EIS INTERNATIONAL INC /DE/, 10-K, 1997-03-31

EIS INTERNATIONAL INC /DE/
10-K, 1997-03-31
TELEPHONE & TELEGRAPH APPARATUS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996.

[ ] 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: 0-20329
EIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware 06-1017599
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)

555 Herndon Parkway, Herndon, Virginia: 20170
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (703) 478-9808

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.01 Per Share
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or an amendment to this
Form 10-K.[ ]

The aggregate market value as of March 19, 1997 of Common Stock held by
non-affiliates* of the Registrant was: $40,216,844.

The number of shares of Common Stock outstanding as of March 19, 1997 was:
11,144,869.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
1996. Portions of such Proxy Statement are incorporated by reference in Part
III.

Omission of Information Required by Items 6, 7, 8 and 14(a):

Insofar as EIS is unable to provide the information required by these Items
without unreasonable effort or expense at this time, it has filed for an
extension under Rule 12b-25 promulgated under the Securities Exchange Act of
1934, as amended, and intends to file the required information within 15 days
of this filing in accordance with the provisions of such rule.

*As used herein, "voting stock held by non affiliates" means shares of Common
Stock held by persons other than executive officers, directors and persons
holding in excess of 5% of the registrant's Common Stock. The determination of
market value of the Common Stock is based on the last reported sale price as
reported by the Nasdaq National Market System on the date indicated. The
determination of "affiliate" status for purposes of this report on Form 10-K
shall not be deemed a determination as to whether a person or entity is an
"affiliate" of the registrant for any other purpose.

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Part I

Item 1. Business

Background

EIS International, Inc. (the "Company" or "EIS") provides integrated systems,
software and services to businesses that use the telephone in organized
campaigns to reach large target audiences. These solutions improve the
productivity and effectiveness of call center operations including campaign
management, staffing and technology integration. The Company is one of the
world's largest suppliers of call center technology and the leading provider of
outbound call center systems.

EIS designs, manufactures, markets and supports sophisticated, full-featured
call center management systems that are used for outbound and blended inbound
applications such as consumer direct marketing, fundraising, market research,
customer service, credit and collections. Staff forecasting and scheduling
software is provided through its subsidiary, Cybernetics Systems International
Corp. ("Cybernetics"). The Company also provides system integration and support
services for its products and those of other vendors, including project
planning, requirements analysis, voice and data integration, and systems
engineering.

EIS customers include many outbound telemarketing service bureaus, financial
institutions, major telecommunications companies, universities, cable operators,
direct response marketers and publishing companies, among others.

EIS systems employ computer telephony integration ("CTI") technology to add
efficiency to the management of call centers and substantially increase the
productivity of telephone agents engaged in calling campaigns. Systems software
features provide for outbound intelligent/predictive dialing, database and
calling list management, scripting, real-time and historical reporting, and the
integration of the EIS software with the customers' computer and telephone
systems. Through the use of the Company's state-of-the-art dialing technology
which includes high-speed call switching, patented voice detection technology,
sophisticated pacing algorithms and call classification, EIS systems increase
the time agents are connected with called parties. Non-productive activities are
automated, leaving the agent free to spend 45-50 minutes per hour in talk time
compared with 15-20 minutes in a non-automated environment. The systems automate
the management of the calling list, including campaign list segmentation, time
zone controls and callback handling. The systems include multi-page scripting
capabilities that allow for conversation branching and for account history,
product information, order forms and calculations to be presented to the agent
on-line. In addition, reporting and agent monitoring capabilities allow
supervisors and managers to track up-to-the minute activities in the call center
so that they can modify and improve the effectiveness of the campaign in
real-time.

EIS systems are based on an open-architecture design to allow them to interface
with a variety of third-party switches and software products and to integrate
easily with customers' host computers and databases. Systems are designed to be
modular, expandable and flexible to respond to the customers' changing
environment and expansion needs.

EIS systems include the Call Processing System, a full-featured solution for
outbound call centers involved predominantly in direct marketing activities; OCM
Gold, a product licensed from AT&T in 1991 and enhanced to work seamlessly with
the AT&T Definity G3 switching platform; System 7000, the system acquired in the
merger with International Telesystems Corporation in 1993 and directed at the
credit and collections market, and Centenium, a powerful client/server solution
for corporate call centers. The Company also markets SmartAgent Manager, a
systems enhancement that blends outbound campaigns with inbound operations and
Sound & Screen, an integrated voice and data recording and playback system for
verification of telephone-based transactions. The Company also develops and
markets Workforce Manager for Windows

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and EMPSx, both computer software systems applications for employee management
and planning through its Cybernetics subsidiary.

EIS is a Delaware corporation organized in 1988. It is the successor by merger
to a Connecticut corporation founded in 1980 to engage in software consulting.
The Company sold its first commercial call center system in 1989 and became a
publicly traded company in July of 1992. EIS' headquarters are located at 555
Herndon Parkway, Herndon, VA 20170. Its telephone number at that location is
(703) 478-9808. Unless the context otherwise requires, the "Company" refers to
EIS International, Inc. (including its predecessor) and its wholly-owned
subsidiaries.

Recent Developments

On March 3, 1997, EIS announced a restructuring and reorganization (the
"Restructuring.") The purpose of the Restructuring was to refocus the Company's
efforts on its core call center systems business and to reduce costs. In
connection with the Restructuring, EIS discontinued the operations of Surefind
Information, Inc. ("Surefind"), its Pittsburgh-based on-line data backup and
recovery services business as of December 31, 1996. EIS will close its
Pittsburgh facility, which housed both the operations of Surefind as well as
EIS' corporate headquarters, the latter of which has now been relocated to an
existing EIS facility in Herndon, Virginia. In addition, in connection with the
Restructuring, EIS downsized the operations of Cybernetics, focusing
Cybernetics' development and marketing efforts primarily on its Workforce
Manager product. Furthermore, EIS plans to close its Cybernetics' Coral Gables,
Florida facility. Finally, EIS terminated the separate operations of Pulse
Technologies, Inc. ("Pulse"), its Chantilly, Virginia-based integration services
business, by making the business of Pulse part of the operations of EIS. A total
of 110 employees were terminated as a result of the Restructuring. Furthermore,
EIS will record a substantial charge in the fourth quarter of 1996 in connection
with the Restructuring, and expects to record additional charges of
approximately $3 million in the first quarter of 1997. See "Management's
Discussion and Analysis of the Results of Operations."

Market Position

EIS systems are designed to improve efficiency and effectiveness of customer
contact centers. In recent years, the rising cost and limited efficiency of
door-to-door sales and direct mail campaigns, coupled with decreased telephone
costs, have made the telephone an increasingly important tool for
business-to-consumer communication. Typically these business-to-consumer
applications employ a number of telephone agents engaged in telephone calling
campaigns. These campaigns are labor intensive, and a significant amount of
valuable calling agent time can be consumed in placing calls and in retrieving
and organizing data for connected calls. By automating these functions, EIS
systems enable an agent to begin a new conversation within seconds after
completing the last one and thus permit a significant increase in productivity.
The systems' automated dialing and data management functions and user-friendly
telephone scripts reduce agent training requirements and, by eliminating
repetitive and frustrating tasks, help to improve job satisfaction and reduce
agent turnover.

Factors that distinguish EIS systems include a modular design and an open
architecture, which gives customers the flexibility of integrating EIS products
with either Company-supplied or customer-supplied call management software.
Proprietary features include predictive dialing with a patented pacing
algorithm, high speed call switching, patented voice detection technology,
sophisticated call management software and multi-page customer scripting
capability. The open architecture, modularity and operating features provide a
high level of system flexibility, easy integration and significant
price-performance advantages, facilitating the design of highly efficient
calling centers. In these centers, the systems are configured to address the
calling campaign objectives of a specific customer or industry application.

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Strategy

The Company's strategy is to provide total solutions to the customer contact
marketplace. The Company will maintain its position as a leading provider of
outbound call processing solutions and extend its strength in outbound call
management to the overall customer contact market including inbound and blended
inbound/outbound. EIS' strategy will be to continue to build on its core
competencies, enhance systems integration capabilities, strengthen strategic
alliances and combinations, capitalize on opportunities for international growth
and focus on customer satisfaction.

Build on Core Competencies. EIS has developed significant expertise in its
core areas of outbound call center management, computer/telephone integration
and, through Cybernetics, expertise in workforce management. Based on this
expertise, EIS plans to continue to expand and enhance its product offerings to
include new features for outbound applications as well as robust capabilities
for inbound applications, blended inbound/outbound, and agent scheduling. EIS
will focus on improving agent efficiency and effectiveness by providing
knowledge to agents through its expertise in CTI.

Enhance Systems Integration Capabilities. As customer contact centers
continue to evolve, they will require interactivity and integration with a
variety of input/output media (e.g. voice mail, email, world wide web,
videoconferencing, etc.) and external databases. EIS will rely on its systems
integration capabilities to complement its products to support these media and
enable integration with data sources with the purpose of improving agent
effectiveness.

Strengthen Strategic Alliances and Combinations. EIS has established and
continues to strengthen alliances with other leading vendors in the customer
contact market so that EIS can offer comprehensive customer contact solutions.
These relationships extend worldwide and include alternative channels of
distribution. EIS has established a lead referral arrangement with Lucent
Technologies, a partnering agreement with Aspect Telecommunications Corp.
("Aspect") and a business affiliate agreement with Nortel. EIS has also worked
with vendors of contact center applications software to enable such vendors to
offer versions of their software that can operate with EIS systems. EIS will
continue to work closely with leading vendors of telecommunications switches so
that EIS products may be easily integrated with their switches.

Capitalize on Opportunities for International Growth. EIS believes that
international markets provide EIS with a significant opportunity for future
growth. EIS has positioned itself to increase its international presence by
developing new and strengthening existing relationships with several foreign
distributors and qualifying its products for sale in additional countries. EIS
intends to continue to pursue opportunities to expand into new international
markets by adding distributors in such markets and obtaining the requisite
regulatory certificates.

Focus on Customer Satisfaction. EIS believes that customer satisfaction is
derived from the focus of every employee in every area of the Company on the
customer experience. EIS plans to continue strengthening our partnerships with
our customers to attain the highest level of customer satisfaction.

Products and Services

Current Products and Services

EIS' outbound call processing systems consist of either EIS proprietary
digital switches which place calls, monitor call results and switch live calls
to agents or interfaces to switches from vendors such as AT&T that operate in
conjunction with call management software provided by EIS. These systems are
identified by the product names Centenium, Call Processing System ("CPS"),
System 7000 and OCM. EIS' proprietary switches can be combined with EIS' Gateway
product to enable such systems to be integrated with outside vendors' software
applications. Cybernetics' workforce management products are

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either Unix or Windows-based software programs which gather and store data from
external systems such as the ACD, and use the data to calculate work volume and
schedule the number of agents needed to meet user-defined service criteria.
Identified by product names of EMPSx and WorkForce Manager, these programs are
used to improve efficiency in inbound call centers.

Centenium. In September 1994, EIS introduced Centenium, its advanced call
center system that integrates outbound calling with the customer's inbound
system. The Centenium system is built on a flexible, client/server architecture
that distributes processing tasks and automates all facets of call center
operations from agent screen displays to management reporting. The core software
for Centenium runs on a UNIX operating system with screen presentations in the
Microsoft Windows environment or in terminal emulation mode. Centenium is
designed to operate with a variety of computer platforms and several
telecommunicating switches, including AT&T's Definity G3, Aspect's CallCenter
and Northern Telecom's Meridian 1, as well as EIS' proprietary switches. In
addition to marketing Centenium to potential new customers, EIS continues to
market Centenium to its existing customers as well.

Centenium can be configured to meet a wide range of customer requirements.
Centenium provides agents, administrators and supervisors with the information
they need to handle call center activities, including scripting, list management
and center activity reporting. Centenium utilizes two sophisticated scripting
packages to provide users with the ability to create agent scripts with logical
branching to lead agents through presentations. Centenium users can prepare
their own reports, combining data from Centenium with other databases.
Supervisors can assign scripts to lists, segment lists and assign them to
separate groups of agents, or filter records in real time during a campaign
using Centenium tools. Centenium uses SQL (structured query language), an
industry standard, to enable users to find and manipulate data in multiple
formats.

Call Processing System CPS. The CPS system consists of a digital switch,
combined with either (i) EIS call management software and related computer
hardware or (ii) EIS Gateway product and the customer's host computer. Using EIS
call management software, the system is a turnkey outbound processing system,
with predictive dialing, voice detection, scripting and data management
functions designed primarily for direct marketing applications. Used with the
EIS Gateway product, the system integrates outside vendors' software
applications with EIS call processing functions. The digital switch can handle 8
to 120 agent stations and can operate up to 112 analog lines, 336 digital T-1
lines, or a mix of both analog and T-1 lines. In addition, the CPS system has
the ability to add both stations and trunk lines in modular increments.

System 7000. The System 7000 provides a turnkey outbound call processing
system with predictive dialing, voice detection, scripting and data management
functions designed primarily for credit/collections applications. The System
7000 product line was acquired by EIS through its merger with ITC in November
1993. The System 7000 digital switch can handle up to 80 agent stations and can
operate up to 144 digital lines. Both stations and trunk lines can be added to
the System 7000 in modular increments.

OCM Gold. The OCM Gold is a software product that provides call management
and predictive dialing through AT&T PBX switches and is designed to operate with
customer host computer databases. EIS obtained exclusive third party worldwide
licensing rights (except as to AT&T for certain purposes) to OCM from AT&T in
June 1991. In 1993, EIS introduced OCM Gold, its first outbound call management
system that can be integrated with the customer's inbound system. EIS has also
successfully migrated OCM to the NCR 3000 Series microcomputers running UNIX
System 5 Release 4 and to the HP Series 9000.

Smart Agent Manager. The SmartAgent Manager (SAM) option for Centenium,
System 7000 and OCM integrates those products with inbound switches from third
parties including AT&T, Aspect and Northern Telecom. With SAM, the system
automatically monitors the demand for agents to answer inbound calls and
switches them from outbound campaigns at the

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same workstation to meet the call center's specified quality levels. When the
peak demand subsides, SAM moves the agents back to outbound to maximize agent
productivity. EIS has utilized advanced Computer Telephony Integration
techniques in partnership with the inbound switch vendors to provide this
seamless operation.

EMPSx. EMPSx is the latest software release of Cybernetics' workforce
management system family of products for the UNIX operating system. EMPSx
operates on the IBM RISC System/6000 running the AIX Operating System and the
Hewlett Packard 9000 series under the HP-UX Operating System. It is targeted at
multi-site installations which require networking of their call centers and
large single site installations with complex workforce management requirements.

Workforce Manager for Windows. Workforce Manager for Windows offers a broad
set of tools for the call center management team to plan, track resource
performance, and analyze current and future strategies. The goal for Cybenetics'
Workforce Manager is to provide the call center management team with an easy to
use, yet comprehensive Workforce Management system that will help them optimize
the use of their workforce, utilizing hardware and operating systems that they
are familiar with.

Integration Services. Integration Services are provided by EIS Client
Services and include CTI application development, inbound/outbound integration,
network analysis, performance assessment, systems data integration and general
call center consulting.

Product Features

Important features of EIS systems include the following:

- Open Architecture -- By separating call processing and call management
functions and employing industry standard operating system software, EIS
is able to offer the ability to integrate a digital switch with a
customer's existing call management software and host computer database.
The separation of these functions allows EIS to offer a cost effective
solution to customers who already have data automation systems in place
and prefer to automate call processing without replacing their existing
call and data management systems. By adopting a client/server architecture
for Centenium, EIS has expanded the number of software applications and
switches that can function with its product offering.

- Highly-Efficient Predictive Dialing -- EIS' patented, predictive dialing
algorithms automatically adjust a system's dialing rate according to
customer-established parameters. These algorithms are included in the
software of the Centenium architecture and in the firmware of EIS digital
switches enabling EIS systems to achieve highly effective call pacing,
thereby maximizing agent utilization while reducing the incidence of calls
for which no agent is available to as little as 1% of answered calls.

- High Speed Voice Detection and Switching -- EIS' patented voice detection
and proprietary call switching technology, used in EIS' digital switch in
Centenium and CPS, enables it to distinguish a voice and switch the call
to an agent within 20 milliseconds (1/50th of a second), so quickly that
the agent is able to hear the called party's first "Hello." This permits
the agent to begin a conversation naturally, as if the agent had manually
placed the call. The digital switches also automatically distinguish and
dispose of busy signals, unanswered calls, telephone company recorded
messages, answering and facsimile machines and modems.

- Sophisticated Call Management -- EIS systems have data management and
system control capabilities, including retrieval of phone lists and
associated files, data updating, call results analysis and system activity
reporting. The call

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management software can, among other things, be programmed to
automatically delete non-working numbers from phone lists, redial busy or
unanswered calls after designated intervals and tailor phone list usage to
implement calling campaigns during predetermined hours across multiple
time zones. EIS has augmented these capabilities in the Centenium product
by introducing a sophisticated message structure for communicating between
elements of the system. Users gain increased control over their operations
and improved ability to observe the results of campaigns through graphical
representation of reports.

- Inbound/Outbound Call Management -- EIS also offers products that can
control and monitor centers that perform both inbound and outbound calling
activities. EIS' SmartAgent Manager product for Centenium, System 7000 and
OCM provides dynamic control of agents based upon quality levels that are
set by the customer.

- Custom Scripting -- EIS call management software provides on-screen
scripting capabilities for EIS' Centenium and CPS systems. These scripts
are automatically presented to the agent by the system and provide a
consistent and comprehensive support function to agents in conversations
with consumers. Scripts can be created by the customer's administrators
without assistance from EIS. Scripts can be designed to utilize automatic
conditional branching that will cause the appropriate page, field or
window to be displayed based upon responses entered in particular fields
by an agent.

- Modular Expansion -- EIS' digital switch can be expanded by adding circuit
boards in increments of eight agent stations, eight analog trunk lines,
and 24 T-1 trunk lines for EIS Centenium, CPS and System 7000 products.
This modular design permits a system to grow with the customer's needs and
reduces system disruption in the event of a trunk or station board
failure.

- Sophisticated Automated Scheduling -- An important feature of Cybernetics'
Workforce Management products, critical to the successful operation of
sophisticated automated scheduling, is the "time-based" nature of its
database management system; in other words, the time factor is actually
embedded in the database allowing it to change dynamically over time.
Standard database concepts in general cannot be used to store, retrieve
and update information which can tell a user when events will happen and
by whom a task will be performed. Cybernetics has built a practical,
easy-to-use scheduling system, using time-based database concepts to
maintain and update the workforce management database.

- ODBC Compliant -- Cybernetics' systems provide Open Database Connectivity
(ODBC) which is a standard programming interface for accessing data in
both relational and nonrelational database management systems providing
seamless connectivity to the customers data.

- Network Compatibility -- Cybernetics' systems are available for single
site or multi site (LAN/WAN) network environments.

Product Development

EIS has a continuing research and development program directed toward
increasing the functionality of existing products based upon current and
anticipated customer needs. A significant element of EIS' research and
development program is the integration of its products into a client/server
architecture, in which information processing tasks are shared among multiple
PCs and networked servers. This program also emphasizes the introduction of new
products to broaden EIS' product line and to reach a larger segment of the CTI
market, as well as technical modification of products for compliance with
individual country standards in connection with EIS' international sales
efforts. During 1994, 1995 and 1996, EIS invested

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$6.6 million, $8.0 million, and $14.2 million, respectively, in research and
development. In addition, EIS spent approximately $1.3 million, $1.4 million and
$2.1 million on capitalized software development costs during 1994, 1995 and
1996, respectively. EIS believes that a significant commitment of its financial
resources and talent will be necessary to maintain and increase its competitive
position in the years ahead. EIS plans to continue to devote a significant
portion of its revenues to research and development activities, including
salaries and other compensation of research and development personnel.

Customers

EIS maintains customer relationships in a variety of industries. EIS
customers include American Express, American Cancer Society, AT&T American
Transtech, APAC Teleservices, Bell Canada, CUC International, Fingerhut, Gannett
Newspapers, GE Capital, JC Penney, Michigan State University, MBNA America Bank
NA, MCI, Metropolitan Life Insurance Company, Nike, Sallie Mae, Sitel
Corporation, Southwestern Bell, Spiegel, Inc., Syracuse University, Telespectrum
Worldwide, Inc., Turner Vision, Inc., University of North Carolina, Warner
Cable, USAA Insurance, American Airlines and Pacific Bell Operator Services.

There were no individual customers which represented greater than 10% of net
revenues in 1994, 1995 or 1996.

Sales and Marketing

EIS markets its systems and services in the United States through a direct
sales force located in numerous regional offices throughout the United States
and in the United Kingdom. EIS also has agreements with independent distributors
in France, Germany, Italy, Holland, Spain, Mexico, Chile and Japan. During 1994,
1995 and 1996, the Company's international revenues were approximately 4%, 6%
and 4% of net revenues, respectively.

EIS has entered into marketing arrangements with three vendors of
telecommunications switches, Lucent Technologies, Aspect and Northern Telecom.
EIS also has developed relationships with over 25 software vendors to market
products for call center applications. In addition, EIS has marketing alliances
with four systems integration and consulting service companies. EIS intends to
seek to continue to build partnerships with third party software and equipment
vendors.

Customer Support and Service

EIS systems are typically used in applications where the services they
provide are critical to a customer's business and, in those applications, a
system failure would suspend or substantially interrupt a customer's business.
EIS believes that its strong commitment to customer support and service is a
significant competitive advantage. This staff seeks to resolve most service
problems through telephone consultation and remote diagnostic programs run
through a modem connected to a customer's system. If a problem cannot be
corrected by telephone consultation or remote diagnostics, a customer service
engineer will visit the customers site, generally within eight hours of the
identification of a problem. Customer support is available through a toll-free
number 24 hours a day, seven days a week. EIS provides a 90-day warranty on each
of its systems. A maintenance contract is available separately for a renewable
term of up to three years based on monthly or yearly payments. Service and other
revenues as a percentage of total revenues were 19.1%, 16.0% and 22.8% in 1994,
1995 and 1996, respectively.

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Competition

The market for call processing and workforce management systems is highly
competitive. EIS believes that competition will intensify as more companies
enter the market with CTI systems. EIS' principal competitors at present include
Davox Corporation, Mosaix, Inc. and Melita International Corporation. EIS may
encounter increased competition from existing competitors and from new market
entrants, including companies that have historically competed primarily in the
inbound market such as Aspect, Rockwell and Northern Telecom. In addition, for
sales of applications software operating in call centers, EIS may compete with
software providers and system integrators such as Andersen Consulting and
Electronic Data Systems Corporation. Finally, for sales of workforce management
systems, the Company competes primarily against TCS Management Group, Inc. and
may from time to time encounter other competitors such as Pipkins, Inc., IEX
Corporation, Electronic Data Systems Corporation and Affinitec Corporation. Many
of EIS' current or potential competitors may have greater financial, technical
and marketing resources than EIS and there can be no assurance that EIS will be
able to continue to compete successfully with existing or new competitors. As
EIS expands its offering of call center applications, EIS may also encounter
increased competition from call center application providers. To date, EIS has
competed on the basis of the capabilities and the price/performance of its
systems, its applications expertise and the quality of its customer support. As
the call processing market matures and new and existing companies compete for
the same customers, price competition is likely to intensify, and such price
competition could adversely affect EIS' operating results.

Regulatory Environment

Certain uses of outbound call processing systems are regulated by federal
and state law. In addition, the Federal Fair Debt Collection Practices Act
prohibits certain consumer debt collection practices, including telephone
communication at any unusual or inconvenient time or place, and it also
prohibits repeated or continuous ringing of the telephone or communication by a
debt collector with the intent to annoy, abuse or harass. The Federal Telephone
Consumer Protection Act (the "TCPA") prohibits the use of automatic dialing
equipment to call emergency telephone lines, health care and similar facility
patient telephone lines, and telephone lines where the called party is charged
for incoming calls, such as those used by pager and cellular phone services. The
TCPA prohibits use of such equipment to engage two or more lines of a multi-line
business simultaneously. Among other things, the TCPA required the Federal
Communications Commission ("FCC") during 1992 to initiate a rulemaking
proceeding concerning the need to protect residential telephone subscribers'
privacy rights to avoid receiving telephone solicitations to which they object.
The FCC rules also require that telemarketers call consumers only after 8 a.m.
and before 9 p.m., local time. Certain states have enacted similar laws limiting
access to telephone subscribers who object to receiving solicitations. Although
compliance with these laws may limit the potential use of EIS' systems in some
respects, EIS' systems can be programmed to operate automatically in full
compliance with these laws through the use of appropriate calling lists and
campaign calling time parameters.

To minimize the likelihood that EIS' products will be subject to existing
and future regulations, EIS works with industry organizations such as the Direct
Marketing Association, North American Telecommunication Association and American
Telemarketing Association to educate consumers, system users and legislators
about the significant distinction between predictive dialing systems, which
promote person-to-person contacts between calling agents and consumers, and
automated dialing recorded message players, which are designed to play recorded
messages without agent involvement.

A number of technical elements of EIS' systems are subject to and conform
with Federal Communications Commission regulations under the Federal
Communications Act of 1934. Future products developed by EIS may also be
required to comply with such regulations before they can be sold in the United
States. To the extent EIS markets its products internationally, it is required
to comply with applicable foreign law, including certification of its products
by appropriate

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government regulatory organizations. There can be no assurance that EIS will not
encounter delays or difficulty in obtaining such certifications and approvals.

Manufacturing and Quality Assurance

EIS' digital switches are manufactured, assembled and tested by independent
subcontractors, including Kimchuk, Inc. ("Kimchuk") and Electronic
Instrumentation and Technology, Inc. ("EIT"). The supply agreement for Kimchuk
currently runs through July 1997 and provides automatic one-year renewal terms,
unless either party gives 90 days' notice of non-renewal. During the term of
this agreement, Kimchuk has a right of first refusal to manufacture some of EIS'
digital switches and related systems components, subject to certain conditions.
EIS may terminate this agreement if Kimchuk is unable to satisfy quality
assurance requirements within a specified time after notice, is unable to meet
EIS' demand for products as specified in the agreement, or seeks protection from
its creditors. The functions of these contract manufacturers are conducted in
accordance with EIS' specifications and under the direction of EIS' engineering
staff. EIS has used these primary subcontractors for over five years. EIS
believes that for at least the next 12 months both subcontractors have
sufficient capacity to meet EIS' anticipated production requirements.

EIS believes that, if necessary, it could make arrangements with one or more
other subcontractors to increase output or replace its current subcontractors,
because EIS' systems are manufactured from standard industry components. To
date, adequate supplies of these components and alternative supplies for other
components that are currently single-sourced have been available in a timely
manner from a variety of suppliers.

EIS has established a software quality assurance program to insure that
software releases function properly and related documentation is complete.
Various simulation tools are used for testing software prior to release, and a
computerized user tracking system logs and documents reported problems and their
resolution. The tracking system permits analysis of customer problems to
determine if service announcements of software changes are warranted.

The personal computers used in the EIS call center system are supplied
through four manufacturers. An interruption in supply of such personal computers
or the required peripherals could disrupt or delay the shipment of call center
systems.

Intellectual Property

EIS' U.S. patent for voice detection technology, based on a unique method of
wave form analysis expires in 2005. EIS' U.S. patent for a method of randomizing
telephone numbers also expires in 2005; its U.S. patent for the digital voice
protocol converter and port controller expires in 2006; its U.S. patent for the
digital voice recording, reproduction and telephone network signaling using
direct storage in RAM of PCM-encoded data expires in 2006; its U.S. patent for
regulating arrivals of customers to servers expires in 2006; its U.S. patent for
a telephone trunk interface circuit expires in 2006; its U.S. patent for an
alternate memory addressing method for information storage and retrieval expires
in 2006; its U.S. patent for a redundancy and buffering design for a call
processor expires in 2007; its U.S. patent for the pacing of telephone calls for
call origination management systems expires in 2007; its U.S. patent for a
method for the classification of audio signals on a telephone line expires in
2008; its U.S. patent for a call pacing algorithm using call progress detection
technology expires in 2010; its U.S. patent for a method for call pacing to
reduce abandoned calls expires in 2011; its U.S. patent for a system for
integrating a stand-alone inbound automatic call distributor and an outbound
predictive dialer expires in 2012; its U.S. patent for an advanced method for
answer machine detection expires in 2012. In July of 1996, EIS was awarded a
patent for a system that archives both voice and data in a call center. In
August of 1996, EIS received a U.S. patent for a system for integrating a stand
alone inbound automatic call distributor and an outbound automatic call dialer.
Because of the rapid change in technology in the call center industry, and
because EIS recognizes that its success depends on

11
<PAGE>

its ability to continue to provide technology enhancements in its current and
future products, EIS does not believe that the expiration of its patents will
have any material adverse effect on its business.

EIS has filed U.S. patent applications for an advanced call pacing
technology, for a system that archives both voice and data in a call center, for
a technology that provides incentives to call center agents, and for technology
that provides a multi-media training environment to call center agents. However,
there can be no assurance that patents for these technologies will be issued.
EIS maintains copyright notices on its software.

EIS has received formal or informal notice of two potential patent
infringement claims against it. During September and October 1991, as a result
of informal discussions with a competitor, EIS was informed of the competitor's
view that certain of EIS' installations might employ technology patented by the
competitor. On June 15, 1992, EIS received a letter from a previously unknown
source which referenced patented technology for use of a standard PBX to place
automated outbound calls. EIS believes that EIS would not have any material
liability in the event either or both of the patent holders were to pursue
patent infringement claims against EIS. There can be no assurance, however, that
EIS would prevail if any infringement dispute should develop. See "Risk Factors
- -- Intellectual Property Risks."

Factors Affecting Future Results

A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, the following factors.

A variety of factors influence the level of the Company's net sales in a
particular quarter, including general economic conditions in the call processing
industry, the timing of significant orders, shipment delays, specific feature
requests by customers, the introduction of new products by the Company, the
introduction of new products by the Company's competitors, acquisitions by the
Company, production and quality problems, changes in the cost of materials,
disruption in sources of supply, seasonal patterns of capital spending by
customers and other factors, many of which are beyond the Company's control.
Since a substantial portion of the expenses of the Company do not vary relative
to sales levels, if net sales levels in a particular quarter do not meet
expectations, it could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company derives a substantial
portion of its revenues from the sale of products in which a single transaction
may exceed $150,000. As a result, the closing, or failure to close, of a small
number of transactions could have a significant impact on the Company's net
sales and operating results in any given quarter.

The market for call processing systems is based upon sophisticated
technologies and is subject to rapid technological change. Current or new
competitors may introduce new products, features or services that could
adversely affect the Company's competitive position. To date, the Company's
research and development programs have periodically produced system features and
enhancements to address customer requirements and to respond to competitive
conditions. However, the Company believes that to remain competitive it must
continue to improve its products and related services and develop and
successfully market new products and services. The success of new products
depends on a variety of factors, including product selection, successful and
timely completion of product development and the Company's ability to offer
products at competitive prices.

The market for call processing systems is highly competitive. The Company
believes that competition will intensify as more companies enter the market. The
Company may encounter increased competition from existing competitors and rom
new market entrants, including companies which have historically competed
primarily in the inbound call processing market. In addition, for sales of
applications software operating in call centers, the Company may compete with
software

12
<PAGE>

providers and system integrators. Many of the Company's current or potential
competitors may have greater financial, technical and marketing resources than
the Company. As the Company expands its offering of call center applications,
the Company may also encounter increased competition from call center
application providers. As the call processing market matures and new and
existing companies compete for the same customers, price competition is likely
to intensify. See "Business - Competition".

The Company may consider strategic acquisitions from time to time. The
Company's ability to expand successfully by acquisition depends on many factors,
including the successful identification and acquisition of businesses and
management's ability to integrate and operate the new businesses effectively.
The consideration paid for such acquisitions, the diversion of the attention of
management to integrate any acquired businesses and any difficulties encountered
in the integration process could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has in the
past experienced difficulties with the successful identification and integration
of acquisition targets (see "Recent Developments").

The Company's success will depend in part on its ability to obtain and maintain
patent protection for its products, to preserve its trade secrets and to operate
without infringing on the proprietary rights of third parties. The Company
attempts to protect its technology by, among other things, investing significant
financial resources in obtaining and maintaining patents, copyrights and trade
secrets. The call processing industry is characterized by vigorous protection
and pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. The Company has
received notices of two potential patent infringement claims. Any assertions of
intellectual property claims could require the Company to discontinue the use of
certain processes or cease the manufacture, use and sale of infringing products,
to incur significant litigation costs an damages, and to develop non-infringing
technology or to acquire licenses to the alleged infringed technology.
Furthermore, the laws of certain countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. See "Business - Intellectual Property".

The Company's call processors (digital switches) are manufactured, assembled
and tested by independent subcontractors under supply contracts. Any adverse
development affecting the Company's current subcontractors could result in
delays in the production and delivery of the Company's systems and could have an
adverse impact on manufacturing quality and the Company's operating results.
Except for some of the integrated circuit boards provided by the subcontractors,
the Company's systems are manufactured from standard industry components. A
delay or lack of supply of these components from existing sources or an
inability to obtain alternative sources, if and when required in the future,
could have a material adverse effect on the Company's business, financial
condition and results of operations. The personal computers used in the
Company's call center system are supplied through two manufacturers. An
interruption in supply of such personal computers or the required peripherals
could disrupt or delay the shipment of call center systems.

The Company has offered lease financing to its international and United
States customers and intends to continue this practice in the future. In the
past, the Company offered these payment terms to entrepreneurial businesses with
limited capitalization which may not be considered "credit worthy" by financial
institutions. The Company has an agreement with a third party leasing company to
finance some of its systems which provides, among other things, that some leases
financed under the agreement are subject to a 10% recourse from the Company. The
Company may enter into additional agreements with third party leasing companies
to finance its systems, which may also include certain recourse arrangements. In
addition, the Company from time to time sells portions of its lease portfolio to
third parties, on terms which may include recourse provisions and at a discount.

Certain uses of outbound call processing systems are regulated by federal
and state law, including the Telephone Consumer Protection Act of 1991 and the
Federal Fair Debt Collection Practices Act. Although compliance with these laws

13
<PAGE>

may limit the potential uses of the Company's systems in some respects, the
Company believes that each system can be programmed to operate automatically in
full compliance with these laws through the use of appropriate calling lists and
campaign calling time parameters. There can be no assurance, however, that
future legislation further restricting telephone solicitation practices, if
enacted, would not adversely affect the Company. A number of technical elements
of the Company's systems are subject to and conform with Federal Communications
regulations under the Federal Communications Act of 1934. Future products
developed by the Company may also be subject to compliance with similar or even
more restrictive regulations before they can be sold in the United States. To
the extent the Company markets its products in foreign countries, it is required
to comply with applicable foreign laws, including certification of its products
by appropriate government regulatory organizations.

The market for call processing systems is relatively new and evolving. The
future financial performance of the Company will depend in part on the
development and continuing growth of this market. The Company believes that such
growth will require expansion of current applications of existing customers,
development of news markets for these systems and increased user acceptance. A
number of factors, such as the continuing development of an already generally
negative consumer perception of telephone solicitation, could adversely impact
the growth of various applications segments of the Company's markets.

The Company's ability to develop marketable products and maintain a
competitive position in light of continuing technological developments will
depend, in large part, on its ability to attract and retain highly qualified
personnel. Competition for the services of these key employees is likely to be
intense.

Because of these and other factors, past financial performance should not be
considered an indicator of future performance.

Employees

At December 31, 1996, EIS employed 571 persons. Many of EIS' employees are
highly skilled, and EIS' continued success depends on its ability to continue to
attract and retain employees of high caliber. EIS has never had a work stoppage,
and none of its employees are represented by a labor organization. EIS considers
its employee relations to be good.

On February 28, 1997, the Company terminated 110 employees associated with
the winding up of its Surefind operations and the downsizing of its Cybernetics
operations at three locations.

Executive Officers of EIS

The executive officers of the Company, the age of each, and their respective
positions are as follows:

<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
James E. McGowan 53 Chief Executive Officer , President and Director

Frederick C. Foley 51 Chief Financial Officer, Senior Vice President, Finance and Treasurer

14
<PAGE>

Kevin R. Murphy 55 Senior Vice President, Worldwide Sales and Marketing

Kent M. Klineman 64 Secretary and Director
</TABLE>

James E. McGowan has been Chief Executive Officer, President and a director of
EIS since February 1997. He was also President and Chief Operating Officer of
EIS Systems, an operating division of EIS, from April 1996 until February 1997.
From September, 1993 to January, 1996 he was President and Chief Executive
Officer of Deluxe Data, a provider of electronic funds transfer processing and
software for financial institutions and automated teller machine networks. From
January, 1993 to September, 1993 he ran McGowan Associates, a consulting company
which he founded. From January, 1990 to December, 1992 he served as President
and Chief Executive Officer at Xerox Imaging Systems.

Frederick C. Foley has been Senior Vice President, Finance, since October 1994,
Chief Financial Officer of EIS since February 1997 and previously from October
1994 to January 1996, and Treasurer since February 1997 and previously from
January 1994 until April 1996. From April 1993 until October 1994, he served as
Vice President, Finance, of EIS. He served as EIS' Controller from October 1991
until November 1993. He was elected as an executive officer of EIS in April
1993.

Kevin R. Murphy has been Senior Vice President, Worldwide Sales and Marketing of
the Company since November 1996. From October 1993 to October 1996 he was
Executive Vice President of Applied Retail Solutions, an applications software
firm. From May 1982 to October 1993, he held various senior management positions
at Fujitsu Systems of America and its subsidiaries.

Kent M. Klineman has been Secretary of the Company and a director since June
1988. He also served as Treasurer of the Company from June 1988 until December
1989. Mr. Klineman is an attorney and private investor and serves as a director
of several closely-held companies. He is also a general partner of ConArb
Partners, L.P., a securities dealer engaged in arbitrage and trading of
convertible securities for its own account, and a director of Concord Camera
Corp., a publicly held corporation.

Item 2. Properties

EIS' executive offices are located in Herndon, Virginia. This facility has
approximately 65,000 square feet and is leased through December 31, 2001, at a
current annual base rent of $1.2 million , plus charges for proportionate real
estate taxes and operating costs. In addition, EIS leases space in Stamford,
Connecticut, primarily for engineering activities. his facility has
approximately 37,000 square feet and is leased through December 31, 2001, at an
annual base rent of approximately $639,000, plus charges for direct costs. EIS
also leases space in Canonsburg, PA and Chantilly, VA. The Canonsburg facility
has 16,000 square feet and is leased through January 2002 at an annual base
rental of $254,000. In connection with its closing of the Canonsburg facility,
EIS has negotiated a release from its lease obligations subject to final
documents being signed. The Chantilly, VA. facility has approximately 20,000
square feet and is leased through January 2003 at an annual base rent of
$229,000. EIS also leases numerous regional small sales and customer support
facilities in the U.S. and one facility in each of the Netherlands and the
United Kingdom, all under renewable leases or occupancy arrangements for a term
of one year or less. EIS believes that its facilities are suitable and adequate
for its current level of employment but will require additional square footage
to accommodate future business and employment growth.

Cybernetics rents space in Coral Gables, FL, Fort Lauderdale, FL, and
Pleasanton, CA. The Coral Gables facility has approximately 9,700 square feet
and is leased through March 2002 at an annual base rent of $180,000. In
connection with the closing of its Coral Gables facility, the Company is looking
to sublet this space. The Fort Lauderdale location

15
<PAGE>

has approximately 7,500 square feet and is leased through February 2001 at an
annual base rent of $101,000. The Pleasanton office has approximately 1,600
square feet and is leased through November 1998 at an annual base rent of
$28,000.

Item 3. Legal Proceedings

EIS is a party to various legal actions and claims arising in the ordinary
course of its business. In management's opinion, EIS has adequate legal defenses
for each of the actions and claims and believes that their ultimate disposition
will not have a material adverse effect on EIS' consolidated financial position
or results of operations.

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

None.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

EIS common stock began trading on the NASDAQ National Market System under the
symbol "EISI" on July 10, 1992. The following table sets forth for the periods
indicated the high and low prices for the Common Stock as reported by NASDAQ.

1995 1996
HIGH LOW HIGH LOW
First Quarter 18 1/4 13 3/4 18 3/4 14 1/4
Second Quarter 18 14 31 5/8 14 3/8
Third Quarter 20 15 1/2 28 3/4 12 7/8
Fourth Quarter 19 1/2 13 7/8 14 1/8 6 1/2

As of December 31, 1996, there were approximately 245 holders of record of the
Company's Common Stock and approximately 5,000 beneficial shareholders of the
Company's Common Stock.

On March 1, 1996, EIS issued an aggregate of 494,673 shares of its Common Stock,
in addition to an aggregate of approximately $8,082,000 in cash, in exchange for
all of the issued and outstanding capital stock of Cybernetics, which was then
merged with and into a wholly-owned subsidiary of EIS. The shares of EIS Common
Stock issued in connection with this transaction were not registered under the
Securities Act of 1933, as amended (the "Securities Act"), were issued to a
total of 11 stockholders of Cybernetics, nine of whom were "accredited
investors" within the meaning of Rule 505 (a) under the Securities Act. These
shares were issued in reliance on Section 4(2) under the Securities Act.

Item 6. Selected Financial Data

Insofar as EIS is unable to provide the information required by this Item
without unreasonable effort or expense at this time, it has filed for an
extension under Rule 12b-25 promulgated under the Securities Exchange Act of
1934, as amended, and intends to file the required information within 15 days of
this filing in accordance with the provisions of such rule.

16
<PAGE>

Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information under the caption "Election of Directors" of EIS' proxy
statement relating to its 1997 Annual Meeting of Stockholders and the
information under the caption "Security Ownership of Certain Beneficial Holders
and Management" in such proxy statement is incorporated herein by reference.

Item 11. Executive Compensation

The information under the caption "Executive Compensation" of EIS' proxy
statement relating to its 1997 Annual Meeting of Stockholders and the
information under the caption "Certain Transactions" of such proxy statement is
incorporated herein by reference. The information in Part 1 under the caption
"Executive Officers of the Company" is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Holders and Management

The information under the caption "Security Ownership of Certain Beneficial
Holders and Management" of EIS' proxy statement relating to its 1997 Annual
Meeting of Stockholders is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The information under the caption "Certain Transactions" of EIS' proxy statement
relating to its 1997 Annual Meeting of Stockholders is incorporated herein by
reference.

17
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements and (2) Financial Statement Schedules:

(3) Exhibits required by Item 601 of Regulation S-K:

3.1 Restated Certificate of Incorporation of EIS
(incorporated by reference to EIS' Exhibit 4.1 to
the Company's Registration Statement on Form S-3
(No. 33-79814) filed with the Securities and
Exchange Commission on June 3, 1994 (the "1994
Registration").

3.2 By-Laws of EIS as amended (incorporated by
reference to Exhibit 3.2 to EIS' Annual Report on
Form 10-K for the year ended December 31, 1993
(the "1993 Form 10-K").

4.1 Specimen Common Stock Certificate of EIS
(incorporated by reference to Exhibit C to EIS'
Registration Statement on Form 8-A dated June 22,
1992).

4.2 Warrant No. WC-1 dated January 1, 1993 issued by
EIS to Equilease Corporation (incorporated by
reference to Exhibit 4.6 to EIS' Annual Report on
Form 10-K for the year ended December 31, 1992
(the "1992 Form 10-K").

4.3 Warrant No. WC-2 dated September 30, 1993 issued
by EIS to Applied Telecommunications Technologies,
I, N.V. (incorporated by reference to Exhibit 4.7
to the 1993 Form 10-K).

*10.1(a) Form of Stock Option Agreement incorporated by
reference to Exhibit 10.2 to the Registration
Statement on Form S-1 of the Registrant, file No.
33-47665 as filed with the commission on May 11,
1992 (the "1992 Registration").

*10.1(b) Amended and Restated Stock Option Plan of EIS
incorporated by reference to EIS' Exhibit A to
EIS' definitive proxy statement filed in
connection with its 1995 Annual Meeting of
Stockholders).

*10.1(c) 1993 Employee Stock Purchase Plan of EIS
incorporated by reference to Exhibit B to EIS'
definitive proxy statement filed in connection
with its 1994 Annual Meeting of Stockholders).

18
<PAGE>

*10.1(d) 1993 Stock Option Plan for Non-Employee Directors
of EIS (incorporated by reference to Exhibit B to
EIS' definitive proxy statement filed in
connection with its 1994 Annual Meeting of
Stockholders).

*10.3 401(K) Plan of EIS (incorporated by reference to
Exhibit 10.3 to the 1992 Registration).

*10.4 Section 125 Plan of EIS (incorporated by reference
to Exhibit 10.4 to the 1992 Registration).

10.5 Lease Agreement dated November 27, 1990 between
Mendik Real Estate Limited Partnership and EIS
(incorporated by reference to Exhibit 10.5 to the
1992 Registration).

10.7 Manufacturing Agreement dated July 17, 1990
between Kimchuk, Inc. and EIS (incorporated by
reference to Exhibit 10.7 to the 1992
Registration).

10.8 Working Capital Line of Credit Commitment Letter
dated October 31, 1990 between Silicon Valley Bank
and EIS (incorporated by reference to Exhibit 10.8
to the 1992 Registration).

10.9 Pledge Agreement dated as of November 1, 1990
between Silicon Valley Bank and EIS (incorporated
by reference to Exhibit 10.9 to the 1992
Registration).

10.10 Security Agreement dated November 1, 1990 between
Silicon Valley Bank and EIS (incorporated by
reference to Exhibit 10.10 to the 1992
Registration).

10.11 Security Agreement dated as of November 1, 1990
between Silicon Valley Bank and EIS Leasing Corp.
(incorporated by reference to Exhibit 10.11 to the
1992 Registration).

10.12 Guaranty dated November 1, 1990 by EIS Leasing
Corp. in favor of Silicon Valley Bank
(incorporated by reference to Exhibit 10.12 to the
1992 Registration).

10.13(a) Amendment to Silicon Valley Bank agreements dated
February 22, 1991 (incorporated by reference to
Exhibit 10.13 to the 1992 Registration).

10.13(b) Amendment to Silicon Valley Bank agreements dated
March 14, 1991 (incorporated by reference to
Exhibit 10.14 to the 1992 Registration).

10.13(c) Amendment to Silicon Valley Bank agreements dated
August 10, 1991 (incorporated by reference to
Exhibit 10.15 to the 1992 Registration).

10.13(d) Amendment to Silicon Valley Bank agreements dated
January 6, 1992 (incorporated by reference to
Exhibit 10.13(d) to the 1992 Registration).

19
<PAGE>

10.13(e) Amendment to Silicon Valley Bank agreements dated
April 14, 1993 (incorporated by reference to
Exhibit 10.13(e) to the 1993 Form 10-K).

10.13(f) Joinder and Assumption Agreement dated October 28,
1994 between Silicon Valley Bank, EIS
International Services Corp. and EIS (incorporated
by reference to Exhibit 10.13(f) to EIS' Annual
Report on Form 10-K for the year ended December
31, 1994 (the "1994 Form 10-K").

10.13(g) Amended and Restated Promissory Note dated October
28, 1994 between Silicon Valley Bank, EIS
International Services Corp. and EIS (incorporated
by reference to Exhibit 10.13(g) to the 1994 Form
10-K).

10.13(h) Security Agreement dated October 28, 1994 between
Silicon Valley Bank and EIS International Services
Corp. (incorporated by reference to Exhibit
10.13(h) to the 1994 Form 10-K).

10.17 Agreement dated June 7, 1991 between American
Telephone & Telegraph Company (AT&T) and EIS
(incorporated by reference to Exhibit 10.24 to the
1992 Registration).

10.18(a) Amendment to AT&T Agreement, dated October 15,
1991 (incorporated by reference to Exhibit 10.25
to the 1992 Registration).

10.18(b) Amendment to AT&T Agreement, dated March 15, 1991
(incorporated by reference to Exhibit 10.26 to the
1992 Registration).

10.20 Lease Participation Agreement dated as of
September 30, 1993 between EIS Leasing Corp. and
Applied Telecommunications Inc. for participation
in a finance equipment lease between EIS Leasing
Corp. and RMH Sales & Marketing Consulting, Inc.
dated as of November 19, 1992 (incorporated by
reference to Exhibit 10.25 to the 1993
Registration).

10.21 Lease Participation Agreement dated as of
September 30, 1993 between EIS Leasing Corp. and
Applied Telecommunications Inc. for participation
in a finance equipment lease between EIS Leasing
Corp. and New Boston Services Group dated as of
March 1, 1993 (incorporated by reference to
Exhibit 10.26 to the 1993 Registration).

10.23 Form of Warrant to Purchase Shares of Class B
Common Stock of ITC (incorporated by reference to
Exhibit 99.4 to the 1993 Registration).

10.24 Lease Agreement dated January 23, 1992 between
Provident Mutual Life Insurance Company and ITC
(incorporated by reference to Exhibit 99.5 to the
1993 Registration).

20
<PAGE>

10.25 ITC 1989 Stock Option Plan, together with form of
stock option agreement (incorporated by reference
to Exhibit 99.6 to the 1993 Registration).

10.31 Loan Document Modification Agreement (No. 3; dated
as of December 27, 1995) between EIS and Silicon
Valley Bank (incorporated by reference to Exhibit
10.31 of the 1995 Registration).

**11. Statement re: computation of per share earnings.

21. Subsidiaries of the Registrant.

**23.1 Consent of KPMG.

**27 Financial Statement Schedules.
- -----------

* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Items 14(a) and (c) of this Report.

** To be filed by amendment.

(b) Current Reports on Form 8K. None

21
<PAGE>

SIGNATURES

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

Dated: March 31, 1997 EIS INTERNATIONAL, INC.

By: /s/ James E. McGowan
-------------------------------
James E. McGowan
President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 this report
had been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Principal Executive Officer:

/s/ James E. McGowan March 26, 1997
- ----------------------------------------------------------
Joseph J. Porfeli
President, Director and Chief Executive Officer

Principal Financial and Accounting Officer:

/s/ Frederick C. Foley March 27, 1997
- ----------------------------------------------------------
Frederick C. Foley
Senior Vice President, Finance and Chief Financial Officer

Directors:

/s/ Robert Cresci March 25, 1997
- ----------------------------------------------------------
Robert Cresci

/s/ Robert Jesurum March 25, 1997
- ----------------------------------------------------------
Robert Jesurum

22
<PAGE>

/s/ Kent M. Klineman March 25, 1997
- ----------------------------------------------------------
Kent M. Klineman

/s/ Charles McCall March 27,1997
- ----------------------------------------------------------
Charles McCall

23
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Description Page
<S> <C> <C>
3.1 Restated Certificate of Incorporation of EIS (incorporated by reference to EIS'
Exhibit 4.1 to the Company's Registration Statement on Form S-3 (No. 33-79814)
filed with the Securities and ExchangeCommission on June 3, 1994 (the "1994
Registration").

3.2 By-Laws of EIS as amended (incorporated by reference to Exhibit 3.2 to EIS'
Annual Report on Form 10-K for the year ended December 31, 1993 (the "1993
Form 10-K").

4.1 Specimen Common Stock Certificate of EIS (incorporated by reference to Exhibit
C to EIS' Registration Statement on Form 8-A dated June 22, 1992).

4.3 Warrant No. WC-2 dated September 30, 1993 issued by EIS to Applied
Telecommunications Technologies, I, N.V. (incorporated by reference to Exhibit
4.7 to the 1993 Form 10-K).

*10.1(a) Form of Stock Option Agreement incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-1 of the Registrant, file No. 33-47665 as filed
with the commission on May 11, 1992 (the "1992 Registration").

*10.1(b) Amended and Restated Stock Option Plan of EIS incorporated by reference to EIS'
Exhibit A to EIS' definitive proxy statement filed in connection with its 1995
Annual Meeting of Stockholders).

*10.1(c) 1993 Employee Stock Purchase Plan of EIS incorporated by reference to Exhibit B to
EIS' definitive proxy statement filed in connection with its 1994 Annual Meeting of
Stockholders).

*10.1(d) 1993 Stock Option Plan for Non-Employee Directors of EIS (incorporated by reference
to Exhibit B to EIS' definitive proxy statement filed in connection with its 1994
Annual Meeting of Stockholders).

*10.3 401(K) Plan of EIS (incorporated by reference to Exhibit 10.3 to the 1992
Registration).

*10.4 Section 125 Plan of EIS (incorporated by reference to Exhibit 10.4 to the 1992
Registration).

10.5 Lease Agreement dated November 27, 1990 between Mendik Real Estate Limited
Partnership and EIS (incorporated by reference to Exhibit 10.5 to the 1992
Registration).

24
<PAGE>

Exhibit Description Page

10.7 Manufacturing Agreement dated July 17, 1990 between Kimchuk, Inc. and EIS
(incorporated by reference to Exhibit 10.7 to the 1992 Registration).

10.8 Working Capital Line of Credit Commitment Letter dated October 31, 1990
between Silicon Valley Bank and EIS (incorporated by reference to Exhibit 10.8
to the 1992 Registration).

10.9 Pledge Agreement dated as of November 1, 1990 between Silicon Valley Bank and
EIS (incorporated by reference to Exhibit 10.9 to the 1992 Registration).

10.10 Security Agreement dated November 1, 1990 between Silico Valley Bank and
EIS (incorporated by reference to Exhibit 10.10 to the 1992 Registration).

10.11 Security Agreement dated as of November 1, 1990 between Silicon Valley
Bank and EIS Leasing Corp. (incorporated by reference to Exhibit 10.11 to the
1992 Registration).

10.12 Guaranty dated November 1, 1990 by EIS Leasing Corp. in favor of Silicon
Valley Bank (incorporated by reference to Exhibit 10.12 to the 1992 Registration).

10.13(a) Amendment to Silicon Valley Bank agreements dated February 22, 1991 (incorporated
by reference to Exhibit 10.13 to the 1992 Registration).

10.13(b) Amendment to Silicon Valley Bank agreements dated March 14, 1991 (incorporated
by reference to Exhibit 10.14 to the 1992 Registration).

10.13(c) Amendment to Silicon Valley Bank agreements dated August 10, 1991 (incorporated
by reference to Exhibit 10.15 to the 1992 Registration).

10.13(d) Amendment to Silicon Valley Bank agreements dated January 6, 1992 (incorporated
by reference to Exhibit 10.13(d) to the 1992 Registration).

10.13(e) Amendment to Silicon Valley Bank agreements dated April 14, 1993 (incorporated
by reference to Exhibit 10.13(e) to the 1993 Form 10-K).

10.13(f) Joinder and Assumption Agreement dated October 28, 1994 between Silicon Valley
Bank, EIS International Services Corp. and EIS (incorporated by reference to
Exhibit 10.13(f) to EIS' Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Form 10-K").

10.13(g) Amended and Restated Promissory Note dated October 28, 1994 between
Silicon Valley Bank, EIS International Services Corp. and EIS (incorporated
by reference to Exhibit 10.13(g) to the 1994 Form 10-K).

25
<PAGE>

Exhibit Description Page

10.13(h) Security Agreement dated October 28, 1994 between Silicon Valley Bank and
EIS International Services Corp. (incorporated by reference to Exhibit 10.13(h)
to the 1994 Form 10-K).

10.17 Agreement dated June 7, 1991 between American Telephone & Telegraph
Company (AT&T) and EIS (incorporated by reference to Exhibit 10.24 to the
1992 Registration).

10.18(a) Amendment to AT&T Agreement, dated October 15, 1991 (incorporated by reference to
Exhibit 10.25 to the 1992 Registration).

10.18(b) Amendment to AT&T Agreement, dated March 15, 1991 (incorporated by reference to
Exhibit 10.26 to the 1992 Registration).

10.20 Lease Participation Agreement dated as of September 30, 1993 between EIS
Leasing Corp. and Applied Telecommunications Inc. for participation in a
finance equipment lease between EIS Leasing Corp. and RMH Sales & Marketing
Consulting, Inc. dated as of November 19, 1992 (incorporated by reference to
Exhibit 10.25 to the 1993 Registration).

10.21 Lease Participation Agreement dated as of September 30, 1993 between EIS
Leasing Corp. and Applied Telecommunications Inc. for participation in a finance
equipment lease between EIS Leasing Corp. and New Boston Services Group
dated as of March 1, 1993 (incorporated by reference to Exhibit 10.26 to the 1993
Registration).

10.23 Form of Warrant to Purchase Shares of Class B Common Stock of ITC (incorporated
by reference to Exhibit 99.4 to the 1993 Registration).

10.24 Lease Agreement dated January 23, 1992 between Provident Mutual Life Insurance
Company and ITC (incorporated by reference to Exhibit 99.5 to the 1993 Registration).

10.25 ITC 1989 Stock Option Plan, together with form of stock option agreement (incorporated
by reference to Exhibit 99.6 to the 1993 Registration).

10.31 Loan Document Modification Agreement (No. 3; dated as of December 27, 1995)
between EIS and Silicon Valley Bank (incorporated by reference to Exhibit 10.31
of the 1995 Registration).

**11. Statement re: computation of per share earnings.

21. Subsidiaries of the Registrant.

26
<PAGE>

Exhibit Description Page

**23.1 Consent of KPMG.]

**27 Financial Statement Schedules.

* Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this form pursuant to Items 14(a) and (c) of this Report.

** To be filed by amendment.

(b) Current Reports on Form 8-K. None.
</TABLE>

Exhibit 21

EIS INTERNATIONAL, INC.
SUBSIDIARIES

SUBSIDIARIES STATE OR OTHER
JURISDICTION OF
INCORPORATION

EIS Leasing Corporation Delaware
EIS Leasing of Delaware, Inc. Delaware

EIS International Services Corp. Virginia

Electronic Information Systems Limited United Kingdom
EIS Limited United Kingdom

Electronic Information Systems International, Inc. Delaware

EIS Foreign Sales Corporation U.S. Virgin Islands
(St. Thomas)

EIS Italia, Sr. L Italy

Surefind Information, Inc. Delaware

Cybernetics Systems International Corp. Delaware

Pulse Technologies, Inc. Virginia