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 30,1997
[ ] 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 June 30,1997
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 June 30,1997 and September 30, 1996 3
Statement of Operations for the 3 month and 9 month
periods ended June 30,1997 and June 30,1996 4
Statement of Cash Flows for the 3 month and 9 month
periods ended June 30,1997 and June 30,1996 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 6/30/97 at 09/30/96
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $160,545.00 $523,422.00
Accounts receivable, net $205,768.00 $209,693.00
Costs and estim uncompleted contracts $0.00 $0.00
Inventory $69,442.00 $68,300.00
Prepaid exp and other current assets $31,251.00 $17,280.00
Deferred tax asset-current $140,013.00 $85,000.00
Total current assets $607,019.00 $903,695.00
Product development costs, net $855,069.00 $530,258.00
Property and equipment, net $56,216.00 $59,769.00
Deferred tax asset-noncurrent $227,000.00 $227,000.00
Total assets $1,745,304.00 $1,720,722.00
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of notes payable $0.00 $0.00
Accounts payable $45,994.00 $57,932.00
Accrued vacation $58,343.00 $40,072.00
Deferred revenue $0.00 $26,000.00
Line of Credit $0.00 $0.00
Other accrued expenses $0.00 $178.00
Total current liabilities $104,337.00 $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 June 30,1997.
Common stock, no par value.
Authorized 2,000,000 shares; issued and
outstanding 1331321 shares as of
September 30, 1996 and 1471321 shares
at June 30,1997 $3,649,727.00 $3,489,727.00
Retained earnings (Accumulated deficit) -$2,327,247.0 -$2,211,674.0
Net stockholders' equity $1,640,967.00 $1,596,540.00
Total liabilities and stockholders equity $1,745,304.00 $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 June 30, ended June 30,
1997 1996 1997 1996
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $136,388 $416,658 $734,844 $954,434
Operating costs and expenses
Cost of Sales 62,240 142,771 140,239 302,110
Advertising & Promotion 15,270 24,074 99,950 29,166
General & Administration 184,811 144,333 532,836 374,619
Research & Development 36,231 26,434 141,534 61,586
Total operating costs/exp $298,552 $337,612 $914,559 $767,481
Profit/(loss)from operations$(162,164) $79,046 $(179,715) $186,953
Other expense (income)
Interest expense 62 145 270 931
Interest income ( 2,695) (3,494) (10,200) ( 6,711)
Gain/Loss on Fixed Assests 0 0 0 0
Income Tax 0 0 800 ( 1,560)
Deferred Tax Expense (53,262) 36,270 (55,013) 83,770
Other 0 (9,770) 0 (9,770)
Total other expense (inc) $(55,895) $23,151 $64,143 $66,660
Net income (loss) $(106,269) $55,895 $(115,572) $120,293
Net income (loss) per share $(.06) $ .04 $(.07) $.09
<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 June,30 ended June 30,
(unaudited) (unaudited)
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) (106,269) $55,895 $(115,572) $120,293
Adjs to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization $ 5,482 $ 4,193 $29,696 $ 8,621
Decrease (increase) in a/r (60,411) (180,865) 3,925 (170,026)
Decrease (increase) in inventory 4,486 (5,128) (1,142) (9,454)
Decrease (increase) in prepaid expenses 20 2,450 (13,971) (950)
Decrease (increase) in current assets 0 0 0 0
Increase (decrease) in a/p accr exp (44,337) 4,974 6,157 4,974
Increase (decrease) in def rev (6,500) (79,500) (26,000) 79,500
Total adjustments $(102,485) $94,876 (2,560) 94,876
Net cash (used) by op activities $(207,529) $(38,981) $(118,132) $(38,981)
Cash flows from investing activities:
(Increase) decrease in prod devl costs $ (28,759) $ 12,932 (340,118) 12,932
Purchase of property and equipment (1,277) (9,384) (9,614) (9,384)
Decrease in Deferred TaxAssets (53,262) 26,500 (55,013) 26,500
Decrease in other assets 0 0 0 0
Net cash (used) by investing actvty $ (83,298) $(30,048) (404,745) (30,048)
Cash flows from financing activities:
Repayments of notes to related parties $ 0 $ 0 $ 0 $ 0
Repayments of other long-term debt 0 (4,738) 0 (4,738)
Proceeds from issuance of common stock 0 3,500 160,000 3,500
Net cash (used) by financing activity 0 (1,238) 160,000 (1,238)
Net increase (decrease) in cash $(290,827) $(10,171) $(362,877) (10,171)
Cash/ cash equiv beginning of period $451,372 $ 470,769 $ 523,422 470,769
Cash/ cash equivalents as of period end $160,545 $ 460,598 $ 160,545 460,598
</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 June 30,1997 and June 30,1996 and the
results of operations and changes in financial position for the 3
and 9 months ended June 30,1997 and June 30,1996.
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>
6/30/97 09/30/96
<S> <C> <C>
Furniture & Fixtures $ 33,982 $33,982
Purchased Software 7,708 3,467
Equipment 372,227 366,855
Total 413,917 404,304
Less : Accumulated depreciation 357,700 344,535
$ 56,216 $ 59,769
</TABLE>
3. The results of operations for the 3 month period ended June 30,1997,
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
The Company notes that, except for the historical information contained
herein, the matters discussed below contain forward-looking statements
subject to risks and uncertainties that may cause the Company's actual
results to differ materially. Such risks and uncertainties include, but
are not limited to, various important competitive and technological
factors such as pricing pressures; as well as customers opting to upgrade to
newer or more fully featured products; changes in customer order patterns,
manufacturing considerations, including the maintenance of margins in a
declining-price environment as well as risk of inventory obsolescence
due to shifts in market demand and new product introductions; and other
risk factors listed from time to time in the Company's reports filed with
the Securities and Exchange Commission, including, but not limited to,
the report on Form 10-K for the year ended September 30, 1996.
RESULTS OF OPERATIONS
During the quarter ended June 30,1997 the Company devoted its
efforts to developing WebberActive 4.0. WebberActive 4.0 is a
channel creation and management tool with HTML content authoring
and extensive dynamic HTML and stylesheet support. This product is
important because it supports new Microsoft standards that will be
used by Internet Explorer 4.0 and Windows 98. In addition the
company secured consulting contracts with seven customers. These
contracts range from private industry to government entities. They
involve the use of WebBase, WebberActive and unannounced future
products. During this quarter the company concluded the Japanese
language version of WebBase, which will be sold in Japan under the
name WebData.
We introduced Webber32, a powerful tag based HTML editor via the
internet. It can be download from many web sites, and has a
dynamic billboard feature to draw attention to our other products.
We also devoted considerable effort on a new web search interface
for databases, "Interactive Discovery". This product enhances the
ease of developing web database sites, and the quality of the
user experience during the process of "discovering" the data they
are looking for.
Revenues for the 3 months ended June 30,1997 were the
result of sales of contract services, our new product ExperForms
(a one step process to convert paper forms to web database forms),
WebBase licenses, royalties received from GemStone, Inc. for
GemBuilder for the Web.
Management has increased marketing efforts, as well as research and
development in the current quarter as part of a shift towards focus on
our WebberActive product.
Revenues for the 3 and 9 month periods ended June 30,1997 were
$136,388 and $728,344, down 67% and 24% respectively from
comparable figures from the prior year of $416,658 and $954,434.
Revenues were down in the current quarter compared to the previous year
because Japanese sales of WebData by our distributor were late to start,
and GBWeb royalties from GemStone were slower than expected.
Our ExperForm product is being bundled by Caere with their OmniForm for
Internet Publisher product, but is not generating substantial revenues yet.
No new licenses were booked during this quarter, but negotiations for
new licenses are in process. Additionally we shifted some of our engineering
staff from consulting to new web product development.
Cost of sales for the 3 and 9 months ended June 30,1997 was
$62,240 and $140,239 compared to prior year periods of $142,771 and
$302,110 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 decreased to and increased to $15,270
and $99,950 respectively. Prior year period's costs of $24,074 and $29,166,
reflected management's decision to actively market the Company's new
web product line. Marketing costs will be reduced until our Webber 4.0
product is released.
General and administrative expenses rose to $184,811 and $532,836 for
the 3 and 9 months ended June 30,1997. Comparable figures for
prior year periods are $144,333 and $374,619. These numbers reflect
additional hiring to market web products as well as the addition of
our subsidiary in Canada.
Research and development was $36,231 and $141,534 for the 3 and
9 months ended June 30,1997, compared to prior year figures of
$26,434 and $61,586. Research and development was higher because of
new web product development.
Loss from operations was $162,164 and $179,715 respectively, for the 3
and 9 months ended June 30,1997. The decreased profits reflect
higher promotion costs and a larger engineering, marketing and sales staff.
Deferred tax expense increased proportionately with income to $(53,262)
and $(55,013) for the three and six months ended June 30,1997 from
$36,270 and $83,770 respectively. These numbers are a result of a change
in accounting policy which took effect FY94, and are not actual cash
expenses.
LIQUIDITY:
At June 30,1997 the Company reported working capital of $502,682
down from $633,503 due to a decrease in cash and accounts
receivable. Net stockholder's equity of $1,640,967, was up from
$1,596,540 on September 30, 1996.
Accounts receivable of $205,768 were down at June 30,1997 from the
September 30, 1996 figure of $209,693. It is believed that all receivables
will be collected.
Net product development costs were $855,069 and $530,258 for the
periods ending June 30,1997 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 $45,994 at June 30,1997 compared to $57,932 at
September 30, 1996.
Accrued vacation was $58,343 at June 30,1997 compared to $40,072 at
September 30, 1996. Both figures represent less than 3% of total assets.
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, Webber32 and WebberActive 2.0, are
already out on the market as a result of this acquisition. SmartSite
will be released in the next fiscal year.
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)
August 14, 1997 Denison Bollay, President and Chairman of the Board
(signature)
August 14, 1997 Robert Reali, Director
(signature)
August 14, 1997 Karl Marlantes, Director
(signature)
August 14, 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> JUN-30-1997
<CASH> 160,545
<SECURITIES> 0
<RECEIVABLES> 205,768
<ALLOWANCES> 18,000
<INVENTORY> 69,442
<CURRENT-ASSETS> 607,019
<PP&E> 413,917
<DEPRECIATION> 357,700
<TOTAL-ASSETS> 1,745,304
<CURRENT-LIABILITIES> 104,337
<BONDS> 0
<COMMON> 1,471,321
0
159,244
<OTHER-SE> 1,640,967
<TOTAL-LIABILITY-AND-EQUITY> 1,745,304
<SALES> 136,388
<TOTAL-REVENUES> 136,388
<CGS> 62,240
<TOTAL-COSTS> 298,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> (159,531)
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<INCOME-CONTINUING> (159,531)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106,269)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
