U. S. Securities & Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______ to _______
Commission file Number 0-11596
EXPERTELLIGENCE, INC.
(Exact name of small business issuer)
California 95-3506403
(State of incorporation) IRS Employer Identification number
203 Chapala Street, Suite B, Santa Barbara, CA 93101
(Address of principal executive offices)
(805) 962-2558
(Issuers telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
periods that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES NO
X
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practical date.
Class Outstanding at June 30,
1995
Preferred stock, no par 34,824,381
Common stock, no par 94,942,256
<PAGE>
EXPERTELLIGENCE, INC.
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheet at June 30, 1995 and September 30, 1994 3
Statement of Operations for the three month and nine month
periods ended June 30, 1995 and June 30, 1994 4
Statements of Cash Flows for the three month and nine month
periods ended June 30, 1995 and June 30, 1994 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT"S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Management's Discussion and Analysis of the
Financial Condition and Results of Operation 7
PART II - OTHER INFORMATION
Other information 9
<PAGE>
<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC.
BALANCE SHEETS
at June 30, at Sept. 30,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 65,678 $ 118,893
Accounts receivable, net 113,821 90,399
Costs and estimated earnings in excess of billings 1,500 8
,784
on uncompleted contracts
Inventory 40,918 41,379
Prepaid expenses and other current assets 11,255 5
,260
Deferred tax asset-current 34,000 57,000
Total current assets 267,172 321,715
Product development costs, net 530,446 480,050
Property and equipment, net 34,452 27,161
Deferred tax asset-noncurrent 72,000 72,000
Total assets $ 904,070 $ 900,926
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of notes payable $ 19,799 $ 30,586
Accounts payable 21,426 26,840
Accrued vacation 29,322 26,139
Deferred revenue 0 32,167
Other accrued expenses 5,207 5,827
Total current liabilities 75,755 121,559
Long term debt 0 0
Stockholders' equity
Preferred stock, no par value. Authorized 100,000,000
shares; issued and outstanding 34,824,381 shares 696,488 6
96,488
as of June 30, 1994 and June 30, 1995
Common stock, no par value. Authorized 200,000,000
shares; issued and outstanding 77,442,256 shares as of
June 30, 1994 and 94,942,256 shares at June 30, 1995 2,808,
226 2,790,726
Retained earnings (Accumulated deficit) (2,676,399) (
2,707,847)
Net stockholders' equity 828,315 779,367
Total liabilities and stockholders' equity $ 904,070 $
900,926
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC
STATEMENTS OF OPERATIONS
For the three months For the nine months
ended June 30, ended June 30,
(unaudited) (unaudited)
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues $ 108,278 $ 188,250 $ 421,836 $ 4
65,467
Operating costs and expenses
Cost of Sales 27,342 31,324 133,440 1
03,426
Advertising & Promotion 254 0 703 0
General & Administration 69,896 78,266 2
13,992 213,997
Research & Development 9,480 12,875 1
8,143 35,885
Total operating costs and expenses 106,972 1
22,466 366,278 353,308
Profit/(loss) from operations 1,306 65,784 5
5,558 112,159
Other expense (income)
Interest expense 643 1,085 2,080 3
,877
Interest income (534) (75) (1,793) (
312)
Gain/Loss on Fixed Assests 0 0 0 0
Income Tax 0 0 800 0
Deferred Tax Expense 0 0 23,000 0
Other 0 0 22 0
Total other expense (income) 108 1,010 2
4,109 3,564
Net income (loss) $ 1,197 $ 64,774 $ 31,450 $
108,594
Net income (loss) per share $ 0.0000092 $ 0.0005770 $ 0
.0002599 $ 0.0009673
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
For the three months ended For the nine months ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) for the period ending June 30 $ 1,197 $ 6
4,774 $ 31,450 $ 108,594
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation and amortization 7,727 16,207 2
7,423 51,314
Decrease (increase) in accounts receivable 4,937 (
4,353) (24,922) (68,701)
Decrease (increase) in inventory 116 0 461 4
27
Decrease (increase) in prepaid expenses (2,695) 2,945(
7,695) 1,906
Decrease (increase) in other current assets 1,707 1
0,575 10,484 950
Increase (decrease) in accounts payable & accrued expenses (19,68
8) 4,710 (35,018) 40,556
Total adjustments (7,895) 30,084 (29,26
8) 26,452
Net cash provided (used) by operating activities (6,698
) 94,858 2,182 135,046
Cash flows from investing activities:
(Increase) decrease in product development costs (38,306) (
20,270) (61,012) (79,077)
Purchase of property and equipment (7,326) (9,446) (
24,098) (11,544)
Decrease in Deferred Tax Assets 0 0 23,000 0
Decrease in other assets 0 0 0 0
Net cash provided (used) by investing activities (45,632) (
29,716) (62,110) (90,621)
Cash flows from financing activities:
Repayments of notes to related parties 0 0 0 0
Repayments of other long-term debt (3,329) (13,386) (
10,786) (15,197)
Proceeds from issuance of common stock 0 0 17,500
0
Net cash provided (used) by financing activities (3,329) (
13,386) 6,714 (15,197)
Net increase (decrease ) in cash (55,658) 51,756 (
53,215) 29,228
Cash and cash equivalents as of beginning of period $ 121,336 $ 2
,903 $ 118,893 $ 25,429
Cash and cash equivalents as of period end $ 65,678 $ 54,659 $
65,678 $ 54,657
</TABLE>
<PAGE>
EXPERTELLIGENCE, INC
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying financial statements contain
all adjustments necessary to present fairly ExperTelligence, Inc.'s financial
position as of June 30, 1995 and June 30, 1994 and the results of operations
and changes in financial position for the three months and nine months ended
June 30, 1995 and 1994.
The accounting policies followed by the Company are set forth in Note 1 of
the ExperTelligence, Inc. Annual Report to Stockholders September 30, 1990 and
are incorporated by reference.
2. Fixed assets are comprised of the following :
<TABLE>
<CAPTION>
June 30, 1995 Sept. 30, 1994
<S> <C> <C>
Furniture & Fixtures $ 33,730 $33,730
Purchased Software 3,467 2,114
Equipment 334,825 312,080
Less : Accumulated depreciation 337,570 320,763
$ 34,452 $ 27,161
</TABLE>
3. The results of operations for the nine month period ended June 30, 1995 are
not necessarily indicative of the results to be expected for the full year.
4. Primary earnings per share are based on the weighted average number of
common stock and equivalents outstanding during the period.
5. At September 30, 1994, the Company had the following approximate net
operating loss carryforwards available to reduce future Federal income taxes:
<TABLE>
<CAPTION>
Expiring Federal Income Tax Financial Reporting
September 30 Purposes Purposes
<S> <C> <C>
1999 $ 464,000 $ 674,000
2000 487,000 497,000
2001 390,000 306,000
2002 309,000 257,000
2003 125,000 53,000
2005 614,000 173,000
2006 581,000 1,064,000
2007 40,000 -
$ 3,010,000 $ 3,024,000
</TABLE>
SFAS 109 was adopted as of October 1, 1993. The Company believes that the
net effect to the tax provision and deferred taxes will not materially differ
from the amounts presented in the accompanying financial statements due to the
available Federal tax net operating loss carryforwards.
<PAGE>
EXPERTELLIGENCE, INC.
MANAGEMENT's DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the quarter ended June 30, 1995 ExperTelligence devoted its efforts to
developing WebBase, our first software tool designed specifically for use on
the Internet.
WebBase allows Web site designers to provide customers with access to database
information over the Internet. WebBase is form driven and interacts with over
50 different database formats including Microsoft Access, Excel, and SQL
Server; Sybase SQL Server; Oracle; dBASE; Paradox; and Btrieve. WebBase
provides solutions ranging from simple access to real estate listings, to
detailed product pricing and availability information, or complex catalog
ordering applications. It includes password protection to allow general access
to anyone browsing a site or limited access to a specific set of authorized
individuals. Database pages created in WebBase can have pictures, input forms,
anchors, and any other feature provided by HTML. The fields from a database
record may be placed anywhere in an HTML document.
The WebBase product is currently being beta tested with final release expected
in September 1995. The extensive research and development effort required to
prepare WebBase for commercial release is reflected in reduced earnings for the
quarter. It is expected that revenues and earnings will increase in the next
six months as WebBase sales commence.
Revenues for the three months ended June 30, 1995 were primarily the result of
contracted development work on the PC ANDE product. The initial version of PC
ANDE was delivered in May to Ameritech. Subsequently, an additional contract
was secured for the creation of a pricing module for this software system.
Work began on the pricing module in June with completion scheduled for the end
of September. PC ANDE and all its component modules will be sold under the
terms of a co-marketing agreement established with Ameritech in the prior
fiscal year. It is anticipated that outside sales will be realized before the
end of the September, 1995.
Additional income was recognized from ongoing maintenance contracts, the
development of interactive voice response (IVR) systems, and the creation of
Web pages for outside Internet sites.
Management intends to reduce research and development costs in the next quarter
while continuing to watch costs and seek additional sources of revenue in an
effort to continue growing the company.
Revenues for the three month and nine month periods ended June 30, 1995 were
$108,278 and $421,836, respectively. Comparable figures for the prior year are
$188,250 and $465,467. It should be noted that figures for the prior year
include a $60,000 one-time bonus received upon signing of the ANDE co-marketing
agreement with Ameritech.
The PC ANDE contract initiated at the end of the last fiscal year and the
related pricing contract remain major sources of revenue (representing 51% of
total revenue). Internet related revenue, however, represents an increasing
percentage of total revenue. This trend is expected to continue as the WebBase
product is released for final sale.
Cost of sales for the three months ended June 30, 1995 is $27,342. Cost of
sales year to date is $133,440. By comparison, cost of sales for the three
months ended June 30, 1994 was $31,324, and cost of sales for the prior year to
date period was $103,426. Cost of sales as a percentage of revenue remains
below 35%.
Advertising and promotion expenses remain minimal ($254 for the quarter and
$703 year to date, as opposed to $0 in the prior fiscal year). The costs of
all advertising for PC ANDE are borne by Ameritech as decided in the co-
marketing agreement signed last year. It is anticipated that such expenses
will increase when the WebBase product is brought to market, but not
substantially as our intention is to market the product primarily over the
Internet (a lower cost alternative to conventional print marketing).
<PAGE>
General and administrative expense for the three month and nine month periods
ended June 30, 1995 were $69,896 and $213,992 respectively. Comparable figures
for the prior year are $78,266 and $213,997. General and administrative
expense consistently runs at 45% of total revenue, but the company continues to
make every effort to keep general and administrative expenses to a minimum.
Research and development costs for the three months ended June 30, 1995 were
lower than like costs for the three months ended June, 1994 ($9,480 versus
$18,143). The comparison between year to date figures for 1995 and 1994 is
similar ($12,875 versus $35,885). This reduction is largely explained by our
decision to capitalize research and development costs related to the WebBase
product and match those expenses to revenues generated in future months (once
the product is available for wide scale sales).
Interest expense was $643 for the three months ended June, 1995 and $1,085 for
the fiscal year to date. Interest expense for the same three months in the
prior year was $2,080 and $3,877 for the year to date. The dramatic reduction
in interest expense reflects the company's strenuous efforts to reduce our
level of long term debt.
Interest income was $534 for the three months ended June 30, 1995 and $1,793
for the fiscal year to date. Interest income for like periods in the prior
year were $75 and $312. An increase in the company's cash reserves (as
compared to the prior year) is responsible for this difference.
Deferred tax expense was not incurred for the three months ended June 30, 1995.
Deferred tax expense year to date is $34,000. There are no comparable figures
for the prior fiscal year as these entries were the result of a change in
accounting policy which took effect at the end of the last fiscal year. It
should be noted that the level of profit prior to this adjustment ($35,197
quarter to date, and $65,450 year to date) is comparable to revenue figures for
like periods in the prior fiscal year ($64,774 quarter to date, and $108,594
year to date) taking into consideration the unusual $60,000 signing bonus
received in the third quarter of the last fiscal year.
LIQUIDITY:
At June 30, 1995 the Company reported working capital of $191,417 and net
stockholder's equity of $828,315. At September 30, 1994 these figures were
$200,156 and $779,367, respectively. The decline in working capital reflects
both a temporary reduction in cash due to an increase in time devoted to new
product development (as opposed to consulting) and the expected reduction over
time of the deferred tax asset for the current year. The continued improvement
in net stockholder's equity confirms the company's status as a profitable
entity.
Accounts Receivable were greater at June 30 1995 ($113,821) than on September
30th of the previous year ($90,399). The difference is attributed to increased
external work during the current reporting period. It is believed that all
receivables will be subsequently collected.
Net product development costs were $530,446 at June 30, 1995 and $480,050 at
September 30, 1994. In both cases the figure represents approximately 55% of
total revenue. Management continues to believe in the commercial viability of
the products for which research costs are capitalized. Company employees have
participated in sales calls for the PC ANDE product with completion of those
sales expected in the next 3 to 6 months. In addition, it is anticipated that
WebBase will be released for commercial sale in the next fiscal quarter. At
that time the associated capital costs will be matched to revenues and expensed.
Accounts Payable was $21,426 at June 30, 1995 compared to $26,840 at September
30, 1994. Both figures represent slightly less than 3% of total assets.
Accrued vacation was $29,322 at June 30, 1995 compared to $26,139 at September
30, 1994. Again, both figures represent 3% of total assets.
Deferred revenue was $0 at June 30, 1995 compared to $32,167 at September 30,
1994. This decline is attributed to completion of the contract requiring
uniform billing at regularly scheduled intervals. All current work is being
billed on a time and materials basis with no lag time between performance of
the work and invoicing for the effort.
<PAGE>
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The annual shareholders meeting of ExperTelligence, Inc. was held on June 19,
1995 at the corporate offices of ExperTelligence, Inc.,
The Secretary noted that 70,128,088 shares were represented at this meeting, in
person or by proxy, which constituted 54.04% of the outstanding shares of the
corporation. This represented a majority and thereby established a quorum.
A motion was made and seconded to elect the following individuals to the Board
of Directors: Mr. Denison Bollay, Mr. Robert Reali, Ms. Bernadette Bagley and
Mrs. Ofelia Garcia.
There were no nominations from the floor. The ballots were tabulated and the
Secretary announced that the four directors had been elected by a vote of
69,985,988 shares in their favor and 142,100 shares withholding authority.
A second motion was made and seconded to appoint McGowan Guntermann,
independent certified public accountants as auditors of the company.
The ballots were tabulated and the Secretary announced that the motion was
passed 69,854,188 shares for, 190,600 shares against and 83,300 shares
abstaining.
A third motion was made and seconded to vote for the approval of a reverse
stock split in the ratio of 100:1.
The ballots were tabulated and the Secretary announced that the motion passed
with 69,580,088 shares for, 371,800 shares against and 176,200 shares
abstaining.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) None
(b) Reports on Form 8-K
None
<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.
ExperTelligence, Inc.
(registrant)
August 14, 1995 Denison Bollay, President Chief Financial
Officer and Chairman of the Board
(signature)
August 14, 1995 Robert Reali, Director
(signature)
August 14, 1995 Bernadette Bagley, Director
(signature)
August 14, 1995 Ofelia Garcia, Director
(signature)
