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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 June 30, 2002                                            
|  |                                                                                         
|  | OR                                                                                      
|  |                                                                                         
|o | 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 CircleLos Angeles, California               |  | 90056                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip code)                          

(323) 642-5200

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(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 July 31, 2002 there were 8,233,074 shares of Common Stock, $.01 par
value, outstanding.



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Page 1 of 15





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TABLE OF CONTENTS



|                                |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  Financial Information:
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | Consolidated Statement of Operations      
|                                |                                                                                               | Consolidated Balance Sheet                
|                                |                                                                                               | Consolidated Statement 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 1. Legal Proceedings                                                                    
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                      
|EXHIBIT 10.1                   



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Elite Information Group, Inc.
Table of Contents

|                                                                                              |                                                                                                   |  |        |       | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ------ | ----- | 
|                                                                                              |                                                                                                   |  | Page  
|                                                                                              |                                                                                                   |  | Number
|                                                                                              |                                                                                                   |  |       
|Part I Financial Information:                                                                 |                                                                                                   |  |        |      
|Item 1. Financial Statements (Unaudited)                                                      |                                                                                                   |  |        |      
|                                                                                              | Consolidated Statement of Operations -
Three and six months ended June 30, 2002
and June 30, 2001 |  |        | 3     | 
|                                                                                              | Consolidated Balance Sheet -
June 30, 2002 and December 31, 2001                                  |  |        | 4     | 
|                                                                                              | Consolidated Statement of Cash Flows -
Six months ended June 30, 2002 and
June 30, 2001           |  |        | 5     | 
|                                                                                              | Notes to Consolidated Financial Statements                                                        |  |        | 6 - 9 | 
|Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                   |  | 9 - 13 |      
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                   |  | 13     |      
|Part II Other Information:                                                                    |                                                                                                   |  |        |      
|Item 1. Legal Proceedings                                                                     |                                                                                                   |  | 14     |      
|Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                   |  | 14     |      
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                   |  | 14     |      
|Signature                                                                                     |                                                                                                   |  | 15     |      



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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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2



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##### Table of Contents






PART I  Financial Information:




Item 1. Financial Statements




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

|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |        |  |        | 
|----------------------------------- | ------------------------------------------------------- | - | ------------------------ | ------ | ------------------ | ------ | ---------------- | ------ | -------- | ------ | -------- | ------ |  | ------ | ------ | ------ |  | ------ | 
|                                    |                                                         |   |                          |        | Three months ended |        | Six months ended
|                                    |                                                         |   |                          |        |                    |        |                 
|                                    |                                                         |   |                          |        | June 30,           |        | June 30,         |        | June 30, |        | June 30,
|                                    |                                                         |   |                          |        | 2002               |        | 2001             |        | 2002     |        | 2001    
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |         
|Revenue:                            |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    | Revenue before expense reimbursements                   |   | $                        | 19,117 |                    |        | $                | 17,392 |          |        | $        | 37,484 |  |        | $      | 31,687 | 
|                                    | Expense reimbursements                                  |   |                          | 937    |                    |        |                  | 935    |          |        |          | 1,779  |  |        |        | 1,677  | 
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    |                                                         |   | Total revenue            |        |                    | 20,054 |                  |        |          | 18,327 |          |        |  | 39,263 |        |        |  | 33,364 | 
|Cost of revenue:                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    | Cost of revenue before reimbursable expenses            |   |                          | 9,327  |                    |        |                  | 8,403  |          |        |          | 18,160 |  |        |        | 16,773 | 
|                                    | Reimbursable expenses                                   |   |                          | 937    |                    |        |                  | 935    |          |        |          | 1,779  |  |        |        | 1,677  | 
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    |                                                         |   | Total cost of revenue    |        |                    | 10,264 |                  |        |          | 9,338  |          |        |  | 19,939 |        |        |  | 18,450 | 
|Gross profit                        |                                                         |   | 9,790                    |        |                    |        | 8,989            |        |          |        | 19,324   |        |  |        | 14,914 |       
|Operating expenses:                 |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    | Research and development                                |   |                          | 2,747  |                    |        |                  | 1,831  |          |        |          | 5,354  |  |        |        | 3,297  | 
|                                    | Sales and marketing                                     |   |                          | 3,696  |                    |        |                  | 2,930  |          |        |          | 7,136  |  |        |        | 5,834  | 
|                                    | General and administrative                              |   |                          | 2,311  |                    |        |                  | 1,872  |          |        |          | 4,565  |  |        |        | 3,617  | 
|                                    | Amortization of goodwill and other acquired intangibles |   |                          | 190    |                    |        |                  | 514    |          |        |          | 380    |  |        |        | 1,028  | 
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    |                                                         |   | Total operating expenses |        |                    | 8,944  |                  |        |          | 7,147  |          |        |  | 17,435 |        |        |  | 13,776 | 
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|Operating income                    |                                                         |   | 846                      |        |                    |        | 1,842            |        |          |        | 1,889    |        |  |        | 1,138  |       
|Interest income, net                |                                                         |   | 107                      |        |                    |        | 224              |        |          |        | 203      |        |  |        | 522    |       
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|Income before income taxes          |                                                         |   | 953                      |        |                    |        | 2,066            |        |          |        | 2,092    |        |  |        | 1,660  |       
|Income tax provision                |                                                         |   | (362                     | )      |                    |        | (777             | )      |          |        | (795     | )      |  |        | (674   | )     
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|Net income                          |                                                         | $ | 591                      |        |                    | $      | 1,289            |        |          | $      | 1,297    |        |  | $      | 986    |       
|                                    |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|Net income per share                |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    | - Basic                                                 |   | $                        | 0.07   |                    |        | $                | 0.16   |          |        | $        | 0.16   |  |        | $      | 0.12   | 
|                                    | - Diluted                                               |   | $                        | 0.07   |                    |        | $                | 0.16   |          |        | $        | 0.15   |  |        | $      | 0.12   | 
|Weighted average shares outstanding |                                                         |   |                          |        |                    |        |                  |        |          |        |          |        |  |        |        |       
|                                    | - Basic                                                 |   |                          | 8,204  |                    |        |                  | 8,059  |          |        |          | 8,185  |  |        |        | 8,059  | 
|                                    | - Diluted                                               |   |                          | 8,760  |                    |        |                  | 8,176  |          |        |          | 8,752  |  |        |        | 8,174  | 

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

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

|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |        |        |        | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ----------------- | ------ | ----------- | ------ | ------------ | ------ | ------ | ------ | 
|                                     |                                                                                                                                                             |                           |                   |        | June 30,    |        | December 31,
|                                     |                                                                                                                                                             |                           |                   |        | 2002        |        | 2001        
|                                     |                                                                                                                                                             |                           |                   |        |             |        |             
|                                     |                                                                                                                                                             |                           |                   |        | (Unaudited) |        |              |        |       
|Assets                               |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Current assets                       |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     | Cash and cash equivalents                                                                                                                                   |                           | $                 | 27,319 |             |        | $            | 24,699 |       
|                                     | Receivables                                                                                                                                                 |                           |                   | 22,622 |             |        |              | 22,601 |       
|                                     | Deferred income taxes                                                                                                                                       |                           |                   | 2,274  |             |        |              | 3,612  |       
|                                     | Other current assets                                                                                                                                        |                           |                   | 2,320  |             |        |              | 1,235  |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     |                                                                                                                                                             | Total current assets      |                   |        | 54,535      |        |              |        | 52,147 |       
|Property and equipment, net          |                                                                                                                                                             |                           | 2,333             |        |             |        | 2,219        |       
|Software costs, net                  |                                                                                                                                                             |                           | 1,473             |        |             |        | 1,827        |       
|Goodwill, net                        |                                                                                                                                                             |                           | 7,965             |        |             |        | 7,965        |       
|Intangible assets, net               |                                                                                                                                                             |                           | 3,266             |        |             |        | 3,654        |       
|Other assets                         |                                                                                                                                                             |                           | 67                |        |             |        | 87           |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     |                                                                                                                                                             | $                         | 69,639            |        |             | $      | 67,899       |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Liabilities and Stockholders Equity |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Current liabilities                  |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     | Accounts payable                                                                                                                                            |                           | $                 | 3,915  |             |        | $            | 3,874  |       
|                                     | Accrued compensation                                                                                                                                        |                           |                   | 3,193  |             |        |              | 4,170  |       
|                                     | Other accrued liabilities                                                                                                                                   |                           |                   | 3,735  |             |        |              | 3,556  |       
|                                     | Deferred revenue                                                                                                                                            |                           |                   | 17,955 |             |        |              | 17,031 |       
|                                     | Income taxes payable                                                                                                                                        |                           |                   | 1,144  |             |        |              | 1,401  |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     |                                                                                                                                                             | Total current liabilities |                   |        | 29,942      |        |              |        | 30,032 |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Deferred income taxes                |                                                                                                                                                             |                           | 240               |        |             |        | 246          |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     |                                                                                                                                                             |                           | Total liabilities |        |             | 30,182 |              |        |        | 30,278 | 
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Commitments and contingencies        |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Stockholders equity                 |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     | Common stock, $.01 par value; Authorized 20,000,000 shares; Issued
shares at June 30, 2002 and December 31, 2001 were 9,484,640
and 9,458,052, respectively |                           |                   | 95     |             |        |              | 95     |       
|                                     | Paid-in capital                                                                                                                                             |                           |                   | 39,649 |             |        |              | 39,387 |       
|                                     | Less treasury stock, at cost at June 30, 2002 and December 31,
2001, 1,273,130 and 1,329,819 shares, respectively                                           |                           |                   | (6,219 | )           |        |              | (6,496 | )     
|                                     | Accumulated earnings                                                                                                                                        |                           |                   | 5,932  |             |        |              | 4,635  |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|Total stockholders equity           |                                                                                                                                                             |                           | 39,457            |        |             |        | 37,621       |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       
|                                     |                                                                                                                                                             | $                         | 69,639            |        |             | $      | 67,899       |       
|                                     |                                                                                                                                                             |                           |                   |        |             |        |              |       

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

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

|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |        |        |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------ | -------------------- | ----- | ---------------- | ---- | -------- | ------ | ------ | ------ | -
|                                                     |                                                                                   |                                                  |                      |       | Six months ended
|                                                     |                                                                                   |                                                  |                      |       |                 
|                                                     |                                                                                   |                                                  |                      |       | June 30,         |      | June 30,
|                                                     |                                                                                   |                                                  |                      |       | 2002             |      | 2001    
|                                                     |                                                                                   |                                                  |                      |       |                  |      |         
|Cash flows from operating activities:                |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     | Net income                                                                        |                                                  | $                    | 1,297 |                  |      | $        | 986    |       
|                                                     | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                  |                      |       |                  |      |          |        |       
|                                                     |                                                                                   | Depreciation and amortization                    |                      |       | 1,280            |      |          |        | 1,772  |       
|                                                     |                                                                                   | Deferred income taxes                            |                      |       | 1,332            |      |          |        | (1,049 | )     
|                                                     |                                                                                   | Changes in current assets and liabilities:       |                      |       |                  |      |          |        |        |       
|                                                     |                                                                                   |                                                  | Receivables          |       |                  | (21  | )        |        |        | (2,587 | )
|                                                     |                                                                                   |                                                  | Accounts payable     |       |                  | 41   |          |        |        | 230    |  
|                                                     |                                                                                   |                                                  | Deferred revenue     |       |                  | 924  |          |        |        | 1,089  |  
|                                                     |                                                                                   |                                                  | Income taxes payable |       |                  | (257 | )        |        |        | 1,896  |  
|                                                     |                                                                                   |                                                  | Accrued compensation |       |                  | (977 | )        |        |        | (92    | )
|                                                     |                                                                                   |                                                  | Other, net           |       |                  | (886 | )        |        |        | (909   | )
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     |                                                                                   | Net cash provided by operating activities        |                      |       | 2,733            |      |          |        | 1,336  |       
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|Cash flows from investing activities:                |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     | Purchase of Law Manager, Inc.                                                     |                                                  |                      |      |                  |      |          | (2,148 | )     
|                                                     | Purchase of property and equipment                                                |                                                  |                      | (625  | )                |      |          | (515   | )     
|                                                     | Investment in software costs                                                      |                                                  |                      | (27   | )                |      |          | (609   | )     
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     |                                                                                   | Net cash used by investing activities            |                      |       | (652             | )    |          |        | (3,272 | )     
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|Cash flows from financing activities:                |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     | Purchase of treasury stock                                                        |                                                  |                      |      |                  |      |          | (319   | )     
|                                                     | Proceeds from issuance of common stock                                            |                                                  |                      | 539   |                  |      |          | 194    |       
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|                                                     |                                                                                   | Net cash provided (used) by financing activities |                      |       | 539              |      |          |        | (125   | )     
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                  | 2,620                |       |                  |      | (2,061   | )     
|Cash and cash equivalents, beginning of period       |                                                                                   |                                                  | 24,699               |       |                  |      | 24,787   |       
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       
|Cash and cash equivalents, end of period             |                                                                                   | $                                                | 27,319               |       |                  | $    | 22,726   |       
|                                                     |                                                                                   |                                                  |                      |       |                  |      |          |       

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

The consolidated financial statements of Elite Information Group, Inc. (Elite
or the Company) for the periods presented reflect the results of operations
and financial position of the Companys wholly owned operating subsidiaries,
Elite Information Systems, Inc. (EIS) and Law Manager, Inc. (LMI). All
significant inter-company balances and transactions have been eliminated in
consolidation.

The unaudited 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 June 30, 2002
and results of operations and cash flows for the interim periods presented.
The results of operations for the three and six months ended June 30, 2002 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. Certain information and footnotes required by generally
accepted accounting principles (GAAP) in annual financial statements have
been omitted or condensed in accordance with quarterly requirements of the
Securities and Exchange Commission. Management believes that the disclosures
included in the accompanying interim consolidated financial statements and
footnotes are adequate to make the information not misleading but should be
read in conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 2001 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  Segment Information and Customer Concentration

The Companys two reportable segments are the businesses of its operating
subsidiaries, EIS and LMI. EIS customers are primarily comprised of law firms
and other professional services firms. LMI customers primarily include large
corporate legal departments and government agencies. The table below presents
revenue, gross profit and total assets for these reportable segments for the
interim periods presented:

|                                       |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |        |        | 
|-------------------------------------- | --- | ----- | ------ | --------------------------- | ------ | ------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ |  | - | ------ | ------ | 
|                                       |     |       |        | Three months ended June 30, |        | Six months ended June 30,
|                                       |     |       |        |                             |        |                          
|(In thousands)                         |     | 2002  |        | 2001                        |        | 2002                      |        | 2001  
|                                       |     |       |        |                             |        |                           |        |        |        |  
|Revenue before expense reimbursements: |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|                                       | EIS |       | $      | 16,844                      |        |                           | $      | 15,383 |        |   | $      | 33,026 |        |  | $ | 28,715 |       
|                                       | LMI |       |        | 2,273                       |        |                           |        | 2,009  |        |   |        | 4,458  |        |  |   | 2,972  |       
|                                       |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|                                       |     | Total |        | $                           | 19,117 |                           |        | $      | 17,392 |   |        | $      | 37,484 |  |   | $      | 31,687 | 
|                                       |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|Gross profit:                          |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|                                       | EIS |       | $      | 8,872                       |        |                           | $      | 7,953  |        |   | $      | 17,612 |        |  | $ | 13,843 |       
|                                       | LMI |       |        | 918                         |        |                           |        | 1,036  |        |   |        | 1,712  |        |  |   | 1,071  |       
|                                       |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|                                       |     | Total |        | $                           | 9,790  |                           |        | $      | 8,989  |   |        | $      | 19,324 |  |   | $      | 14,914 | 
|                                       |     |       |        |                             |        |                           |        |        |        |   |        |        |        |  |   |       
|                                      
|                                       |     | EIS   |        | LMI                         |        | Total                     |        |       
|Total Assets at June 30, 2002          |     | $     | 58,441 |                             |        | $                         | 11,198 |        |        | $ | 69,639 |        |        | 
|Total Assets at June 30, 2001          |     | $     | 52,571 |                             |        | $                         | 9,970  |        |        | $ | 62,541 |       

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The Company evaluates performance of its segments based on revenue and earnings
before interest, taxes, depreciation, and amortization (EBITDA). EBITDA is a
non-GAAP disclosure but is presented for informational purposes and is
reconciled to income before income taxes below.

|                              |     |       |      |                             |       |                           |       |       |       |   |        |       |       |   |        |       |       | 
|----------------------------- | --- | ----- | ---- | --------------------------- | ----- | ------------------------- | ----- | ----- | ----- | - | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                              |     |       |      | Three months ended June 30, |       | Six months ended June 30,
|                              |     |       |      |                             |       |                          
|(In thousands)                |     | 2002  |      | 2001                        |       | 2002                      |       | 2001 
|                              |     |       |      |                             |       |                           |       |       |       |  
|EBITDA:                       |     |       |      |                             |       |                           |       |       |       |   |        |       |       |   |        |      
|                              | EIS |       | $    | 1,242                       |       |                           | $     | 2,410 |       |   | $      | 2,945 |       |   | $      | 3,378 |      
|                              | LMI |       |      | 245                         |       |                           |       | 321   |       |   |        | 224   |       |   |        | (468  | )    
|                              |     |       |      |                             |       |                           |       |       |       |   |        |       |       |   |        |      
|                              |     | Total |      | $                           | 1,487 |                           |       | $     | 2,731 |   |        | $     | 3,169 |   |        | $     | 2,910 | 
|Interest income, net          |     |       | 107  |                             |       |                           | 224   |       |       |   | 203    |       |       |   | 522    |      
|Depreciation and amortization |     |       | (641 | )                           |       |                           | (889  | )     |       |   | (1,280 | )     |       |   | (1,772 | )    
|                              |     |       |      |                             |       |                           |       |       |       |   |        |       |       |   |        |      
|Income before income taxes    |     | $     | 953  |                             |       | $                         | 2,066 |       |       | $ | 2,092  |       |       | $ | 1,660  |      
|                              |     |       |      |                             |       |                           |       |       |       |   |        |       |       |   |        |      

No customers accounted for more than 10% of consolidated revenues for the three
and six months ended June 30, 2002 and 2001.

NOTE 3  Earnings per Share

The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 Earnings per Share (SFAS 128).
SFAS 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. 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), which were not included in the computation
of diluted earnings per share, totaled 109,000 and 1.2 million for the
six-month periods ending June 30, 2002 and 2001, respectively. Anti-dilutive
options totaled 145,000 and 1.2 million for the three-month periods ending June
30, 2002 and 2001, respectively.

The following is a reconciliation of the denominator for the basic and diluted
earnings per share (EPS) computations:

|                                     |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |       | 
|------------------------------------ | ---------------------------------------- | ---- | --------------------------- | ----- | ------------------------- | ---- |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                                     |                                          |      | Three months ended June 30, |       | Six months ended June 30,
|                                     |                                          |      |                             |       |                          
|(In thousands)                       |                                          | 2002 |                             | 2001  |                           | 2002 |  | 2001 
|                                     |                                          |      |                             |       |                           |      |  |       | 
|Weighted average shares outstanding: |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |      
|                                     | Basic                                    |      |                             | 8,204 |                           |      |  | 8,059 |  |  |  | 8,185 |  |  |  | 8,059 | 
|                                     |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |      
|Effect of dilutive securities:       |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |      
|                                     | Options and employee stock purchase plan |      |                             | 556   |                           |      |  | 117   |  |  |  | 567   |  |  |  | 115   | 
|                                     |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |      
|                                     | Diluted                                  |      |                             | 8,760 |                           |      |  | 8,176 |  |  |  | 8,752 |  |  |  | 8,174 | 
|                                     |                                          |      |                             |       |                           |      |  |       |  |  |  |       |  |  |  |      

NOTE 4  New Accounting Standards

In November 2001, the Emerging Issues Task Force (EITF) released Issue No.
01-14 regarding Income Statement Characterization of Reimbursements Received
for Out-Of-Pocket Expenses Incurred. This pronouncement requires that
reimbursements received from customers for out-of-pocket expenses incurred be
characterized as revenue in the Companys statement of operations. The Company
incurs incidental expenses in the delivery of services to its clients that are
commonly referred to as out-of-pocket expenses. These expenses include but
are not limited to travel and related charges. Accordingly, the Company has
classified reimbursable expenses billed to clients as revenue, which are offset
by a corresponding charge to cost of revenue, for all periods presented. This
change in classification had no effect on current or previously reported net
income or net income per share.

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In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, which establishes new standards for accounting and reporting
requirements for business combinations and requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001.

On January 1, 2002, the Company adopted SFAS No. 142 and No. 144. SFAS No.
142, Goodwill and Other Intangible Assets, 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. Intangible assets that have finite useful lives
continue to be amortized over their useful lives and are subject to impairment
testing in accordance with current accounting standards. In accordance with
adoption of SFAS No.142, on January 1, 2002, the Company ceased to amortize
goodwill. In addition, the Company completed an impairment assessment of
goodwill upon implementation of SFAS No. 142 and no impairment was indicated.
Following is a reconciliation of the reported net income and net income per
diluted share for 2001 on a pro forma basis to exclude charges for goodwill
amortization:

|                                      |                                 |               |                    |               |                  |  |   |       | 
|------------------------------------- | ------------------------------- | ------------- | ------------------ | ------------- | ---------------- |  | - | ----- | 
|                                      |                                 |               | Three months ended |               | Six months ended
|(In thousands, except per share data) |                                 | June 30, 2001 |                    | June 30, 2001
|                                      |                                 |               |                    |               |                 
|Net income:                           |                                 |               |                    |               |                  |  |   |      
|                                      | Reported net income             |               | $                  | 1,289         |                  |  | $ | 986   | 
|                                      | Add back: Goodwill amortization |               |                    | 202           |                  |  |   | 385   | 
|                                      |                                 |               |                    |               |                  |  |   |      
|                                      | Adjusted net income             |               | $                  | 1,491         |                  |  | $ | 1,371 | 
|Basic earnings per share:             |                                 |               |                    |               |                  |  |   |      
|                                      | Reported net income             |               | $                  | 0.16          |                  |  | $ | 0.12  | 
|                                      | Add back: Goodwill amortization |               |                    | 0.03          |                  |  |   | 0.05  | 
|                                      |                                 |               |                    |               |                  |  |   |      
|                                      | Adjusted net income             |               | $                  | 0.19          |                  |  | $ | 0.17  | 
|Diluted earnings per share:           |                                 |               |                    |               |                  |  |   |      
|                                      | Reported net income             |               | $                  | 0.16          |                  |  | $ | 0.12  | 
|                                      | Add back: Goodwill amortization |               |                    | 0.02          |                  |  |   | 0.05  | 
|                                      |                                 |               |                    |               |                  |  |   |      
|                                      | Adjusted net income             |               | $                  | 0.18          |                  |  | $ | 0.17  | 

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
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 No. 121 for recognizing and measuring the
impairment of long-lived assets to be held and used, as well as measuring
long-lived assets to be disposed of by sale. Adoption of this statement on
January 1, 2002 did not have a material impact on the Companys consolidated
results of operations and financial condition.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 supercedes the existing
guidance related to the accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (Including Certain Costs Incurred in a
Restructuring). Under SFAS
No. 146, a liability for exit or disposal costs will be recognized and measured
initially at its fair value in the period in which the liability is incurred.
The provisions of SFAS No. 146 are effective for exit or disposal activities
initiated after December 31, 2002 with earlier application encouraged. The
Company will adopt this standard on future exit or disposal activities.

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NOTE 5  Intangible Assets and Goodwill

At June 30, 2002 and December 31, 2001, goodwill and intangible asset balances
consisted of the following:

|                             |                                            |                |        |              |             |                |        |              |             |   |        |       |  |   |        |        |  
|---------------------------- | ------------------------------------------ | -------------- | ------ | ------------ | ----------- | -------------- | ------ | ------------ | ----------- | - | ------ | ----- |  | - | ------ | ------ | -
|                             |                                            |                | 2002   |              | 2001       
|                             |                                            |                |        |              |            
|                             |                                            |                | Gross  |              | Accumulated |                | Gross  |              | Accumulated
|(In thousands)               |                                            | Carrying Value |        | Amortization |             | Carrying Value |        | Amortization
|                             |                                            |                |        |              |             |                |        |              |            
|Amortized intangible assets: |                                            |                |        |              |             |                |        |              |             |   |        |       |  |   |        |       
|                             | Customer lists and maintenance contracts   |                | $      | 5,400        |             |                | $      | (2,803       | )           |   | $      | 5,400 |  |   | $      | (2,532 | )
|                             | Developed software acquired in
acquisition |                |        | 1,100        |             |                |        | (431         | )           |   |        | 1,100 |  |   |        | (321   | )
|                             | Other                                      |                |        | 34           |             |                |        | (34          | )           |   |        | 34    |  |   |        | (27    | )
|                             |                                            |                |        |              |             |                |        |              |             |   |        |       |  |   |        |       
|                             |                                            | $              | 6,534  |              |             | $              | (3,268 | )            |             | $ | 6,534  |       |  | $ | (2,880 | )     
|                             |                                            |                |        |              |             |                |        |              |             |   |        |       |  |   |        |       
|Goodwill                     |                                            | $              | 15,290 |              |             | $              | (7,325 | )            |             | $ | 15,290 |       |  | $ | (7,325 | )     
|                             |                                            |                |        |              |             |                |        |              |             |   |        |       |  |   |        |       

Intangible asset amortization expense for the three and six months ended June
30, 2002 was approximately $194,000 and $388,000, respectively. Estimated
amortization expense for the next five years is as follows:

|                                  |  |   |     | 
|--------------------------------- |  | - | --- | 
|(In thousands)                   
|For the years ending December 31, |  |   |     | 
|2002                              |  | $ | 767 | 
|2003                              |  | $ | 760 | 
|2004                              |  | $ | 760 | 
|2005                              |  | $ | 659 | 
|2006                              |  | $ | 540 | 

At June 30, 2002 and December 31, 2001, goodwill associated with the Companys
reporting units, EIS and LMI, totaled $1,252,000 and $6,713,000, respectively.




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

General

Elite is an international provider of a comprehensive suite of financial and
practice management systems for professional services firms, based in Los
Angeles, California. The Companys customers include legal and other
professional services organizations of all sizes such as accounting,
consulting, public relations, financial services, actuarial, software,
security, insurance, market research and systems integration firms, as well as
corporations and government. 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 are available through an
Application Service Provider (ASP) or hosted solution (e-Connect from
Elite) where EIS maintains hardware and software that is accessed remotely by
the customer. Additionally, Internet-based applications and services are
available to smaller professional services companies. LMI provides software
products including advanced case management, calendar and docketing, records
management and resource management, as well as a full range of related
customization and implementation services to large corporate legal departments,
law firms and government agencies.

Critical Accounting Policies and Estimates

Managements Discussion and Analysis of Financial Condition and Results of
Operations discusses Elites consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The presentation 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 revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Management believes the critical

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accounting policies that affect its more significant judgments and estimates
used in the preparation of its consolidated financial statements relate to
revenue recognition, reserves for uncollectible receivables and realization of
long-lived assets.

Revenue from the licensing of software along with related services is generally
recognized as work is performed under the percentage of completion method of
accounting with progress measured using labor hours incurred to date compared
to total estimated labor hours to be incurred. The Companys revenue
recognition may be affected when labor hours incurred fall short of or exceed
estimates. Additionally, losses may be incurred on contracts. These losses
are recognized in the period in which they are determined to be probable and
estimable.

The Company maintains an allowance for doubtful accounts and reserves for the
issuance of credit memos based on an estimate of losses expected to result from
its customers not making required payments. If the financial condition of
Elites customers were to deteriorate, resulting in a greater than expected
aggregate impairment of their ability to make payments, additional allowances
may be required. The Companys software products and their related
implementation services are complex and receivable reserves are necessary in
the event of disputed customer billings.

The Company monitors conditions that may affect the carrying value of its
property and equipment, software costs and intangible assets. When conditions
indicate potential impairment of such assets, the Company undertakes necessary
market and technology studies and evaluates projected future earnings
associated with these assets. Future adverse changes in market or
technological conditions or poor operating results could result in losses or an
inability to recover the carrying value of the assets, thereby possibly
requiring an impairment charge in the future.

Segment Information

The Companys two reportable segments are the businesses of its operating
subsidiaries, EIS and LMI. EIS customers are primarily comprised of law firms
and other professional services firms. LMI customers primarily include large
corporate legal departments and government agencies. See operating results by
segment in Note 2 of Notes to the Consolidated Financial Statements.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2002 and 2001

The Companys revenue before expense reimbursements for the second quarter
ended June 30, 2002 totaled $19.1 million, which was up 10% from the $17.4
million reported for the second quarter of 2001. Revenue for the first six
months of 2002 of $37.5 million compares to revenue for the first half of 2001
of $31.7 million. Elites revenue growth for 2002 compared to last year is due
mainly to higher EIS contract revenue, consulting services billings and
increased maintenance support revenue reflecting its growing customer base.
EIS revenues for the first half of 2002 totaled $33.0 million, a $4.3 million
increase or 15% compared to the first half of 2001. LMI revenues increased
$1.5 million compared to the first half of 2001 to $4.5 million, supported by
the growth in its consulting and implementation services backlog. During the
second quarter of 2002 an unanticipated contract dispute occurred with a
significant EIS customer for which the Company reversed revenue for the year
and reserved against the collection of related accounts receivable. The
Company is in ongoing discussions with the customer and further reserves could
be necessary depending on the final resolution of this matter. This reversal
had the effect of reducing revenue for the second quarter by approximately
$400,000 and lowering earnings per diluted share by approximately $0.03.

The Companys backlog of unearned revenue from signed customer orders totaled
$30.3 million at June 30, 2002, compared to $25.5 million at December 31, 2001.

Gross profit for the three months ended June 30, 2002 was $9.8 million, up from
$9.0 million in the same quarter of 2001. The Companys gross margin percent,
excluding the effect of expense reimbursements, was unchanged at approximately
51% for this years second quarter compared to the same period last year. For
the six months ended June 30, 2002, gross profit was $19.3 million (or 52% of
revenue before expense reimbursements) versus $14.9 million (or 47% of revenue
before expense reimbursements) for the same period of 2001. 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.

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The Companys higher gross profit margin, excluding the effect of expense
reimbursements, for the six months ended June 30, 2002 is due primarily to an
increased gross profit margin at EIS of 53% compared to 49% for the same period
of 2001. The improved EIS gross profit margin can be attributed mainly to an
increase in revenues without the same corresponding increase in costs,
particularly reduced levels of third party implementation services, along with
the reclassification of certain personnel related costs to research and
development expense for the current year. With the present weakness in the
economy the Company is experiencing lower demand for new higher-margin software
licenses, while demand for its services remains strong as customers seek to
enhance their existing technology investments. This trend could adversely
impact the Companys gross profit margins until these conditions change.

Research and development (R&D) expenses for this years second quarter of
$2.7 million (or 14% of total revenue) increased from $1.8 million (or 10% of
total revenue) in 2001. Such expenses for the first half of 2002 totaled $5.4
million (or 14% of total revenue) compared to $3.3 million (or 10% of total
revenue) for the first six months of the prior year. The Company capitalizes
certain software development costs incurred subsequent to achieving
technological feasibility and prior to when the product is available for
general release to customers as prescribed by FASB No. 86, Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. The
Companys capitalized software development costs for the three and six months
ended June 30, 2001 amounted to $330,000 and $580,000, respectively. Including
capitalized costs, R&D expenses for the second quarter and first six months of
2001 represented 12% of total revenues. The Company did not capitalize any
software development costs during the first half of 2002 and expects that the
costs that qualify for capitalization will be substantially lower in 2002
compared to 2001. The increase in R&D spending for 2002 is due primarily to
costs for the further enhancement of Elites existing product lines, combined
with the development of new products designed to broaden the Companys product
suite to meet the needs of the Professional Services Automation (or PSA)
markets. R&D expenses for 2002 are also higher compared to 2001 due to the
reclassification of certain personnel related costs previously reflected in
cost of revenue.

Sales and marketing expenses increased to $3.7 million (or 18% of total
revenue) for the second quarter of 2002 compared to $2.9 million (or 16% of
total revenue) in the same period of 2001. Sales and marketing expenses for
the first half of 2002 of $7.1 million (or 18% of total revenue) were up from
$5.8 million (or 17% of total revenue) in the same period last year. Sales and
marketing expenses consist primarily of salaries, commissions, travel,
advertising and promotional expense. The increase for the year is primarily a
reflection of added personnel costs and advertising to support sales of the
Companys new products and its expansion into new PSA markets.

General and administrative expenses of $2.3 million (or 12% of total revenue)
for the second quarter of 2002 were up from $1.9 million (or 10% of total
revenue) in the second quarter of 2001. These expenses totaled $4.6 million
(or 12% of total revenue) for the first half of 2002 compared to $3.6 million
(or 11% of total revenue) in the first six months of last year. General and
administrative expenses consist mainly of salaries of corporate executive,
legal, financial, information systems and human resources personnel, as well as
professional fees and insurance costs.

Amortization expense for goodwill and other acquired intangibles in the second
quarter of 2002 decreased to $190,000 (or 1% of total revenue) from $514,000
(or 3% of total revenue) in the second quarter of 2001. These expenses
declined to $380,000 (or 1% of total revenue) for the first half of 2002 from
$1.0 million (or 3% of total revenue) for the same period of 2001. The lower
amortization expense for 2002 is a reflection of the adoption of SFAS No. 142,
Goodwill and Other Intangible Assets on January 1, 2002, at which time the
Company ceased to amortize goodwill.

The Company reported net interest income of $107,000 and $203,000 for the
second quarter and first half of 2002, respectively. Interest income for the
same periods last year totaled $224,000 and $522,000, respectively. The
reduced interest income in the current year primarily reflects lower interest
rates on the balances available for investment.

The income tax provision for the second quarter of 2002 was $362,000 (or 38% of
pre-tax income) and for the first half of the year was $795,000 (or 38% of
pre-tax income), compared to $777,000 (or 38% of pre-tax income) for the second
quarter of 2001 and $674,000 (or 41% of pre-tax income) for the first half of
2001.

Risks and Uncertainties

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.
During the second quarter of 2002 an

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unanticipated contract dispute occurred with a significant customer for which
the Company reversed revenue for the year and reserved against the collection
of related accounts receivable. The Company is in ongoing discussions with the
customer and further reserves could be necessary depending on the final
resolution of this matter.

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 competition or in the Companys
or its competitors pricing policies, the Companys success in expanding to new
markets, the timing and cost of new product development, the revenue mix of
software systems and services, the loss of key personnel and changes in general
economic conditions or in the particular markets the Company serves.

Liquidity and Capital Resources

The Companys cash and cash equivalents totaled $27.3 million at June 30, 2002
compared to $24.7 million at December 31, 2001. Working capital, current
assets less current liabilities, at June 30, 2002 was $24.6 million compared to
$22.1 million at December 31, 2001. The increase in cash and cash equivalents
during the year was due mainly to cash generated from 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.

Net cash provided by operating activities for the first six months of 2002 was
$2.7 million compared to $1.3 million for the first half of 2001. This
increase is primarily attributable to higher cash collections from customers,
which allowed receivable balances to remain relatively flat for the first six
months of 2002 at approximately $22.6 million compared to the effect of an
increase in receivables for the first six months of 2001. Net cash flows used
by investing activities were down significantly to $652,000 for the first half
of 2002 compared to $3.3 million for the same period of 2001 due to an absence
of required purchase agreement payments for LMI in 2002. Net cash provided by
financing activities of $539,000 for the first six months of 2002 compares to
net cash used by financing activities of $125,000 for the same period of 2001,
reflecting higher proceeds from the exercise of employee stock options in 2002
and the repurchase of stock in 2001.

On June 26, 2002, the Company entered into a new two-year, $10 million
revolving credit agreement with Mellon 1st Business Bank (successor in interest
to Mellon Bank, N.A.). No borrowings were outstanding under the credit
facility at June 30, 2002. 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 collateralized by
substantially all of the Companys tangible and intangible assets.
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 May
2004.

New Accounting Standards

In November 2001, the Emerging Issues Task Force (EITF) released Issue No.
01-14 regarding Income Statement Characterization of Reimbursements Received
for Out-Of-Pocket Expenses Incurred. This pronouncement requires that
reimbursements received from customers for out-of-pocket expenses incurred be
characterized as revenue in the Companys statement of operations. The Company
incurs incidental expenses in the delivery of services to its clients that are
commonly referred to as out-of-pocket expenses. These expenses include but
are not limited to travel and related charges. Accordingly, the Company has
classified reimbursable expenses billed to clients as revenue, which are offset
by a corresponding charge to cost of revenue, for all periods presented. This
change in classification had no effect on current or previously reported net
income or income per share.

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, which establishes new standards for accounting and reporting
requirements for business combinations and requires that the purchase method
of accounting be used for all business combinations initiated 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.
Intangible assets that have finite useful lives 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 No. 121 for recognizing and measuring the impairment of long-lived assets
to be held and used, as well as measuring long-lived assets to be disposed of
by sale.

The Company adopted SFAS No. 142 and SFAS No. 144 on January 1, 2002. The
adoption of these statements did not have a material adverse impact on the
Companys consolidated results of operations, financial condition and cash
flows.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 supercedes the existing
guidance related to the accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (Including Certain Costs Incurred in a
Restructuring). Under SFAS
No. 146, a liability for exit or disposal costs will be recognized and measured
initially at its fair value in the period in which the liability is incurred.
The provisions of SFAS No. 146 are effective for exit or disposal activities
initiated after December 31, 2002 with earlier application encouraged. The
Company will adopt this standard on future exit or disposal activities.

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, unforeseen
changes in the Companys markets including competitive changes, 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,
the revenue mix of software systems and services, the loss of key personnel,
general changes in the economy and in the particular markets served by the
Company. 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, 2001
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

A portion of the Companys business is transacted in foreign currencies and the
Company may be exposed to financial market risk resulting from fluctuations in
foreign currency exchange rates. The Company monitors the volatility of
foreign currencies and may utilize hedging programs or other derivative
financial instruments commonly used to reduce financial market risks if deemed
appropriate. To date the Company has not utilized any derivative financial
instruments.

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 through limiting default risk, market risk and
reinvestment risk by depositing its cash and cash equivalents in high-quality
financial instruments.

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##### Table of Contents






PART II  Other Information




Item 1. Legal Proceedings

From time to time the Company is involved in certain claims and litigation
arising out of its operations in the ordinary course of business. Further, the
Company periodically is subject to government audits and inspections. In the
opinion of the Companys management, any such matters presently pending will
not, individually or in the aggregate, have a material adverse effect on the
Companys results of operations or financial condition.




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

The Annual Meeting of Stockholders of Elite Information Group, Inc., was held
on May 9, 2002. The matters voted on and the number of votes cast for, against
or withheld, as well as the number of abstentions as to each such matter, were
as follows:



| | 1. |  | Alan Rich and Arthur G. Epker III were elected at the annual
meeting as Class III directors. Listed below are the names of the
two nominees elected to serve as directors and the four other
continuing directors:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |                    |  |                    
|-------------------- |  | ------------------ |  | -------------------
|Class I              |  | Class II           |  | Class III          
|                     |  |                    |  |                    
|Christopher K. Poole |  | David A. Finley    |  | Alan Rich          
|Roger Noall          |  | William G. Seymour |  | Arthur G. Epker III

The following is a separate tabulation with respect to each nominee elected:

|                    |  |     |           |          |  |            |           | 
|------------------- |  | --- | --------- | -------- |  | ---------- | --------- | 
|                    |  |     |           |          |  | Against or
|                    |  | For |           | Withheld
|                    |  |     |           |         
|Alan Rich           |  |     | 5,719,926 |          |  |            | 1,897,144 | 
|Arthur G. Epker III |  |     | 5,723,926 |          |  |            | 1,893,144 | 



| | 2. |  | With respect to the proposal to approve an amendment to the
Companys 1996 Stock Option Plan, 2,352,235 shares were voted for,
1,789,827 were voted against, there were 218,535 abstentions and
3,256,473 broker non-votes.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | With respect to the proposal to ratify the selection of
PricewaterhouseCoopers LLP as the independent public accountants,
6,327,765 shares were voted for, 66,564 were voted against and there
were 1,222,741 abstentions. 




Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits:
|--- |  | ---------

|            |  |                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                
|10.1        |  | Credit Agreement by and between Elite Information Systems, Inc.,
Elite Information Group, Inc., and Mellon 1st Business Bank
(successor in interest to Mellon Bank, N.A.) dated June 26, 2002                                                                                  
|10.2        |  | Elite Information Group, Inc. Amended and Restated 1996 Stock
Option Plan (Incorporated by reference to the Registrants Notice
of Annual Meeting of Stockholders and definitive Proxy Statement
pertaining to the 2002 Annual Meeting of Stockholders, SEC File
No. 000-20034)



|(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: August 14, 2002 | By:                                                                  | /s/ Barry D. Emerson
|                      |                                                                     
|                      | Barry D. Emerson, Vice President,
Treasurer, Chief Financial Officer

15