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 31,1997
[ ] 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 March 31,1997
Preferred stock, no par 159244
Common stock, no par 1471321
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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 March 31,1997 and March 31,1996 3
Statement of Operations for the 3 month and 6 month
periods ended March 31,1997 and March 31,1996 4
Statement of Cash Flows for the 3 month and 6 month
periods ended March 31,1997 and March 31,1996 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 3/31/97 at 3/31/96
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $451,372.00 $523,422.00
Accounts receivable, net $145,357.00 $209,693.00
Costs and estim uncompleted contracts $0.00 $0.00
Inventory $73,928.00 $68,300.00
Prepaid exp and other current assets $31,271.00 $17,280.00
Deferred tax asset-current $86,751.00 $85,000.00
Total current assets $788,679.00 $903,695.00
Product development costs, net $826,311.00 $530,258.00
Property and equipment, net $59,198.00 $59,769.00
Deferred tax asset-noncurrent $227,000.00 $227,000.00
Total assets $1,901,188.00 $1,720,722.00
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of notes payable $0.00 $0.00
Accounts payable $64,905.00 $57,932.00
Accrued vacation $52,921.00 $40,072.00
Deferred revenue $6,500.00 $26,000.00
Line of Credit $0.00 $0.00
Other accrued expenses $30,850.00 $178.00
Total current liabilities $155,176.00 $124,182.00
Long term debt $0.00 $0.00
Stockholders' equity:
Preferred stock, no par value.
Authorized 1,000,000 shares; issued and
outstanding 159244 shares $318,487.00 $318,487.00
as of September 30, 1996 and 159244 shares
as of March 31,1997.
Common stock, no par value.
Authorized 2,000,000 shares; issued and
outstanding 1331321 shares as of
September 30, 1996 and 1471321 shares
at March 31, $3,649,727.00 $3,489,727.00
Retained earnings (Accumulated deficit) -$2,222,202.0 -$2,211,674.0
Net stockholders' equity $1,746,012.00 $1,596,540.00
Total liabilities and stockholders equity $1,901,188.00 $1,720,722.00
<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 March 31, ended March 31,
1997 1996 1997 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $248,698 $313,359 $598,456 $537,777
Operating costs and expenses
Cost of Sales 38,065 86,542 79,360 159,340
Advertising & Promotion 14,312 4,077 84,680 5,092
General & Administration 173,372 155,099 341,533 235,134
Research & Development 58,369 5,956 111,659 30,304
Total operating costs/exp $284,118 $251,674 $617,232 $429,870
Profit/(loss)from operations $(35,420) $61,685 $(18,776) $107,907
Other expense (income)
Interest expense 70 190 208 784
Interest income ( 4,050) (2,907) ( 7,505) ( 3,216)
Gain/Loss on Fixed Assests 0 0 0 0
Income Tax 0 0 800 ( 1,560)
Deferred Tax Expense (10,451) 27,500 (1,751) 47,500
Other 0 0 0 0
Total other expense (inc) $(14,431) $24,783 $(8,248) $43,508
Net income (loss) $(20,989) $36,902 $(10,528) $64,399
Net income (loss) per share $(.02) $ .03 $(.01) $.05
<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 Mar 31, ended Mar 31,
(unaudited) (unaudited)
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (20,989) $36,902 $(10,528) $64,399
Adjs to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization $12,615 $11,945 $24,214 $ 46,283
Decrease (increase) in a/r 230,573 121,830 64,336 10,838
Decrease (increase) in inventory (5,955) (4,326) (5,628) (4,326)
Decrease (increase) in prepaid expenses (13,991) 3,200 (13,991) (3,600)
Decrease (increase) in current assets 0 0 0 200
Increase (decrease) in a/p accr exp 27,476 42,270 50,494 32,608
Increase (decrease) in def rev (173,167) (86,125) (19,500) 24,500
Total adjustments $ 77,551 $88,794 99,925 106,503
Net cash (used) by op activities $ 56,562 $125,696 $89,397 $170,904
Cash flows from investing activities:
(Increase) decrease in prod devl costs $(269,516) $(15,017) (311,359) (31,755)
Purchase of property and equipment (7,574) (15,686) (8,337) (20,041)
Decrease in Deferred TaxAssets (10,451) 27,500 (1,751) 47,500
Decrease in other assets 0 0 0 0
Net cash (used) by investing actvty $(287,541) $(3,203) (321,447) (4,296)
Cash flows from financing activities:
Repayments of notes to related parties $ 0 $ 0 $ 0 $(25,000)
Repayments of other long-term debt 0 (4,310) 0 (8,554)
Proceeds from issuance of common stock 160,000 300,000 160,000 300,000
Net cash (used) by financing activity 160,000 295,690 160,000 266,446
Net increase (decrease) in cash $(70,979) $418,183 $(72,050) 433,054
Cash/ cash equiv beginning of period $522,351 $ 52,586 $ 523,422 37,715
Cash/ cash equivalents as of period end $451,372 $470,769 $ 451,372 470,769
</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 March 31,1997 and March 31,1996 and the
results of operations and changes in financial position for the 3
months ended March 31,1997 and 6 months and March 31,1996.
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>
3/31/97 09/30/96
<S> <C> <C>
Furniture & Fixtures $ 33,982 $33,982
Purchased Software 7,419 3,467
Equipment 371,239 366,855
Total 412,640 404,304
Less : Accumulated depreciation 353,442 344,535
$ 59,198 $ 59,769
</TABLE>
3. The results of operations for the 3 month period ended March 31,1997,
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 March 31,1997 ExperTelligence devoted its
efforts to developing ExperForms and WebWizards. In addition the
company carried out beta testing and completed documentation for
GemBuilder for the Web, which will be sold through the efforts of
GemStone, Inc. In addition we added extensive support for the Japanese
language version of WebBase, which will be sold in Japan under the name
WebData.
Revenues for the 3 months ended March 31,1997 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 and six month periods ended March 31,1997 were
$248,698 and $598,456, down 21% and up 10% respectively from
comparable figures from the prior year of $313,359 and $537,777.
Revenues were down in the current quarter compared to the previous year
because of a shift of our engineering staff from consulting to new web
product development.
Cost of sales for the three and six months ended March 31,1997 was
$38,065 and $79,360 compared to prior year periods of $86,542 and
$159,340 reflecting the generally lower cost of sales associated with
license sales, which occurred this year, versus consulting sales, which
occurred in the previous year.
Advertising and promotion expenses increased to $14,312 and $84,680
respectively. These figures are up significantly over the prior year
period's costs of $4,077 and $5,092, reflecting management's decision to
actively market our new web product line. We started a relationship with
a new public relations firm. These marketing costs will continue, and
very likely increase as new products are introduced into the market.
General and administrative expenses rose to $173,372 and $341,533 for
the three and six months ended March 31,1997. Comparable figures for
prior year periods are $155,099 and $235,134. These numbers reflect
additional hiring to market web products.
Research and development was $58,369 and $111,659 for the three and
six months ended March 31,1997, compared to prior year figures of
$5,956 and $30,304. Research and development was higher because of
new web product development.
Loss from operations was $35,420 and $18,776 respectively, for the three
and six months ended March 31,1997. The decreased profits reflect
higher promotion costs and larger marketing and sales staff.
Deferred tax expense dropped proportionately with income to $(10,451)
and $(1,751) for the three and six months ended March 31,1997 from
$27,500 and $47,500 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 31,1997 the Company reported working capital of $633,503
down from $779,513 due to a decrease in cash and accounts
receivable. Net stockholder's equity of $1,746,012, was up from
$1,596,540 on September 30, 1996.
Accounts receivable of $145,357 were down at March 31,1997 from the
September 30, 1996 figure of $209,693 due to the collection of a
GemStone receivable. It is believed that all receivables will
be collected.
Net product development costs were $826,311 and $530,258 for the
periods ending March 31,1997 and September 30, 1996 respectively. The
bulk of the product development costs are related to the acquisition of
CSD Corporation. Management continues to believe in the commercial
viability of the products for which research costs are capitalized.
Accounts payable was $64,903 at March 31,1997 compared to $57,932 at
September 30, 1996.
Accrued vacation was $52,921 at March 31,1997 compared to $40,072 at
September 30, 1996. Both figures represent less than 3% of total assets.
Deferred revenue was $6,500 on March 31,1997 compared to $26,000 on
September 30, 1996. This reflects one quarter remaining in ANDE
maintenance for Bell Canada. $166,667 of the December 31, 1996
deferred revenue reflected our work on GemBuilder for the Web.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
See item 5.
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
On March 12, 1997 ExperTelligence purchased CSD Corporation of
Toronto, Ontario, for 40,000 shares of ExperTelligence common stock
and $28,052 in cash. As part of the transaction, the previous owners of
CSD immediately purchased the accounts receivable and other assets of
CSD. The purchase of CSD Corporation brings new technology to the
ExperTelligence family of software for the emerging Webmaster function.
One new ExperTelligence product, WebberActive, is already out on the
market as a result of this acquisition. Three more, Webber32, DataPort,
and SmartSite, will be released next quarter.
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)
May 15, 1997 Denison Bollay, President and Chairman of the Board
(signature)
May 15, 1997 Robert Reali, Director
(signature)
May 15, 1997 Karl Marlantes, Director
(signature)
May 15, 1997 David Swan, Director
(Signature)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 451,372
<SECURITIES> 0
<RECEIVABLES> 145,357
<ALLOWANCES> 18,000
<INVENTORY> 73,928
<CURRENT-ASSETS> 788,679
<PP&E> 412,640
<DEPRECIATION> 353,442
<TOTAL-ASSETS> 1,901,188
<CURRENT-LIABILITIES> 155,176
<BONDS> 0
<COMMON> 1,471,321
0
159,244
<OTHER-SE> 1,746,012
<TOTAL-LIABILITY-AND-EQUITY> 1,901,188
<SALES> 248,698
<TOTAL-REVENUES> 248,698
<CGS> 38,065
<TOTAL-COSTS> 284,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> (20,989)
<INCOME-TAX> 800
<INCOME-CONTINUING> (20,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,989)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
