<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
---------------------------------------------
FOR THE QUARTER ENDED OCTOBER 31, 1997 COMMISSION FILE NUMBER 0-25016
T-NETIX, INC.
------------------------------------------------------
(Exact Name of registrant as Specified in Its Charter)
COLORADO 84-1037352
- ---------------------------- -----------------------------------
(State of Other Jurisdiction (I.R.S.Employer Identification No.)
of Incorporation)
67 INVERNESS DRIVE EAST
ENGLEWOOD, COLORADO 80112
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 790-9111
--------------------------------------------------------------------
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and 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.
Class Outstanding at December 10, 1997
- ------------------------------- --------------------------------
Common Stock, $.01 stated value 8,475,065
<PAGE> 2
T-NETIX, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART ITEM PAGE
- ---- ---- ----
<S> <C> <C>
I. FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheets, October 31, 1997
and July 31, 1997 (Unaudited)............................................... 2
Consolidated Statements of Operations, Three Months Ended
October 31, 1997 and 1996 (Unaudited) ...................................... 3
Consolidated Statements of Shareholders' Equity, Three Months Ended
October 31, 1997 and Year Ended July 31, 1997 (Unaudited) .................. 4
Consolidated Statements of Cash Flows, Three Months Ended
October 31, 1997 and 1996 (Unaudited) ...................................... 5
Notes to Consolidated Financial Statements (Unaudited)............................... 6
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ......................................................................... 7
II. OTHER INFORMATION - Items 1 through 6 ........................................................ 12
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
T-NETIX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
1997 1997
---- ----
(amounts in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 197 $ 190
Accounts receivable, net of allowance 13,395 11,779
Prepaid expenses 470 236
Property and equipment, at cost:
Telecommunications equipment 40,210 39,065
Construction in progress 3,682 3,626
Office equipment 4,335 3,901
-------- --------
Property and equipment 48,227 46,592
Less accumulated depreciation and amortization (19,666) (17,798)
-------- --------
Property and equipment, net 28,561 28,794
Patent license rights 2,460 2,586
Other assets, net 3,461 3,325
-------- --------
$ 48,544 $ 46,910
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable $ 3,389 $ 2,992
Accrued liabilities 3,816 3,688
Debt 13,459 13,378
-------- --------
Total liabilities 20,664 20,058
Shareholders' equity:
Preferred stock, $0.01 stated value, 10,000,000 shares
authorized; no shares issued -- --
Common stock, $0.01 stated value, 70,000,000 shares
authorized; issued and outstanding 8,475,065 and 8,314,583 85 83
shares, respectively
Additional paid-in capital 27,697 26,908
Retained earnings (deficit) 98 (139)
-------- --------
Total shareholders' equity 27,880 26,852
Commitments and contingencies
-------- --------
$ 48,544 $ 46,910
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
T-NETIX, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
October 31, October 31,
1997 1996
------------- -------------
(amounts in thousands, except
per share amounts)
<S> <C> <C>
Revenue:
Telecommunication services $ 8,803 $ 8,059
Telecommunication licensing 46 --
Direct call provisioning 506 429
Voice print 380 18
------- -------
Total revenue 9,735 8,506
Expenses:
Operating costs and expenses
Telecommunications services 3,963 3,910
Direct call provisioning 482 437
Voice print 92 --
------- -------
Total operating costs and expenses 4,537 4,347
Selling, general, and administrative 1,863 1,864
Research and development 582 711
Depreciation and amortization 2,089 1,826
------- -------
Total expenses 9,071 8,748
Operating income (loss) 664 (242)
Interest expense (270) (155)
------- -------
Earnings (loss) before income taxes 394 (397)
Income taxes 157 --
------- -------
Net earnings (loss) $ 237 $ (397)
======= =======
Net earnings (loss) per common share $ 0.03 $ (0.04)
======= =======
Weighted average common shares
outstanding 9,089 8,825
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
T-NETIX, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Total
Common stock Additional Retained share-
---------------------- paid-in earnings holders'
Shares Amounts capital (deficit) equity
------ ------- -------- --------- -------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balances at August 1, 1996 8,151 $81 $26,208 $(730) $25,559
Common stock issued upon
exercise of stock options 155 2 204 -- 206
Common stock issued in
business acquisition 8 -- 94 -- 94
Stock option tax benefit -- -- 402 -- 402
Net earnings -- -- -- 591 591
----- --- ------- ----- -------
Balances at July 31, 1997 8,314 83 26,908 (139) 26,852
Common stock issued upon
exercise of stock options 161 2 632 -- 634
Stock option tax benefit -- -- 157 -- 157
Net earnings -- -- -- 237 237
----- --- ------- ----- -------
Balances at October 31, 1997 8,475 $85 $27,697 $ 98 $27,880
===== === ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
T-NETIX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended October 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 237 $ (397)
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,089 1,826
Provision for losses on accounts receivable 152 71
Deferred tax expense 157 --
Changes in operating assets and liabilities, net of
acquisition of business:
Change in accounts receivable (1,768) (777)
Change in prepaid expenses (234) 98
Change in other assets (39) (126)
Change in accounts payable 397 (119)
Change in accrued liabilities 128 (465)
------- -------
Cash provided by operating activities 1,119 111
------- -------
Cash flows from investing activities:
Capital expenditures (1,635) (2,672)
Other investing activities (192) (653)
------- -------
Cash used in investing activities (1,827) (3,325)
------- -------
Cash flows from financing activities:
Proceeds from borrowings 295 3,275
Payments of debt (214) (124)
Common stock issued for cash under option plans 634 40
------- -------
Cash provided by financing activities 715 3,191
------- -------
Net decrease in cash and cash equivalents 7 (23)
Cash and cash equivalents at beginning of period 190 145
------- -------
Cash and cash equivalents at end of period $ 197 $ 122
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
T-NETIX, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited financial statements
The accompanying unaudited consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary to reflect a fair
presentation of the financial position and results of operations of T-NETIX,
Inc. and subsidiaries (the Company) for the interim periods presented. All
adjustments, in the opinion of management, are of a normal and recurring nature.
Reclassification
Certain amounts in the 1998 financial statements have been reclassified to
conform with the 1997 presentation.
Research and development
Costs associated with the research and development of new technology or
significantly altering existing technology are charged to operations as
incurred.
Software development costs have been accounted for in accordance with Statement
of Financial Accounting Standards No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed. Under the standard,
capitalization of software development costs begins upon the establishment of
technological feasibility, subject to net realizable value considerations.
Capitalized software costs are amortized over the economic useful life of the
software product, which is generally estimated to be three years. The Company
capitalized $192,000 in software development costs for the three months ended
October 31, 1997. Unamortized capitalized software cost was $616,000 at October
31, 1997.
Earnings (loss) per common share
Earnings (loss) per common share for the three months ended October 31, 1997 and
1996, are computed based upon the weighted average number of common and dilutive
common equivalent shares outstanding during the period. For purposes of the
calculation of earnings per common share, common stock equivalents consist of
stock options to acquire common stock (using the treasury stock method).
Income taxes
A valuation allowance is provided when it is more likely than not that some
portion or all of the net deferred tax asset will not be realized. The Company
has historically established valuation allowances primarily for net operating
loss carryforwards and portions of other deferred tax assets as a result of its
history of net losses. The Company has pre-tax earnings for the three months
ended October 31, 1997 and has reversed the valuation allowance to the extent
that the net operating losses and other items were used to offset taxable
income. The net reduction in the valuation allowance resulted from decreases
associated with tax benefits related to utilization of net operating losses
offset by increases attributable to certain originating stock option deductions.
The decrease in the valuation allowance for the three months ended October 31,
1997 was offset by an increase in paid-in capital.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For a comprehensive understanding of the Company's financial condition and
performance, this discussion should be considered within the context of the
consolidated financial statements and accompanying notes and other information
contained herein.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained in management's
discussion and analysis of financial condition and results of operations and
elsewhere in this Form 10-Q include forward-looking statements that involve
risks and uncertainties not limited to, the demand for the Company's products
and services and market acceptance risks, the renewal of existing site specific
customer contracts, the ability to retain the base of current site specific
customer contracts, the continued relationship with existing customers, the
effect of economic conditions, the effect of regulation, including the
Telecommunications Act of 1996, the impact of competitive products and pricing,
the Company's continuing ability to develop hardware and software products,
commercialization and technological difficulties, manufacturing capacity and
product supply constraints or difficulties, actual purchases by current and
prospective customers under existing and expected agreements, the progress of
contract implementation efforts that allow the Company to recognize revenue
under its accounting policies, and the results of financing efforts, along with
the other risks detailed herein.
OVERVIEW
INMATE CALLING SERVICES
The Company derives revenue under contracts with its customers, including AT&T,
MCI, Bell Atlantic, GTE, SBC Communications, Inc., BellSouth, U S WEST, and
other telecommunications service providers, primarily from the provisioning of
specialized call processing services for correctional facilities. This revenue
is generated under long-term contracts which provide for transaction fees paid
on a per-call basis. The Company is paid a prescribed fee for each call
completed and additional fees for validating phone numbers dialed by inmates.
The Company also derives revenue as a direct provider of inmate calls. The
following table sets forth certain information concerning the accepted calls
processed by the Company for its customers in the inmate calling market and
excludes direct call provisioning.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
October 31, October 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Call volumes processed 23,500,000 21,731,000
Average daily transactions 255,000 236,000
</TABLE>
The Company's call volume and revenue growth have resulted primarily from the
net addition of call processing systems for both existing and new customers. The
Company believes it has also benefited, to a lesser extent, from the overall
growth in the inmate calling market. The Company will continue to market its
services to additional call providers; however, it expects growth in call
processing volumes will come predominantly from adding new systems for existing
customers. The Company expects the rate of growth in calls processed will
decrease relative to the historical rates.
7
<PAGE> 9
SPEAKEZ SUBSIDIARY
The Company's acquisition of SpeakEZ in October 1995 has led to an
increased focus on new technology, specifically speaker verification and
identification technologies. The Company believes that its on going product
development activities for the SpeakEZ Voice Print(sm) technology will provide
current and future opportunities for revenue. SpeakEZ Voice Print(sm) products
are available and ready for sale in the telecommunications, financial services,
computer network and computer telephony integration ("CTI") markets. However,
there can be no assurance that these products will achieve market acceptance
and become widely adopted. The market for speaker verification software has
only recently begun to develop. As is typical in the case of a new and rapidly
evolving market, demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty.
The SpeakEZ Voice Print(sm) products are also often times subject to a
long sales cycle. This is especially true in the Company's target markets, where
customers generally commit significant resources to an evaluation of new
software and require the vendor to expend substantial time, effort, and money
educating them about the value of the vendor's solution. As a result, sales to
these types of customers generally require an extensive sales effort throughout
the organization, and often require final approval by an executive officer or
senior level employee. Further, in most cases the Company's SpeakEZ Voice
Print(sm) software applications must be integrated and made compatible with the
customers' embedded information systems. Typically, the system integration
effort requires the cooperation of other technology vendors which also
contribute to the extension of the sales cycle. The Company will likely
experience delays following initial contact with prospective customers and
expend substantial funds and management effort in connections with these sales.
There can be no assurance that the Company will be able to successfully execute
such sales. The Company uses other technology suppliers in addition to its own
direct sales force to distribute its technology and therefore at time lacks
control over such partners. Due to this and reason discussed above, revenue from
the Company's SpeakEZ Voice Print(sm) products and services will be difficult to
predict. While the Company attempts to pursue multiple market revenue
opportunities at any given time, there can be no assurance that the Company will
not experience fluctuations in revenue from its SpeakEZ Voice Print(sm) products
and services. The Company has and will continue to invest significant time and
effort and resources in bringing these products to market and anticipates the
continued offering of new SpeakEZ Voice Print(sm) products and services.
8
<PAGE> 10
RESULTS OF OPERATIONS
Three Months Ended October 31, 1997 and 1996
The following table sets forth certain statement of operations data as a
percentage of total revenue for the three months ended October 31, 1997 and
1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
1997 1996
---- ----
<S> <C> <C>
Revenue:
Telecommunications services.................................................. 90% 95%
Telecommunications licensing................................................. 1 -
Direct call provisioning..................................................... 5 5
Voice print .............................................................. 4 -
--- ---
Total revenue............................................................ 100 100
Expenses:
Operating costs and expenses................................................. 47 51
Selling, general and administrative.......................................... 19 22
Research and development..................................................... 6 8
Depreciation and amortization................................................ 21 22
--- ---
Operating income (loss) ................................................... 7 (3)
Interest expense............................................................. (3) (2)
--- ---
Earnings (loss) before income taxes........................................ 4 (5)
Income taxes .............................................................. (2) -
--- ---
Net earnings (loss) ....................................................... 2% (5)%
=== ===
</TABLE>
Total Revenue. Total revenue increased 14% to $9,735,000 for the three months
ended October 31, 1997 from $8,506,000 for the corresponding prior period. This
increase resulted from a 9% increase in telecommunications services revenue to
$8,803,000 for the three months ended October 31, 1997, from $8,059,000 in the
corresponding prior period, due to an 8% increase in call volume resulting
primarily from a net increase in the number of installed systems. Due to the
Company's significant market share, the Company expects that the rate of growth
in calls processed will decrease relative to the historical rate. The Company
recognized $46,000 in telecommunication licensing revenue associated with the
Strike Three(tm) product for the three months ended October 31, 1997. No such
revenue was recognized in the three months ended October 31, 1996. Direct call
provisioning revenue remained consistent as a percentage of total revenue. There
was a dollar increase in direct call provisioning revenue of $77,000 in the
three months ended October 31, 1997 compared to the three months ended October
31, 1996 due primarily to the addition of sites in which the Company is
provisioning the long distance service. The Company anticipates it will continue
to convert some of its direct call provisioning accounts to telecommunications
services customers for which it receives transaction fee revenue versus direct
call provisioning revenue and it will actively attempt to provision long
distance calling services on potential site contracts. The Company recognized
SpeakEZ Voice Print(sm) revenue in the amount of $380,000 for the provisioning
of services and for the sale of software licenses and hardware systems. Future
amounts of voice print revenue are unpredictable and depend upon market
acceptance, risk of technological success, and impact of new competition.
Operating costs and expenses. Total operating costs and expenses increased to
$4,537,000 for the three months ended October 31, 1997, from $4,347,000 for the
corresponding prior period, but decreased as a percentage of total revenue to
47% for the three months ended October 31, 1997 from 51% for the corresponding
prior period. Operating costs and expenses of telecommunications services
primarily consist of service administration costs for correctional facilities,
including salaries and related personnel expenses, communication costs and
inmate calling systems repair and maintenance expense. Operating costs and
expenses of telecommunications services also include costs associated with call
verification procedures, primarily network expenses and database access charges.
The Company invoices these
9
<PAGE> 11
verification procedure costs to its customers with minimal margins. Operating
costs and expenses associated with direct call provisioning include the costs
associated with telephone line access, commissions paid to correctional
facilities, costs associated with uncollectible accounts and billing charges.
Voice print operating costs for the three months ended October 31, 1997 include
the cost of hardware systems sold, installation costs, and royalty charges.
The following table sets forth the operating costs and expenses for
each type of revenue as a percentage of corresponding revenue for the three
months ended October 31, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
1997 1996
---- ----
<S> <C> <C>
Operating costs and expenses:
Telecommunications services ...... 45% 49%
Direct call provisioning ......... 95 102
Voice print ...................... 24 --
</TABLE>
Operating costs and expenses associated with providing telecommunications
services decreased as a percentage of corresponding revenue to 45% for the three
months ended October 31, 1997, from 49% in the corresponding prior period. The
decrease is primarily due to revenue increases without significant additional
costs and to cost containment measures implemented by the Company in the
delivery of its services. Direct call provisioning costs decreased as a
percentage of corresponding revenue to 95% for the three months ended October
31, 1997, from 102% in the corresponding prior period. This percentage decrease
is primarily attributable to the conversion of sites that had an overall higher
cost structure due to a higher commission expense than the remaining direct
sites and the addition of new sites where the Company provisions the long
distance services producing generally higher margins on these sites. Voice print
operating costs for the three months ended October 31, 1997 include the cost of
hardware systems sold, installation costs, services performed, allowance for
doubtful accounts and royalty charges.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $1,863,000 for the three months ended
October 31, 1997, from $1,864,000 in the corresponding prior period, and
decreased as a percentage of total revenue to 19% from 22% in the corresponding
prior period. Increases in the costs associated with the marketing personnel
and other marketing costs to support the SpeakEZ Voice Print(sm) products of
$298,000 and $212,000 for other personnel and infrastructure support at the
corporate level were offset primarily by reductions in estimated property taxes
and legal fees aggregating approximately $512,000. The selling, general and
administrative expenses associated with the SpeakEZ Voice Print(sm) technology
was $488,000 for the three months ended October 31, 1997. The Company expects
the level of selling, general, and administrative expenses to remain at the
current levels over this fiscal year. There can be no assurance, however, that
due to the potential lack of market acceptance, risk of technological success,
or impact of new competition that revenue will grow at the same rate as the
anticipated selling, general and administrative expenses.
Research and Development Expenses. Research and development expenses decreased
to $582,000 for the three months ended October 31, 1997, from $711,000 in the
corresponding prior period. The research and development for the Inmate Calling
Services division decreased to $197,000 for the three months ended October 31,
1997, from $349,000 in the corresponding prior period. The primary reason for
the decrease is due to the capitalization of software development costs for the
new Computer Telephony Interface platform of approximately $100,000. No such
costs were capitalized in the corresponding prior period. The research and
development expense associated with the SpeakEZ Voice Print(sm) technology was
$385,000 for the three months ended October 31, 1997 as compared to $362,000 for
the corresponding prior period. For the three months ended October 31, 1997, the
Company capitalized $92,000 of computer software development costs associated
with the SpeakEZ Voice Print(sm) technology compared to $155,000 for the
corresponding prior period. In addition, under a government contract the Company
is partially reimbursed for expenses on this project. This reimbursement totaled
approximately $190,000 for the three months ended October 31, 1997 and was
recognized as a reduction to SpeakEZ Voice Print(sm) technology related research
and development
10
<PAGE> 12
expenses. Such reimbursements were $40,000 for the corresponding prior period.
The Company expects the dollar amount of research and development expense to
remain at current levels over this fiscal year. There can be no assurance,
however, that due to potential lack of market acceptance, risk of technological
success, or impact of new competition that revenue will grow at the same rate as
the anticipated research and development expenses.
Depreciation and Amortization Expenses. Depreciation and amortization expenses
increased to $2,089,000 for the three months ended October 31, 1997, from
$1,826,000 in the corresponding prior period. The increase is due to an
increased fixed asset base resulting from increased inmate call processing
systems installed by the Company. In addition, infrastructure additions in
research and development and selling, general and administrative functions also
added to the increase in depreciation for office and testing equipment. The
depreciation and amortization associated with the SpeakEZ Voice Print(sm)
technology and the related business acquisition was $204,000 for the three
months ended October 31, 1997 as compared to $121,000 for the corresponding
prior period. The Company expects depreciation and amortization to continue to
increase as the number of inmate call processing systems and potential
installations for SpeakEZ Voice Print(sm) systems increase. The increases,
however, may be offset as certain capitalized costs from previous periods become
fully depreciated.
Interest Expense. Interest expense increased to $270,000 for the three months
ended October 31, 1997, from $155,000 in the corresponding prior period. The
increase was primarily attributable to a increase in the average balance of
indebtedness. The increase in indebtedness was necessary to support capital
expenditures for inmate call processing systems and operating and other cash
expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied upon commercial borrowings, the sale of
equity securities and operating cash flow to fund its operations and capital
needs. Borrowings from a line of credit with a bank supplied the Company with a
majority of its cash provided by financing activities during the three months
ended October 31, 1997. The net cash provided by financing activities in the
three months ended October 31, 1997 was $715,000 compared to $3,191,000 for the
corresponding prior period. Cash provided by operations was $1,119,000 for the
three months ended October 31, 1997 as compared to $111,000 for the
corresponding prior period. The change in cash provided by operations was
primarily attributable to changes in net earnings, adjusted for noncash expense
items such as depreciation and amortization, provision for losses on accounts
receivable and deferred tax expense. Comparably, these net amounts totaled
$2,535,000 for the three months ended October 31, 1997 and $1,500,000 for the
corresponding prior period. The net change in operating assets and liabilities
was the other offsetting difference in the change in cash provided by
operations. The total change for the three months ended October 31, 1997 was
made up primarily of increases in accounts receivable of $1,768,000 and
increases in accounts payable of $397,000 and accrued liabilities of $128,000.
The total change for the three months ended October 31, 1996 was made up
primarily of increases in accounts receivable of $777,000 offset by decreases in
accounts payable of $119,000 and accrued liabilities of $465,000.
Cash used in investing activities was $1,827,000. This included capital
expenditures of $1,635,000 for the three months ended October 31, 1997 as
compared to $2,672,000 in the corresponding prior period. The capital
expenditures for the three months ended October 31, 1997 were mainly for
telecommunications equipment and office equipment. Additional investing
activities of $192,000 for the three months ended October 31, 1997 and $653,000
for the corresponding prior period included expenditures for patent defense
costs and capitalized software development costs. The Company anticipates that
capital expenditures for telecommunications equipment will primarily follow the
installation of new systems.
The Company has been funding its operations by using cash provided by operations
and available borrowings under a $20,000,000 line of credit arrangement.
Management believes that the credit facility should be sufficient to fund the
Company's operations and anticipated new inmate call processing systems and
potential installations for SpeakEZ Voice Print(sm) for the foreseeable future.
If the borrowing facilities and cash from operations are insufficient to
satisfy the Company's requirements, the Company may be required to sell
additional equity securities or extend its borrowing facilities. There can be
no assurance that such financing will be available or, if available, will be
obtainable on satisfactory terms.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 Financial Data Schedule
B. No reports on Form 8-K were filed during the three
month period ended October 31, 1997.
12
<PAGE> 14
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.
T-NETIX, Inc.
-------------
(Registrant)
Date December 15, 1997 By: /s/ Alvyn A. Schopp
----------------- --------------------------
(Signature)
Alvyn A. Schopp, Executive Vice
President and Chief Financial Officer
(Principal Accounting Officer)
13
<PAGE> 15
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN T-NETIX, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE
THREE MONTHS ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 13,504
<ALLOWANCES> 109
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 48,227
<DEPRECIATION> 19,666
<TOTAL-ASSETS> 48,544
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 85
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 48,544
<SALES> 0
<TOTAL-REVENUES> 9,735
<CGS> 0
<TOTAL-COSTS> 4,537
<OTHER-EXPENSES> 4,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270
<INCOME-PRETAX> 394
<INCOME-TAX> 157
<INCOME-CONTINUING> 237
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
