<PAGE> 1
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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, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number: 0 - 18323
SYNTELLECT INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0486871
(State or other jurisdiction (IRS employer
of incorporation) identification number)
1000 Holcomb Woods Parkway, Suite 410A, Roswell, Georgia 30076
(Address of principal executive office) (Zip Code)
(770) 587-0700
(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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
13,431,320 shares of common stock, $.01 par value, were outstanding on
July 31, 1996
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SYNTELLECT INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations-
Three Months and Six Months Ended
June 30, 1996 and June 30, 1995 4
Condensed Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1996 and June 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBITS
Exhibit 11 - Schedule of Computation of Net Income
(Loss) Per Share
Exhibit 27 - Financial Data Schedule
</TABLE>
2
<PAGE> 3
SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,141 $ 5,125
Marketable securities 3,295 4,225
Receivables, net 13,124 14,881
Inventories 5,028 5,293
Prepaid expenses 1,354 2,154
Deferred contract costs 248 1,133
-------- --------
Total current assets 27,190 32,811
Property and equipment, net 6,885 5,821
Other assets 996 1,087
-------- --------
$35,071 $39,719
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,098 $3,660
Accrued liabilities 6,236 7,168
Customer deposits 512 482
Deferred revenue 3,039 3,311
Current portion of long-term debt 326 747
-------- --------
Total current liabilities 12,211 15,368
Long-term debt, less current portion 18 175
Shareholders' equity:
Preferred stock, $.01 par value. Authorized 2,500,000 -- --
shares; no shares issued or outstanding
Common stock, $.01 par value. Authorized 135 134
25,000,000 shares; issued and outstanding,
13,419,646 and 13,381,753, respectively
Additional paid-in capital 60,355 60,246
Deferred compensation (71) (91)
Accumulated deficit (36,291) (34,815)
Foreign currency translation adjustment (133) (140)
Unrealized holding gain (loss) on marketable securities (12) (17)
-------- -------
23,983 25,317
Treasury stock, at cost, 175,732 shares (1,141) (1,141)
-------- -------
22,842 24,176
-------- -------
$35,071 $39,719
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net revenues:
System sales $ 8,088 $ 6,247 $15,627 $ 14,970
Service bureau 2,342 1,449 4,507 2,823
Maintenance and other services 3,574 3,468 6,816 6,670
-------- -------- ------- --------
Total net revenues 14,004 11,164 26,950 24,463
Cost of revenues:
System sales 4,774 4,245 9,331 8,872
Service bureau 1,272 884 2,474 1,621
Maintenance and other services 1,008 832 1,851 1,589
-------- -------- ------- --------
Total cost of revenues 7,054 5,961 13,656 12,082
-------- -------- ------- --------
Gross margin 6,950 5,203 13,294 12,381
Operating expenses:
Selling, marketing and administrative 5,181 5,146 10,343 10,000
Research and development 1,472 1,174 3,000 2,345
Depreciation and amortization 774 752 1,567 1,485
-------- -------- ------- --------
Total operating expenses 7,427 7,072 14,910 13,830
-------- -------- ------- --------
Operating income (loss) (477) (1,869) (1,616) (1,449)
Other income (expense)
Interest income 97 96 202 269
Other (13) (10) (62) (14)
-------- -------- ------- --------
Total other income 84 86 140 255
-------- -------- ------- --------
Income (loss) before income taxes $ (393) (1,783) (1,476) (1,194)
Income taxes -- -- -- 25
-------- -------- ------- --------
Net income (loss) $ (393) $(1,783) $(1,476) $(1,219)
======== ======== ======== ========
Net income (loss) per common share $ (.03) (.14) $ (.11) $ (.09)
======== ======== ======== ========
Shares used in per share calculations 13,412 13,151 13,400 13,163
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,476) $ (1,219)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,567 1,485
Provision for doubtful accounts 180 157
Provision for inventory obsolescence 9 15
Stock option compensation expense 20 16
(Increase) decrease in receivables 2,155 1,386
(Increase) decrease in inventories (117) (1,033)
Increase (decrease) in accounts payable (1,559) 292
Increase (decrease) in accrued liabilities (1,158) (279)
Change in other assets and liabilities 1,467 1,922
-------- --------
Total adjustments 2,564 3,961
-------- --------
Net cash provided by operating activities 1,088 2,742
Cash flows from investing activities:
Purchase of marketable securities (4,806) (26)
Maturities of marketable securities 5,741 330
Purchase of property and equipment (2,576) (2,021)
Proceeds from disposition of SNS product line 30 --
Proceeds from disposition of Dytel product line -- 39
-------- --------
Net cash used in investing activities (1,611) (1,678)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 110 257
Payment on note payable to bank -- (200)
Principal payments on long-term debt (578) (381)
-------- --------
Net cash used in financing activities (468) (324)
-------- --------
Effect of exchange rates on cash 7 58
-------- --------
Net increase (decrease) in cash and cash equivalents (984) 798
Cash and cash equivalents at beginning of period 5,125 5,921
-------- --------
Cash and cash equivalents at end of period $ 4,141 $ 6,719
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 27 $ 61
======== ========
Cash paid for income taxes $ 155 $ --
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SYNTELLECT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except shares and per share amounts)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Syntellect Inc. (the "Company") and its wholly-owned
subsidiaries, Pinnacle Investment Associates, Inc., Syntellect Canada Inc.,
Syntellect Europe Ltd., Syntellect Technology Corp. (formerly Dytel, Inc.) and
Syntellect Network Systems Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
The financial statements have been prepared in accordance with
generally accepted accounting principles, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
financial statements include all adjustments of a normal recurring nature which
are necessary for a fair presentation of the results for the interim periods
presented. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make information presented not misleading, it is suggested that these financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's 1995 annual report on Form 10-K. The
results of operations for the three and six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
(2) ACQUISITION OF PINNACLE INVESTMENT ASSOCIATES INC.
On March 14, 1996, Syntellect completed its acquisition of Pinnacle
Investment Associates Inc. ("Pinnacle") in a transaction that has been accounted
for as a pooling of interests. Pursuant to the terms of the merger, Syntellect
issued 4,685,838 shares of common stock and assumed outstanding options
belonging to Pinnacle stockholders for the purchase of an additional 740,848
shares of common stock at a weighted average exercise price of $1.04 per share.
The common stock issued in this transaction had a total value of $20.5 million
based on the fair market value of the common stock on the date of issuance.
Pinnacle is a holding company that owns all of the outstanding capital stock of
Telecorp Systems, Inc. ("Telecorp"). Telecorp develops and distributes inbound
and outbound call center systems worldwide, primarily in the cable television,
newspaper and health care industries.
The financial position and results of operations of Syntellect and
Pinnacle for all periods presented have been restated to give effect to the
merger. The following presents supplemental disclosure of the separate results
of Syntellect and Pinnacle for those periods presented in the accompanying
financial statements prior to the date of the merger.
Combined Condensed Balance Sheets
As of December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
SYNTELLECT PINNACLE COMBINED
---------- -------- --------
<S> <C> <C> <C>
Assets
Current assets $24,893 $ 7,918 $32,811
Property and equipment 3,785 2,036 5,821
Other assets 1,040 47 1,087
------- -------- -------
$29,718 $ 10,001 $39,719
======= ======== =======
Liabilities
Current liabilities $ 9,614 $ 5,754 $15,368
Long-term debt 175 -- 175
-------- -------- -------
9,789 5,754 15,543
Shareholders' equity 19,929 4,247 24,176
-------- -------- -------
$ 29,718 $ 10,001 $39,719
======== ======== =======
</TABLE> 6
<PAGE> 7
Combined Condensed Statements of Operations
For The Three Months Ended June 30, 1995
(unaudited)
<TABLE>
<CAPTION>
SYNTELLECT PINNACLE COMBINED
---------- -------- --------
<S> <C> <C> <C>
Net revenues $ 7,347 $ 3,817 $11,164
Cost of revenues 3,926 2,035 5,961
-------- -------- -------
Gross margin 3,421 1,782 5,203
Operating expenses 5,462 1,610 7,072
-------- -------- -------
Operating income (loss) (2,041) 172 (1,869)
Other income (expense) 92 (6) 86
-------- -------- -------
Income (loss) before taxes (1,949) 166 (1,783)
Income tax expense -- -- --
-------- -------- -------
Net income (loss) $(1,949) $ 166 $(1,783)
======== ======== =======
Net income (loss) per share $ (.23) $ .03 $ (.14)
======== ======== =======
Shares used in per share calculation 8,465 5,147 13,151
======== ======== =======
Combined Condensed Statements of Operations
For The Six Months Ended June 30, 1995
(unaudited)
SYNTELLECT PINNACLE COMBINED
---------- -------- --------
Net revenues $17,503 $ 6,960 $ 24,463
Cost of revenues 8,491 3,591 12,082
------- -------- -------
Gross margin 9,012 3,369 12,381
Operating expenses 10,745 3,085 13,830
------- -------- -------
Operating income (loss) (1,733) 284 (1,449)
Other income (expense) 223 32 255
------- -------- -------
Income (loss) before taxes (1,510) 316 $ (1,194)
Income tax expense 25 -- 25
------- -------- -------
Net income (loss) $(1,535) $ 316 $ (1,219)
======= ======== =======
Net income (loss) per share $ (.18) $ .06 $ (.09)
======= ======== =======
Shares used in per share calculation 8,447 5,147 13,163
======= ======== =======
</TABLE>
7
<PAGE> 8
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Finished goods $ 5,236 $ 5,499
Purchased components 3,922 6,729
Repair, warranty and maintenance inventory 2,002 2,090
-------- --------
11,160 14,318
Less allowances for obsolescence (6,132) (9,025)
-------- --------
$ 5,028 $ 5,293
======== ========
</TABLE>
(4) DISPOSITION OF SYNTELLECT NETWORK SYSTEMS INC. SUBSIDIARY
On April 1, 1996, the Company sold its Syntellect Network Systems Inc.
subsidiary ("SNS") under a stock purchase agreement with an unrelated third
party. Under the Agreement, the Company sold all of the issued and outstanding
shares of SNS common stock for $720. The Company received $30 of the sales price
at closing with the remaining $690 to be received in 23 monthly installments of
$30, without interest, beginning May 1996. The completion of this transaction
did not significantly impact the Company's results of operations.
(5) LEASE COMMITMENT
In June 1996, the Company entered into a ten year lease for a new
60,000 square foot facility in Phoenix. The lease is scheduled to commence in
March 1997 and will require the Company to provide the lessor with a $934 letter
of credit as a security deposit until certain net worth levels are achieved. The
letter of credit will be funded from the line of credit described in Note 6.
(6) SUBSEQUENT EVENT - SHORT-TERM DEBT
Subsequent to June 30, 1996, the Company negotiated a $2.0 million
revolving credit agreement with a commercial bank to replace its existing credit
facilities. The new credit line, which will be used to provide working capital
financing, is collateralized by accounts receivable and accrues interest at
prime. The agreement is renewable annually and requires the Company to maintain
certain operating ratios with respect to working capital and net worth.
8
<PAGE> 9
SYNTELLECT INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ACQUISITION OF PINNACLE INVESTMENT ASSOCIATES INC.
On March 14, 1996, Syntellect completed its acquisition of Pinnacle
Investment Associates Inc. ("Pinnacle") in a transaction that has been accounted
for as a pooling of interests. Pursuant to the terms of the merger, Syntellect
issued 4,685,838 shares of common stock and assumed outstanding options
belonging to Pinnacle stockholders for the purchase of an additional 740,848
shares of common stock at a weighted average exercise price of $1.04 per share.
The common stock issued in this transaction had a total value of $20.5 million
based on the fair market value of the common stock on the date of issuance.
Pinnacle is a holding company that owns all of the outstanding capital stock of
Telecorp Systems, Inc. ("Telecorp"). Telecorp develops and distributes inbound
and outbound call center systems worldwide, primarily in the cable television,
newspaper and health care industries. The financial position and results of
operations of Syntellect and Pinnacle for all periods presented have been
restated to give effect of the merger.
The merger provides the combined company with several distinct
marketing advantages including: (i) a more diversified product line which
includes both inbound voice processing technology and outbound predictive dialer
products; (ii) a larger sales force and distribution network together with
improved access into new vertical markets; and (iii) the formation of the
Syntellect Interactive Services Division ("SIS Division") which combines the
voice response outsourcing, on-site facilities management and disaster recovery
services offered through Syntellect's transaction-based service bureau with the
processing capacity of Telecorp's National Transaction Center. In addition, the
merger provides the combined company with greater financial resources and access
to a new management team with substantial expertise in the voice processing
industry.
NET REVENUES
Net revenues for the second quarter ended June 30, 1996 were $14.0
million, an increase of 25% from the $11.2 million reported for the second
quarter of 1995. For the six month period ended June 30, 1996, net revenues were
$27.0 million, an increase of 10% from the $24.5 million reported for the
corresponding period of 1995. Net revenues consist of SYSTEM SALES, SERVICE
BUREAU REVENUES and MAINTENANCE AND OTHER SERVICE REVENUES, which represented
58%, 17% and 25% of net revenues, respectively for the six month period ended
June 30, 1996, and 61%, 12% and 27% of net revenues, respectively in the
comparable prior year period.
SYSTEM SALES increased $1.8 million, or 29%, between the comparable
quarters, and $657,000, or 4% between the corresponding six month periods.
System sales include the Company's primary inbound product lines, VocalPoint, an
open architecture IVR platform; the Premier and Premier 030 proprietary IVR
systems; the VocalPoint System 6000 Audio Response Unit for the cable television
industry; and an outbound predictive dialer, the VocalPoint System 9000.
VocalPoint IVR sales increased $1.6 million quarter-over-quarter, and $1.2
million between the comparable six month periods. These increases occurred
primarily in the Company's domestic and European markets. In addition, the
Company's backlog at the end of the second quarter included more than $2.6
million in VocalPoint IVR orders. Sales of the Premier and Premier 030 product
lines decreased $288,000 and $148,000, respectively, quarter-over-quarter, and
$784,000 and $2.2 million between the comparable six month periods. Sales of the
older Premier lines continue to decrease as these product lines are in their
9
<PAGE> 10
final phase-out stage. Premier 030 sales decreased as expected in the Company's
domestic install base, and by $1.3 million in the Far East and Latin American
markets where the Company has recently introduced and is actively marketing
VocalPoint solutions. The Company reorganized its international sales operation
during the second quarter and the new management group will focus on
transitioning the product sales mix in these markets. VocalPoint System 6000
sales increased $819,000 and $3.0 million between the comparable quarters and
six month periods, respectively. The six month results include a $3.0 million
call center installation in the United Kingdom. Sales of the VocalPoint System
9000 decreased $180,000 quarter-over-quarter, and by an insignificant amount
between the six month periods.
System sales were further impacted between the comparable six month
periods by a $525,000 decrease in sales of the Dytel product line and the System
2000 digital voice system manufactured by the Syntellect Network Systems ("SNS")
subsidiary. The Company sold the Dytel product line to a third party purchaser
in February 1995. The SNS subsidiary was sold to an unrelated third party on
April 1, 1996. (See Note 4 to the Condensed Consolidated Financial Statements.)
SERVICE BUREAU REVENUES increased $893,000, or 62%,
quarter-over-quarter, and $1.7 million, or 60%, between the comparable six month
periods. These increases resulted primarily from the continued growth of the
Company's Home Ticket(TM) service, a pay-per-view order processing service for
cable television providers which is offered through the SIS Division in Atlanta.
MAINTENANCE AND OTHER SERVICE REVENUES increased approximately $100,000 between
the comparable quarters and six month periods.
DOMESTIC AND INTERNATIONAL SALES for the quarter ended June 30, 1996
were $11.0 million, or 79%, and $3.0 million, or 21% of total revenues,
respectively. For the six month period ended June 30, 1996, domestic and
international sales were $19.7 million and $7.3 million, respectively. The
international sales figures for the six month period include a $3.0 million
VocalPoint System 6000 call center installation in the United Kingdom.
GROSS MARGIN
The gross margin percentage for the quarter ended June 30, 1996 was 50%
of net revenues, as compared with 47% in the comparable prior year quarter.
Gross margins on system sales improved as a result of changes in the Company's
sales discounting policies and lower material costs. In addition, the Company
had a larger volume of high margin Service Bureau offerings such as the Home
Ticket(TM) pay-per-view service, and increased revenues from patent licenses
quarter-over-quarter and between the comparable six month periods. The Company
includes those costs directly associated with the generation of revenue in its
computation of gross margin, including direct labor, application development,
travel, maintenance, customer support, supplies and hardware. Gross margins will
fluctuate on a quarterly basis due to changes in competitive pressures, sales
volume, product mix, variations in the ratio of domestic versus international
sales, or changes in the mix of direct and indirect sales activity; accordingly,
the gross margin reported for the second quarter is not necessarily indicative
of the results to be expected for the full year.
OPERATING EXPENSES
Operating expenses for the second quarter were $7.4 million, an
increase of $355,000, or 5%, over the prior year quarter. For the six month
period ended June 30, 1996, operating expenses were $14.9 million, an increase
of $1.1 million, or 8%, over the prior year period. Selling, marketing and
administrative expenses increased less than 1% between the comparative quarters
and by $343,000, or 3%, between the corresponding six month periods. These
increases resulted primarily from the additional costs incurred to integrate the
sales, marketing and administrative functions of Syntellect and Telecorp.
Research and development expenses for the second quarter of 1996 increased 25%
over the prior year quarter, and by $655,000, or 28% between the comparative six
month periods. The Company allocated additional resources during the first half
of 1996 to the development of market-driven features and upgrades for the
Company's existing product lines. Depreciation and amortization expense
increased $22,000, or 3%, and $80,000, or 5%, between the comparable quarters
and six month periods. The Company purchased $2.6 million in computer and voice
processing equipment during the first six months of 1996 in connection with the
integration of the two companies, and for the expansion of the SIS Division.
10
<PAGE> 11
NET INCOME (LOSS)
Syntellect reported a net loss of $393,000, or $(.03) per share for the
second quarter of 1996, compared to a net loss of $1.8, or $(.14 ) per share for
the same period last year. For the six month period ended June 30, 1996, the
Company reported a net loss of $1.5 million, or $(.11) per share, compared to a
net loss of $1.2 million, or $(.09) per share for the comparable prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
Syntellect had working capital of $15.0 million at June 30, 1996, as
compared with $17.4 million at December 31, 1995. The current ratios at these
dates were 2.2:1 and 2.1:1, respectively. Cash, cash equivalents and marketable
securities at the end of the second quarter totaled $7.4 million as compared
with $9.4 million at year end. Syntellect generated a $1.1 million positive cash
flow from operating activities during the first six months of 1996. In addition,
the Company received $935,000 from the net maturity of marketable securities and
$110,000 from the sale of common stock. Cash was used during this period of time
to make $2.6 million in capital expenditures and $578,000 in principal payments
on long-term debt. Receivables, net of reserves were $13.1 million at June 30,
1996, a decrease of $1.8 million from the $14.9 million reported at December 31,
1995. This decrease results from the Company's improved collection efforts which
lowered the average collection period for trade receivables from 143 days at
December 31, 1995 to 81 days by end of the second quarter. The reserve for
doubtful accounts was $1.3 million at June 30, 1996, a decrease of $262,000 from
the year end balance. Inventories have decreased $265,000 since December 31,
1995 as a result of the Company's improved processing controls and stock
reduction plan. The working capital balance was also impacted during the first
six months of 1996 by the recognition of $930,000 in deferred revenues and $1.1
million in deferred costs related to the completion of the large VocalPoint
System 6000 call center installation in the United Kingdom.
Subsequent to June 30, 1996, the Company negotiated a $2.0 million
revolving credit agreement with a commercial bank to replace its existing credit
facilities. The new credit line, which will be used to provide working capital
financing, is collateralized by accounts receivable and accrues interest at
prime. The agreement is renewable annually and requires the Company to maintain
certain operating ratios with respect to working capital and net worth. A
portion of the new line will be used to fund a $934 letter of credit for a
security deposit on a new facility lease in Phoenix. Syntellect expects that its
available cash and equivalents, marketable securities and revolving credit line,
together with future cash flows from operating activities, will be sufficient to
support the Company's operating plan for the remainder of 1996 and 1997.
11
<PAGE> 12
SYNTELLECT INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
Syntellect is a defendant in a patent infringement suit filed on May
24, 1996, by Elk Industries, Inc., in the United States District Court for the
Southern District of Florida. The suit alleges that Syntellect's systems,
including VocalPoint, infringe U.S. Patent No. 4,124,773 on an "Audio Storage
and Distribution System". The suit seeks damages and an injunction. Syntellect
is vigorously defending against the suit.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Syntellect held its Annual Meeting of Stockholders on May 28, 1996 to
vote on the following proposal:
1. The election of J. Lawrence Bradner, William P. Conlin and A. LeRoy
Ellison to serve on the Board of Directors for a three year term. There were
10,717,334 votes cast in favor of Mr. Bradner's election with 41,190 votes
against; 10,716,946 votes cast in favor of Mr. Conlin's election with 41,578
votes against; and 10,709,044 votes cast in favor of Mr. Ellison's election with
49,480 votes against.
Four additional directors, Jack R. Kelly, Jr., Steve G. Nussrallah,
Daniel D. Ross and Patrick J. Welsh will continue to serve their existing terms
through 1997 or 1998, as applicable.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Schedule of Computation of Net Income (Loss) Per
Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The following current report on Form 8-K was filed during the
three months ended June 30, 1996:
Amendment No. 1 to Form 8-K current report, dated March 14,
1996, reporting shareholder approval of Syntellect's merger
with Pinnacle Investment Associates, Inc.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNTELLECT INC.
Date: August 9, 1996 By /s/ Neal L. Miller
-------------------------------
Neal L. Miller
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
13
<PAGE> 1
EXHIBIT 11
SYNTELLECT INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (393) $ (1,783) $ (1,476) $ (1,219)
========= ======== ======== ========
Weighted average shares:
Common shares outstanding 13,412 13,151 13,400 13,163
Common equivalent shares representing shares
issuable upon exercise of stock options (1) -- -- -- --
--------- -------- -------- --------
Total weighted average shares - primary 13,412 13,151 13,400 13,163
Incremental common equivalent shares (calculated using -- -- -- --
the higher of end of period or average market value (2)
Total weighted average shares - fully diluted
13,412 13,151 13,400 13,163
========= ======== ======== ========
Primary net income (loss) per common and equivalent
share $ (.03) $ (.14) $ (.11) $ (.09)
========= ======== ======== ========
Fully diluted net income (loss) per common and equivalent
share (2) $ (.03) $ (.14) $ (.11) $ (.09)
========= ======== ======== ========
Additional adjustments to fully diluted weighted
average shares (3):
Total weighted average shares - fully diluted 13,412 13,151 13,400 13,163
Common equivalent shares representing shares
issuable upon exercise of stock options (1) -- -- -- --
--------- -------- -------- --------
Total weighted average shares - fully
diluted, as adjusted 13,412 13,151 13,400 13,163
========= ======== ======== ========
Fully diluted net income (loss) per common and equivalent
share, as adjusted (3) $ (.03) $ (.14) $ (.11) $ (.09)
========= ======== ======== ========
</TABLE>
- -----------
Notes:
(1) Amount calculated using the treasury stock method and fair market
values.
(2) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
Incremental amounts are zero; calculation is shown for presentation
purposes only.
(3) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF SYNTELLECT, INC. AND SUBSIDIARIES AS OF
JUNE 30, 1996, AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS OF
SYNTELLECT, INC. AND SUBSIDIARIES FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 4,141
<SECURITIES> 3,295
<RECEIVABLES> 14,390
<ALLOWANCES> 1,266
<INVENTORY> 5,028
<CURRENT-ASSETS> 27,190
<PP&E> 22,138
<DEPRECIATION> 15,253
<TOTAL-ASSETS> 35,071
<CURRENT-LIABILITIES> 12,211
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 22,707
<TOTAL-LIABILITY-AND-EQUITY> 35,071
<SALES> 15,627
<TOTAL-REVENUES> 26,950
<CGS> 9,331
<TOTAL-COSTS> 13,656
<OTHER-EXPENSES> 14,910
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (1,476)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,476)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
