-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OcaWB0BjZkKeY5A0XRDWhtR1W42kjQU8tm2X/43fUomnV/NzmGuRaFFcGAL5wsdl Bioo8SYMlTwwcEKtKA5apw== 0000723533-99-000001.txt : 19990218 0000723533-99-000001.hdr.sgml : 19990218 ACCESSION NUMBER: 0000723533-99-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPERTELLIGENCE INC CENTRAL INDEX KEY: 0000723533 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 953506403 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-11596 FILM NUMBER: 99543804 BUSINESS ADDRESS: STREET 1: 203 CHAPALA STREET STREET 2: STE B CITY: SANTA BARBARA STATE: CA ZIP: 93101 BUSINESS PHONE: 8059622558 FORMER COMPANY: FORMER CONFORMED NAME: ORIGINAL COMPUTER CAMP INC DATE OF NAME CHANGE: 19841023 10QSB 1 10-QSB FOR THE 3 MONTHS ENDED DECEMBER 31, 1998 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, 1998 [ ] 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, 1998 Preferred stock, no par 159,244 Common stock, no par 1,504,288 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, 1998 and September 30, 1998 3 Statement of Operations for the 3 months period ended December 31, 1998 and December 31,1997. 4 Statement of Cash Flows for the 3 months period ended December 31, 1998 and December 31, 1997. 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
ExperTelligence, Inc. Balance Sheets at 12/31/98 at 09/30/98 ASSETS Current assets: Cash and cash equivalents *** $ 40,048 $ 130,149 Accounts receivable, net 72,118 102,409 Inventory 62,443 66,723 Prepaid exp and other current assets 51,078 16,570 Deferred tax asset-current 177,507 125,000 Total current assets $403,195 $440,851 Long- Term Accounts Receivable $ 51,585 $ 51,585 Product development costs, net 919,692 801,144 Property and equipment, net 48,225 52,732 Deferred tax asset-noncurrent 353,000 353,000 Total assets $1,775,696 $1,699,312 LIABILITIES & STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $42,794 $87,498 Accrued vacation 65,767 63,994 Deferred revenue 0 0 Line of Credit 0 0 Other accrued expenses 161 0 Total current liabilities $108,722 $151,492 Long term debt 0 0 Stockholders' equity: Preferred stock, no par value. Authorized 1,000,000 shares; outstanding and 159,244 shares $318,487 $318,487 as of December 31, 1998 and September 30, 1998 Common stock, no par value. Authorized 2,000,000 shares; issued and outstanding 1,504,288 shares as of December 31,1998 and 1,471,921 shares as of September 30, 1998 $3,776,890 $3,651,890 Retained earnings (Accumulated deficit) $(2,428,403) $(2,422,557) Net stockholders' equity $1,666,974 $1,547,820 Total liabilities and stockholders equity $1,775,696 $1,699,312 *** Subsequent to the end of the quarter, approximately $1,187,000 was raised in private placements (see Item-2, Changes in Securities).
EXPERTELLIGENCE, INC. STATEMENTS OF OPERATIONS For the three months ended December 31 December 31, (unaudited) (unaudited) 1998 1997 Revenues $52,512 $286,419 Operating costs and expenses Cost of Sales 38,132 96,450 Sales & Marketing 31,744 158 General & Administration 82,841 88,189 Research & Development 23,371 26,756 Total operating costs and expenses $176,088 $211,593 Profit/(loss) from operations $(123,576) $ 74,826 Other expense (income) Interest expense 0 348 Interest income (464) (69) Gain/Loss on Fixed Assets 0 0 Income Tax 800 800 Deferred Tax Expense (52,507) 36,000 Other 0 0 Total other expense (income) $(52,171) $37,079 Net income (loss) $(71,405) $37,747 Net income (loss) per share $( .04) $.02 See accompanying notes to financial statements.
EXPERTELLIGENCE, INC. STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH For the three months ended December 31, December 31, 1998 1997 (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) for the period ending December 31, 1998 and December 31, 1997 $ (71,405) $37,747 Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation & amortization 18,743 18,557 Decrease (increase) in accounts receivable 30,291 (139,675) Decrease (increase) in inventory 4,280 0 Decrease (increase) in prepaid expenses (34,508) (8,954) Decrease (increase) in other current assets 0 0 Increase (decrease) in accounts payable & accrued expenses (42,771) 11,672 Increase (decrease) in deferred revenue 0 0 Total adjustments $( 23,964) $(82,400) Net cash provided (used) by operating activities $(95,370) $(44,653) Cash flows from investing activities: (Increase) decrease in product development costs $(65,959) $ (12,252) Purchase of property and equipment (1,265) (455) Decrease in Deferred Tax Assets (52,507) 36,000 Decrease in other assets 0 0 Net cash provided (used) by investing activities $(119,731) $ (12,707) Cash flows from financing activities: Repayments of notes to related parties 0 30,000 Repayments of other long-term debt 0 0 Proceeds from issuance of common stock 125,000 0 Net cash provided (used) by financing activities 125,000 30,000 Net increase (decrease ) in cash $(90,101) $(27,360) Cash and cash equivalents as of beginning of period $130,149 $ 27,465 Cash and cash equivalents as of period end $ 40,048 $ 105
ExperTelligence, Inc. NOTES TO FINANCIAL STATEMENTS The accompanying unaudited financial statements have been prepared by ExperTelligence, Inc. ( or the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Annual Report Form 10-K for the year ended September 30, 1998. The accompanying financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods presented. The results of operations for the three months period ended December 31, 1998 are not necessarily indicative of the results to be expected for any other interim period or for the full fiscal year. The accounting policies followed by the Company are set forth in Note 1 of the ExperTelligence, Inc. Annual Report to Stockholders September 30, 1998 and are incorporated by reference. 2. Fixed assets are comprised of the following :
12/31/98 09/30/98 Furniture & Fixtures $33,983 $33,983 Purchased Software 9,662 9,662 Equipment 392,930 391,667 Total 436,575 435,312 Less : Accum depreciation 388,350 382,580 $ 48,225 $ 52,732
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, 1998, the Company had the following approximate net operating loss carryforwards available to reduce future Federal income taxes:
Federal Federal State State Expiring NetOperating Tax NetOperating Tax September30 Losses Credits Losses Credits 1999 28,000 56,000 - - 2000 487,000 30,000 - - 2001 390,000 - - - 2002 309,000 - 171,000 - 2003 125,000 - 38,000 - 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 - - 2009 - - - - 2010 - 1,000 - - 2011 - 4,000 - 8,000 2012 342,000 2,000 - - 2013 76,000 - - - $2,920,000 $192,000 $209,000 $34,000
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. 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, 1998. The Company's financial disclosures can be accessed at its website http://www.exgp.com/. OVERVIEW The objective of ExperTelligence (The Company) is to support its clients in making their information needs or their information-driven products interactive on the World Wide Web. The Company designs, develops, markets and implements software solutions for business applications based on advanced, object-oriented, Internet technologies which are designed, developed, integrated, and sold by the Company and its partners. The Company specializes in the development and hosting of Web/Database and Electronic Commerce application solutions using WebBaseTM and ExperForms. The Company's extensive experience with eCommerce and database systems, combined with their web service WebData(R) and the WebData Network, have given the Company the necessary experience to develop significant cutting edge Web software tools and high profile services. The Company is uniquely qualified to develop and host complex "intelligent" web sites that take full advantage of databases and their potential for sophisticated, cost effective applications. Additional information on the Company's products and consulting services can be found at its website http://www.expertelligence.com/ and http://www.webdata.com/. On December 1, 1998 ExperTelligence launched WebData.com, a specialized database portal designed to provide rapid access to Internet databases from a single place. The company has applied for the trademark "The Internet IS the Database". ExperTelligence has a patent pending on its WebData4D interface. Simultaneously, ExperTelligence announce it's link exchange network "WebDataNetwork". This is the first banner exchange program based on interactive queries to databases. Users can add banners to their sites by following the instructions at http://www.webdatanetwork.com/; the rest is completely automatic. RESULTS OF OPERATIONS FOR THE THREE MONTHS PERIOD ENDED DECEMBER 31, 1998 AND 1997 ExperTelligence's revenues consist of product revenues, (including licensing of its software), consulting, and other services. Total revenues were $52,512 and $286,419 for the three months period ended December 31, 1998, and 1997, respectively. This decrease of 82% is a direct result of the Company's decision to focus its attention on the final development and marketing of its new web database portal WebData.com and its companion WebDataNetwork.com. On December 1, 1998 the Company launched WebData and WebData Network. Cost of Sales consists primarily of service personnel, software amortization and provision for inventory. Cost of Sales were $38,132 (73% of revenue) and $96,450 (34% of revenue)for the three months period ended December 31, 1998 and 1997, respectively. The 60% decrease is directly attributable to Management's decision to put its full efforts into WebData and WebData Network. Software amortization, which remains a constant, pushed the percentage mix down. Sales and marketing consists of sales personnel, advertising and promotion. Sales and marketing expenses were $31,744 (60% of revenue) and $198 (0% of revenue) for the three months period ended December 31, 1998 and 1997, respectively. Beginning with this fiscal year the Company will be reporting sales and marketing personnel and their related expenses under this heading. In prior years, the Company reported these expenses under the general and administrative heading. In this quarter the Company enlisted the services of two consultants. Jupiter Communications, which specializes in on-line advertising strategies. The Terpin Group, whom the Company has an ongoing relationship, will assist the Company with the preparation of widespread, timely news reporting. An agreement between the Terpin Group and the Company was reached in December 1998, in which services will be exchanged for common stock. (See item-2, Changes in Securities). General and Administrative expenses includes costs of administrative salaries, employee benefits, facilities, depreciation, communication, insurance, professional fees, shareholder expense and other related expenses associated with the day to day operation of the Company. General and administrative expenses were $82,841 (159% of revenue) and $88,189 (31% of revenue) for the three months period ended December 31, 1998 and 1997, respectively. General and administrative expense on the whole were down 6%. Sales and marketing expenses have been reclassified to the Sales and Marketing heading. Professional fees are up due to accelerated patent and trademark protection. During this quarter, efforts were made to hire an individual to focus on strategic business development. Subsequent to this quarter end, such an individual was hired. Research and Development expense consists primarily of the cost of research and development personnel. Research and development expenses were $23,371 (45% of revenue) and $26,756 (9% of revenue) for the three months period ended December 31, 1998 and 1997, respectively. The capitalization of developer's time on WebData development resulted in this 13% decrease. Loss and profit from operations for the three months period ended December 31, 1998 and December 31, 1997 were $(123,576), and $74,826, respectively. This decrease in profits represents management's decision to diversify its revenue streams by completing and bringing to market, WebData.com. The Company feels that in redirecting its team and leading Internet technologies to it's database portal, WebData, they are much better poised to ride the Internet growth wave. Deferred tax expense decreased and increased proportionately with income for the three months period ended December 31, 1998 and 1997 respectively. These numbers are a result of the change in accounting policy which took effect FY94, and are not actual cash expenses. The software developed and used by the Company is Year 2000 compliant. Internal reviews indicate that the Company's products do not contain code that directly uses dates that would lead to user problems at the turn of the century. In house software has been reviewed and the necessary steps for compliance have been completed. LIQUIDITY At December 31, 1998 the Company reported working capital of $294,473 which was up 2% from $289,359 at September 30, 1998. This increase is due to an increase in prepaid expenses and current deferred tax assets. Net stockholder's equity of $1,666,974 was up 8% from $1,547,820 on September 30, 1998. Subsequent to the end of the quarter, approximately $1,187,000 was raised in private placements (see Item-2, Changes in Securities). Accounts receivable of $72,118 was down at December 31, 1998 from the September 30, 1998 figure of $102,409. This 30% decrease is in keeping with the Company's decision to pursue additional sources of revenue by launching WebData and its companion WebData Network. It is believed that all receivables will be collected. Net product development costs were $919,692 and $801,144 for the periods ending December 31, 1998 and September 30, 1998, respectively. This 15% increase reflects the shift in salaries from software and contract services to software development. Management continues to believe in the commercial viability of all products for which research costs are capitalized. Accounts payable was $42,794 at December 31, 1998 compared to $87,498 at September 30, 1998. Accrued vacation was $65,767 at December 31, 1998 compared to $63,994 at September 30, 1997. Both figures represent less than 3% of total assets. PART II. OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities During the quarter ended December 31, 1998, the Company agreed to issue 10,000 shares of common stock at $3.00 per share to pay for public relation expenses. Under Section 4(2) of the Securities Act of 1933 and Regulation D, on November 30, 1998, the Company sold 15,000 shares of unregistered common stock with warrants at $3 per share to a private investor. Subsequent Events: On January 12, 1999, these warrants were exercised. Under the same Regulation D, on January 14&15, 1999, the Company sold 182,000 shares of unregistered common stock through private placements, to individual investors at $6 per share. In addition, 91,000 underlying warrants at $10 per share were issued. These will expire in two years. The funds will be used for general corporate purposes. Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders On February 3, 1999 the Company held its Annual Meeting of Shareholders. The matters presented for vote were the Election of Officers and Ratification of Selection of Auditors. The nomination for directors, Denison W. Bollay, Robert Reali and Trygve Duryea was carried with 832,567 For and 130 Abstain. McGowan, Guntermann was ratified as auditors for the Company with 832,697 For. Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K 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 16, 1999 Denison Bollay, President and Chairman of the Board (signature) February 16, 1999 Robert Reali, Director (signature) February 16, 1999 Trygve Duryea, Director (signature) EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR QTR 10-Q DATED DECEMBER 31, 1998
5 3-MOS SEP-30-1998 DEC-31-1998 40,048 0 72,118 0 62,443 403,195 436,575 388,350 1,775,696 108,722 0 1,504,288 0 159,244 1,666,974 1,775,696 52,512 52,512 38,132 176,088 0 0 0 (123,576) (51,707) (464) 0 0 0 (71,405) 0 0 -----END PRIVACY-ENHANCED MESSAGE-----