BARRISTER GLOBAL SERVICES NETWORK INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended December 31, 2002

Commission File Number
0-14063

BARRISTER GLOBAL SERVICES NETWORK, INC.
(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.)


290 Ellicott Street, Buffalo, New York (Address of principal executive offices)		14203 (Zip Code)

Registrant’s telephone number, including area code (716) 845-5010

Not Applicable

Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes	X	No


Class		Outstanding at January 31, 2003
Common $.24 Par Value		11,901,326 Shares

BARRISTER GLOBAL SERVICES NETWORK, INC.

INDEX

Page

PART I. Financial Information
Number


Item 1.		Financial Statements


Condensed Balance Sheets at December 31, 2002
and March 31, 2002		3

Condensed Statements of Operations -
Three and Nine Months Ended December 31, 2002
and December 31, 2001		4

Condensed Statement of Stockholders’ Equity -
Nine Months Ended December 31, 2002		5

Condensed Statements of Cash Flows -
Nine Months Ended December 31, 2002
and December 31, 2001		6

Notes to Condensed Financial Statements		7


Item 2.	Management’s Discussion and Analysis
	of Financial Condition and Results
	of Operations	9

Item 4.	Evaluation of Disclosure Controls and Procedures	11

PART II. Other Information


	Item 6.	Exhibits and Reports on Form 8-K	12

SIGNATURES			13

CERTIFICATIONS			14

PART I. FINANCIAL INFORMATION
BARRISTER GLOBAL SERVICES NETWORK, INC.
CONDENSED BALANCE SHEETS
(In thousands) (unaudited)


			December 31			March 31

			2002			2002

ASSETS
Current assets:
	Cash and equivalents		$	1,528		$	1,222
	Short-term investments			1,016			1,040
	Accounts receivable			1,243			1,289
	Service parts inventory			600			933
	Prepaid expenses			92			23
	Deferred and refundable income taxes			487			487

		Total current assets		4,966			4,994

Equipment and leasehold improvements, at cost				2,090			1,835
	Less accumulated depreciation			1,576			1,448

		Net equipment and leasehold improvements		514			387

Marketable securities				—			1,730
Goodwill				2,005			—
Intangible assets				186			—
Other assets				57			25

			$	7,728		$	7,136

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current installments of long-term debt		$	38		$	307
	($266 to a related party at March 31, 2002)			1,250			—
	Amount due for acquisition			1,250			—
	Accounts payable			494			761
	Accrued compensation and benefits			366			677
	Customer advances and unearned revenue			958			661
	Other accrued expenses			51			152

		Total current liabilities		3,157			2,558

Deferred compensation				197			267
Long-term debt, excluding current installments				—			27
Stockholders’ equity :
	Preferred stock			—			—
	Common stock, $.24 par value, 11,901,326 and 11,844,963 shares outstanding at December and March respectively			2,867			2,867
	Additional paid-in capital			23,025			23,028
	Accumulated deficit			(21,458	)		(21,550	)
	Accumulated other comprehensive loss			(2	)		—
	Note receivable for treasury shares issued			(31	)		—
	Treasury stock at cost			(27	)		(61	)

		Total stockholders’ equity		4,374			4,284

			$	7,728		$	7,136

See accompanying notes to condensed financial statements.

BARRISTER GLOBAL SERVICES NETWORK, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)


			Three months ended						Nine months ended
			Dec 31			Dec 31			Dec 31			Dec 31
			2002			2001			2002			2001

Revenues			$	3,188		$	3,296		$	10,194		$	9,423
Costs and expenses:
	Cost of services			2,291			2,439			7,574			7,010
	Selling, general and administrative expenses			1,033			957			3,017			2,779

Operating loss				(136)			(100)			(397	)		(366	)

Other expense (income):
	Interest expense to related party			—			6			5			28
	Other interest income			(16	)		(53	)		(66	)		(168	)
	Common stock received from demutualization			—			—			(428	)		—

		Total other income		(16	)		(47	)		(489	)		(140	)

(Loss) earnings before income taxes				(120	)		(53	)		92			(226	)
Income tax benefit				(77	)		(20	)		—			(85	)

Net (loss) earnings			$	(43)		$	(33	)	$	92		$	(141	)

Basic and diluted (loss) earnings per common share			$	.00		$	.00		$	.01		$	(.01	)

Weighted average number of common shares outstanding:
		Basic		11,901			11,945			11,889			11,945

		Diluted		11,901			11,945			11,892			11,945

See accompanying notes to condensed financial statements.

BARRISTER GLOBAL SERVICES NETWORK, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
(In thousands, except share data)


			Additional
	Common		paid-in			Accumulated			Accumulated other			Treasury
	stock		capital			deficit			comprehensive loss			stock			Total

Balance at March 31, 2002	$	2,867	$	23,028		$	(21,550	)	$	—		$	(61	)	$	4,284
Sale of 56,363 treasury shares		—		(3	)		—			—			34			31
Note receivable for treasury shares		—		—			—			—			(31	)		(31	)
Unrealized loss on securities, net of tax		—		—			—			(2	)		—			(2	)
Net earnings		—		—			92			—			—			92

Balance at December 31, 2002	$	2,867	$	23,025		$	(21,458	)	$	(2	)	$	(58	)	$	4,374

See accompanying notes to condensed financial statements.

BARRISTER GLOBAL SERVICES NETWORK, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)


				Nine months ended

				Dec 31			Dec 31
				2002			2001

Cash flows from operating activities:
	Net earnings (loss)			$	92		$	(141	)
	Adjustments to reconcile net earnings (loss) to net cash (used) provided by operating activities:
		Depreciation			128			127
		Amortization			33			—
		Common stock received from demutualization			(428	)		—
		Changes in current assets and liabilities:
			Accounts receivable		446			423
			Inventories		333			(5	)
			Prepaid expenses		(65	)		(41	)
			Accounts payable		(395	)		165
			Accrued compensation and benefits		(994	)		(109	)
			Customer advances and unearned revenues		267			(286	)
			Other liabilities		(140	)		(121	)

		Net cash (used) provided by operating activities			(723	)		12

Cash flows from investing activities:
	Additions to equipment and leasehold improvements				(114	)		(70	)
	Maturity of investments				3,119			3,993
	Purchases of investments				(939	)		(3,985	)
	Acquisition of business, net of cash received				(713	)		—
	Other assets				(28	)		—

		Net cash provided (used) by investing activities			1,325			(62	)

Cash flows from financing activities:
	Repayment of debt				(296	)		(321	)

		Net cash used in financing activities			(296	)		(321	)

Net increase (decrease) in cash and equivalents					306			(371	)
Cash and equivalents at beginning of period					1,222			1,104

Cash and equivalents at end of period				$	1,528		$	733

	Interest paid			$	9		$	39
	Non-cash investing and financing activities:
		Amount due for acquisition		$	1,250		$	—
		Sale of treasury shares in exchange for note receivable		$	31		$	—

See accompanying notes to condensed financial statements.

BARRISTER GLOBAL SERVICES NETWORK, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Barrister Global Services Network, Inc. (the “Company”) provides equipment maintenance for multi-vendor equipment including personal computers and related equipment generally attached to local area networks. This comprehensive maintenance and warranty service is done on a contractual and time and materials basis. These services are provided through a network of service locations throughout the United States.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required by GAAP for complete financial statement presentation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations, and cash flows have been included. Operating results for the period ended December 31, 2002 are not necessarily indicative of the results to be expected for other interim periods or the full year. These financial statements should be read in conjunction with the financial statements and accompanying notes contained in the Barrister Global Services Network, Inc. Form 10-K for the fiscal year ended March 31, 2002.

2. Cash and equivalents consist of cash and liquid debt instruments with maturity of three months or less from the date of purchase. Cash and equivalents are stated at cost plus accrued interest, which approximates market value. Short-term investments contain both held-to-maturity securities of $515,000, based on the Company’s ability and intent to hold the securities until maturity and available-for-sale securities of $501,000. The held-to-maturity securities are recorded at amortized cost adjusted for the accretion of discounts or cost plus accrued interest. Available-for-sale securities are carried at fair value, based on quoted market prices. The net unrealized gains or losses, if any, on these securities are reported as a separate component of stockholders’ equity, net of tax. Short-term investments include corporate debt instruments. At December 31, 2002, short-term investments also included shares of Principal Financial Group, Inc. (“Principal”) common stock received in the demutualization of Principal.

3. On July 15, 2002, the Company acquired all of the outstanding stock of Advantage Innovation, Inc. (“Advantage”) for $1,200,000 in cash and future consideration of two contingent payments. The contingent payments are due on the first and second anniversaries of the closing, in an amount based upon the amount of earnings before interest, taxes, depreciation and amortization achieved by Advantage in each of the two years. Based on the results of Advantage as of December 31, 2002, the first contingent payment of $1,250,000 has been earned and therefore this amount has been recorded on the balance sheet as additional goodwill and as a current liability. This amount has been disclosed as a non cash investing activity in the statement of cash flows. Advantage was a privately held technical and computer services firm located in New Orleans, Louisiana performing services nationwide generally in the consumer market. The acquisition has been accounted for as a purchase and, accordingly, the operating results of Advantage have been included in the Company’s financial statements since the date of acquisition. The assets acquired and liabilities assumed were recorded at estimated fair values as determined by the Company’s management based on preliminary information available. The Company also had an independent valuation performed for the intangible assets associated with the acquisition. These assets were valued at $219,000 and are included in other assets on the balance sheet. The excess of the aggregate purchase price over the fair value of the net assets acquired is accounted for as

goodwill. The pro forma results for the nine month periods ending December 31, 2002 and December 31, 2001, had the acquisition occurred at the beginning of the period , are as follows: Revenues of $12,288,000 and $11,230,000 respectively; Net earnings of $ 156,000 and net loss of $(33,000) respectively; and Net earnings per common share, basic and diluted of $ .01 and net loss per common share of $(.00) respectively. The pro forma amounts do not purport to be indicative of the actual results that would have occurred had the transaction been consummated on April 1, 2001 or of the future results of operations which will be obtained as a result of the consummation of the transaction.

4. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”, SFAS No. 142, “Goodwill and Other Intangible Assets” and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” on April 1, 2002. SFAS No. 141 requires that the purchase method be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill and intangible assets with indefinite lives from an amortization method to an impairment approach. SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale and it expands the presentation of discontinued operations to include more disposal transactions. The adoption of SFAS No. 141 and No. 144 did not have any effect on the financial statements. Goodwill and other intangible assets subject to SFAS No. 142 were approximately $2,191,000 as of December 31, 2002 attributed to the purchase of Advantage on July 15, 2002. No goodwill existed prior to the acquisition of Advantage.

5. In June 2002 the Company received 14,159 shares of Principal Financial Group, Inc. common stock issued to the Company in connection with the demutualization of Principal. The shares issued pertained to the Company’s defined benefit pension plan which had been terminated in 1991. These financial statements reflect all adjustments necessary to record the value of these shares in total other income on the effective date of receipt by the Company and to record subsequent changes in the fair market value of the shares in accumulated other comprehensive loss.

6. Total comprehensive income (loss) recorded by the Company for the three and nine-month periods ended December 31, 2002 includes unrealized gains or losses on available-for-sale securities as shown below. For the three and nine month periods ended December 31, 2001, total comprehensive loss was the same as the net loss.


	Three months			Nine months
	ended			ended

Net (loss) earnings	$	(43	)	$	92
Unrealized gain (loss), net of tax		34			(2	)

Total comprehensive (loss) income	$	(9	)	$	90

7. The weighted average common shares used in the computation of basic and diluted earnings per share were as follows:

Three months ended

Six months ended

Dec. 31

2002

2001

2002

2001

Basic:


For Quarter Ended	December 31, 2002

Commission File Number	0-14063