-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NxKXjOZjTUPHrWW10QqflzQyndj3/qRyYnzp3aFPUhNKPPT3EARns8HqJwLvCsbu 18eFWp8qg6CBGBSv0b00dQ== 0000931763-98-002135.txt : 19980814 0000931763-98-002135.hdr.sgml : 19980814 ACCESSION NUMBER: 0000931763-98-002135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNTELLECT INC CENTRAL INDEX KEY: 0000758830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 860486871 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18323 FILM NUMBER: 98685917 BUSINESS ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 BUSINESS PHONE: 7705870700 MAIL ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 10-Q 1 FORM 10-Q ================================================================================ 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, 1998 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 of (IRS employer identification number) incorporation) 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. 13,652,029 shares of common stock, $.01 par value per share, were outstanding on August 13, 1998 ================================================================================ 1 SYNTELLECT INC. AND SUBSIDIARIES INDEX Page ---- PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Condensed Consolidated Balance Sheets- June 30, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Operations- Three Months and Six Months Ended June 30, 1998 and June 30, 1997 4 Condensed Consolidated Statements of Cash Flows- Six Months Ended June 30, 1998 and June 30, 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion & Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBITS Exhibit 27.1 - Financial Data Schedule - 1998 12 Exhibit 27.2 - Financial Data Schedule - 1997 13
2 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except shares and per share amounts)
June 30, December 31, 1998 1997 -------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,922 $ 2,290 Marketable securities ($1.1 million restricted) 4,198 8,233 Trade receivables, net of allowance for doubtful accounts 10,712 10,894 of $660 and $1,199, respectively Note receivable - current portion 707 856 Inventories 2,761 2,593 Prepaid expenses 1,394 714 -------- -------- Total current assets 23,694 25,580 Property and equipment, net 5,638 5,813 Note receivable - noncurrent portion 3,000 3,361 Other assets 84 54 -------- -------- $ 32,416 $ 34,808 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,067 $ 2,160 Accrued liabilities 4,534 5,471 Customer deposits 1,614 1,081 Deferred revenue 3,689 3,197 Capital lease obligations - current portion 229 183 -------- -------- Total current liabilities 12,133 12,092 Capital lease obligations - noncurrent portion 554 530 -------- -------- Total liabilities 12,687 12,622 -------- -------- Shareholders' equity: Preferred stock, $.01 par value per share. Authorized 2,500,000 shares; no shares issued or outstanding -- -- Common stock, $.01 par value per share. 136 136 Authorized 25,000,000 shares; issued and, outstanding 13,630,898 and 13,576,761, respectively Additional paid-in capital 60,797 60,727 Deferred compensation ---- (33) Accumulated deficit (40,064) (37,454) Accumulated other comprehensive income (loss) 1 (49) -------- -------- 20,870 23,327 Treasury stock, at cost, 175,732 shares (1,141) (1,141) -------- -------- Total shareholders' equity 19,729 22,186 -------- -------- $ 32,416 $ 34,808 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1998 1997 1998 1997 ------------------ ------------------ Net revenues: System sales $ 5,336 $ 5,047 $ 9,636 $13,773 Service bureau 2,294 2,446 4,514 5,010 Maintenance and other services 3,774 3,532 8,315 7,113 ------- ------- ------- ------- Total net revenues 11,404 11,025 22,465 25,896 Cost of revenues: System sales 3,198 3,999 6,065 8,530 Service bureau 1,291 1,561 2,662 3,244 Maintenance and other services 1,134 909 2,292 1,920 ------- ------- ------- ------- Total cost of revenues 5,623 6,469 11,019 13,694 ------- ------- ------- ------- Gross margin 5,781 4,556 11,446 12,202 Operating expenses: Selling, marketing and administrative 5,007 4,906 10,163 10,089 Research and development 1,405 1,479 2,854 2,937 Depreciation and amortization 712 1,021 1,389 1,971 ------- ------- ------- ------- Total operating expenses 7,124 7,406 14,406 14,997 ------- ------- ------- ------- Operating loss (1,343) (2,850) (2,960) (2,795) Other income (expense), net Interest income 170 76 366 149 Other (12) (24) (16) (46) ------- ------- ------- ------- Total other income 158 52 350 103 ------- ------- ------- ------- Loss before income taxes (1,185) (2,798) (2,610) (2,692) Income taxes -- -- -- -- ------- ------- ------- ------- Net loss $(1,185) $(2,798) $(2,610) $(2,692) ======= ======= ======= ======= Net (loss) per common share - basic $ (.09) $ (.21) $ (.19) $ (.20) ======= ======= ======= ======= Net (loss) per common share - diluted $ (.09) $ (.21) $ (.19) $ (.20) ======= ======= ======= ======= Weighted average shares - basic 13,582 13,487 13,580 13,486 Weighted average shares - diluted 13,582 13,487 13,580 13,486 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment (23) 73 42 (150) Unrealized gain on marketable securities 2 (4) 8 2 ------- ------- ------- ------- Other comprehensive income (loss) (21) 69 50 (148) ------- ------- ------- ------- Comprehensive (loss) $(1,206) $(2,729) $(2,560) $(2,840) ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. 4 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Six Months Ended June 30, ---------------------- 1998 1997 ---------------------- Cash flows from operating activities: Net loss $(2,610) $ (2,692) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,389 1,971 Provision for doubtful accounts 162 160 Provision for inventory obsolescence -- 20 Stock option compensation expense 16 19 Decrease in receivables 20 1,817 (Increase) decrease in inventories (168) 1,090 Increase (decrease) in accounts payable (93) 643 (Decrease) in accrued liabilities (937) (1,498) Change in other assets and liabilities 325 282 ------- -------- Net cash provided (used) by operating (1,896) 1,812 activities ------- -------- Cash flows from investing activities: Purchase of marketable securities (7,757) (11,223) Maturities of marketable securities 11,800 9,276 Proceeds from notes receivables 500 -- Purchase of property and equipment (1,048) (2,085) ------- -------- Net cash provided (used) in investing 3,495 (4,032) activities ------- -------- Cash flows from financing activities: Proceeds from issuance of common stock 87 72 Principal payments on long-term debt (96) (276) ------- -------- Net cash (used) in financing activities (9) (204) ------- -------- Effect of exchange rates on cash 42 (150) ------- -------- Net increase (decrease) in cash and cash equivalents 1,632 (2,574) Cash and cash equivalents at beginning of period 2,290 4,928 ------- -------- Cash and cash equivalents at end of period $ 3,922 $ 2,354 ======= ======== Supplemental disclosure of cash flow information: Cash paid for interest $ 34 $ 54 ======= ======== Cash paid for income taxes $ -- $ 21 ======== ========
Noncash Investing and Financing Activities: The Company entered into two capital lease obligations of $61 and $105 during the three months ended June 30,1998 for additions to its existing telephone system. See accompanying notes to condensed consolidated financial statements. 5 SYNTELLECT INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except shares and per share amounts) (unaudited) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of Syntellect Inc. ("Syntellect" or the "Company") and its wholly-owned subsidiaries, Telecorp Systems, Inc., Syntellect Canada Inc., Syntellect Europe Ltd., Syntellect Deutschland GmbH, Syntellect Technology Corp. and Syntellect Interactive Services, Inc. ("SIS"). 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. 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 1997 annual report on Form 10-K. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. REVENUE RECOGNITION In October 1997, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 97-2, Software Revenue Recognition. On January 1, 1998, the Company adopted SOP 97-2 which is effective for financial statements for fiscal years beginning after December 15, 1997. The implementation of this statement did not have a material impact on the Company's unaudited consolidated financial statements for the six month period ended June 30, 1998. COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. On January 1, 1998, the Company adopted SFAS No. 130 which is effective for fiscal years beginning after December 15, 1997. Comprehensive income includes all changes in equity during a period except those resulting in investments by owners and distribution to owners. OTHER The Company continues to evaluate the requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which was issued in June 1997. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 but does not apply to interim financial statements in the initial year of application. (2) INVENTORIES Inventories consist of the following:
June 30, December 31, 1998 1997 -------- ------------ Finished goods $ 1,022 $ 913 Purchased components 3,035 2,742 Repair, warranty and maintenance inventory 2,122 2,346 ------- ------- 6,179 6,001 Less allowances for obsolescence (3,418) (3,408) ------- ------- $ 2,761 $ 2,593 ======= =======
6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET REVENUES Net revenues for the quarter ended June 30, 1998 were $11.4 million, an increase of 3%, from the $11.0 million reported for the second quarter of 1997. For the six month period ended June 30, 1998, net revenues were $22.5 million, a decrease of 13% from $25.9 million for the corresponding period in 1997. Net revenues consist of SYSTEM SALES, SERVICE BUREAU REVENUES and MAINTENANCE AND OTHER SERVICES REVENUES, which represented 47%, 20% and 33% of net revenues, respectively, for the quarter ended June 30, 1998, and 43%, 20%, and 37% of net revenues, respectively, for the six month period ended June 30, 1998. Revenues from SYSTEM SALES increased $289,000, or 6%, between the comparable quarters and decreased $4.1 million, or 30%, between the corresponding six month periods. Core product sales include the Company's primary inbound product line, VocalPoint, and open architecture Interactive Voice Response ("IVR") platform; an outbound system, the VocalPoint Predictive Dialer; VocalPoint Interactive Services, providing computer telephony integration ("CTI") functionality; and Interactive Web Response ("IWR"). Non- core products include the Premier and Premier 030 proprietary IVR systems and the VocalPoint ARU (Audio Response Unit) for the cable television industry. SYSTEM SALES revenues from the Company's core products, as described above, increased $879,000, or 24%, to $4.6 million in the quarter ended June 30, 1998, from $3.7 million in the comparable prior year period, and represented 86% and 74% of total system sales in the respective quarters. This increase was primarily due to a 55% increase in the VocalPoint product while non-core revenues continue to decline quarter-over-quarter. For the six month period ended June 30, 1998, core product revenues decreased $1.6 million, or 16%, to $8.2 million from $9.8 million in the comparable year ago period and represented 85% and 71% of total system sales, respectively. SYSTEM SALES from the Company's non-core products decreased $2.6 million, or 64%, to $1.4 million for the six month period ended June 30, 1998, from $4.0 million in the comparable year ago period. SERVICE BUREAU REVENUES decreased by $152,000, or 6%, quarter-over- quarter and $496,000, or 10%, between the comparable six month periods. The cable TV industry has experienced a decline in consumer purchases of pay-per- view events which resulted in lower than historical transaction processing fees by the Company. MAINTENANCE AND OTHER SERVICE REVENUES increased by $242,000 between the comparable quarters and $1.2 million as compared to the prior six month periods. The increase is primarily due to settlements of patent lawsuits for which the Company retained economic rights after the sale of the patent portfolio in October 1997. INTERNATIONAL REVENUES for the second quarter of 1998 were $2.6 million, or 23% of total revenues, compared to $2.1 million, or 19%, for the second quarter of 1997. International revenues typically consist of a small number of larger orders and are subject to quarter-to-quarter fluctuations. For the six month period ended June 30, 1998, international revenues were $4.7 million, or 21% of total revenues, as compared to $6.1 million, or 24%, for the prior comparable period. GROSS MARGIN The gross margin percentage for the quarter ended June 30, 1998 was 51% of net revenues as compared with 41% in the comparable prior year quarter. Gross margins for SYSTEM SALES increased to 40% from 21% between comparable quarters as a result of the mix in products and controlling fixed costs in cost of sales. Gross margins for the SERVICE BUREAU increased to 44% from 36% between the comparable quarters as a result of lower fixed costs. Gross margins on MAINTENANCE AND OTHER SERVICES decreased to 70% from 74% between the comparable quarters. 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 8 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 margins reported for the second quarter and the first six months of 1998 are not necessarily indicative of the results to be expected for the full year. The gross margin percentage for the six months ended June 30, 1998 was 51% of net revenues as compared to 47% in the comparable year ago period. Gross margins on SYSTEM SALES decreased to 37% from 38%, SERVICE BUREAU increased to 41% from 35%, and MAINTENANCE AND OTHER SERVICES decreased to 72% from 73% for the comparable six month periods. Gross margins for the six months ended June 30, 1998 were positively impacted primarily by cost control of fixed costs. OPERATING EXPENSES Operating expenses for the second quarter of 1998 were $7.1 million, a decrease of $282,000 from the prior year quarter. For the six month period ended June 30, 1998, operating expenses were $14.4 million, a decrease of $591,000, or 4%, over the prior year period. This decrease is primarily due to the fixed asset write-down of $1.3 million in 1997 causing depreciation and amortization expense to decrease $309,000, or 30%, and $582,000, or 30%, between comparable three month and six month periods. Selling, marketing and administrative expenses increased $101,000, or 2%, between the comparable quarters and $74,000, or 1%, between the corresponding six month periods. Research and development expenses for the second quarter of 1998 decreased $74,000, or 5%, over the prior year quarter and by $83,000, or 3%, over the comparable six month period. NET INCOME (LOSS) Syntellect reported a net loss of $1.2 million, or $(.09) per share for the second quarter of 1998, compared to a net loss of $2.8 million, or $(.21) per share for the prior year quarter. For the six month period ended June 30, 1998, the Company reported a net loss of $2.6 million, or $(.19) per share, compared to a net loss of $2.7 million, or $(.20) per share for the comparable prior year period. LIQUIDITY AND CAPITAL RESOURCES Syntellect had working capital of $11.6 million at June 30, 1998, as compared with $13.5 million at December 31, 1997. The current ratio was 2.0:1 and 2.1:1, respectively. Cash, cash equivalents and marketable securities at the end of the second quarter totaled $8.1 million as compared with $10.5 million at year end. Syntellect used $1.9 million in cash flows from operating activities during the first six months of 1998, received $87,000 in proceeds from the issuance of common stock, and added $166,000 in long-term debt related to capital leases for additional telephone equipment. Cash used during the six month period consisted of $1 million in capital expenditures and $96,000 in principal payments on long-term debt. Receivables, net of reserves, were $10.7 million at June 30, 1998, a decrease of $182,000 from the $10.9 million reported at December 31, 1997. Syntellect expects that its current cash, cash equivalents and marketable securities, combined with future cash flows from operating activities, will be sufficient to support the Company's operations for the remainder of 1998. The Company has a $1.1 million letter of credit pledged as a security deposit for the Company's facility in Phoenix, Arizona. This $1.1 million letter of credit is secured by a U.S. Treasury security held in the Company's available-for-sale portfolio and accordingly, this marketable security is restricted as to the disposal by such letter of credit agreement. This report on Form 10-Q may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Also see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 for a discussion of important factors that could affect the validity of any such forward-looking statements. 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27.1 - Financial Data Schedule-1998 Exhibit 27.2 - Financial Data Schedule-1997 (b) Reports on Form 8-K No current reports on Form 8-K were filed during the three months ended June 30, 1998. 10 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 13, 1998 By /S/ Peter W. Pamplin ------------------------ Peter W. Pamplin Vice President, Chief Financial Officer, Secretary and Treasurer 11 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF SYNTELLECT, INC. AND SUBSIDIARIES AS OF JUNE 30, 1998, AND THE CONSOLIDATED STATEMENT OF OPERATIONS OF SYNTELLECT, INC. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 3,922 4,198 11,372 660 2,761 23,694 13,363 7,725 32,416 12,133 0 0 0 136 19,593 32,416 9,636 22,465 6,065 11,019 14,406 162 54 (2,610) 0 (2,610) 0 0 0 (2,610) (.19) (.19)
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF SYNTELLECT, INC. AND SUBSIDIARIES AS OF JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF OPERATIONS OF SYNTELLECT, INC. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 2,354 3,222 12,897 1,130 2,975 21,748 27,117 18,730 30,970 11,074 0 0 0 135 19,138 30,970 13,773 25,896 8,530 13,694 14,997 160 54 (2,692) 0 (2,692) 0 0 0 (2,692) (.20) (.20)
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