jr. Director June 29, 1999
- -------------------------------
Warren E. Emblidge, Jr.
/s/ Richard E. McPherson Director June 29, 1999
- -------------------------------
Richard E. McPherson
/s/ Jay S, Moeller Director June 29, 1999
- -------------------------------
Jay S. Moeller
/s/ James D. Morgan Director June 29, 1999
- -------------------------------
James D. Morgan
</TABLE>
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INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
--------------------------------
Board of Directors
Barrister Information Systems Corporation:
Under date of June 28, 1999, we reported on the balance sheets of Barrister
Information Systems Corporation as of March 31, 1999 and 1998, and the related
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended March 31, 1999, as contained in the 1999
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, 1999. 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 LLP
Buffalo, New York
June 28, 1999
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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, 1997 $ 100 $ 25 $ -- $ 125
------ ------ ------ ------
Year ended March 31, 1998 $ 125 $ 85 $ -- $ 210
------ ------ ------ ------
Year ended March 31, 1999 $ 210 $ -- $ -- $ 210
------ ------ ------ ------
Allowance for inventory
obsolescence:(1)
Year ended March 31, 1997 $ 760 $ 900 $ 779 $ 881
------ ------ ------ ------
Year ended March 31, 1998 $ 881 $ 900 $1,056 $ 725
------ ------ ------ ------
Year ended March 31, 1999 $ 725 $ 942 $1,317 $ 350
------ ------ ------ ------
</TABLE>
- --------
(1) The allowance is included in inventory in the balance sheets.
Page -15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page No.
No. Description or Location
------- ----------- -----------
<S> <C> <C>
2 Asset Purchase Agreement, dated January 15, 1999, (f)
by and among Registrant and Icon Technology LLC
and Jay Moeller, Tom Jones, Alan Lash and Stuart Guild
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, 1999 (to be deemed filed only to the extent
required by the instructions to exhibits for reports on
Form 10-K)
23* KPMG 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-Q for the
quarter ended September 30, 1994
(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.
(f) Designates Exhibit annexed to the Company's Report on Form 8-K dated
January 15, 1999.
Page -16-
<PAGE> 1
BARRISTER INFORMATION SYSTEMS CORPORATION
EXHIBIT 13 - ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
<PAGE> 2
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended March 31
------------------------------------------------------------------
1999(1) 1998 1997 1996 1995
------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 14,994 $ 17,065 $ 14,177 $ 13,729 $ 15,327
Net earnings (loss) 8 23 (386) (205) (159)
Net earnings (loss) per common share -- -- (.05) (.03) (.03)
BALANCE SHEET DATA AT YEAR END:
Working capital 2,296 2,271 2,367 2,929 2,880
Total assets 8,706 7,377 6,953 6,978 6,544
Long-term debt 1,487 1,395 1,504 1,392 3,329
Shareholders' equity 3,812 1,993 1,952 2,337 298
</TABLE>
- -------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA
The following is a summary of quarterly financial data for the fiscal years
ended March 31, 1999 and March 31, 1998.
<TABLE>
<CAPTION>
----------------------------------------------------------------
1st 2nd 3rd 4th Total
Quarter Quarter Quarter Quarter Year
----------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1999, AS RESTATED(2)
Revenues $ 3,761 $ 3,575 $ 3,576 $ 4,082 $ 14,994
Net earnings (loss) (26) 143 25 (134) 8
Net earnings (loss) per common share -- .02 -- (.02) --
1999, AS ORIGINALLY REPORTED
Revenues $ 3,913 $ 3,645 $ 3,612
Net earnings (loss) 103 104 5
Net earnings (loss) per common share .01 .01 --
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 -- --
</TABLE>
- -----------------------------------------
(1) The 1999 amounts reflect the acquisition of the assets of Icon Technology
LLC as of January 1, 1999. See note 7 to the financial statements.
(2) The Company has restated its previously reported results for the first
three quarters of fiscal 1999. The restatement reverses all of the revenue
previously recorded on a contract with extended payment terms, while
deferring the contract's cost. Revenue will be recorded on this contract as
the cash is received. This treatment is believed to be consistent with
recent interpretations of software contract accounting.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 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)
-------------------------------------------------
1999 1998
vs. vs.
1999 1998 1997 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales 15.0% 11.3% 17.5% 16.8% (22.5%)
Services 85.0 88.7 82.5 (15.8) 29.5
----- ----- -----
Total revenues 100.0 100.0 100.0 (12.1) 20.4
----- ----- -----
Costs and expenses:
Cost of product sales(1) 19.2 20.3 35.5 10.5 (55.6)
Cost of services(2) 78.6 77.0 83.0 (14.0) 20.1
----- ----- -----
Total cost of revenues 69.7 70.6 74.7 (13.2) 13.8
Selling, general, and
administrative 24.6 23.6 24.3 (8.5) 16.6
Product development and
engineering 4.5 4.6 3.4 (14.0) 60.3
----- ----- -----
Total costs and expenses 98.8 98.8 102.4 (12.1) 16.0
----- ----- -----
Operating earnings (loss) 1.2 1.2 (2.4) (12.1) --
Interest expense 1.2 1.1 .3 (5.8) 377.5
----- ----- -----
Net earnings (loss) -- .1 (2.7) (65.2) --
===== ===== =====
</TABLE>
- ----------------------------
(1) Percentage of product sales
(2) Percentage of services revenues
===============================================================================
PAGE 2 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<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 sources of revenues are derived from hardware maintenance services on
PC related equipment provided to a broad base of customers throughout the United
States and from the licensing of software and sale of 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. Through the acquisition of the assets of Icon
Technology LLC (Icon) in January 1999, the Company added a second major product,
LegalHouse, which is a software product that uses a sophisticated data warehouse
to provide powerful and unique management reporting and budgeting.
Icon was a limited liability company engaged in the business of providing
computer related consulting services primarily to the legal market. Icon was
also a developer and seller of a software product called LegalHouse. The assets
of Icon were acquired in exchange for 2,500 shares of preferred stock which are
convertible into 2,500,000 shares of common stock upon shareholder approval at
the Company's 1999 annual meeting.
The Company primarily licenses its software products to the legal market through
direct sales. Marketing efforts are focused on trade shows, seminars,
advertisement in professional publications and product demonstrations. The
Company has also licensed the Javelan product to accounting firms, consultants,
departments of state government and departments of Fortune 1000 companies. The
market for its software products 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 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 its software products 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 1999 PAGE 3
<PAGE> 5
===============================================================================
RESULTS OF OPERATIONS
The increase in product sales for fiscal 1999 as compared to 1998 was primarily
a result of LegalHouse sales that commenced in the fourth quarter of fiscal
1999. 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. The percentage of margin realized on product sales
increased for both years based on the increased percentage of product sales that
were comprised of software related products which have a smaller associated cost
of sales. Margins on Javelan and LegalHouse 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
software sales in fiscal 2000 principally from increased LegalHouse sales.
The decrease in services revenues for fiscal 1999 as compared to 1998 resulted
from decreased revenues from hardware maintenance contracts and hardware time
and material services which were partially offset by increases in software
services. The drop in these revenues was a result of three factors. First, all
work for CIC Systems, Inc. was halted in March 1998. Revenues from CIC
represented 7% of total revenues (approximately $1,200,000) in fiscal
1998.Second, IBM reduced the amount of subcontracts for hardware services that
it was providing to the Company. As a result, revenues from IBM, the Company's
largest customer, dropped from 17% of total revenues in fiscal 1998 to 10% of
total revenues in fiscal 1999. IBM's contract with the Company has a provision
that stipulates that IBM is able to terminate any of its contracts by providing
thirty days advance notice. Third, other contract expirations exceeded new
business generated. Recently, the Company announced a new product, Global
Services Network(TM) ("GSN"), which it expects will support its marketing
efforts to increase its hardware related revenues. GSN is a web-based service
management system for providing real-time service call tracking, service call
details, service histories, equipment life-cycle information and service
performance information. An increase in services revenues associated with the
sale of Javelan was realized for the comparable periods. This revenue was a
direct result of the increase in services realized from the growing base of
customers. In addition, services associated with LegalHouse and general
consulting services commenced in the fourth quarter of fiscal 1999 as a result
of the Icon transaction. Additional increases in software related services are
expected in fiscal 2000.
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
increase in hardware time and material services was primarily the result of a
contract signed with CIC in the third quarter of fiscal 1997 and the use of a
new computer system to more thoroughly capture billable work. The increase in
Javelan associated services was a direct result of the growing base of Javelan
customers.
===============================================================================
PAGE 4 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 6
==============================================================================
The cost of services increased as a percentage of revenues for fiscal 1999 as
compared to 1998. The large drop in hardware related services revenues impacted
margins since certain fixed expenses could not be reduced commensurate with the
drop in revenues. While software related services revenues increased, margins
were impacted by the addition of personnel to improve the management,
administration and delivery of the services. The decrease in the cost of
services as a percentage of revenues when fiscal 1998 is compared to 1997 was
primarily due to margins generated from the increase in Javelan associated
services and from the capture of additional hardware time and material billings.
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 $942,000, $900,000
and $900,000 for 1999, 1998, and 1997, respectively.
The increase in selling, general and administrative expenses as a percentage of
total revenues for fiscal 1999 as compared to 1998 resulted from a 12% decrease
in revenues for the comparative periods. Expense reductions of approximately 8%
were realized from lower commission expenses. 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 new
business generated during the year.
Expenditures for product development and engineering, before taking into account
amounts capitalized and amortized for software production costs, increased to 6%
of total revenues in fiscal 1999, compared to 4.9% of total revenues in 1998 and
1997. The increase was a result of lower levels of revenues in 1999 and to
expenses incurred in the fourth quarter of fiscal 1999 related to enhancements
of LegalHouse. Costs capitalized as software production costs amounted to
$545,000, $304,000 and $330,000 in 1999, 1998 and 1997, respectively.
Amortization amounted to $311,000, $241,000 and $116,000 for these same three
years.
Interest expense was approximately the same when fiscal 1999 is compared to
1998. 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.
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,
1999, since the Company has fully reserved for the tax effect of net deductible
temporary differences and operating loss carry forwards. These benefits will be
recorded in future periods as they are realized or as their realization becomes
predictable.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 5
<PAGE> 7
===============================================================================
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a net increase in cash of $12,000 during fiscal 1999.
The principal sources of cash were $414,000 provided by operating activities and
$228,000 from the sale of common stock. Principal uses of cash during the year
were additions to capitalized software of $545,000 and additions to equipment
and leasehold improvements of $325,000. Of the proceeds from long-term debt,
$400,000 was obtained to provide the financing for a large contract with
extended payment terms. Based on interpretations of Statement of Position 97-2
"Software Revenue Recognition" which was effective for fiscal 1999, revenue
cannot be recognized under software contract accounting when payment terms are
more than twelve months after delivery, based on the presumption that the fee is
not fixed and determinable. This presumption is based on the possibility that a
refund or concession may be granted to the customer regarding future payments.
All costs associated with this contract are deferred. Revenues and costs in
equal amounts will be recognized as cash is received. The profit earned on this
contract will not be recognized until cash received exceeds the costs deferred.
The Company's initial accounting for this transaction fully recognized the
revenue and expense for this contract. As a result, the Company was required to
restate its results for the first three quarters of fiscal 1999. The restatement
did not have any impact on cash flow. In fiscal 1998, the Company experienced a
net decrease in cash of $16,000. 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.
The principal cash requirements for fiscal 2000 are investments in capitalized
software and additions to equipment and leasehold improvements that together are
expected to approximate amounts spent in fiscal 1999. Scheduled debt repayments
should approximate $390,000. The Company expects to meet its cash requirements
by generating positive cash flow from operating activities. Other sources of
cash expected in fiscal 2000 are term loans in the amount of $100,000 from
regional development agencies; lease financing for certain capital additions;
and the exercise of some of the 700,000 outstanding warrants ($198,000 has been
received in fiscal 2000). Any income earned should not require cash payments for
taxes, since the company has use of operating loss carry forwards of
approximately $2,040,000 at March 31, 1999. The Company expects to achieve
continued growth in revenues and profits in its software business in 2000. This
expectation is based on greater levels of marketing, selling and development
resources being applied to the LegalHouse product acquired from Icon, the
===============================================================================
PAGE 6 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 8
===============================================================================
sale of JavelanX, the newest version of Javelan which operates on a firms wide
area network or over the Internet, and having a full year of results for the
Icon business in 2000 compared to only one quarter in 1999. The Company also
expects that the introduction of the GSN product and increased selling and
marketing resources will enable it to increase hardware related revenues and
profits in 2000.
If the Company is unsuccessful in increasing its revenues and generating a
profit, there can be no assurance that it will be able to generate positive cash
from operations or that sufficient cash will be available to meet its required
obligations.
YEAR 2000 COMPLIANCE
The Company's Javelan and LegalHouse products are 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 the products are not year 2000
compliant. Javelan primarily utilizes operating systems obtained from Microsoft
which the Company believes, based on information provided by Microsoft are year
2000 compliant or will be compliant by that time. Other third party software and
hardware products that are integrated with Javelan have been tested for year
2000 issues. While no material issues have been found, the Company cannot fully
predict the effect of the year 2000 with respect to these third party products.
In March, 1999, the Company installed the Javelan product as a replacement for
its accounting system, which was not year 2000 compliant. No material
incremental costs over and above normal and ongoing expenditures for
improvements in management information systems were incurred in enacting this
replacement. All other internal hardware and software systems have been
evaluated and those that have been identified as being non compliant are being
modified, upgraded or replaced. The Company believes that it has the necessary
resources to complete these changes and that the year 2000 issue will not pose
significant operational problems for the Company.
The Company has contacted its major suppliers to assess their readiness for the
year 2000. To date, the suppliers contacted have indicated that they are in
compliance or expect to be compliant by the end of the year. The Company has
multiple sources for products and services it requires and does not feel that
any supplier would have a material adverse impact on the Company if they
experienced year 2000 problems in their business operations. While the Company
has not formally contacted its customers regarding the year 2000, it is aware
that its largest customer (10% of revenues) is diligently addressing the year
2000 issue.
The Company is continuing the evaluation of its non-information technology
systems and equipment to determine those systems and equipment which are not
year 2000
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 7
<PAGE> 9
===============================================================================
compliant. To date, no formal contingency plans have been developed to handle
unexpected and non-contemplated year 2000 problems. However, based on the
results of evaluations to date, the Company does not anticipate the need for
such a plan nor that the cost associated with year 2000 issues will have a
material adverse impact on its financial position, results of operations, or
liquidity. While the Company believes its efforts are adequate to address its
year 2000 concerns, there can be no guarantee that all internal systems, as well
as those of third parties on which the Company relies upon, will be converted on
a timely basis and will not have a material affect on the Company's operation.
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.
===============================================================================
PAGE 8 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 10
<TABLE>
==========================================================================================================
BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
March 31
------------------------------
1999 1998
------------------------------
ASSETS (Note 2)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 222 $ 210
Accounts receivable, less allowance for doubtful
accounts of $210 in 1999 and 1998 3,090 3,084
Service parts inventory 2,341 2,936
Prepaid expenses 50 30
------- -------
Total current assets 5,703 6,260
------- -------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Computer and other equipment 2,905 2,859
Furniture and fixtures 949 946
Leasehold improvements 284 284
------- -------
4,138 4,089
Less accumulated depreciation 3,555 3,673
------- -------
Net equipment and leasehold improvements 583 416
------- -------
SOFTWARE PRODUCTION COSTS 1,007 658
GOODWILL 1,158 -
OTHER ASSETS 255 43
------- -------
$ 8,706 $ 7,377
======= =======
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 9
<PAGE> 11
<TABLE>
==========================================================================================
<CAPTION>
March 31
------------------------
1999 1998
------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank (note 2) $ -- $ 250
Note payable (to a related party, note 2) -- 100
Current installments of long-term debt ($203 in 1999
and $98 in 1998 to a related party, note 2) 390 127
Accounts payable 1,108 1,274
Accrued compensation and benefits 832 722
Customer advances and unearned revenue 1,026 1,461
Other accrued expenses 51 55
-------- --------
Total current liabilities 3,407 3,989
-------- --------
LONG-TERM DEBT, EXCLUDING
CURRENT INSTALLMENTS ($930 in 1999 and
$1,377 in 1998 to a related party, note 2) 1,487 1,395
SHAREHOLDERS' EQUITY (notes 2, 3 and 7):
Preferred stock, authorized 2,000,000 shares,
2,500 convertible shares issued and outstanding
in 1999 1,250 --
Common stock, $.24 par value.
Authorized 20,000,000 shares;
8,891,236 and 8,216,362 shares issued and
outstanding in 1999 and 1998, respectively 2,134 1,972
Additional paid-in capital 21,964 21,565
Accumulated deficit (21,536) (21,544)
-------- --------
Total shareholders' equity 3,812 1,993
-------- --------
COMMITMENTS AND CONTINGENCIES (notes 6 and 11)
$ 8,706 $ 7,377
======== ========
See accompanying notes to financial statements.
=========================================================================================
PAGE 10 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
</TABLE>
<PAGE> 12
===============================================================================
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended March 31
--------------------------------
1999 1998 1997
--------------------------------
<S> <C> <C> <C>
REVENUES:
Product sales $ 2,251 $ 1,927 $ 2,486
Services 12,743 15,138 11,691
-------- -------- --------
Total revenues 14,994 17,065 14,177
-------- -------- --------
COSTS AND EXPENSES:
Cost of product sales 433 392 883
Cost of services 10,020 11,657 9,703
-------- -------- --------
Total cost of revenues 10,453 12,049 10,586
Selling, general and
administrative expenses 3,683 4,023 3,451
Product development and engineering 670 779 486
-------- -------- --------
Total costs and expenses 14,806 16,851 14,523
-------- -------- --------
OPERATING EARNINGS (LOSS) 188 214 (346)
INTEREST EXPENSE:
Related party (note 2) 157 149 2
Other 23 42 38
-------- -------- --------
Total Interest 180 191 40
-------- -------- --------
NET EARNINGS (LOSS) $ 8 $ 23 $ (386)
======== ======== ========
PER COMMON SHARE - BASIC AND DILUTED:
NET EARNINGS (LOSS) $ -- $ -- $ (.05)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 8,363 8,207 8,201
======== ======== ========
DILUTED 8,996 8,478 8,567
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 11
<PAGE> 13
==============================================================================
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended March 31
------------------------------------
1999 1998 1997
------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK
Beginning balance $ -- $ -- $ --
Issued 2,500 Series E shares in connection with
acquisition of Icon Technologies, LLC (Note 7) 1,250 -- --
-------- -------- --------
Ending balance 1,250 -- --
-------- -------- --------
COMMON STOCK
Beginning balance 1,972 1,968 1,968
Sale of 291,991 shares, 15,066 shares and 3,332
shares in 1999, 1998 and 1997, respectively 70 4 --
Issued 382,883 shares on conversion of debt 92 -- --
-------- -------- --------
Ending balance 2,134 1,972 1,968
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Beginning balance 21,565 21,551 21,550
Sale of common shares 158 14 1
Issuance of shares on conversion of debt 241 -- --
-------- -------- --------
Ending balance 21,964 21,565 21,551
-------- -------- --------
ACCUMULATED DEFICIT
Beginning balance (21,544) (21,567) (21,181)
Net income (loss) 8 23 (386)
-------- -------- --------
Ending balance (21,536) (21,544) (21,567)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY $ 3,812 $ 1,993 $ 1,952
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
===============================================================================
PAGE 12 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 14
===============================================================================
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 8 $ 23 $(386)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation 181 173 207
Amortization of software production costs 311 241 116
Amortization of goodwill 43 -- --
Loss (gain) on disposal of equipment -- (2) 12
Changes in current assets and liabilities:
Accounts receivable 66 (486) (1,020)
Inventory 595 36 398
Prepaid expenses (15) 37 (35)
Other assets (219) -- --
Accounts payable (201) 227 320
Accrued compensation and benefits 110 80 93
Customer advances and unearned revenue (461) 141 479
Other accrued expenses (4) (12) (17)
------- ------- -------
Net cash provided by operating activities 414 458 167
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold improvements (325) (131) (332)
Proceeds on sale of equipment -- 3 40
Additions to software production costs (545) (304) (330)
Acquisition costs, net of cash received (104) -- --
Other 5 (7) (3)
------- ------- -------
Net cash used by investing activities (969) (439) (625)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 498 17 29
Repayment of long-term debt (159) (70) (544)
Proceeds from sale of common stock 228 18 1
------- ------- -------
Net cash provided (used) by financing activities 567 (35) (514)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 12 (16) (972)
CASH AT BEGINNING OF YEAR 210 226 1,198
------- ------- -------
CASH AT END OF YEAR $ 222 $ 210 $ 226
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION (note 8)
</TABLE>
See accompanying notes to financial statements.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 13
<PAGE> 15
===============================================================================
NOTES TO FINANCIAL STATEMENTS
March 31, 1999, 1998 and 1997
(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, accounting and
consulting firms, 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 computer 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 and
LegalHouse 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. When services are deemed
essential to the functionality of the software delivered, the
percentage-of-completion method of revenue recognition is
utilized. 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,
consulting, 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 98-9
"Modification of SOP 97-2, Software Revenue Recognition, with
respect to Certain Transactions." 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 were implemented by the Company in fiscal
1999. The adoption had insignificant impact on the Company, as its
revenue recognition practices were consistent with those set forth
in the SOP's.
(d) INVENTORIES - Inventories are stated at the lower of cost
(first-in, first-out) or market. Service parts inventory is
charged to cost of services when the part is no longer repairable
or becomes excess to the Company's needs based on actual and
projected service revenues.
(e) EQUIPMENT AND LEASEHOLD IMPROVEMENTS -Depreciation is recorded on
the straight-line method based on the estimated useful lives of
the assets. Computer and other equipment and furniture and
fixtures are depreciated over estimated useful lives of three to
ten years. Improvements to leased property are depreciated over
the lesser of the term of the lease or the life of the
improvements.
(f) SOFTWARE PRODUCTION AND DEVELOPMENT COSTS - Capitalized software
production costs are carried at the lower of unamortized cost or
net realizable value, and are amortized based on current and
===============================================================================
PAGE 14 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 16
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) OTHER ASSETS - Other assets are primarily comprised of the costs
of an uncompleted software contract with a governmental entity.
Since this contract has payment terms of five years, the contract
price has been deemed not to be fixed and determinable pursuant to
the requirements of SOP 97-2. Accordingly, no revenue or profit
will be recognized and contract costs are being deferred until the
cash is collected from the customer beginning in fiscal year 2000.
(h) 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 Standards (SFAS) No. 123
"Accounting for Stock-based Compensation" had been applied.
(i) 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.
(j) PER SHARE DATA AND EARNINGS 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 convertible preferred stock and of stock options and
warrants assumed to be exercised using the treasury stock method.
(k) RECENT ACCOUNTING PRONOUNCEMENTS - Statement of Financial
Accounting Standards ( "SFAS") No. 130, "Reporting Comprehensive
Income" was adopted by the Company in fiscal 1999 without any
inpact on the financial statements, and SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities" is not expected
to have any impact when adopted.
(2) NOTE PAYABLE AND LONG-TERM DEBT
The short term note payable to bank at March 31, 1998 was converted to
a term loan in March 1999, repayable in thirty-six (36) equal monthly
installments of principal and interest at the prime rate plus 2 1/2
percent (10.25% at March 31, 1999).
In March 1998 BIS Partners, L.P. agreed to convert certain past due
amounts from the Company into a demand note bearing interest at prime plus 3 1/2
percent.
A summary of long-term debt follows:
<TABLE>
<CAPTION>
March 31
----------------------------
1999 1998
----------------------------
(in thousands)
<S> <C> <C>
Term note with BIS Partners, L.P. $ 1,133 $ 1,475
Term note payable to RDC 400 --
Term note payable to bank 237 --
Other 107 47
--------- --------
Total long-term debt 1,877 1,522
Less current installments 390 127
--------- --------
Long-term debt, excluding current installments $ 1,487 $ 1,395
========= ========
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 15
<PAGE> 17
===============================================================================
BIS Partners, L.P. ("BIS") is 87.5 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.
During the fourth quarter of fiscal 1997, the Company renegotiated the
terms of its agreement with BIS, extending the repayment schedule
through the year 2004 and, accordingly, reducing cash payments
otherwise scheduled in fiscal 1998 and 1999 and adjusting the interest
rate to prime plus 3.5%. As a result of this restructuring and the
incremental cash flow it will require, the Company, in fiscal 1998,
reinstated the recognition of interest expense based on an effective
estimated rate. In the fourth quarter of fiscal 1999 BIS converted
$233,000 of the term loan and the $100,000 demand note into 383,000
common shares at $0.87 per share, the fair market value at that time.
Also, in 1999 the Company sold 219,000 common shares for $190,000.
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 1999, 1998 and
1997.
In October 1998 the Company entered into a loan agreement with the
Buffalo and Erie County Regional Development Corporation (RDC) to
finance a long term contract with an agency of a state government.
Proceeds were drawn on the loan as work was performed and all work
under the contract was completed prior to year end at which time
payments from the agency were assigned to the RDC. The loan will be
repaid in 60 equal installments beginning in April 1999 with interest
at 6% fixed for the term of the agreement. The amount and timing of the
loan repayments approximate the payments due from the agency.
Payments on long-term debt are estimated to be due as follows:
YEAR ENDING MARCH 31 AMOUNT (IN THOUSANDS)
-------------------- ---------------------
2000 $ 390
2001 484
2002 577
2003 337
2004 89
=====
(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.
===============================================================================
PAGE 16 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 18
===============================================================================
A summary of stock option activity follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- ---------------------- -------------------------
Shares Weighted Shares Weighted Shares Weighted
Subject to Average Subject to Average Subject to Average
Options Exercise Options Exercise Options Exercise
(thousands) Price (thousands) Price (thousands) Price
--------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 772 $ 0.78 525 $ 0.56 536 0.55
Granted 148 1.14 266 1.25 -
Canceled (86) 0.74 (4) 0.50 (8) 0.50
Exercised (73) 0.52 (15) 0.50 (3) 0.50
------- -------- --------
Outstanding end of year 761 0.88 772 0.78 525 0.56
======= ======== ========
Exercisable at year end 500 0.74 501 0.62 342 0.55
======= ======== ========
Reserved for grant, end of year 17 79 41
======= ======== ========
Weighted-average fair value of
options granted during year $ 0.57 $0.69 $ -
</TABLE>
At March 31, 1999, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $.50 - $1.63 and
6.4 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>
---------------------
1999 1998
---------------------
<S> <C> <C>
Risk-free interest rate 5.87% 5.45%
Price volatility 42.0% 45.4%
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 1999 and 1998 would be decreased and the reported net loss
for 1997 would be increased by $105,000, $50,000 and $17,000,
respectively, resulting in a $(.01) loss for 1999 with no change in the
reported per share amounts for 1998 and 1997. The following warrants
are outstanding at March 31, 1999:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Expiration Date
---------------- -------------- ---------------
<S> <C> <C>
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 .
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 17
<PAGE> 19
===============================================================================
(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 $31,000 in 1999,
$29,000 in 1998 and $25,000 in 1997.
(5) INCOME TAXES
There were no tax benefits established in the statements of operations
for the year ended March 31, 1997 since the Company had fully reserved
for the tax effect of net deductible temporary differences and
operating loss carry forwards 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 1999 and 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:
-----------------------------
1999 1998
-----------------------------
(in thousands)
Net operating loss carry forwards $ 1,136 $ 898
Inventory write downs 140 290
Depreciation 77 85
Vacation pay 77 93
Bad debt allowance 90 84
Software production costs (403) (263)
Other 83 66
------ ------
$ 1,200 $ 1,253
====== ======
A prior year ownership change limits the future use of the net
operating loss and credit carry forwards 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,
$2,840,000 of tax loss carryforward is available through 2014.
(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 $641,000 in 1999, $682,000 in 1998 and $703,000 in 1997.
Future minimum rental payments required under leases that have initial
or remaining noncancellable lease terms in excess of one year are:
$384,000 in 2000, $33,000 in 2001, and $4,000 in 2002.
(7) BUSINESS ACQUISITION
On January 15, 1999 the Company acquired the assets of Icon Technology
LLC (Icon) in exchange for 2,500 shares of preferred stock which are
convertible into 2,500,000 shares of common stock upon shareholder
approval at the Company's 1999 annual meeting. The preferred stock has
no provision for
===============================================================================
PAGE 18 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 20
===============================================================================
dividends. The acquisition was accounted for as a purchase.
Accordingly, assets acquired and liabilities assumed are recorded at
their estimated fair values at the date of acquisition. The excess of
the purchase price over the fair value of net assets acquired was
$1,201,000 and is recorded as goodwill to be amortized over a period
of 7 years. The purchase price allocation was made based in some cases
on preliminary information which may be subject to refinement in
fiscal year 2000.
The operating results of Icon have been included in the statement of
operations from January 1, 1999. The unaudited pro forma results below
assume the acquisition had occurred at the beginning of fiscal years
ended March 31, 1999 and March 31, 1998.
<TABLE>
<CAPTION>
---------------------------
1999 1998
---------------------------
(In thousands)
<S> <C> <C>
Revenue $15,801 $7,931
Net earnings - 48
Earnings per share basic
and diluted - -
</TABLE>
(8) SUPPLEMENTAL CASH FLOW INFORMATION
The following provides supplemental cash flow data:
<TABLE>
<CAPTION>
--------------------------------
1999 1998 1997
----------------------------------
(in thousands)
<S> <C> <C> <C>
Interest paid $ 185 $ 120 $ 40
====== ====== ======
Non-cash financing activities:
Debt converted to common stock by BIS Partners, L.P. $ 333 $ -- $ --
Preferred stock issued in connection with acquisition 1,250 -- --
====== ====== ======
</TABLE>
(9) MAJOR CUSTOMER
Sales to the Company's largest customer accounted for 10%, 17% and 20%
of total revenues for 1999, 1998 and 1997, respectively. The Company
performs hardware maintenance services for end users under various
subcontracts from this customer. These subcontracts can be canceled
with 30 days notice.
(10) SEGMENT INFORMATION
In 1999 the company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which requires reporting
certain financial information according to the "management approach."
This approach requires reporting information regarding operating
segments on the basis used internally by management to evaluate segment
performance. The Statement has been adopted for all periods presented.
The accounting policies of the segments are the same as those
described in note 1. Segments are determined based on product
categories. The Company evaluates performance based on operating
profits.
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 19
<PAGE> 21
===============================================================================
Reportable segments are comprised as follows: Hardware maintenance services,
generally on PC related equipment: Software licensing and software support
services, predominantly to the legal industry: and Corporate operations.
The following provides segment information:
<TABLE>
<CAPTION>
------------------------------------------------
1999 1998 1997
-----------------------------------------------
(in thousands)
<S> <C> <C> <C>
Hardware Maintenance:
Total revenues $ 8,590 $ 11,955 $ 9,538
Operating earnings 510 1,083 340
Identifiable assets 3,861 4,942 4,496
Capital expenditures 158 20 122
Depreciation and amortization 65 55 50
Software:
Total revenues 6,404 5,110 4,639
Operating earnings 1,169 753 816
Identifiable assets 4,515 2,128 2,079
Capital expenditures 648 397 460
Depreciation and amortization 436 307 186
Corporate:
Total expense 1,491 1,622 1,502
Identifiable assets 330 307 378
Capital expenditures 64 18 80
Depreciation and amortization 34 52 87
Consolidated:
Total revenues 14,994 17,065 14,177
Operating earnings (loss) 188 214 (346)
Identifiable assets 8,706 7,377 6,953
Capital expenditures 870 435 662
Depreciation and amortization 535 414 323
</TABLE>
(11) 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 20 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 22
- -------------------------------------------------------------------------------
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, 1999 and 1998, and the related statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended March 31, 1999. 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, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended March 31,
1999, in conformity with generally accepted accounting principles.
KPMG LLP
Buffalo, New York
June 28, 1999
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 21
<PAGE> 23
===============================================================================
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 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
June 26, 1998 1 1/2 15/16
September 25, 1998 1 1/4 7/8
December 25, 1998 1 1/2 13/16
March 31, 1999 2 1 3/4
</TABLE>
The Company's common stock was held by approximately 379 shareholders
of record as of June 23, 1999.
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 22 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 24
===============================================================================
ANNUAL MEETING
The annual meeting of shareholders will take place at 10:00 a.m. on
Thursday, September 16, 1999 at:
Buffalo and Erie County Public Library Auditorium
Clinton and Ellicott Streets
Buffalo, New York 14203
SHAREHOLDERS INQUIRIES
Address all shareholder inquiries to:
Secretary
Barrister Information Systems Corporation
465 Main Street
Buffalo, New York 14203
Telephone: (716) 845-5010
<TABLE>
<CAPTION>
DIRECTORS
<S> <C>
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. Jay S. Moeller
President and Chief Executive Officer President, Software Division
Hemex, Inc Barrister Information Systems Corporation
Richard P. Beyer James D. Morgan
Vice President, Finance Vice President and Chief Scientist
Barrister Information Systems Corporation Comptek Research, Inc.
OFFICERS
Henry P. Semmelhack Thomas W. Jones
President and Chairman Vice President, LegalHouse Development
Richard P. Beyer Jay S. Moeller
Vice President, Finance and Treasurer President, Software Division
David L. Blankenship Mark J. Phillips
Vice President, Services Operations Vice President, Sales
Mark C. Donadio Susan T. Robinson
Vice President, Secretary Vice President, Software Operations
and General Counsel
</TABLE>
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999 PAGE 23
<PAGE> 25
===============================================================================
BARRISTER INFORMATION SYSTEMS CORPORATION OFFICES
CORPORATE
465 MAIN STREET
BUFFALO, NY 14203
716-845-5010
FAX: 716-845-5033
WEBSITE: WWW.BARRISTER.COM
ATLANTA
1597 PHOENIX CTR OFFICE PARK
SUITE 1
PHOENIX BLVD
COLLEGE PARK, GA 30308
770-997-4300
BOSTON
45 POND STREET
NORWELL, MA 02061
781-681-7070
CLEVELAND
THE ATRIUM OFFICE PLAZA
668 EUCLID AVENUE
SUITE 310A
CLEVELAND, OH 44114
216-575-7570
HARTFORD
701 HEBRON AVE.
GLASTONBURY, CT 06033
860-659-1178
NEW YORK CITY
253 WEST 35TH STREET
NEW YORK, NY 10004
212-564-7187
RICHMOND
593 SOUTHLAKE BLVD
RICHMOND, VA 23236
804-897-9440
SAN DIEGO
6046 CORNERSTONE CT. W.
SUITE 102
SAN DIEGO, CA 92121
619-535-9294
SAN FRANCISCO
4340 REDWOOD HWY
#D320
SAN RAFAEL, CA 94903
415-491-6269
WASHINGTON/
ARLINGTON
3426 N. WASHINGTON BLVD.
ARLINGTON, VA 22201
703-524-9400
TimeManager and Barrister/Eagle are trademarks, Javelan, Legalhouse, 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) 1999 Barrister Information Systems Corporation.
All rights reserved.
===============================================================================
PAGE 24 BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999
<PAGE> 1
BARRISTER INFORMATION SYSTEMS CORPORATION
EXHIBIT 23 - KPMG 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 29, 1999 relating to
the balance sheets of Barrister Information Systems Corporation as of March 31,
1999 and 1998, and the related statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended March 31,
1999, and the related schedule which reports appear in or are incorporated by
reference in the March 31, 1999 annual report on Form 10-K of Barrister
Information Systems Corporation.
KPMG LLP
Buffalo, New York
June 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 222
<SECURITIES> 0
<RECEIVABLES> 3,090
<ALLOWANCES> 0
<INVENTORY> 2,341
<CURRENT-ASSETS> 5,703
<PP&E> 4,138
<DEPRECIATION> 3,555
<TOTAL-ASSETS> 8,706
<CURRENT-LIABILITIES> 3,407
<BONDS> 1,487
0
1,250
<COMMON> 2,134
<OTHER-SE> 428
<TOTAL-LIABILITY-AND-EQUITY> 8,706
<SALES> 2,251
<TOTAL-REVENUES> 14,994
<CGS> 433
<TOTAL-COSTS> 10,453
<OTHER-EXPENSES> 4,353
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 8
<INCOME-TAX> 0
<INCOME-CONTINUING> 8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
