<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>



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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.


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PAGE 24        BARRISTER INFORMATION SYSTEMS CORPORATION -- ANNUAL REPORT 1999