-----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, VXXWKEpyeNS9HYyn5NKQhDAyDn3exFqkwN0aQ2P7s+8VVEUa+ZIF1lbxHeD4G+GS 7X5xQx5ZYsA5Ev4pCK2pnA== 0000950153-96-000547.txt : 19960814 0000950153-96-000547.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950153-96-000547 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 1934 Act SEC FILE NUMBER: 000-18323 FILM NUMBER: 96609253 BUSINESS ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 BUSINESS PHONE: 6027892800 MAIL ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 10-Q 1 QUARTERLY REPORT FOR THE QUARTER ENDED 6/30/96 1 =============================================================================== 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 =============================================================================== 2 SYNTELLECT INC. AND SUBSIDIARIES INDEX
Page 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
2 3 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
June 30, December 31, 1996 1995 ------ ----------- (Unaudited) 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 ======= =======
See accompanying notes to condensed consolidated financial statements. 3 4 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1996 1995 1996 1995 ---- ---- ---- ---- (unaudited) (unaudited) 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 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 4 5 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended June 30, -------------------- 1996 1995 ---- ---- (unaudited) 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 $ -- ======== ========
See accompanying notes to condensed consolidated financial statements. 5 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)
SYNTELLECT PINNACLE COMBINED ---------- -------- -------- 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 ======== ======== =======
6 7 Combined Condensed Statements of Operations For The Three Months Ended June 30, 1995 (unaudited)
SYNTELLECT PINNACLE COMBINED ---------- -------- -------- 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 ======= ======== =======
7 8 (3) INVENTORIES Inventories consist of the following:
June 30, December 31, 1996 1995 --------- ------------ 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 ======== ========
(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 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 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 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 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 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 EX-11 2 COMPUTATION OF NET INCOME (LOSS) PER SHARE 1 EXHIBIT 11 SYNTELLECT INC. AND SUBSIDIARIES SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, --------------- ---------------- 1996 1995 1996 1995 ---- ---- ---- ---- 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) ========= ======== ======== ========
- ----------- 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. EX-27 3 FINANCIAL DATA SCHEDULE
5 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. 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 4,141 3,295 14,390 1,266 5,028 27,190 22,138 15,253 35,071 12,211 0 0 0 135 22,707 35,071 15,627 26,950 9,331 13,656 14,910 180 27 (1,476) 0 (1,476) 0 0 0 (1,476) (.11) (.11)
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