- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

--------------------

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

JULY 19,1996
----------------------------
(Date of earliest event reported)

INTERPHASE CORPORATION
(Exact name of registrant as specified in its charter)

TEXAS 0-13071 75-1549797
- ---------------------------- ----------------- -------------
(State or other jurisdiction (Commission file) (IRS employer
of incorporation or number) identification no.)
organization)

13800 SENLAC DRIVE
DALLAS, TEXAS 75234
(Address of principal executive offices, including zip code)

(214) 654-5000
-------------------------------
(Registrant's telephone number,
including area code)

Page 1 of 22 sequentially
numbered pages.

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- --------------------------------------------------------------------------------

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

-1-

(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.

Synaptel's financial statements filed as part of this report are
listed on the Index to Historical and Pro Forma Financial Information
on page 3 of this report, which index is incorporated in this Item
7(a) by reference.

(b) PRO FORMA FINANCIAL INFORMATION

Pro forma financial statements filed as part of this report are listed
on the Index to Historical and Pro Forma Financial Information on page
3 of this report, which index is incorporated in this Item 7(b) by
reference.

The exhibits filed as part of this report are listed on the Index to
Exhibits on page 22 of this report, which index is incorporated in
this Item 7(c) by reference.

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.

Dated: October 3, 1996 INTERPHASE CORPORATION

By: /s/ Robert L. Drury
----------------------------------------
Robert L. Drury, CHIEF FINANCIAL OFFICER

-2-

INTERPHASE CORPORATION
INDEX TO HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

Page No.
HISTORICAL FINANCIAL INFORMATION

Consolidated Financial Statements of Synaptel as of
December 31, 1995 and 1994 and for each of the three years ended
December 31, 1995, including report of Independent
Public Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . 4

Unaudited Condensed Consolidated Financial Statements of Synaptel for the
six month period ended June 30, 1996. . . . . . . . . . . . . . . . . 13

PRO FORMA FINANCIAL INFORMATION

Summary Information Related to the Unaudited Condensed Pro Forma
Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . 17

Unaudited Condensed Pro Forma Consolidated Statement of Operations of
Interphase Corporation for the six-month period ended
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Notes to Unaudited Condensed Pro Forma Consolidated Statement of
Operations of Interphase Corporation for the six-month period
ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 19

Unaudited Condensed Pro Forma Consolidated Statement of Operations
of Interphase Corporation for the year ended
October 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Notes to Unaudited Condensed Pro Forma Consolidated Statement of
Income of Interphase Corporation for the year ended
October 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . 21

-3-

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Interphase Corporation:

We have audited the accompanying consolidated balance sheets of Synaptel
Corporation and subsidiaries (a French Societe Anonyme), as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Synaptel Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

September 30, 1996
Dallas, Texas

-4-

SYNAPTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of US $, except number of shares)

ASSETS December 31, December 31,
- ------ 1995 1994
----------- -----------

Cash and cash equivalents $ 525 $ 291
Trade accounts receivable, less allowances for
uncollectible accounts of $162 and $127, respectively 4,806 5,228
Inventories, net 1,185 741
Prepaid expenses and other current assets 1,594 1,005
--------- ---------
Total current assets 8,110 7,265
--------- ---------
Property and equipment, net 639 575
Capitalized software and licenses, net of accumulated
amortization of $ 467 and $ 306 214 324
Tax credit receivables 1,469 1,237
Other assets 51 32
--------- ---------
2,373 2,168
--------- ---------

TOTAL ASSETS $ 10,483 $ 9,433
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current portion of long-term debt $ 930 $ 518
Trade accounts payable 3,082 2,098
Accrued compensation 2,054 1,904
Other current liabilities 365 176
--------- ---------
Total current liabilities 6,431 4,696
--------- ---------
Long-term debt 376 1,257
Other long term liabilities 814 382
--------- ---------

Total liabilities 7,621 6,335
--------- ---------
Commitments

Common stock, $ 18.30 par value; 37,800 shares
authorized; 37,800 shares outstanding 692 692
Additional paid-in capital 1,475 1,475
Cumulative foreign currency translation adjustment 476 206
Retained earnings 219 725
--------- ---------
Total shareholders' equity 2,862 3,098
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,483 $ 9,433
--------- ---------
--------- ---------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-5-

SYNAPTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of US $, except number of shares)

Year Ended December 31,
---------------------------------------
1995 1994 1993
--------- --------- ---------
Revenues $ 10,747 $ 10,909 $ 8,146
Cost of sales (4,102) (4,108) (3,212)
--------- --------- ---------
Gross profit 6,645 6,801 4,934
--------- --------- ---------
Research and development (net) 3,389 3,718 1,887
Sales and marketing 2,415 2,062 2,186
General and administrative 1,164 1,009 749
--------- --------- ---------
Total operating expenses 6,968 6,789 4,822
--------- --------- ---------
Operating income (loss) (323) 12 112

Interest expense 144 117 144
Other expense (income) 7 (12) -
--------- --------- ---------
Income (loss) before income taxes (474) (93) (32)

Provision (benefit) for income taxes 32 15 (1)
--------- --------- ---------
Net income (loss) $ (506) $ (108) $ (31)
--------- --------- ---------
--------- --------- ---------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-6-

SYNAPTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US $, except number of shares)

Year ended December 31,
--------------------------------------
1995 1994 1993
--------------------------------------

Cash flows from operating activities:
Net income (loss) $ (506) $ (108) $ (31)
--------------------------------------
Adjustment to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 554 137 167
Change in assets and liabilities
Trade accounts receivable, net 422 (1,438) (1,461)
Inventories, net (444) 81 378
Prepaid expenses and other current assets (589) (703) 2
Tax credit receivables (232) (481) (38)
Trade accounts payable 984 682 2
Other current liabilities 189 117 46
Accrued compensation 150 327 404
Other long term liabilities 432 225 168
--------------------------------------
Net adjustments 1,466 (1,053) (332)
--------------------------------------
Net cash provided (used) by operating activities 960 (1,161) (363)
--------------------------------------
Cash flows from investing activities:
Additions to property, equipment and leasehold improvements (457) (329) (114)
Additions to capitalized software (51) (7) (135)
Increase in other assets (19) (19) 14
--------------------------------------
Net cash used by investing activities (527) (355) (235)
--------------------------------------
Cash flows from financing activities:
Proceeds from current debt 412 518 -
Payments of long term debt (881) 489 (727)
Cumulative translation adjustment 270 293 (87)
Proceeds from issuance of common stock - - 1,658
Other - 19 (1)
--------------------------------------
Net cash provided (used) by financing activities (199) 1,319 843
--------------------------------------
Net increase (decrease) in cash and cash equivalents 234 (197) 245

Cash and cash equivalents at beginning of year 291 488 243
--------------------------------------
Cash and cash equivalents at end of year $ 525 $ 291 $ 488
--------------------------------------
--------------------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-7-

SYNAPTEL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands of US $, except number of shares)

Additional Cumulative
Common Stock Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------

Balance at December 31, 1992 27,000 $ 490 $ - $ 864 $ - $ 1,354
------------------------------------------------------------------------------------
Issuance of common stock 10,800 183 1,475 - - 1,658
Cumulative translation adjustment - - - - (87) (87)
Net income (loss) - - - (31) - (31)
------------------------------------------------------------------------------------
Balance at December 31, 1993 37,800 673 1,475 833 (87) 2,894
------------------------------------------------------------------------------------
Cumulative translation adjustment - - - - 293 293
Other - 19 - - - 19
Net income (loss) - - - (108) - (108)
------------------------------------------------------------------------------------
Balance at December 31, 1994 37,800 692 1,475 725 206 3,098
------------------------------------------------------------------------------------

Cumulative translation adjustment - - - - 270 270
Net income (loss) - - - (506) - (506)
-
------------------------------------------------------------------------------------
Balance at December 31, 1995 37,800 $ 692 $ 1,475 $ 219 $ 476 $ 2,862
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-8-

SYNAPTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS :

Synaptel Corporation and subsidiaries ("Synaptel" or the "Company") designs,
develops, and manufactures integrated services digital network (ISDN), X.25
products, and remote access related products. Synaptel operations are based in
Paris, France.

Effective June 29, 1996, Synaptel and certain subsidiaries were acquired by
Interphase Corporation ("Interphase"). Synaptel has maintained its accounting
records and financial statements in French Francs in accordance with accounting
principles accepted in France. Certain items have been restated to comply with
U.S. Generally Accepted Accounting Practices and reporting required by the
Securities and Exchange Commission.

PRINCIPLES OF CONSOLIDATION :

The accompanying consolidated financial statements include the financial
statements of Synaptel and the wholly owned subsidiaries that were purchased by
Interphase. The Synaptel subsidiary Cortical, which includes certain Synaptel
engineering activity, is not included in the accompanying consolidated financial
statements as this subsidiary was not acquired by Interphase.

All significant intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES :

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS:

The Company considers marketable securities with original maturities of less
than three months, as well as interest bearing money market accounts, to be cash
equivalents.

CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially expose the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards (SFAS)
No. 105 consist primarily of trade accounts receivable. The majority of the
Company's sales have been to original equipment manufacturers of computer
systems. The Company conducts credit evaluations of its customers' financial
condition and limits the amount of trade credit extended when necessary. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.

INVENTORIES:

-9-

Inventories are valued at the lower of cost or market and include material,
labor and manufacturing overhead. Cost is determined on an average cost basis.
At December 31, 1995 and 1994, inventory consisted of the following (amounts in
000's):

1995 1994
------- -------

Raw Materials $ 435 $ 254
Work-in-process - 59
Finished Goods 1,018 647
------- -------
1,453 960

Reserve for excess and obsolete (268) (219)
------- -------
Total $ 1,185 $ 741
------- -------
------- -------

PREPAID EXPENSES AND OTHER CURRENT ASSETS:

The components of prepaid expenses and other assets were as follows at December
31, 1995 and 1994
(amounts in 000's):

1995 1994
------- -------

Research and development tax
credit $ 714 $ -
VAT and other current receivables 612 758
Prepaid expenses 176 200
Other 92 47
------- -------
Total $ 1,594 $ 1,005
------- -------
------- -------

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Depreciation and amortization are
provided over the estimated useful lives of depreciable assets using primarily
the straight-line method. When property and equipment are sold or otherwise
retired, the cost and accumulated depreciation applicable to such assets are
eliminated from the accounts, and any resulting gain or loss is reflected in
current operations.

Property and equipment and the depreciable lives as of December 31, 1995 and
1994 are as follows
(amounts in 000's):

1995 1994
------- -------

Gross property and
equipment 3-8 years $ 1,950 $ 1,493
Less: accumulated
depreciation 1,311 918
------- -------

$ 639 $ 575
------- -------
------- -------

-10-

CAPITALIZED SOFTWARE AND LICENSES:

Capitalized software and licenses represent various licenses purchased by the
Company and utilized in connection with the Company's products as well as the
general operations of the Company. Capitalized software and licenses are
amortized using the straight line method over a three year period.

REVENUE RECOGNITION:

Revenue from product sales is recorded only when the earnings process has been
completed, which is generally at the time of shipment. Revenue from contract
development activity is recognized as the service is performed.

RESEARCH AND DEVELOPMENT COSTS AND GOVERNMENTAL SUBSIDY:

Research and development (R&D) costs are charged to expense as incurred and are
net of a governmental subsidy of $834,000, $404,000, and $95,000, in 1995, 1994
and 1993, respectively.

FOREIGN EXCHANGE:

The Company uses the French Franc as its functional currency. Therefore,
monetary assets and liabilities of the Company's foreign operations are
translated into U.S. Dollars at the exchange rates in effect at the end of the
year. Revenue and expense transactions are translated using the average
exchange rates that prevailed during the year. The resulting gains and losses
are included as a component of equity.

INCOME TAXES:

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting For Income Taxes" ("SFAS No.
109). SFAS No. 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under SFAS No. 109, deferred tax
liabilities and assets are determined based on estimated future tax effects on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect.

2. LONG TERM DEBT

The Company has established borrowing arrangements with five banks. Two of
these arrangements bear interest at 7.7% and 8%. The remaining are variable
interest rates based on Pibor (Paris Interbank Offering Rate) ranging from
Pibor, plus 0.5% to Pibor, plus 1.4%. Scheduled future maturities of debt at
December 31, 1995 are as follows (amounts in 000's):

1996 $ 930
1997 200
1998 176
-------
$ 1,306
-------
-------

-11-

3. OTHER LONG TERM LIABILITIES

Other long term liabilities were primarily composed of advances from the
government for R&D activity which must be repaid. Scheduled payments at
December 31, 1995 are as follows (amounts in 000's):

1996 $ 224
1997 163
1998 39
1999 14
------
$ 440
------
------

4. INCOME TAXES

The Company's results of operations include an R&D subsidy representing the
French government's support of R&D activities. Excluding this subsidy, the
Company has historically incurred losses and accordingly has not provided for
income taxes. At December 31, 1995, the Company had a net operating loss
carryforward ("NOL") of approximately $748,000, of which $48,000 expires in
1998. The remaining NOL is not subject to expiration. The Company has not
recognized a deferred tax asset for the NOL as management does not believe that
it is likely to realize such asset. The provision for income taxes as reflected
in the accompanying statement of operations reflects nominal income taxes paid
by certain subsidiaries.

5. EMPLOYEE BENEFIT PLANS

Substantially all post employment benefits are provided through government
programs. The Company is required to make a one time payment upon retirement
that is based on compensation and length of service. The Company's obligation
for all employees post employment benefits is not material.

6. OTHER FINANCIAL INFORMATION
MAJOR CUSTOMERS:

In 1995, the Company had one major customer which represented approximately
15.5% ($1,688,000) of revenues.

COMMITMENTS:

In 1995, Synaptel was a guarantor for $408,000 loan granted by the Societe
Generale Bank to a Synaptel's subsidiary (Cortical) which was not acquired by
Interphase. This guarantee has expired as of June 30, 1996.

As of December 31, 1995, operating lease commitments having noncancelable terms
of more than one year were as follows (amounts in 000's):

YEAR ENDING DECEMBER 31,
- ------------------------
1996 $ 44
1997 25
1998 7
------
Total $ 76
------
------
Total rent expense for operating leases was approximately $38,000, $23,000, and
$8,000, for the years ended December 31, 1995, 1994, and 1993, respectively.

-12-

SYNAPTEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of US $, except number of shares)

JUNE 30,
ASSETS 1996
- ------ -----------
(UNAUDITED)

Cash and cash equivalents $ 11
Trade accounts receivable, net 2,652
Inventories, net 1,595
Prepaid expenses and other current assets 662
------
Total current assets 4,920
------
Plant and equipment, net 374
Capitalized software and licenses, net 119
Tax credit receivables 1,554
Other assets 179
------
2,226
------
Total assets $7,146
------
------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current portion of long-term debt $1,174
Trade accounts payable 3,110
Accrued compensation 1,820
Other current liabilities 285
------
Total current liabilities 6,389
------
Long-term debt 676
Other liabilities 622
------
Total liabilities 7,687
------
Commitments

Common stock, $ 18.30 par value; 37,800 shares authorized;
37,800 shares outstanding 692
Additional paid-in capital 1,475
Cumulative foreign currency translation adjustment 170
Retained earnings (deficit) (2,878)
------
Total shareholders' equity (541)
------
Total liabilities and shareholders' equity $ 7,146
------
------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-13-

SYNAPTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of US $, except number of shares)

JUNE 30,
1996
--------
(UNAUDITED)

Revenues $ 3,093
Cost of sales (1,708)
-------
Gross profit 1,385
-------
Research and development (net) 2,449
Sales and marketing 1,387
General and administrative 1,216
-------
Total operating expenses 5,052
-------
Operating income (loss) (3,667)
Interest expense 39
Other expense (income) (609)
--------
Income (loss) before income taxes (3,097)
Provision (benefit) for income taxes -
--------
Net income (loss) $ (3,097)
--------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

-14-

SYNAPTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US $)

PERIOD ENDED
JUNE 30, 1996
-------------
(UNAUDITED)

Net cash provided by operating activites $ (624)

Cash Flows from investing activities:
Decrease in other assets (128)
--------
Net cash used by investing activities (128)

Cash flows from financing activities:
Proceeds from notes payable 544
Cumulative translation adjustment (306)
--------
Net cash provided by financing activities 238
Net change in cash (514)
Cash and cash equivalents at beginning of period 525
--------
Cash and cash equivalents at end of period $ 11
--------
--------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS

-15-

SYNAPTEL CORPORATION

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying consolidated interim financial statements include the accounts
of Synaptel Corporation and its wholly owned subsidiaries ("Synaptel" or the
"Company"). Significant intercompany accounts and transactions have been
eliminated.

While the accompanying interim financial statements are unaudited, they have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, all material
adjustments and disclosures necessary to fairly present the results of such
periods have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1995. Comparative
June 30, 1995 information is not available.

2. ACQUISITION

3. INVENTORY

Inventories are valued at the lower of cost or market and include material,
labor and manufacturing overhead. Cost is determined on an average cost basis.
At June 30, 1996, inventory consisted of the following:

JUNE 30, 1996
-------------
Raw Materials $ 913
Work-in-process -
Finished Goods 955
------
1,868
Reserve for excess and obsolete (273)
------
Total $1,595
------
------

-16-

UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA

Effective June 29, 1996 Interphase Corporation (the "Company") acquired all the
capital stock of Synaptel, S.A., ("Synaptel"), a French company, for
approximately $19 million. The purchase consideration consisted of $8 million
in cash, 594,595 shares of the Company's common stock, valued at approximately
$9.2 million and $1.8 million of accrued acquisition costs.

The following unaudited condensed pro forma consolidated financial information
consists of the Company's Unaudited Condensed Pro Forma Consolidated Statements
of Operations for the year ended October 31, 1995, and the six-month period
ended June 30, 1996, (collectively, the "Pro Forma Statements"). The Pro Forma
Statements give effect to the purchase of Synaptel. The Unaudited Condensed Pro
Forma Consolidated Statements of Operations for the year ended October 31, 1995
and the six-month period ended June 30, 1996 give effect to the purchase of
Synaptel as if such transaction had occurred as of November 1, 1994. The
Company's Unaudited Condensed Pro Forma Consolidated Balance Sheet as of June
30, 1996 has not been presented as the purchase of Synaptel was reflected in the
Company's historical consolidated balance sheet as of June 30, 1996.

Effective January 31, 1996 the Company changed its fiscal year end from October
31 to December 31. The following pro forma statements present the Company's
most recent fiscal year end and interim period results of operations.

The Pro Forma Statements do not purport to represent what the results of
operations of the Company would actually have been if the aforementioned
transaction in fact had occurred on November 1, 1994, or to project the results
of operations or financial position for any future periods or at any future
date.

-17-

INTERPHASE CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(All amounts in 000's except per share data)
For the Six-Month Period Ended June 30, 1996

Interphase Pro Forma Pro Forma
Corporation Synaptel Adjustments Consolidated
----------- -------- ----------- ------------

Net sales $ 23,195 $ 3,093 $ -- $26,288
Cost of goods sold 11,416 1,708 -- 13,124
-------- ------- --------- -------
Gross profit 11,779 1,385 -- 13,164
Research and development 4,554 2,449 -- 7,003
Sales and marketing 4,320 1,387 -- 5,707
General and administrative 1,985 1,061 170 (a) 3,538
322 (b)
Acquired in process R&D 11,646 -- (11,646)(f) --
-------- ------- --------- -------
Total operating expenses 22,505 4,897 (11,154) 16,248
-------- ------- --------- -------
Operating income (loss) (10,726) (3,512) 11,154 (3,084)
Interest expense (income),
net (217) 39 (361)(c) (539)

Other expense (income), net 10 (609) -- (599)
-------- ------- --------- -------
Income (loss) before
extraordinary item
and provision for
income taxes (10,519) (2,942) 11,515 (1,946)

Provision (benefit) for
income taxes 402 -- (162)(d) 240
-------- ------- --------- -------
Net income (loss) before
extraordinary item $(10,921) $(2,942) $ 11,677 $(2,186)
-------- ------- --------- -------
-------- ------- --------- -------

Net income (loss) per
common and common
equivalent share (2.32) (0.41)
-------- -------
-------- -------

Weighted average number
of common and common
equivalent shares
outstanding 4,705 595(e) 5,300
-------- -------- -------
-------- -------- -------

SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS.

-18-

NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six-Month Period Ended June 30, 1996

The unaudited condensed pro forma consolidated statement of operations for the
six-month period ended June 30, 1996, combines the following information:

1. The historical unaudited condensed consolidated statement of
operations of the Company for the six-month period ended June 30, 1996.

2. The historical unaudited condensed consolidated statement of
operations of Synaptel for the six-month period ended June 30, 1996.

3. Pro forma adjustments

PRO FORMA ADJUSTMENTS:

(a) To record amortization expense of goodwill, resulting from the
acquisition, using the straight line method over 10 years.

(b) To record amortization expense of other intangibles, primarily
developed technology, resulting from the acquisition using the
straight line method over 7 years.

(c) Interest on debt of $8.5 million bearing interest at LIBOR +2 percent
(estimated at 8.5% per annum). This debt was incurred by the Company
in July 1996 to fund the acquisition of Synaptel and provide working
capital to Synaptel.

(d) To adjust taxes for the effect of the interest expense pro forma
adjustment using an effective tax rate of approximately 36%. The
pro forma tax adjustment does not reflect the impact of amortization
related pro forma adjustments as such amortization is not deductible
for federal income tax purposes.

(e) To record the weighted average impact of shares issued as
consideration (594,595) in the acquisition.

(f) To eliminate the write-off of acquired in process research and
development resulting from the acquisition which is reflected in
Interphase's June 30, 1996 historical financial statements and is
a non recurring charge.

-19-

INTERPHASE CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(All amounts in 000's except per share data)
For the Six-Month Period Ended June 30, 1996

Interphase Pro Forma Pro Forma
Corporation Synaptel Adjustments Consolidated
----------- -------- ----------- ------------

Revenues $47,368 $10,747 $ -- $58,115
Cost of Sales 23,821 4,102 -- 27,923
------- ------- ------- -------
Gross profit 23,547 6,645 -- 30,192
Research and development 7,327 3,389 -- 10,716
Sales and marketing 8,583 2,415 -- 10,998
General and administrative 4,004 1,164 340 (a) 6,151
643 (b)
Acquired in process R&D -- -- -- (c) --
-------- ------- -------- -------
Total operating expenses 19,914 6,968 983 27,865
-------- ------- -------- -------
Operating income (loss) 3,633 (323) (983) (2,327)
Interest expense (income),
net (586) 144 (723)(d) (1,165)

Other expense (income), net (3) 7 -- (4)
-------- ------- --------- -------
Income (loss) before
extraordinary item
and provision for
income taxes 4,222 (474) (260) (3,488)

Provision (benefit) for
income taxes 1,463 32 (324)(e) 1,171
-------- ------- --------- -------
Net income (loss) before
extraordinary item $ (2,759) $ (506) $ 64 $ 2,317
-------- ------- --------- -------
-------- ------- --------- -------

Net income (loss) per
common and common
equivalent share (0.55) (0.41)
-------- -------
-------- -------

Weighted average number
of common and common
equivalent shares
outstanding 5,051 595(f) 5,646
-------- -------- -------
-------- -------- -------

SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS.

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NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six-Month Period Ended June 30, 1996

The unaudited condensed pro forma consolidated statement of income for the year
ended October 31, 1995 combines the following information:

1. The historical condensed consolidated statement of operations of the
Company for the year ended October 31, 1995.

2. The historical condensed consolidated statement of operations of
Synaptel for the year ended December 31, 1995.

3. Pro forma adjustments

PRO FORMA ADJUSTMENTS:

(a) To record amortization expense of goodwill, resulting from the
acquisition, using the straight line method over 10 years.

(b) To record amortization expense of other intangibles, primarily
developed technology, resulting from the acquisition using the straight
line method over 7 years.

(c) The write-off of acquired in process research and development of
approximately $11.6 million has not been reflected in the pro forma
financial statements as this charge is non recurring.

(d) Interest on debt of $8.5 million bearing interest at LIBOR + 2 percent
(estimated at 8.5% per annum). This debt was incurred by the Company
in July 1996 to fund the acquisition of Synaptel and to provide working
capital to Synaptel.

(e) To adjust taxes for the effect of the interest expense pro forma
adjustment using an effective tax rate of approximately 36%. The pro
forma tax adjustment does not reflect the impact of amortization and
acquired in process research and development write-off adjustments as
these adjustments are not deductible for federal income tax purposes.

(f) To record the weighted average impact of shares issued as
consideration (594,595) in the acquisition.

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INTERPHASE CORPORATION
INDEX TO EXHIBITS

Exhibit
Number
------

10 Loan agreement dated as of June 26, 1996 between Interphase
Corporation and Bank One Texas, N.A.

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