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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


Form 10-Q

(Mark one)

|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

|      |                                                                                         
|----- | ----------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ___________ .

Commission file number 0-20034

ELITE INFORMATION GROUP, INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 41-1522214                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

|                                                  |  |           
|------------------------------------------------- |  | ----------
|5100 West Goldleaf Circle
Los Angeles, California |  | 90056     
|                                                  |  |           
|(Address of principal executive offices)          |  | (Zip code)

(323) 642-5200




(Registrants telephone number, including area code)


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 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 [   ].

As of November 6, 2001 there were 8,098,442 shares of Common Stock, $.01 par
value, outstanding.



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Elite Information Group, Inc.
Table of Contents


TABLE OF CONTENTS



|                                |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|Part I  Financial Information:
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | Consolidated Statements of Operations     
|                                |                                                                                               | Consolidated Balance Sheets               
|                                |                                                                                               | Consolidated Statements of Cash Flows     
|                                |                                                                                               | Notes to Consolidated Financial Statements
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Part II  Other Information    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                      
|EXHIBIT 11                     



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|-------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ------
|                                 |  |                                                                                                                   |  | Page  
|                                 |  |                                                                                                                   |  | Number
|                                 |  |                                                                                                                   |  |       
|Part I    Financial Information: |  |                                                                                                                  
|                                
|                                
|                                
|                                
|Item 1.                          |  | Financial Statements                                                                                              |  |       
|                                 |  | Consolidated Statements of Operations -

   Three and nine months ended September 30, 2001 and September 30, 2000 |  | 3     
|                                
|                                
|                                
|                                
|                                 |  | Consolidated Balance Sheets -
   September 30, 2001 and December 31, 2000                                         |  | 4     
|                                
|                                
|                                
|                                
|                                 |  | Consolidated Statements of Cash Flows -
   Nine months ended September 30, 2001 and
September 30, 2000            |  | 5     
|                                
|                                
|                                
|                                
|                                 |  | Notes to Consolidated Financial Statements                                                                        |  | 6 - 7 
|                                
|                                
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|Item 2.                          |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations                             |  | 7 -10 
|                                
|                                
|                                
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|Item 3.                          |  | Quantitative and Qualitative Disclosures about Market Risk                                                        |  | 10    
|                                
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|Part II   Other Information:     |  |                                                                                                                  
|                                
|                                
|                                
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|Item 6.                          |  | Exhibits and Reports on Form 8-K                                                                                  |  | 11    
|                                
|                                
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|Signature                        |  | 12                                                                                                               



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PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND
MAY BE TRADE NAMES OR TRADEMARKS OF ELITE INFORMATION GROUP, INC., ITS
SUBSIDIARIES OR THIRD PARTIES.



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Part I  Financial Information:




Item 1. Financial Statements




Elite Information Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |        |       |        | 
|----------------------------------- | ------------------------------------------------------- | --------- | ------------------------ | ----- | ------------------ | ----- | ----------------- | ----- | ----- | ----- | ------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                    |                                                         |           |                          |       | Three months ended |       | Nine months ended
|                                    |                                                         |           |                          |       | September 30,      |       | September 30,    
|                                    |                                                         |           |                          |       |                    |       |                  
|                                    |                                                         |           |                          |       | 2001               |       | 2000              |       | 2001  |       | 2000  
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |       
|Net revenue                         |                                                         | $         | 18,516                   |       |                    | $     | 12,858            |       |       | $     | 50,203 |        |       | $      | 39,933 |       
|                                    | Cost of revenue                                         |           |                          | 9,138 |                    |       |                   | 7,513 |       |       |        | 25,911 |       |        |        | 22,607 |      
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Gross profit                        |                                                         |           | 9,378                    |       |                    |       | 5,345             |       |       |       | 24,292 |        |       |        | 17,326 |       
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Operating expenses                  |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|                                    | Research and development                                |           |                          | 1,737 |                    |       |                   | 1,607 |       |       |        | 5,034  |       |        |        | 4,378  |      
|                                    | Sales and marketing                                     |           |                          | 2,710 |                    |       |                   | 2,622 |       |       |        | 8,544  |       |        |        | 7,763  |      
|                                    | General and administrative                              |           |                          | 1,975 |                    |       |                   | 1,487 |       |       |        | 5,592  |       |        |        | 4,834  |      
|                                    | Amortization of goodwill and other acquired intangibles |           |                          | 552   |                    |       |                   | 354   |       |       |        | 1,580  |       |        |        | 850    |      
|                                    | Write-off of in-process research and development        |           |                          |      |                    |       |                   | 1,000 |       |       |        |       |       |        |        | 1,000  |      
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|                                    |                                                         |           | Total operating expenses |       |                    | 6,974 |                   |       |       | 7,070 |        |        |       | 20,750 |        |        |       | 18,825 | 
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Operating income (loss)             |                                                         |           | 2,404                    |       |                    |       | (1,725            | )     |       |       | 3,542  |        |       |        | (1,499 | )     
|Interest income, net                |                                                         |           | 180                      |       |                    |       | 462               |       |       |       | 702    |        |       |        | 1,325  |       
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Income (loss) before income taxes   |                                                         |           | 2,584                    |       |                    |       | (1,263            | )     |       |       | 4,244  |        |       |        | (174   | )     
|Income tax (provision) benefit      |                                                         |           | (651                     | )     |                    |       | 1,113             |       |       |       | (1,325 | )      |       |        | 567    |       
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Net income (loss)                   |                                                         | $         | 1,933                    |       |                    | $     | (150              | )     |       | $     | 2,919  |        |       | $      | 393    |       
|                                    |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|Net income (loss) per share         |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|                                    |                                                         | - Basic   |                          | $     | 0.24               |       |                   | $     | (0.02 | )     |        | $      | 0.36  |        |        | $      | 0.05  |       
|                                    |                                                         | - Diluted |                          | $     | 0.23               |       |                   | $     | (0.02 | )     |        | $      | 0.36  |        |        | $      | 0.05  |       
|Weighted average shares outstanding |                                                         |           |                          |       |                    |       |                   |       |       |       |        |        |       |        |        |       
|                                    |                                                         | - Basic   |                          |       | 8,067              |       |                   |       | 8,542 |       |        |        | 8,062 |        |        |        | 8,515 |       
|                                    |                                                         | - Diluted |                          |       | 8,247              |       |                   |       | 8,542 |       |        |        | 8,187 |        |        |        | 8,758 |       

The accompanying notes are an integral part of these consolidated financial statements

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Elite Information Group, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)

|                                     |                                                                                                                      |                           |                            |        |               |        |        |              |        |        | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | ------ | ------------- | ------ | ------ | ------------ | ------ | ------ | 
|                                     |                                                                                                                      |                           |                            |        | September 30, |        |        | December 31,
|                                     |                                                                                                                      |                           |                            |        | 2001          |        | 2000  
|                                     |                                                                                                                      |                           |                            |        |               |        |       
|                                     |                                                                                                                      |                           |                            |        | (Unaudited)   |        |        |              |       
|Assets                               |                                                                                                                      |                           |                            |        |               |        |        |             
|Current assets                       |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     | Cash and cash equivalents                                                                                            |                           | $                          | 22,618 |               |        | $      | 24,787       |       
|                                     | Receivables                                                                                                          |                           |                            | 20,577 |               |        |        | 15,684       |       
|                                     | Deferred income taxes                                                                                                |                           |                            | 3,864  |               |        |        | 3,715        |       
|                                     | Other current assets                                                                                                 |                           |                            | 1,575  |               |        |        | 822          |       
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     |                                                                                                                      | Total current assets      |                            |        | 48,634        |        |        |              | 45,008 |       
|Property and equipment, net          |                                                                                                                      |                           | 2,221                      |        |               |        | 2,336  |             
|Software costs, net                  |                                                                                                                      |                           | 1,731                      |        |               |        | 1,167  |             
|Intangible assets, net               |                                                                                                                      |                           | 12,176                     |        |               |        | 12,385 |             
|Other assets, net                    |                                                                                                                      |                           | 1                          |        |               |        | 148    |             
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     |                                                                                                                      | $                         | 64,763                     |        |               | $      | 61,044 |             
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|Liabilities and Stockholders Equity |                                                                                                                      |                           |                            |        |               |        |        |             
|Current liabilities                  |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     | Accounts payable-trade                                                                                               |                           | $                          | 4,617  |               |        | $      | 3,552        |       
|                                     | Accrued compensation                                                                                                 |                           |                            | 3,390  |               |        |        | 3,024        |       
|                                     | Other accrued liabilities                                                                                            |                           |                            | 3,872  |               |        |        | 6,391        |       
|                                     | Deferred revenue                                                                                                     |                           |                            | 15,131 |               |        |        | 14,570       |       
|                                     | Income taxes payable                                                                                                 |                           |                            | 2,209  |               |        |        | (44          | )     
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     |                                                                                                                      | Total current liabilities |                            |        | 29,219        |        |        |              | 27,493 |       
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|Deferred income taxes                |                                                                                                                      |                           | 13                         |        |               |        | 911    |             
|Other liabilities                    |                                                                                                                      |                           |                           |        |               |        | 8      |             
|Stockholders equity                 |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     | Common stock, $.01 par value; Authorized 20,000,000 shares; Issued
shares were 9,418,123 and 9,415,123, respectively |                           |                            | 94     |               |        |        | 94           |       
|                                     | Paid-in capital                                                                                                      |                           |                            | 39,260 |               |        |        | 39,326       |       
|                                     | Less treasury stock, at cost, 1,351,021
and 1,362,276 shares, respectively                                           |                           |                            | (6,599 | )             |        |        | (6,645       | )     
|                                     | Accumulated earnings (deficit)                                                                                       |                           |                            | 2,776  |               |        |        | (143         | )     
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     |                                                                                                                      |                           | Total stockholders equity |        |               | 35,531 |        |              |        | 32,632 | 
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             
|                                     |                                                                                                                      | $                         | 64,763                     |        |               | $      | 61,044 |             
|                                     |                                                                                                                      |                           |                            |        |               |        |        |             

The accompanying notes are an integral part of these consolidated financial
statements

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Elite Information Group, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |        |         |        |  
|---------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------- | -------------------------------------- | ------ | ----------------- | ------ | ------ | ------ | ------- | ------ | -
|                                               |                                                                                   |                                                     |                                        |        | Nine months ended
|                                               |                                                                                   |                                                     |                                        |        | September 30,    
|                                               |                                                                                   |                                                     |                                        |        |                  
|                                               |                                                                                   |                                                     |                                        |        | 2001              |        | 2000  
|                                               |                                                                                   |                                                     |                                        |        |                   |        |       
|Cash flows from operating activities:          |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               | Net income                                                                        |                                                     | $                                      | 2,919  |                   |        | $      | 393    |        
|                                               | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                     |                                        |        |                   |        |        |        |        
|                                               |                                                                                   | Depreciation and amortization                       |                                        |        | 2,702             |        |        |        | 1,774   |       
|                                               |                                                                                   | Write-off of in-process research and development    |                                        |        |                  |        |        |        | 1,000   |       
|                                               |                                                                                   | Deferred income tax benefits                        |                                        |        | (1,047            | )      |        |        | (903    | )     
|                                               |                                                                                   | Changes in current assets and liabilities:          |                                        |        |                   |        |        |        |         |       
|                                               |                                                                                   |                                                     | Receivables                            |        |                   | (4,893 | )      |        |         | 9,343  |  
|                                               |                                                                                   |                                                     | Accounts payable                       |        |                   | 1,065  |        |        |         | (345   | )
|                                               |                                                                                   |                                                     | Deferred revenue and customer deposits |        |                   | 561    |        |        |         | (4,446 | )
|                                               |                                                                                   |                                                     | Income taxes payable                   |        |                   | 2,253  |        |        |         | 332    |  
|                                               |                                                                                   |                                                     | Other, net                             |        |                   | (619   | )      |        |         | (401   | )
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               |                                                                                   | Net cash provided by operating activities           |                                        |        | 2,941             |        |        |        | 6,747   |       
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|Cash flows from investing activities:          |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               | Purchase of Law Manager, Inc.                                                     |                                                     |                                        | (3,532 | )                 |        |        | (9,200 | )      
|                                               | Purchase of property and equipment                                                |                                                     |                                        | (608   | )                 |        |        | (1,953 | )      
|                                               | Investment in software costs                                                      |                                                     |                                        | (950   | )                 |        |        |       |        
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               |                                                                                   | Net cash used in investing activities               |                                        |        | (5,090            | )      |        |        | (11,153 | )     
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|Cash flows from financing activities:          |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               | Purchase of treasury stock                                                        |                                                     |                                        | (352   | )                 |        |        |       |        
|                                               | Proceeds from issuance of common stock                                            |                                                     |                                        | 332    |                   |        |        | 113    |        
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|                                               |                                                                                   | Net cash (used in) provided by financing activities |                                        |        | (20               | )      |        |        | 113     |       
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|Net decrease in cash and cash equivalents      |                                                                                   |                                                     | (2,169                                 | )      |                   |        | (4,293 | )     
|Cash and cash equivalents, beginning of period |                                                                                   |                                                     | 24,787                                 |        |                   |        | 31,152 |       
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       
|Cash and cash equivalents, end of period       |                                                                                   | $                                                   | 22,618                                 |        |                   | $      | 26,859 |       
|                                               |                                                                                   |                                                     |                                        |        |                   |        |        |       

The accompanying notes are an integral part of these consolidated financial
statements

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Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1  Basis of Presentation

For the periods presented, the consolidated financial statements of Elite
Information Group, Inc. (Elite or the Company) reflect the results of
operations and financial position of the Companys wholly owned subsidiaries,
Elite Information Systems, Inc., Law Manager Inc. (LMI) and Elite.com. The
Company acquired all of the outstanding capital stock of LMI on July 11, 2000
and results for this new operation are reflected in the
Companys consolidated financial
statements since the date of acquisition (see Note 4).

The consolidated financial statements of the Company include all adjustments of
a normal recurring nature which, in the opinion of management, are necessary
for a fair presentation of financial position as of September 30, 2001 and
results of operations and cash flows for the interim periods presented. The
results of operations for the three and nine months ended September 30, 2001
are not necessarily indicative of the results to be expected for the entire
year.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, certain information and footnotes required
by generally accepted accounting principles are not included herein. These
interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 2000 as reported by the Company in its Annual Report on Form 10-K.

Certain prior year amounts have been reclassified to conform to current year
presentation.

NOTE 2  Earnings per Share

The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128 Earnings per Share. SFAS No.
128 requires the presentation of basic and diluted earnings per share for all
periods presented. Basic earnings per share is computed on the basis of the
weighted average number of common shares outstanding, which excludes weighted
average treasury shares outstanding. Diluted earnings per share is computed on
the basis of the weighted average number of common shares outstanding combined
with any outstanding common stock equivalents (principally stock options)
required to be included under the treasury stock method. Options with
exercise prices greater than the average market price of common shares (or
anti-dilutive options) were not included in the computation of diluted
earnings per share. There were approximately 1.0 million weighted average
anti-dilutive options for the three and nine-month periods ended September 30,
2001 and approximately 1.0 million and 270,000 weighted average anti-dilutive
options for the three and nine-month periods ended September 30, 2000,
respectively. A reconciliation of the denominator for the basic and diluted
earnings per share (EPS) computation can be found in
Exhibit 11 to this Report on
Form 10-Q.

NOTE 3  New Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
requires companies to record derivatives on their balance sheets as assets or
liabilities, measured at fair value. Under SFAS No. 133, gains or losses
resulting from changes in the values of derivatives are to be reported in the
statement of operations or as a deferred item, depending on the use of the
derivatives and whether they qualify for hedge accounting. The Company adopted
SFAS No. 133 in the first quarter of 2001. To date, the Company has not
engaged in any hedging activity. Application of SFAS No. 133 did not have an
impact on the Companys financial reporting.

In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
establishes new standards for accounting and reporting requirements for
business combinations and will require that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. Use of
the pooling-of-interest method will be prohibited. This new standard is
effective for business combinations completed after June 30, 2001.

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In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses how intangible assets should be accounted for in the
financial statements. This new standard eliminates amortization for goodwill
and intangible assets that have indefinite useful lives and requires such
assets to be tested annually for impairment, or more frequently if events or
changes in circumstances indicate that the related assets might be impaired.
Goodwill amortization for the first nine months of 2001 was approximately
$940,000. Intangible assets that have finite useful lives will continue to be
amortized over their useful lives and are subject to impairment testing in
accordance with current accounting standards.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, that supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. However, this statement retains the fundamental provisions of
SFAS 121 for a) recognition and measurement of the impairment of long-lived
assets to be held and used and b) measurement of long-lived assets to be disposed
of by sale.

The Company is required to adopt SFAS No. 142 and SFAS No. 144 in the first
quarter of 2002, however, goodwill and intangible assets acquired after June
30, 2001 will be subject to the amortization provisions of SFAS No. 142. The
Company is evaluating the impact the adoption of these statements will have on
its financial reporting.

NOTE 4  Significant Transactions

On July 11, 2000, the Company acquired all of the outstanding capital stock of
LMI. LMI provides software products, including advanced case management,
docketing, records management and e-commerce systems, as well as a full range
of implementation services, to law firms, large corporate legal departments and
government agencies. In July 2001, the Company paid an additional $1.3 million
to the sellers of LMI pursuant to terms of the LMI purchase agreement, which
was recorded as goodwill, bringing total consideration paid for this business
to approximately $14.9 million. An aggregate of $2.7 million of additional
purchase price may be payable over the next two years, in equal annual
installments on the anniversary date of the acquisition, subject to certain
conditions. The consideration paid to date by the Company was funded by its
existing cash reserves.

NOTE 5  Subsequent Event

On November 8, 2001, the Company announced that its
Board of Directors had authorized a stock buy-back program to
purchase from time-to-time on the open market, or through negotiated
purchases, up to 500,000 shares of the Company's common stock. The
shares acquired will become treasury shares and would be available
for various corporate purposes. The funds required for the stock
purchases are expected to be provided from the Company's cash and
cash equivalent balances on hand and internally generated cash flow.
The timing and amount of shares purchased will depend upon market
conditions and other factors. The stock buy-back program will
terminate on December 31, 2002, unless extended.




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

Results of Operations

The consolidated financial statements of Elite Information Group, Inc. (Elite
or the Company) reflect the results of operations and financial position of
the Companys wholly owned subsidiaries, Elite Information Systems, Inc.
(EIS), Law Manager, Inc. (LMI) and Elite.com. The Company acquired all of
the outstanding capital stock of LMI on July 11, 2000 and results for this new
operation are reflected in the Companys financial statements since the date of
acquisition.

Based in Los Angeles, California, EIS is a worldwide provider of integrated
practice and financial management software products, including integrated time
and billing, general ledger, accounts payable and matter management products.
Customers include professional services organizations of all sizes. EIS
software products are often sold with related services to aid the customer in
implementation, data conversion and user training efforts. The Companys
products can be licensed outright and installed onsite at the customers
location or rented through an ASP hosting solution (e-Connect from Elite),
where EIS maintains the hardware and software that is accessed remotely by the
customer.

LMI provides software products, including advanced case management, docketing,
records management and e-commerce systems, as well as a full range of
implementation services, to law firms, large corporate legal departments and
government agencies.

Elite.com provides Internet-based time tracking and billing services to smaller
professional services companies, including legal, management consulting,
computer systems consulting and integration, accounting and engineering.
Elite.com utilizes hosted, Internet-based applications and services delivered
through its various partners and alliances.

The Companys revenue for the third quarter ended September 30, 2001 totaled a
record $18.5 million, which was up 44.0% from the $12.9 million reported for
the third quarter of 2000. Revenue for the first nine months of 2001 of $50.2
million compares to revenue of $39.9 million for the same period last year up
25.7%. Elites revenue growth for 2001 compared to 2000 is due mainly to
higher software license and implementation services revenues from new EIS
contracts, increased sales to existing customers, higher maintenance

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revenues, and the added revenues for LMI, which was acquired by the Company in July 2000.

The increase in software license and implementation services revenues compared
to prior year was due primarily to the Companys higher backlog of signed
customer orders. Backlog for EIS at the beginning of 2001 totaled $15.9
million compared to $11.6 million at the start of 2000. Backlog at September
30, 2001 for EIS totaled $16.1 million compared to $7.3 million at September
30, 2000.

Gross profit, which represents net revenue less cost of revenue, for the three
months ended September 30, 2001 was $9.4 million, up from $5.3 million in the
same quarter of 2000. The Companys gross margin percent was 50.6% for this
years third quarter compared to 41.6% for the same period last year. For the
nine months ended September 30, 2001, gross profit was
$24.3 million (or 48.4%
of revenue) versus $17.3 million (or 43.4% of revenue) for the same period of
2000. The Companys cost of revenue consists primarily of expenses for
deployable resources such as implementation personnel and contract labor,
salaries and related expenses for the Companys customer support department,
and amounts paid to third party software vendors. The Companys improved gross
margin percentage compared to the prior year mainly reflects the larger
proportion of higher margin license revenues and a lower level of software
vendor royalty costs.

Research and development expenses for this years third quarter of $1.7 million
(or 9.4% of revenue) increased slightly from $1.6 million (or 12.5% of revenue) in 2000.
Such expenses for the first nine months of 2001 totaled $5.0 million (or 10.0%
of revenue) compared to $4.4 million (or 11.0% of revenue) for the first nine
months of the prior year. Research and development expenses consist primarily
of salaries and expenses of the Companys research and development personnel
and outside consultants. The higher expenses in 2001 over the same period last
year reflect costs for work to design and develop certain products to support
the Companys expansion into new Professional Services Automation markets,
partially offset by reduced expenses for Elite.com. Research and development
expenses exclude internally developed software costs that were
capitalized totaling approximately $320,000 for the third quarter and approximately
$900,000 for the first nine months of 2001. No software development costs were
capitalized in 2000.

The increased R&D effort for EIS is expected to continue through 2001 as the
Company completes development of its new product lines. The Company is
committed to maintaining strong research and development efforts so it can
continue to provide innovative software solutions as the needs of its customer
base and target markets change.

Sales and marketing expenses for the third quarter increased slightly compared
to the third quarter of 2000 and totaled $2.7 million. As a percentage of
revenues, sales and marketing expenses decreased to 14.6% of revenue in the
third quarter of 2001 from 20.4% of revenue for the third quarter of 2000, as a
result of the increase in revenue. Year-to-date expenses of $8.5 million (or
17.0% of revenue) were up from $7.8 million (or 19.4% of revenue) in the same
period last year. Sales and marketing expenses consist primarily of salaries,
commissions, travel and promotional expense. The increase for the year is due
primarily to higher sales compensation costs related to the Companys higher
sales volume.

General and administrative expenses of $2.0 million (or 10.7% of revenue) for
the third quarter of 2001 were up from $1.5 million (or 11.6% of revenue) in
the third quarter of 2000. These expenses totaled $5.6 million (or 11.1% of
revenue) for the first nine months of this year compared to $4.8 million (or
12.1% of revenue) in the first nine months of last year. General and
administrative expenses consist mainly of salaries of corporate executive,
legal, financial and human resources personnel, as well as professional fees
and insurance costs. The increase in general and administrative expenses is
due largely to higher costs at EIS to support sales growth along with the
incremental costs for LMI.

Higher intangibles amortization expense in 2001 primarily relates to costs
associated with the LMI acquisition. Additionally, as part of the LMI
acquisition, the Company recorded a $1.0 million charge in the third quarter of
2000 to write-off the estimated value of LMIs in-process research and
development.

The Company reported net interest income of $180,000 and $702,000 for the third
quarter and first nine months of 2001, respectively. Interest income for the
same periods last year totaled $462,000 and $1.3 million, respectively. The
reduced interest income in the current year reflects the Companys lower cash
balances available for investment due largely to the funds used for the
acquisition of LMI and to repurchase the Companys common stock, offset partially by its positive cash flow from
operations combined with
lower interest rates.

The income tax provision for the third quarter of 2001 was $651,000 and for the
first nine months of the year was $1.3 million. The income tax benefit for the
third quarter of 2000 was $1.1 million and for the first nine months of 2000
was $567,000. The Companys income tax benefit for the third quarter and first
nine months of the prior year reflects $750,000 of tax refunds received for
research and experimentation credits.

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Risks and Uncertainties

Although the terrorist attacks against the United
States and their aftermath did not have a material effect on the
Company's operations for the third quarter of 2001, the Company's
revenues depend to a considerable degree on the ability of its
implementation personnel to travel to customer sites to perform work.
Significant disruptions of air travel may impair the Company's
ability to service current contracts.

The Companys personnel and other operating expenses are based in part on its
expectations for work efforts needed to generate future revenue and are
relatively fixed in the short-term. If the Company is unable to generate
significant new engagements, or if there is any delay or cancellation of
engagements in a particular period, there could be a material adverse affect on
the Companys consolidated results of operations and financial condition.
Additionally, the Companys implementation personnel require significant
advanced training prior to servicing customers. Therefore, the Company could
face the short-term risk of having a shortage of experienced implementation
personnel capable of generating revenues in the event of a rapid ramp up in new
customer orders.

Management believes that the Company could experience significant fluctuations
in future operating results caused by several factors, including the size and
timing of customer engagements; the length of the sales cycle; market
acceptance of its software systems and services; technological changes in
computer systems and environments; changes in the Companys or its competitors
pricing policies; the Companys success in expanding to new markets; the cost
of new product development; the mix of software systems and services; and
changes in general economic conditions.

The Company may be subject to Year 2000 claims or litigation by: its customers;
customers of divested businesses in which the Company retained potential
product liabilities, including its former Customer Relationship Management
business; customers of its recently acquired LMI business; or other parties.
Although the ultimate outcome of any litigation is uncertain, the Company does
not believe that the amount of liability, if any, from such actions would have
a material adverse effect on the Company. To date, the Company has not been
subject to any such claims or litigation.

Liquidity and Capital Resources

The Companys cash and cash equivalents totaled $22.6 million at September 30,
2001 compared to $24.8 million at December 31, 2000. Working capital at
September 30, 2001 was $19.4 million compared to $17.5 million at December 31,
2000. The reduction in cash and cash equivalents during the year was due
mainly to amounts paid under the LMI purchase agreement and cash used to
purchase capital equipment and software, offset by cash generated by
operations. Management believes that the Companys cash and cash equivalent
balances, anticipated cash flow from operations and other external sources of
available credit will be sufficient to meet the Companys cash requirements for
the foreseeable future.

On May 16, 2000, the Company entered into a two-year, $10 million revolving
credit agreement with Mellon Bank, N.A. No borrowings were outstanding under
the credit facility at September 30, 2001. Borrowings under the credit
facility will bear interest at the Companys choice of an adjusted LIBOR or
prime rate, as defined in the credit agreement. The credit facility is secured
by substantially all of the Companys tangible and intangible assets and
requires the Company to maintain an aggregate of $5 million in a certificate of
deposit as collateral with the bank. Additionally, the credit agreement
contains customary covenants that require compliance with certain financial
ratios and targets, and restricts the incurrence of additional indebtedness,
payment of dividends and acquisitions or dispositions of assets, among other
things. The credit facility expires in April 2002.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
requires companies to record derivatives on their balance sheets as assets or
liabilities, measured at fair value. Under SFAS No. 133, gains or losses
resulting from changes in the values of derivatives are to be reported in the
statement of operations or as a deferred item, depending on the use of the
derivatives and whether they qualify for hedge accounting. The Company adopted
SFAS No. 133 in the first quarter of 2001. To date, the Company has not
engaged in any hedging activity. Application of SFAS No. 133 did not have an
impact on the Companys financial reporting.

In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
establishes new standards for accounting and reporting requirements for
business combinations and will require that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. Use of
the pooling-of-interest method will be prohibited. This new standard is
effective for business combinations completed after June 30, 2001.

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In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses how intangible assets should be accounted for in the
financial statements. This new standard eliminates amortization for goodwill
and intangible assets that have indefinite useful lives and requires such
assets to be tested annually for impairment, or more frequently if events or
changes in circumstances indicate that the related assets might be impaired.
Goodwill amortization for the first nine months of 2001 was approximately
$940,000. Intangible assets that have finite useful lives will continue to be
amortized over their useful lives and are subject to impairment testing in
accordance with current accounting standards.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, that supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. However, this statement retains the fundamental provisions of
SFAS 121 for a) recognition and measurement of the impairment of long-lived
assets to be held and used and b) measurement of long-lived assets to be disposed
of by sale.

The Company is required to adopt SFAS No. 142 and SFAS No. 144 in the first
quarter of 2002, however, goodwill and intangible assets acquired after June
30, 2001 will be subject to the amortization provisions of SFAS No. 142. The
Company is evaluating the impact the adoption of these statements will have on
its financial reporting.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain statements that are, or may
be, forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, that represent the Companys expectations or beliefs
concerning future events, including the Companys future product initiatives,
sales and financial performance. For this purpose, any statements that are not
statements of historical fact may be deemed to be forward-looking statements.
Such forward-looking statements are about matters that are inherently subject
to risks and uncertainties.

Factors that could influence the matters discussed in, and cause actual results
to vary materially from any results expressed or implied by, such
forward-looking statements include the timing and amount of revenue that may be
recognized by the Company, continuation of current expense trends, absence of
unforeseen changes in the Companys markets, continued acceptance of the
Companys existing services and products in the Companys existing markets and
the acceptance of these services and products in new markets, the ability to
timely complete the development of new products and services at reasonable
cost, customer acceptance of new products and services and general changes in
the economy. These factors of risk are also detailed under Risks and
Uncertainties in this Form 10-Q and from time to time in the Companys SEC
reports, including the Report on Form 10-K for the year ended December 31, 2000
and the annual report to shareholders. There can be no assurance that such
future events or projected results will be achieved and actual results could
differ materially. The Company does not undertake any obligation to update any
forward-looking statements.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company has limited exposure to market risk for changes in interest rates
related to the Companys cash and cash equivalents. The Company maintains an
investment policy designed to ensure the safety and preservation of its cash
and cash equivalents by limiting default risk, market risk and reinvestment
risk by depositing its cash and cash equivalents in major financial
institutions.

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Part II  Other Information




Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

|            |  |                                  
|----------- |  | ---------------------------------
|Exhibit No. |  | Description                      
|            |  |                                  
|11          |  | Computation of earnings per share

(b) Reports on Form 8-K:

None.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|      |  |                   |  |                               |  |                                                                     
|----- |  | ----------------- |  | ----------------------------- |  | --------------------------------------------------------------------
|      |  |                   |  | ELITE INFORMATION GROUP, INC.
|     
|     
|Date: |  | November 13, 2001 |  | By:                           |  | /s/ Barry D. Emerson                                                
|      |  |                   |  |                               |  |                                                                     
|      |  |                   |  |                               |  | Barry D. Emerson, Vice President,
Treasurer, Chief Financial Officer

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