TABLE OF CONTENTS

INDEX
PART I. FINANCIAL INFORMATION
BARRISTER GLOBAL SERVICES NETWORK, INC. BALANCE SHEETS
BARRISTER GLOBAL SERVICES NETWORK, INC. STATEMENTS OF OPERATIONS
BARRISTER GLOBAL SERVICES NETWORK, INC. STATEMENT OF STOCKHOLDERS’ EQUITY
BARRISTER GLOBAL SERVICES NETWORK, INC. STATEMENTS OF CASH FLOWS
BARRISTER GLOBAL SERVICES NETWORK, INC. NOTES TO FINANCIAL STATEMENTS
PART II. OTHER INFORMATION
BARRISTER GLOBAL SERVICES NETWORK, INC.

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.

FORM 10-Q

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

For Quarter Ended		September 30, 2001
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 incorporation of organization)		(I.R.S. Employer Identification No.)
290 Ellicott Street, Buffalo, New York		14203
(Address of principal executive offices)		(Zip Code)

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

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 October 29, 2001
Common $.24 Par Value		11,944,963 Shares

 

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BARRISTER GLOBAL SERVICES NETWORK, INC.

INDEX

		Page
PART I. Financial Information		Number
	Item 1. Financial Statements
	Balance Sheets at September 30, 2001 and March 31, 2001		3
	Statements of Operations - Three and Six Months Ended September 30, 2001 and September 30, 2000		4
	Statement of Stockholders’ Equity - Six Months Ended September 30, 2001		5
	Statements of Cash Flows - Six Months Ended September 30, 2001 and September 30, 2000		6
	Notes to Financial Statements		7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
PART II. Other Information
	Item 4. Submission of matters to a vote of Security Holders		11
	Item 6. Exhibits and Reports on Form 8-K		11

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				September 30				March 31
				2001				2001
				(unaudited)
ASSETS
Current assets:
	Cash and equivalents			$	1,223			$	1,104
	Short-term investments				931				3,253
	Accounts receivable				1,547				1,905
	Service parts inventory				1,380				1,410
	Prepaid expenses				86				24
		Total current assets			5,167				7,696
Equipment and leasehold improvements, at cost					2,462				2,384
	Less accumulated depreciation				1,973				1,890
		Net equipment and leasehold improvements			489				494
Marketable securities					1,721				—
Other assets					27				25
				$	7,404			$	8,215
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current installments of long-term debt ($401 and $379 to a related party, respectively)			$	449			$	424
	Accounts payable				524				609
	Accrued compensation and benefits				456				484
	Customer advances and unearned revenue				462				732
	Other accrued expenses				39				148
		Total current liabilities			1,930				2,397
Long-term debt, excluding current installments ($63 and $274 to a related party, respectively)					119				355
Stockholders’ equity :
	Preferred stock				—				—
	Common stock, $.24 par value				2,867				2,867
	Additional paid-in capital				23,028				23,028
	Accumulated deficit				(20,540	)			(20,432	)
		Total stockholders’ equity			5,355				5,463
				$	7,404			$	8,215

See accompanying notes to financial statements

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					Three months ended								Six months ended
					Sept 30				Sept 30				Sept 30				Sept 30
					2001				2000				2001				2000
Revenues					$	3,084			$	2,696			$	6,127			$	5,096
Costs and expenses:
		Cost of services				2,299				2,025				4,571				3,813
		Selling, general and administrative expenses				933				836				1,822				1,586
Operating loss						(148	)			(165	)			(266	)			(303	)
Interest expense (income):
		Related party				10				22				22				43
		Other				(53	)			(80	)			(115	)			(117	)
			Total interest, net			(43	)			(58	)			(93	)			(74	)
Net loss from continuing operations before income taxes						(105	)			(107	)			(173	)			(229	)
Income tax benefit						(40	)			(38	)			(65	)			(83	)
Net loss from continuing operations						(65	)			(69	)			(108	)			(146	)
Discontinued operations:
	Gain on sale of discontinued operations net of income taxes of $1,694					—				(5	)			—				1,773
Net (loss) earnings					$	(65	)		$	(74	)		$	(108	)		$	1,627
Basic and diluted (loss) earnings per common share:
		Continuing operations			$	(.01	)		$	(.01	)		$	(.01	)		$	(.01	)
		Discontinued operations				.00				.00				.00				.15
			Total		$	(.01	)		$	(.01	)		$	(.01	)		$	.14
Weighted average number of common shares outstanding:
			Basic and diluted			11,945				11,924				11,945				11,899

See accompanying notes to financial statements.

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						Additional
		Common				paid-in				Accumulated
		stock				capital				deficit				Total
Balance at March 31, 2001		$	2,867			$	23,028			$	(20,432	)		$	5,463
Net loss			—				—				(108	)			(108	)
Balance at Sept. 30, 2001		$	2,867			$	23,028			$	(20,540	)		$	5,355

Common stock — 11,944,963 shares issued and outstanding at September 30, 2001 and March 31, 2001.

See accompanying notes to financial statements.

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					Six months ended
					Sept 30				Sept 30
					2001				2000
Cash flows from operating activities:
	Net (loss) earnings				$	(108	)		$	1,627
	Adjustments to reconcile net earnings (loss) to net cash used by operating activities:
		Gain on sale of discontinued operations				—				(3,467	)
		Deferred income taxes				—				826
		Depreciation				83				71
		Changes in current assets and liabilities:
			Accounts receivable			358				(472	)
			Inventories			30				145
			Prepaid expenses			(62	)			(22	)
			Accounts payable			(85	)			(674	)
			Accrued compensation and benefits			(28	)			(296	)
			Customer advances and unearned revenues			(270	)			47
			Other liabilities			(109	)			770
		Net cash used by operating activities				(191	)			(1,445	)
Cash flows from investing activities:
	Additions to equipment and leasehold improvements					(78	)			(239	)
	Proceeds from sale of discontinued operations					—				6,623
	Maturity of investments					3,349				—
	Purchases of short-term investments					(2,748	)			(3,568	)
	Other assets					(2	)			1
		Net cash provided by investing activities				521				2,817
Cash flows from financing activities:
	Proceeds from long-term debt					—				152
	Repayment of debt					(211	)			(708	)
	Proceeds from sale of common stock					—				44
		Net cash used in financing activities				(211	)			(512	)
Net increase in cash and equivalents from continuing operations						119				860
Net increase in cash from discontinued operations						—				32
Net increase in cash and equivalents						119				892
Cash and equivalents at beginning of period						1,104				161
Cash and equivalents at end of period					$	1,223			$	1,053
Supplemental disclosure of cash flow information:
		Interest paid			$	28			$	64

See accompanying notes to financial statements.

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BARRISTER GLOBAL SERVICES NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS

1.     In the opinion of Management, the accompanying financial statements present fairly the financial position, results of operations and cash flows for the periods shown. The second quarter results for each year represent operations for the quarters ended September 30, 2001 and September 30, 2000. The financial data included herein was compiled in accordance with the same accounting policies applied to the Company’s audited annual financial statements. Any adjustments made were of a normal recurring nature.

The results of operations for the six month period ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year.

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 and marketable securities are classified as held-to-maturity securities based on the Company’s ability and intent to hold the securities until maturity. The securities are recorded at amortized cost adjusted for the accretion of discounts or cost plus accrued interest. Short-term investments consist of certificates of deposits and corporate debt instruments. Marketable securities consist of mortgage-backed securities and are expected to mature in less than two years.

3.     On May 5, 2000, the Company sold substantially all of the assets of the Company’s software business to Keystone Solutions US, Inc. (“Keystone”), a wholly owned subsidiary of Keystone Software PLC. The Company has agreed to indemnify Keystone with respect to any breach of its representations and warranties (subject to a $50,000 basket and a cap of the purchase price paid) or any breach of any covenant of the Company contained in the Asset Purchase Agreement. The Company agreed to indemnify Keystone with respect to claims or actions pending at or arising after the closing date (May 5, 2000) that related to the operation of the software business prior to that date.

     The pre-tax net gain on the sale of the software business recorded in the first six months of the prior year was $3,467,000. The net gain less applicable income taxes (see note 4) is shown in the statements of operations under the caption discontinued operations.

4.     The income tax benefit recorded in each of the comparable quarters on the net loss from continuing operations approximated the statutory tax rate. No additional tax benefits were established in the statements of operations for the comparable periods, since the Company has fully reserved for the tax effect of net deductible temporary differences and loss carryforwards. These benefits will be recorded in future periods as they are realized or as their realization becomes predictable.

     The income tax provision associated with the gain from the sale of the software business (see note 3) was higher than the statutory tax rate since goodwill valued at $986,000 on the books had a zero basis for tax purposes. The provision includes current taxes of $894,000 and deferred taxes of $800,000. The deferred taxes resulted from the use of tax loss carryforwards from prior years, the reversal of temporary differences between book and tax on the assets sold,

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and the temporary difference created by the treatment of a portion the proceeds which were held in escrow.

5.     The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” beginning April 1, 2001. SFAS No. 133 requires all derivatives to be recorded on the balance sheet at fair value and establishes new accounting rules for hedging instruments. The Company does not enter into hedging transactions or acquire derivative instruments, accordingly, SFAS No. 133 had no impact on the financial statements.

     The Company will adopt SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible 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. The pronouncements are not expected to have an impact on the financial statements.

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

Financial Condition

     Cash and equivalents, short-term investments and marketable securities totaled $3,875,000 at September 30, 2001 and $4,357,000 at March 31, 2001. The net decrease of $482,000 was primarily a result of debt repayments of $211,000, net cash used by operating activities of $191,000 and additions to equipment and leasehold improvements of $78,000.

     The principal cash requirements expected for fiscal 2002 are debt repayments approximating $424,000, and additions to equipment and leasehold improvements which are expected to decrease from amounts spent in the prior year. The Company continues to explore the potential of a move of its headquarters into more suitable space. The Company had entered into a contingent lease for such a move, but decided to let this lease expire. It is expected that if any move takes place, the earliest that it would occur would be next fiscal year. The Company’s cash and short term investments will be sufficient to cover working capital, capital expenditure requirements and debt repayments in fiscal 2002.

Results of Operations

     For the quarter ended September 30, 2001, revenues increased 14.4% from the same quarter in 2000. For the six month period ended September 30, 2001, revenues increased 20.2% compared with the first six months of the prior year. These increases resulted from growth in revenues from hardware maintenance contracts and from services provided on a time and materials basis. For the comparative second quarters, revenues from hardware maintenance contracts grew to $2,287,000, an increase of 10.3% and for the comparative first six months these revenues grew to $4,570,000, an increase of 17.4%. These increases principally resulted from the capture of new contracts in the prior year and one large contract which started in September of this year. Time and material revenues increased by 21.3% to a total of $756,000 for the comparable second quarters and by 28.3% to a total of $1,501,000 for the comparative six month periods. The principal reasons for these increases were business generated from a new customer obtained from a reseller that started in April, 2001, the continuation of services outsourced by a direct customer, which commenced in the second half of the previous fiscal year, and services provided on a new large contract, which started in September of this year.

     The cost of services as a percentage of revenues remained approximately the same for the comparable second quarters, amounting to 74.6% for the second quarter of the current year compared to 75.1% for the second quarter of the prior year. Similar results were realized for the comparable first six months, as these costs amounted to 74.6% of revenues for the first six months of this year compared to 74.8% of revenues for the first six months of the prior year.

     Selling, general and administrative expenses were 30.3% of revenues for the second quarter of this year compared to 31.0% of revenues for the comparable quarter last year. For the comparable six month periods, these expenses were 29.7% of revenues compared to 31.1% of revenues in the previous year. The primary reason for these decreases is that the increases in revenues have been achieved without a commensurate growth in general and administrative expenses.

     The decrease in interest income for the comparable second quarters was primarily based on a drop in interest rates, which impacted earnings from the Company’s investments. An

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increase in interest income was realized for the comparable six month periods since the net proceeds from the sale of the Company’s software business was received in May, 2000. Prior to that date, the Company did not have any investments and was incurring interest expense on certain borrowings.

     The income tax benefit recorded in each of the comparable quarters and six month periods on the net loss from continuing operations approximated the statutory tax rate. No additional tax benefits were established in the statements of operations for the comparable periods, since the Company has fully reserved for the tax effect of net deductible temporary differences and loss carryforwards. These benefits will be recorded in future periods as they are realized or as their realization becomes predictable.

     The pre-tax net gain on discontinued operations recognized in the first six months of the prior year is based on the sale of the Company’s software business to Keystone on May 5, 2000. The income tax provision associated with the gain from the sale of the software business is higher than the statutory tax rate since goodwill valued at $986,000 on the books had a zero basis for tax purposes. The provision included current taxes of $894,000 and deferred taxes of $800,000. The deferred taxes resulted from the use of tax loss carryforwards from prior years, the reversal of temporary differences between book and tax on the assets sold and the temporary difference created by the treatment of a portion of the proceeds which were held in escrow.

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.

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PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

(a)		The Company’s Annual Meeting of Shareholders was held on September 10, 2001
(b)		At the Annual Meeting, the stockholders approved the following proposals, as recommended by management.

						Votes		Votes
			Votes			against		abstained
			for			or withheld		or unvoted
1.		Election of the following nominees for director:
		Joseph A. Alutto		10,510,774		55,622		—
		Franklyn S Barry		10,508,774		57,622		—
		Richard P. Beyer		10,510,774		55,622		—
		Warren W. Emblidge		10,492,774		73,622		—
		Richard E. McPherson		10,490,774		75,622		—
		James D. Morgan		10,510,774		55,622		—
		Henry P. Semmelhack		10,510,774		55,622		—
2.		Approval of amendment to the Company’s 1999 stock incentive plan to increase the number of shares of the Company’s common stock available for options and awards under the plan by 400,000 shares to a total of 1,000,000 shares.		10,299,475		240,476		26,445
3.		Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the current fiscal year.		10,513,673		35,258		17,465

Item 6. Exhibits and Reports on Form 8-K

(a)		Exhibits: None
(b)		Reports on Form 8-K: None

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BARRISTER GLOBAL SERVICES NETWORK, INC.

Date:		November 13, 2001		By:		/s/ Henry P. Semmelhack
						Henry P. Semmelhack President and Chief Executive Officer
Date:		November 13, 2001		By:		/s/ Richard P. Beyer
						Richard P. Beyer Vice President, Finance (Principal Financial Officer)

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