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 March 31, 1996
[ ] 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 March 31, 1996
Preferred stock, no par 233,192
Common stock, no par 1,164,507
<PAGE>
EXPERTELLIGENCE, INC.
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheet at March 31, 1996 and September 30, 1995 4
Statement of Operations for the three month and six month
periods ended March 31, 1996 and March 31, 1995 5
Statements of Cash Flows for the three month and six month
periods ended March 31, 1996 and March 31, 1995 6
Notes to Financial Statements 7
ITEM 2. MANAGEMENT' DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Management's Discussion and Analysis of the
Financial Condition and Results of Operation 9
PART II - OTHER INFORMATION
Other information 11
<PAGE>
<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC.
BALANCE SHEETS
at March 31, at Sept.30,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents 470,769 37,716
Accounts receivable, net 206,344 217,183
Costs and est earnings in excess of billings
on uncompleted contracts 0 0
Inventory 38,909 34,583
Prepaid expenses and other current assets 7,762 4,362
Deferred tax asset-current 0 44,000
Total current assets 723,782 337,844
Product development costs, net 543,053 552,383
Property and equipment, net 47,410 32,567
Deferred tax asset-noncurrent 26,500 30,000
Total assets $ 1,340,747 $952,794
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities:
Current portion of notes payable $ 4,738 13,293
Accounts payable 41,370 14,393
Accrued vacation 32,836 29,377
Deferred revenue 24,500 0
Line of Credit 0 25,000
Other accrued expenses 7,572 5,398
Total current liabilities 111,016 87,461
Long term debt 0 0
Stockholders' equity
Preferred stock, no par value.
Authorized 1,000,000 shares;
issued and outstanding 233,192 466,380 696,488
as of March 31, 1996 and
348,248 shares as of March 31, 1995
Common stock, no par value. Authorized 2,000,000
shares; issued and
outstanding 1,164,507shares as of March 31, 1996
and 949,451 as of March 31, 1995 3,338,334 2,808,226
Retained earnings (Accumulated deficit) (2,574,983) (2,639,381)
Net stockholders' equity $ 1,229,731 $ 865,333
Total liabilities and stockholders' equity$ 1,340,747 $ 952,794
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC
STATEMENTS OF OPERATIONS
For the three months For the six months
ended March 31, ended March 31,
1996 1995 1996 1995
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $313,359 $164,668 $537,777 $313,559
Operating costs and expenses
Cost of Sales $86,542 $56,728 $159,340 $106,098
Advertising & Promotion 4,077 0 5,092 449
General & Administration 155,099 68,812 235,134 144,097
Research & Development 5,956 4,413 30,304 8,663
Total operating costs/exp $251,674 $129,953 $429,870 $259,307
Profit/(loss) from operations $61,685 $34,715 $107,907 $54,252
Other expense (income)
Interest expense 190 703 784 1,437
Interest income ( 2,907) ( 783) ( 3,216) ( 1,259)
Gain/Loss on Fixed Assests 0 0 0 0
Income Tax 0 0 ( 1,560) 800
Deferred Tax Expense 27,500 14,800 47,500 23,000
Other 0 0 0 22
Total other expense (inc) $24,783 $14,720 $43,508 $24,000
Net income (loss) $36,902 $19,995 $64,399 $30,252
Net income (loss) per share $.0361889 $.0001541 $.0553015 $.0002500
<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 For the six months
ended March 31, ended March 31,
(unaudited) (unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) for the period
ending March 31 $ 36,902 $ 19,995 $ 64,399 $30,252
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization $ 11,945 $ 9,237 $ 46,283 $19,696
Decrease (increase) in a/r 121,830 52,582 10,838 (29,859)
Decrease (increase) in inventory ( 4,326) 0 ( 4,326) 345
Decrease (increase) in prepaid expenses 3,200 2,500 ( 3,600) (5,000)
Decrease (increase) in other current assets 0 1,538 200 8,776
Increase (decrease) in a/p accr exp 42,270 ( 55,726) 32,608 (14,727)
Increase (decrease) in def rev ( 86,125) 0 24,500 0
Total adjustments $ 88,794 $ 10,131 $ 106,505 (20,769)
Net cash (used) by op activities $ 125,696 $ 30,126 $ 170,904 $ 9,483
Cash flows from investing activities:
(Increase) decrease in prod devel costs$ (15,017) $ (8,547) $ (31,755) $ (22,706)
Purchase of property and equipment (15,686) (12,375) (20,041) (16,772)
Decrease in Deferred Tax Assets 27,500 14,800 47,500 23,000
Decrease in other assets 0 0 0 0
Net cash (used) by investing activities $ (3,203) $ (6,122) $ (4,296) $ (16,478)
Cash flows from financing activities:
Repayments of notes to related parties $ 0 $ 0 $ (25,000) $ 0
Repayments of other long-term debt ( 4,310) ( 4,104) ( 8,554) ( 8,061)
Proceeds from issuance of common stock 300,000 0 300,000 17,500
Net cash (used) by financing activity $ 295,690 $ (4,104) $ 266,446 $ 9,439
Net increase (decrease ) in cash $ 0 $ 19,900 $ 433,054 $ 2,443
Cash/ cash equiv beginning of period 52,586 101,436 37,715 118,893
Cash/ cash equivalents as of period end $ 470,769 $ 121,336 $ 470,769 $ 121,336
</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 March 31, 1996 and
March 31, 1995 and the results of operations and changes in
financial position for the three months and six months ended
March 31, 1996 and 1995.
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> March 31, 1996 Sept. 30,1995
<S> <C> <C>
Furniture & Fixtures $ 33,730 $33,730
Purchased Software 3,467 3,467
Equipment 356,733 336,693
Less : Accumulated depreciation 346,520 341,323
$ 47,410 $32,567
</TABLE>
3. The results of operations for the three month period ended March
31, 1996 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.
</PAGE>
<TABLE>
<CAPTION>
Note 6 - INCOME TAXES (continued)
As of September 30, 1995, the Company had the following
approximate net operating loss and tax credit
carry forwards available to reduce future federal and state income
taxes:
Federal Federal State State
Expiring Net Operating Tax Net Operating Tax
September 30 Losses Credits Losses Credits
<S> <C> <C> <C> <C>
1996 $ - $ - $ 195,000 $ -
1997 - - 255,000 -
1998 - - 49,000 -
1999 272,000 56,000 - -
2000 487,000 29,000 - -
2001 390,000 - - -
2002 309,000 - - -
2003 125,000 - - -
2004 - 6,000 - -
2005 614,000 30,000 - -
2006 481,000 39,000 - 9,000
2007 68,000 14,000 - 15,000
2008 - 10,000 - -
$ 2,746,000 $ 184,000 $ 499,000 $ 24,000
</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 carry forwards.
<PAGE>
EXPERTELLIGENCE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the quarter ended March 31, 1996 ExperTelligence continued
to aggressively expand the market for its Internet database connectivity
tool WebBase. By the end of the quarter we completed packaging and
CDs for distribution, and signed up Ingram as a distributor. We also
put together a 30 day trial version on CD in a mailing ROMvelope
to be used for promotions and trade shows in anticipation of InterOp,
Internet World and the Internet Developers Forum.
We also continued development of WebBase Pro with powerful new
features unique to WebBase including Agent3W for remote web site
integration and Web Data Interchange. It also features Shopping
Baskets, Remote Management, Verity's full text search engine, and
one day of training. It will ship in May for $4995.
E-Merge is a powerful new email database engine that allows bulk, but
customized emails to be sent automatically. Users can select portions
of the database to send personalized emails to, embedding information
from the database, as well as conditionally including paragraphs.
Revenues for the three and six month periods ended March 31, 1996
were $313,559 and $537,777, up 90% and 72% respectively from
comparable figures from the prior year of $164,668 and $313,559.
Cost of sales were $86,542 and $159,340 compared to prior year
periods of $56,728 and $106,098. Cost of sales as a percentage of
revenue remains below 30%.
Advertising and promotion are still low at $4,077 and $5092
respectively. It is anticipated that these numbers will be significantly
larger next quarter as our promotional efforts are initiated.
General and administrative expenses rose to $155,099 and $235,134
for the three and six months ended March 31, 1996 (49% and 44% of
revenue). Comparable figures for prior year periods are $68,812 and
$144,097. These numbers reflect additional hiring to sell and support
WebBase.
Research and development was $5,956 and $30,304 for the three and
six months ended March 31, 1996, compared to prior year figures of
$4,413 and $8,663. This quarter most of our time was devoted to
customer solutions and support since the WebBase engine is complete,
while last quarter major advanced features were still in development.
Profit from operations was $61,685 and $107,907 respectively, a 20%
pretax margin for the three and six months ended March 31, 1996.
Interest expense was reduced to $190 and $784 from $703 and $1,437
for the three and six months ended March 31, 1996 due to nearly
eliminating debt. Interest income rose substantially to $2,907 and
$3,216 for the three and six months ended March 31, 1996 compared
to $783 and $1,259 due to larger cash balances in our account.
Deferred tax expense rose proportionately with income to $27,500 and
$47,500 for the three and six months ended March 31, 1996 from
$14,800 and $23,000 respectively. These numbers are a result of a
change in accounting policy which took effect FY94, and are not
actual cash expenses.
LIQUIDITY:
At March 31, 1996 the Company reported working capital of $723,782
and net shareholders equity of $1,229,731, up from $337,844 and
$952,794 on Sept. 30, 1995. This is from earnings and a small
private investment in the company. It is anticipated that the
company may raise additional capital through an offering
to increase marketing efforts on Internet products, working
capital and the possibility of an acquisition.
Accounts receivable of $206,344 is almost the same as the $217,183 in
September 30, 1995. It is believed all receivables will be subsequently
collected.
Net product development costs were $543,053 and $552,383 March
31,1996 and Sept 30,1995 respectively. The reduction reflects
amortization of our ANDE product. Management continues to believe
in the commercial viability of the products for which research costs
are capitalized.
Accounts Payable was $41,370 at March 31,1996 compared to $14,393
at Sept 30,1995. Increased revenues and expenses have resulted in an
increase in AP.
Accrued vacation was up slightly to $32,836 at March 31,1996 from
$29,377 in Sept 30, 1995.
Deferred revenue was $24,500 compared to none in Sept 30,1995.
This reflects a prepaid ANDE maintenance contract.
<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
None
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 Ofelia Garcia, Director
(signature)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 470,769
<SECURITIES> 0
<RECEIVABLES> 206,344
<ALLOWANCES> 0
<INVENTORY> 38,909
<CURRENT-ASSETS> 723,782
<PP&E> 393,930
<DEPRECIATION> 346,518
<TOTAL-ASSETS> 1,340,747
<CURRENT-LIABILITIES> 111,016
<BONDS> 0
<COMMON> 1,164,507
0
348,248
<OTHER-SE> 1,229,731
<TOTAL-LIABILITY-AND-EQUITY> 1,340,747
<SALES> 537,777
<TOTAL-REVENUES> 537,777
<CGS> 159,340
<TOTAL-COSTS> 429,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784
<INCOME-PRETAX> 110,339
<INCOME-TAX> 45,940
<INCOME-CONTINUING> 64,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,399
<EPS-PRIMARY> .055
<EPS-DILUTED> .055
</TABLE>
