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 December 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, 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 December 31,1996
Preferred stock, no par 159244
Common stock, no par 1431321
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ExperTelligence, Inc.
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheet at December 31,1996 and December 31,1995 3
Statement of Operations for the 3 month and 3 month
periods ended December 31,1996 and December 31,1995 4
Statement of Cash Flows for the 3 month and 3 month
periods ended December 31,1996 and December 31,1995 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 8
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<TABLE>
<CAPTION>
ExperTelligence, Inc.
Balance Sheets
at 12/31/96 at 12/31/95
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $522,351.00 $52,583.00
Accounts receivable, net $375,930.00 $328,174.00
Costs and estim uncompleted contracts $0.00 $0.00
Inventory $67,973.00 $34,583.00
Prepaid exp and other current assets $17,281.00 $10,962.00
Deferred tax asset-current $76,300.00 $24,000.00
Total current assets $1,059,835.00 $450,302.00
Product development costs, net $564,525.00 $537,247.00
Property and equipment, net $56,507.00 $34,460.00
Deferred tax asset-noncurrent $227,000.00 $30,000.00
Total assets $1,907,867.00 $1,052,009.00
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of notes payable $0.00 $9,048.00
Accounts payable $74,890.00 $9,963.00
Accrued vacation $46,310.00 $28,353.00
Deferred revenue $179,666.00 $110,625.00
Line of Credit $0.00 $0.00
Other accrued expenses $0.00 $1,192.00
Total current liabilities $300,866.00 $159,181.00
Long term debt $0.00 $0.00
Stockholders' equity:
Preferred stock, no par value.
Authorized 1,000,000 shares; issued and
outstanding 348248 shares $318,487.00 $696,488.00
as of December 31,1995 and 159244 shares
as of December 31,1996.
Common stock, no par value.
Authorized 2,000,000 shares; issued and
outstanding 949451 shares as of
December 31,1995 and 1431321 shares
at December $3,489,727.00 $2,808,226.00
Retained earnings (Accumulated deficit) $-2,201,213.0 $-2,611,886.0
Net stockholders' equity $1,607,001.00 $892,828.00
Total liabilities and stockholders equity $1,907,867.00 $1,052,009.00
<FN>
See accompanying notes to financial statements
</TABLE>
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<TABLE>
<CAPTION>
EXPERTELLIGENCE, INC
STATEMENTS OF OPERATIONS
For the three months Fiscal year to date
ended December 31, ended December 31,
1996 1995 1996 1995
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $349,757 $224,417 $349,757 $224,417
Operating costs and expenses
Cost of Sales 41,295 72,798 41,295 72,798
Advertising & Promotion 70,368 1,016 70,368 1,016
General & Administration 171,620 80,035 171,620 80,035
Research & Development 49,830 24,348 49,830 24 348
Total operating costs/exp $333,113 $178,197 $333,113 $178,197
Profit/(loss)from operations $ 16,644 $ 46,220 $ 16,644 $ 46,220
Other expense (income)
Interest expense 138 593 138 593
Interest income ( 3,455) ( 309) ( 3,455) ( 309)
Gain/Loss on Fixed Assests 0 0 0 0
Income Tax 800 (1,560) 800 ( 1,560)
Deferred Tax Expense 8,700 20,000 8,700 20,000
Other 0 0 0 0
Total other expense (inc) $ 6,183 $18,724 $ 6,183 $18,724
Net income (loss) $10,461 $27,496 $10,461 $27,496
Net income (loss) per share $.007 $ .020 $.007 $.020
<FN>
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
ExperTelligence, Inc.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
For the three months For the fiscal yr
ended Dec 31, ended Dec 31,
(unaudited) (unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) for the period
ending Dec 31 $ 10,461 $27,496 $ 10,461 $27,496
Adjs to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization $11,598 $ 2,462 $11,598 $ 2,462
Decrease (increase) in a/r (166,237) 110,991 (166,237) 110,991
Decrease (increase) in inventory 327 0 327 0
Decrease(increase)in deferred tax assets 8,700 20,000 8,700 20,000
Decrease (increase) in prepaid expenses (1) (6,600) (1) (6,600)
Decrease (increase) in current assets 0 0 0 0
Increase (decrease) in a/p accr exp 16,780 (33,636) 16,780 (33,636)
Increase(decrease) in accrued vacation 6,238 (1,024) 6,238 (1,024)
Increase (decrease) in def rev 153,666 110,625 153,666 110,625
Total adjustments $ 31,071 $(19,164) 31,071 (19,164)
Net cash (used) by op activities $ 41,532 $ 8,332 $41,532 $ 8,332
Cash flows from investing activities:
(Increase) decrease in prod devel costs $(41,843) $15,136 $(41,843) $15,136
Purchase of property and equipment (760) (4,355) (760) (4,355)
Decrease in Deferred TaxAssets 0 0 0 0
Decrease in other assets 0 0 0 0
Net cash (used) by investing activities $42,603 $10,781 $42,603 $10,781
Cash flows from financing activities:
Repayments of notes to related parties $ 0 $(4,246) $ 0 $(4,246)
Repayments of other long-term debt 0 0 0 0
Proceeds from issuance of common stock 0 0 0 0
Net cash (used) by financing activity $ 0 $(4,246) $ 0 $(4,246)
Net increase (decrease ) in cash $(1,071) $14,867 $ (1,071) $14,867
Cash/ cash equiv beginning of period $523,422 $37,716 $ 523,422 $ 37,716
Cash/ cash equivalents as of period end $522,351 $52,583 $ 522,351 $ 52,583
</TABLE>
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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 December 31,1996 and December 31,1995 and the
results of operations and changes in financial position for the 3
months ended December 31,1996 and 3 months and December 31,1995.
The accounting policies followed by the Company are set forth
in Note 1 of the ExperTelligence, Inc. Annual Report to Stockholders
September 30, 1996 and are incorporated by reference.
2. Fixed assets are comprised of the following :
<TABLE>
<CAPTION>
12/31/96 09/30/96
<S> <C> <C>
Furniture & Fixtures $ 33,982 $33,982
Purchased Software 3,467 3,467
Equipment 367,615 366,855
Total 405,064 404,304
Less : Accumulated depreciation 348,557 344,535
$ 56,507 $ 59,767
</TABLE>
3. The results of operations for the 3 month period ended December 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.
5. At September 30, 1996, the Company had the following approximate net
operating loss carryforwards available to reduce future Federal income
taxes:
<TABLE>
<CAPTION>
Federal Federal State State
Expiring NetOperating Tax NetOperating Tax
September30 Losses Credits Losses Credits
<S> <C> <C> <C> <C>
1997 - - 225,000 -
1998 - - 49,000 -
1999 42,000 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 - 16,000
2008 - 10,000 - -
$2,516,000 $184,000 $274,000 $25,000
</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 December 31,1996 ExperTelligence devoted its efforts
to enhancing WebBase, our database web server for the Internet, creating
GemBuilder for the Web, which will be sold through the efforts of GemStone,
Inc., and making a Japanese version of WebBase which will be sold in Japan
under the name WebData.
Revenues for the 3 months ended December 31,1996 were primarily the
result of WebBase licenses and advances against royalties received from
GemStone, Inc. for GemBuilder for the Web.
Management intends to increase marketing efforts, as well as research and
development costs in the next quarter in an effort to continue growing the
company.
Revenues for the three month period ended December 31,1996 were $349,757,
up 56% from $224,417 for the period ended December 31,1995. Net profit was
$10,461, down from $27,496 over the same period last year. The decreased
profits reflect higher promotion costs and larger marketing and sales staff.
Cost of sales for the three months ended December 31,1996 was $41,295, down
43% from $72,798 for the previous year period. Cost of sales as a percentage
of revenue was 12%.
Advertising and promotion expenses for the quarter were $70,368, up
significantly over the prior year period's costs of $1,016, reflecting
management's decision to actively market our new WebBase product line.
These marketing costs will continue, and very likely increase as new
products are introduced into the market.
LIQUIDITY:
At December 31,1996 the Company reported working capital of $758,969 and
net stockholder's equity of $1,607,001, up from $291,121 and $892,828 on
December 31,1995. The increase in working capital reflects higher cash
and cash equivalents, $522,351 on December 31,1996 compared to $52,583 on
December 31,1995.
Accounts receivable of $375,930 were greater at December 31,1996 than the same
period of the previous year's accounts receivable of $328,174. $200,000 of
this figure is from GemStone, Inc., which was billed at the end of the
period upon completion of contractual product development milestones and
reflects payment terms in the GemStone contract. It is believed that all
receivables will be collected.
Net product development costs were $564,525 on December 31,1996 compared
to $537,247 on December 31,1995. Management continues to believe in the
commercial viability of the products for which research costs are
capitalized.
Accounts payable was $74,890.00 at December 31,1996
compared to $9,963.00 at December 31,1995.
Accrued vacation was $46,310 at December 31,1996 compared to $28,353 at
December 31,1995. Both figures represent less than 3% of total assets.
Deferred revenue was $179,666 on December 31,1996 compared to $110,625 on
December 31,1995. $166,667 of the December 31,1996 deferred revenue
reflects our work on GemBuilder for the Web which is currently in beta
testing and the fact that GemStone has the right to convert any
outstanding balance on $250,000 of the prepaid royalties on GemBuilder
for the Web into ExperTelligence common shares at $5.25 a share.
This option expires on May 6, 1997.
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
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)
February 13, 1997 Denison Bollay, President and Chairman of the Board
(signature)
February 13, 1997 Robert Reali, Director
(signature)
February 13, 1997 Karl Marlantes, Director
(signature)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 522,351
<SECURITIES> 0
<RECEIVABLES> 375,930
<ALLOWANCES> 18,000
<INVENTORY> 67,973
<CURRENT-ASSETS> 1,059,835
<PP&E> 405,064
<DEPRECIATION> 348,557
<TOTAL-ASSETS> 1,907,867
<CURRENT-LIABILITIES> 300,866
<BONDS> 0
<COMMON> 1,431,321
0
159,244
<OTHER-SE> 1,607,001
<TOTAL-LIABILITY-AND-EQUITY> 1,907,867
<SALES> 349,757
<TOTAL-REVENUES> 349,757
<CGS> 41,295
<TOTAL-COSTS> 333,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> 10,461
<INCOME-TAX> 800
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,461
<EPS-PRIMARY> .007
<EPS-DILUTED> .007
