<PAGE>
 
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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 MARCH 31, 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.
 
  13,581,073 shares of common stock, $.01 par value per share, were
outstanding on May 14, 1998
 
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<PAGE>
 
                        SYNTELLECT INC. AND SUBSIDIARIES
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
  Unaudited Condensed Consolidated Balance Sheets--March 31, 1998 and
   December 31, 1997......................................................   3
  Unaudited Condensed Consolidated Statements of Operations--Three Months
   Ended March 31, 1998 and March 31, 1997................................   4
  Unaudited Condensed Consolidated Statements of Cash Flows--Three Months
   Ended March 31, 1998 and March 31, 1997................................   5
  Notes to Condensed Consolidated Financial Statements....................   6
Item 2. Management's Discussion and 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
</TABLE>
 
                                       2
<PAGE>
 
                        SYNTELLECT INC. AND SUBSIDIARIES
                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
              (IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                         MARCH 31,  DECEMBER 31,
                                                           1998         1997
                                                         ---------  ------------
<S>                                                      <C>        <C>
                         ASSETS
Current assets:
  Cash and cash equivalents............................. $  3,950     $  2,290
  Marketable securities ($1.1 million restricted).......    5,770        8,233
  Trade receivables, net of allowance for doubtful
   accounts of $912 and $1,199, respectively............   10,949       10,894
  Notes receivables--current portion....................      872          856
  Inventories...........................................    2,837        2,593
  Prepaid expenses......................................    1,023          714
                                                         --------     --------
    Total current assets................................   25,401       25,580
Property and equipment, net.............................    5,657        5,813
Notes receivable--noncurrent portion....................    3,182        3,361
Other assets............................................       99           54
                                                         --------     --------
                                                         $ 34,339     $ 34,808
                                                         ========     ========
          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................................... $  2,749     $  2,160
  Accrued liabilities...................................    4,944        5,471
  Customer deposits.....................................    1,681        1,081
  Deferred revenue......................................    3,448        3,197
  Capital lease obligations--current portion............      188          183
                                                         --------     --------
    Total current liabilities...........................   13,010       12,092
Capital lease obligations--noncurrent portion...........      481          530
                                                         --------     --------
    Total liabilities...................................   13,491       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. Authorized
   25,000,000 shares; issued and outstanding, 13,581,073
   and 13,576,761, respectively.........................      136          136
  Additional paid-in capital............................   60,743       60,727
  Deferred compensation.................................      (33)         (33)
  Accumulated deficit...................................  (38,879)     (37,454)
  Accumulated other comprehensive income................       22          (49)
                                                         --------     --------
                                                           21,989       23,327
  Treasury stock, at cost, 175,732 shares...............   (1,141)      (1,141)
                                                         --------     --------
    Total shareholder's equity..........................   20,848       22,186
                                                         --------     --------
                                                         $ 34,339     $ 34,808
                                                         ========     ========
</TABLE>
 
      See accompanying notes to unaudited condensed consolidated financial
                                  statements.
 
                                       3
<PAGE>
 
                        SYNTELLECT INC. AND SUBSIDIARIES
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                               MARCH 31,
                                                          --------------------
                                                            1998       1997
                                                          ---------  ---------
<S>                                                       <C>        <C>
Net revenues:
  System sales........................................... $   4,300  $   8,726
  Service bureau.........................................     2,220      2,564
  Maintenance and other services.........................     4,541      3,581
                                                          ---------  ---------
    Total net revenues...................................    11,061     14,871
Cost of revenues:
  System sales...........................................     2,867      4,531
  Service bureau.........................................     1,371      1,683
  Maintenance and other services.........................     1,158      1,011
                                                          ---------  ---------
    Total cost of revenues...............................     5,396      7,225
                                                          ---------  ---------
    Gross margin.........................................     5,665      7,646
Operating expenses:
  Selling, marketing and administrative..................     5,156      5,183
  Research and development...............................     1,449      1,458
  Depreciation and amortization..........................       677        950
                                                          ---------  ---------
    Total operating expenses.............................     7,282      7,591
                                                          ---------  ---------
Operating income (loss)..................................    (1,617)        55
Other income (expense)
  Interest income........................................       196         73
  Other..................................................        (4)       (18)
                                                          ---------  ---------
    Total other income...................................       192         55
                                                          ---------  ---------
Income (loss) before income taxes........................    (1,425)       110
  Income taxes...........................................       --           4
                                                          ---------  ---------
  Net income (loss)...................................... $  (1,425) $     106
                                                          =========  =========
Net income (loss) per common share--basic................ $    (.10) $     .01
                                                          =========  =========
Net income (loss) per common share--diluted.............. $    (.10) $     .01
                                                          =========  =========
Weighted average shares--basic...........................    13,579     13,485
                                                          =========  =========
Weighted average shares--diluted.........................    13,579     14,042
                                                          =========  =========
Other comprehensive income, net of tax:
  Foreign currency translation adjustment................        65       (223)
  Unrealized (loss) on marketable securities.............         6          3
                                                          ---------  ---------
Other comprehensive income (loss)........................        71       (220)
                                                          ---------  ---------
Comprehensive income (loss).............................. $  (1,354) $    (114)
                                                          =========  =========
</TABLE>
 
 
      See accompanying notes to unaudited condensed consolidated financial
                                  statements.
 
                                       4
<PAGE>
 
                        SYNTELLECT INC. AND SUBSIDIARIES
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                               MARCH 31,
                                                          --------------------
                                                            1998       1997
                                                          ---------  ---------
<S>                                                       <C>        <C>
Cash flows from operating activities:
  Net income (loss)...................................... $  (1,425) $     106
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
    Depreciation and amortization........................       677        950
    Provision for doubtful accounts......................        81         80
    Provision for inventory obsolescence.................       --          10
    Stock option compensation expense....................       --           9
    (Increase) in receivables............................      (136)      (792)
    (Increase) decrease in inventories...................      (244)       538
    Increase in accounts payable.........................       589        469
    (Decrease) in accrued liabilities....................      (527)      (587)
    Change in other assets and liabilities...............       411         95
                                                          ---------  ---------
      Net cash provided (used) by operating activities...      (574)       878
                                                          ---------  ---------
Cash flows from investing activities:
  Purchase of marketable securities......................    (3,196)    (5,030)
  Maturities of marketable securities....................     5,665      3,160
  Proceeds from notes receivable.........................       250
  Purchase of property and equipment.....................      (521)      (927)
                                                          ---------  ---------
      Net cash provided (used) in investing activities...     2,198     (2,797)
                                                          ---------  ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock.................        16         10
  Principal payments on long-term debt...................       (45)      (148)
                                                          ---------  ---------
      Net cash used in financing activities..............       (29)      (138)
                                                          ---------  ---------
Effect of exchange rates on cash.........................        65       (223)
                                                          ---------  ---------
Net increase (decrease) in cash and cash equivalents.....     1,660     (2,280)
Cash and cash equivalents at beginning of period.........     2,290      4,928
                                                          ---------  ---------
Cash and cash equivalents at end of period............... $   3,950  $   2,648
                                                          =========  =========
Supplemental disclosure of cash flow information:
  Cash paid for interest................................. $      14  $      33
                                                          =========  =========
  Cash paid for income taxes............................. $     --   $      20
                                                          =========  =========
</TABLE>
 
      See accompanying notes to unaudited condensed consolidated financial
                                  statements.
 
                                       5
<PAGE>
 
                       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
Corporation 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. 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 1997
Annual Report on Form 10-K. The results of operations for the three months
ended March 31, 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 period ended
March 31, 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:
 
<TABLE>
<CAPTION>
                                                          MARCH 31, DECEMBER 31,
                                                            1998        1997
                                                          --------- ------------
   <S>                                                    <C>       <C>
   Finished goods........................................  $ 1,018    $   913
   Purchased components..................................    3,058      2,742
   Repair, warranty and maintenance inventory............    2,256      2,346
                                                           -------    -------
                                                             6,332      6,001
   Less allowances for obsolescence......................   (3,495)    (3,408)
                                                           -------    -------
                                                           $ 2,837    $ 2,593
                                                           =======    =======
</TABLE>
 
                                       6
<PAGE>
 
(3) YEAR 2000 COMPLIANCE
 
  The Company has addressed the Year 2000 Compliance issues, both the software
that it licenses and its internal use of software, and believes there will be
no material effect on the Company's operations or financial condition since
the cost of remediation has been incurred or those costs to be incurred are
not expected to be material. However, because costs related to this project
are based on estimates of the Company, there is no assurance that actual costs
will not differ materially from the current expectations which could cause an
adverse effect on the Company's results of operations.
 
    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
 
NET REVENUES
 
  Net revenues for the quarter ended March 31, 1998 were $11.0 million, a
decrease of 26% from the $14.9 million reported for the first quarter of 1997.
Net revenues consist of SYSTEM SALES, SERVICE BUREAU REVENUES and MAINTENANCE
AND OTHER SERVICES REVENUES, which represented 39%, 20% and 41% of net
revenues, respectively, for the quarter ended March 31, 1998, and 59%, 17%,
and 24% of net revenues, respectively, for the comparable prior year period.
 
  SYSTEM SALES for the period ended March 31, 1998 were $4.3 million, a
decrease of approximately $4.4 million, or 51%, over the $8.7 million reported
for the same prior year period. Core product sales include the Company's
primary inbound product line, VocalPoint, an 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.
 
  The decrease in SYSTEM SALES was related to several factors. First, as a
result of the Company's changes in product strategy introduced in 1997, both
product sales and delivery cycles for the Company's core products have been
longer than past experience while recent growth in the order rates and the
Company's backlog have not yet resulted in increased revenues. Second, the
Company continues to show a decline in non-core product revenue which began
two years ago. In the current quarter, non-core revenues declined $2 million
to $700,000 from the prior year quarter.
 
  SERVICE BUREAU REVENUES decreased by $344,000, or 13%, quarter-over-quarter.
The cable TV industry has been experiencing a decline in consumer purchases of
pay-per-view events which results in lower than historical transaction
processing fees by the Company. In addition, in the prior year quarter, the
Company processed a one-time campaign for a large customer that generated
approximately $300,000 in revenue.
 
  MAINTENANCE AND OTHER SERVICES REVENUES increased by $960,000 between the
comparable quarters. The maintenance component remained stable quarter-over-
quarter. Revenues from patents and other services increased $999,000, or 170%,
as compared to the same prior year period. During the quarter, the Company
settled one of the patent suits for which it retained economic rights after
the sale of the patent portfolio in October 1997. Revenue recognized on this
transaction was $1 million in the quarter ended March 31, 1998. The Company
expects, based on the terms of the settlement, to recognize an additional
$1.75 million in revenues on this transaction during the remainder of 1998.
 
  INTERNATIONAL REVENUES for the first quarter of 1998 were $2.1 million, or
19% of total revenues, compared to $4.0 million, or 27% of total revenues, for
the first quarter of 1997. International revenues typically consist of a small
number of larger orders and are subject to quarter-to-quarter fluctuations.
Specifically, the period ended March 31, 1997 included significant revenues
from large customer orders received late in 1996.
 
                                       7
<PAGE>
 
GROSS MARGIN
 
  The gross margin percentage for the quarter ended March 31, 1998 remained
stable at 51% of net revenues as compared to the prior year quarter. Gross
margins for system sales decreased to 33% from 48% between comparable quarters
primarily as a result of decreased system revenues and the proportion of fixed
costs in cost of sales. Gross margins for the service bureau increased from
34% to 38% between the comparable quarters as a result of the mix of business
and lower variable costs. Gross margins on maintenance and other services
increased to 75% from 72% 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 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 first quarter of
1998 are not necessarily indicative of the results to be expected for the full
year.
 
OPERATING EXPENSES
 
  Operating expenses for the first quarter of 1998 were $7.3 million, a
decrease of $309,000, or 4%, from the prior year quarter of $7.6 million. This
decrease is primarily due to the fixed asset write-down of $1.3 million in
1997 causing depreciation and amortization expense to decrease $273,000, or
29% , quarter-over-quarter. Selling, marketing and administrative expenses and
research and development costs were stable as compared to the prior year
quarter of $5.2 million and $1.4 million, respectively.
 
NET INCOME (LOSS)
 
  Syntellect reported a net loss of $1.4 million, or $(.10) per share, for the
first quarter of 1998, compared to a net income of $106,000, or $.01 per
share, for the prior year quarter. The decline was caused by the decrease in
revenues while fixed costs remained stable as compared to the prior year
quarter.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Syntellect had working capital of $12.4 million at March 31, 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 first quarter totaled $9.7 million as compared with $10.5
million at year end. Syntellect used $574,000 in cash flows for operating
activities during the first three months of 1998 and received $16,000 in
proceeds from the issuance of common stock. Cash used during the three month
period consisted of $521,000 in capital expenditures and $45,000 in principal
payments on long-term debt. Receivables, net of reserves, were $10.9 million
at March 31, 1998 and at December 31, 1997. Inventories increased $244,000
since December 31, 1997 in preparation of orders to be delivered early in the
second quarter of 1998.
 
  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.
 
                                       8
<PAGE>
 
                           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
  March 31, 1998.
 
                                       9
<PAGE>
 
                                   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.
 
 
                                                    /s/ Neal L. Miller
                                          By___________________________________
                                                      Neal L. Miller
                                              Vice President, Chief Financial
                                                         Officer,
                                                  Secretary and Treasurer
                                               (Principal Financial Officer)
 
                                                   /s/ Peter W. Pamplin
                                          By___________________________________
                                                     Peter W. Pamplin
                                               Vice President and Controller
                                              (Principal Accounting Officer)
 
Date: May 14, 1998
 
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