U. S. Securities & Exchange Commission
                   Washington, D.C. 20549

FORM 10-KSB

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE 
         SECURITIES AND EXCHANGE ACT OF 1934
         For the fiscal year ended September 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 Id number

203 Chapala Street,  Suite B, Santa Barbara, CA 93101
(Address of principal executive offices)

 (805) 962-2558
(Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange 
Act:

        Title of each class            Name of each 
                                    exchange on which
                                        registered
                  None                     None

Securities registered under Section 12(g) of the Exchange 
Act:

    Preferred Stock, no par    Common Stock, no par
      (Title of class)           (Title of class)

Check whether the issuer (1) filed all reports required to 
be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such 
shorter period that the registrant was required to file such 
reports), and 2) has been subject to such filing 
requirements for the past 90 days.        
YES      X      NO

Check if there is no disclosure of delinquent filers in 
response to Item 405 of Regulation S-B contained in this 
form and no disclosure will be contained, to the best of the 
registrant's knowledge, in definitive proxy statements or 
information statements incorporated by reference in Part III 
of this Form 10-KSB or in any amendment to this Form 10-KSB.   
[ X  ]

Issuers revenues for the most recent fiscal year:  $955,246   

State the aggregate market value of the voting stock held by 
non-affiliates, computed by reference to the per share 
closing bid price thereof on the Over-the-Counter Exchange 
as of a specified date within the past 60 days:  
Approximately $1,840,776 million based on a $1.25 per share 
closing bid price as of December 23,1997.


State the number of shares outstanding of each of the 
issuer's classes of common equity, as of the latest 
practical date.  
Outstanding at September, 30 1997   
Preferred stock, no par         159,244
Common stock, no par          1,472,621    
    
<PAGE>

ExperTelligence, Inc.
Annual Report on Form 10-KSB
For the Fiscal Year Ended September 30, 1997

Table of Contents


Item number                                    Page Number

Part I

1.    Description of Business                         iv        
2.    Description of Property                          v
3.    Legal Proceedings                                v
4.    Submission of Matters to a Vote of Security 
        Holders                                        v

Part II

5.    Market for Common Equity and Related 
       Stockholder Matters                           vii
6.    Management's Discussion and Analysis           vii
7.    Financial Statements                          1-15
8.    Changes In and Disagreements With Accountants 
      on Accounting and Financial Disclosure          ix

Part III
9.    Directors, Executive Officers, Promoters and 
      Control Persons; Compliance with Section 16(a)
      of the Exchange Act                              x
10.   Executive Compensation                           x    
11.   Security Ownership of Certain Beneficial 
       Owners and Management                          xi
12.   Certain Relationships and Related 
       Transactions                                   xi  

13.   Exhibits and Reports on Form 8-K                xi

<PAGE>

Part I

Item 1. Description of Business

The objective of ExperTelligence is to support 
companies in making their information needs or their 
information-driven products interactive on the World 
Wide Web.  It does this by providing software tools 
and applications based on advanced, object-oriented, 
Internet-aware technologies which are designed, 
developed, integrated, and sold by the Company and its 
partners.

The Company successfully completed its transition to 
the Internet market by continuing sales and support of 
WebBaseTM, a web data-base server, and its internet 
compatible mail merge tool, E-Merge TM.  The Company 
devoted considerable resources this year in further 
promoting these internet products.  WebBase is now 
being sold over the internet and through the Company's 
telephone sales organization.  WebBase is being resold 
through two major OEMs. "GemBuilder for the Web" from 
GemStone Systems, Inc. is targeted towards the Global 
2000 business objects market, and ExperForms (based on 
WebBase) is being resold by CAERE Corporation as a 
business web forms solution.

This year the Company introduced a Japanese version of 
WebBase and Emerge with Open Technologies of Japan.

This year the Company acquired, Cerebral Systems 
Development, a Canadian corporation which produces 
software.   As a result of this acquisition the 
Company has introduced two new HTML editors, Webber 32 
and WebberActive.  We are finalizing development of a 
third product, which will be introduced next year. 

The Company has a presence in the telecommunications 
industry with ANDE TM (Ameritech Network Design 
Expert).  ANDE  has been licensed to Southwestern Bell 
(12/95) and Bell Canada (6/96), and is jointly owned 
with our development partner, Ameritech.

ExperTelligence employs ten people full time and one 
person part time.  Additional contract workers are 
hired as necessary to complete specific projects.

Business of Issuer

Software development remains the primary business of 
ExperTelligence.  The Company creates tools and applications 
both independently and under contract for various customers.  

WebBase provides users the tools to develop easy access to 
database information over the Internet.  It includes full 
server capabilities and can interface with any of 50 
database formats including Microsoft Access, Excel and SQL 
Server, Sybase SQL Server, Oracle, dBase, Paradox, and 
Btrieve.  Full details about WebBase TM may be found on our 
web site, http://www.expertelligence.com.

WebBase provides for solutions ranging from simple access to 
a real estate listing to complex enterprise-wide information 
system applications in human resources, finance, and sales.  
It allows existing databases to be enhanced through the 
addition of hypertext links into other Internet 
publications.

"GemBuilder for the Web" from GemStone Systems, Inc. 
is targeted towards the Global 2000 business objects 
market.  It delivers the first web server based on 
persistent business smalltalk objects.  GemStone is 
transitioning towards Java solutions presently.

In addition, ExperForms, based on WebBase, is being 
resold through CAERE Corporation packaged with 
"OmniForm for Internet Publisher". Together, our 
products allow someone to convert a paper form into a 
functioning web database solution in minutes.  The 
Company has participated with CAERE in major trade 
shows and other joint marketing activities this year 
allowing the Company to receive industry wide 
exposure. 

WebberActive 4.1 is capable of assisting authors building 
"dynamic HTML" pages, as well as building "channels" (part 
of Microsoft's push technology).  This product is based on 
HTML standards, including the latest standard HTML 4.0.  It 
has Microsoft's Internet Explorer built into the product, 
and can work closely with Netscape's browsers.  An HTML 
validation engine can verify the adherence of the desired 
HTML standard.  The product is also capable of hosting 
ActiveX controls, including "design time controls".  The 
"tag assistant" helps users select from the hundreds of 
tags, attributes and values.

Webber32 is a free HTML editor and validation tool the 
Company distributes internationally to introduce potential 
customers to the Company.  It is downloaded free at over 20 
popular internet sites.

Ameritech Network Design Expert (ANDE) is a fully integrated 
design tool which allows users to analyze and determine 
workable ISDN solutions by illustrating the equipment 
configurations required to run the applications.  The ANDE 
co-marketing agreement signed in May of 1994 remains in 
force.  This agreement establishes Ameritech and 
ExperTelligence as co-owners of ANDE with ExperTelligence 
entitled to a percentage of all gross sales of the product.

The Company has entered into negotiations with two of the 
largest software and hardware manufacturers in the high tech 
industry.  One is a license to use our HTML validation 
engine from WebberActive.  The other is a license for a 
customized WebBase for a major consumer electronics firm.

Competitive Information

We were one of the first entrants in the web database server 
marketplace and have delivered proven solutions to many 
Fortune 500 customers, but the Internet market is highly 
dynamic and competitive.  The Company continues to solidify 
its market base with the addition of three new OEMs.  The 
rapidly changing nature of the software industry requires 
that a significant effort be devoted to constantly 
developing new goods, services and partnerships.  The 
Company has shown significant activity in each of these 
areas during the last year.

Regulatory Information

Government approval is not required for the sale of any of 
the Company's products.  

There are no existing or probable government regulations 
which will have a material effect on the Company, and there 
is no material cost of compliance to environmental laws.

Item 2. Description of Property

The Company does not own any real estate.  The following is 
the Company's principle place of business:

    Location                Size            Lease 
Term

    203 Chapala Street, Suite B         2,100 Sq. Ft.    
    Two Years
    Santa Barbara, CA 93101


Item 3. Legal Proceedings

The Company is not a party to any litigation.


Item 4. Submission of Matters to a Vote of Security 
Holders

<PAGE>

Part II

Item 5. Market for Common Equity and Related Stockholder 
Matters

The Company's common stock is traded on the Over-the-Counter 
Exchange, under the symbol "EXGP".  At September 30, 1997 
there were approximately 1,088 holders of record (1,086 
holding common stock and 2 holding preferred stock).

As of September 30, 1997 the Company's assets and equity are 
still below NASD's minimum requirements.  As such, 
quotations of the Company's security are not traded on 
NASDAQ.

The high and low bid price per share of the Company's common 
stock on the Exchange for the last two fiscal years was as 
follows (as these shares are traded on the OTC market, the 
prices indicated below are not necessarily reflective of 
actual transactions):

<TABLE>
<CAPTION>
    For the fiscal year ended September 30,
                       1997             1996
                   High     Low     High     Low
<S>               <C>      <C>    <C>       <C>
First Quarter     $4.25    $3.25   $1.00    $.075
Second Quarter    $5.00    $4.00  $14.00    $8.00
Third Quarter     $3.25    $2.75  $13.00    $8.50
Fourth Quarter    $2.50    $2.50   $5.00    $4.00
</TABLE>

There were no dividends declared during the past two fiscal 
years.

No dividends shall be paid or other distributions made 
(other than those payable solely in Common Stock) with 
respect to the Common Stock during any fiscal year of the 
Corporation until dividends in the total amount of $.18 per 
share on the outstanding shares of Series A Preferred shall 
have been paid.  The Corporation shall not declare or pay 
any dividends on any shares of Preferred Stock or any other 
class or series of stock of the Corporation ranking as to 
dividends on a parity with the Preferred Stock unless the 
Corporation shall pay a ratable dividend on the Preferred 
Stock and such parity stock in proportion to the full 
dividend preference amounts to which each is entitled.  
After the payment of the full dividend preference amount on 
the Series A Preferred and on all other parity stock, and 
after payment in any fiscal year of the Corporation of $.18 
per share of Common Stock (adjusted to reflect any 
subdivision or combination of the Common Stock after the 
Original Issue Date of the Series A Preferred) outstanding 
on such payment date, if any additional dividend is paid in 
such fiscal year on the Common Stock, the holders of Series 
A Preferred shall be entitled to receive, contemporaneously 
with such additional payment on the Common Stock, an amount 
per share equal to (i) the amount of such additional 
dividend paid on the Common Stock, multiplied by (ii) the 
number of shares of Common Stock into which a share of 
Series A Preferred is convertible on the date of the payment 
of the additional dividend on the Common Stock.

Item 6. Management's Discussion and Analysis

General

The past year has been a period of considerable change for 
the Company.  The Company has signed and completed numerous 
contracts, added OEMs, acquired a foreign subsidiary, and 
added several new products.  The Company has completed a 
transition to the Internet market. 

Results of Operations

Comparison of Fiscal Year 1997 to Fiscal Year 1996

Sales decreased 25% from $1,270,773 to $955,246.  Consulting 
revenues decreased by 75% while License and Royalty revenues 
increased by 50%.  Cost of Sales decreased by 59% due to 
increased sales of licensed software and decreased travel 
and support in consulting activities.  General and 
Administrative expenses were up 20% due to the addition of 
two new officers.  Research and Development decreased by 
15%.  This decrease is a direct result of the President of 
the Company taking a more active role in the sales and 
marketing of the company.  Sales and Marketing increased by 
73%.  This increase is due to increased trade show activity, 
increased sales and telemarketing staff and the addition of 
a full time sales administrator.  Income from operations 
after taxes decreased from $427,707 to a loss of $(146,910).  
This loss is indicative of the Company's decision to 
actively pursue product sales, develop and promote new 
products through acquisitions and negotiate contracts with a 
variety of partners.  These results are consistent with the 
Company's plan to anticipate where growth is necessary 
within the high tech market.

Liquidity and Capital Resources

Cash decreased from $523,422 in 1996 to $27,464 in 1997.  
The decrease is due to decreased sales and profits and 
increased marketing effort.  Working capital decreased over 
the same period from $779,513 to $411,450. 

The net value of Capitalized Product Development Costs 
increased by $289,875 due to the purchase of Cerebral 
Systems Development..  The Company believes product 
development costs will be recovered in the future as 
development costs are matched to sales.

Long term debt has been eliminated.


Item 7. Financial Statements

The Financial Statements as of September 30, 1997 and 1996 
are presented on the pages that follow.



Item 8. Changes In and Disagreements With Accountants on 
Accounting and Financial Disclosure

    None.



<PAGE>

            EXPERTELLIGENCE, INC. AND SUBSIDIARY
                  SANTA BARBARA, CALIFORNIA

               CONSOLIDATED FINANCIAL STATEMENTS
                   September 30, 1997 and 1996

                    TABLE OF CONTENTS

                                                       Page

Independent Auditor's Report                              1
Consolidated Financial Statements:
  Consolidated Balance Sheets                             2
  Consolidated Statements of Income                       3
  Consolidated Statements of Shareholders' Equity         4
  Consolidated Statements of Cash Flows                   5
  Notes to Consolidated Financial Statements         6 - 18


INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
ExperTelligence, Inc.
Santa Barbara, California

We have audited the accompanying consolidated balance sheets of 
ExperTelligence, Inc., a California corporation, and subsidiary as of 
September 30, 1997 and 1996, and the related consolidated statements 
of income, shareholders' equity, and cash flows for the years then 
ended.  These consolidated financial statements are the responsibility 
of the Company's management.  Our responsibility is to express an 
opinion on these consolidated financial statements based on our 
audits.

We conducted our audits in accordance with generally accepted 
auditing standards.  Those standards require that we plan and 
perform the audit to obtain reasonable assurance about whether the 
consolidated financial statements are free of material misstatement.  
An audit includes examining, on a test basis, evidence supporting the 
amounts and disclosures in the consolidated financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the 
overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to 
above present fairly, in all material respects, the financial position of 
ExperTelligence, Inc., and subsidiary at September 30, 1997 and 1996, 
and the results of their operations and their cash flows for the years 
then ended, in conformity with generally accepted accounting 
principles.


McGowan Guntermann
Santa Barbara, California
December 4, 1997
<PAGE>

                              -1-

                  
<PAGE>
<TABLE>
<CAPTION>
               EXPERTELLIGENCE, INC. AND SUBSIDIARY

                   CONSOLIDATED BALANCE SHEETS
                   September 30, 1997 and 1996

                              ASSETS

                                                  1997        1996
<S>                                              <C>         <C>
CURRENT ASSETS
Cash:
Non-interest bearing                             $16,355     $56,654
Interest bearing                                  11,110     466,768

Total Cash                                        27,465     523,422

Accounts receivable - related party (Note 9)        -          7,167
Accounts receivable - net of allowance (Note 1E) 271,312     202,526
Inventory (Note 1C)                               65,178      68,300
Prepaid expenses and other current assets         28,083      17,280
Deferred tax assets (Note 1J and 6)              110,000      85,000

  Total Current Assets                           502,038     903,695

PROPERTY AND EQUIPMENT - Net (Note 1I and 2)      53,947      59,769

OTHER ASSETS
Product development costs, net (Note 1D)         820,133     530,258
Deferred tax assets (Note 1J and 6)              328,000     227,000

  Total Other Assets                           1,148,133     757,258


    TOTAL ASSETS                             $ 1,704,118 $ 1,720,722

</TABLE>
<TABLE>
<CAPTION>

               LIABILITIES AND SHAREHOLDERS' EQUITY


                                                  1997       1996
<S>                                           <C>           <C>
CURRENT LIABILITIES
Accounts payable                             $    33,174  $     57,932
Accrued payroll taxes                               -              178
Accrued vacation                                  57,413        40,072
Deferred revenue                                    -           26,000

Total Current Liabilities                         90,587       124,182


SHAREHOLDERS' EQUITY (Notes 3 and 4):
Preferred stock, no par value, authorized 
 1,000,000 shares; issued and outstanding 
 159,244 shares for 1997 and 1996 (liquidation 
 preference is $3 per share, see Note 3)         318,487       318,847
Common stock, no par value, authorized 
 2,000,000 shares; issued and outstanding 
 1,472,621 shares for 1997 and 1,331,321 shares 
 for 1996                                       3,653,627    3,189,727
Common stock subscribed (Note 5)                    -          300,000
Accumulated deficit                            (2,358,583)  (2,211,674)

Total Shareholders' Equity                      1,613,531    1,596,540    


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $ 1,704,118  $ 1,720,722    
</TABLE>


SEE AUDITOR'S REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              -2-
<PAGE>

             EXPERTELLIGENCE, INC. AND SUBSIDIARY
              CONSOLIDATED STATEMENTS OF INCOME
          For the Years Ended September 30, 1997 and 1996

<TABLE>
<CAPTION>
                                                    1997         1996
<S>                                               <C>           <C>
INCOME (Note 7)                                $    955,246    $ 1,270,773

OPERATING COSTS AND EXPENSES
Cost of sales                                       215,997        364,808
Selling and marketing                               229,231         62,839
General and administration                          706,649        564,887
Research and development                             84,531         99,363

Total Operating Costs and Expenses                1,236,408      1,091,897


INCOME (LOSS) FROM OPERATIONS                      (281,162)       178,876

OTHER EXPENSES (INCOME)
Interest expense                                        738            931
Interest income                                     (10,916)       (10,051)
Loss on foreign currency exchange                     1,125            -
Miscellaneous income                                     -          (2,511)

Total Other Expense (Income)                         (9,053)       (11,631)


INCOME (LOSS) BEFORE INCOME TAXES                  (272,109)       190,507

INCOME TAXES (Note 6)                              (125,200)      (237,200)

NET INCOME (LOSS)                              $   (146,909)    $  427,707


EARNINGS PER SHARE AND COMMON STOCK
EQUIVALENTS (Note 1G)

INCOME (LOSS) BEFORE INCOME TAXES              $     (.1721)    $    .1368
INCOME TAXES                                         (.0792)        (.1703)

NET INCOME (LOSS)                              $     (.0929)    $    .3071

EQUIVALENT NUMBER OF SHARES                       1,580,379      1,392,621
</TABLE>

     SEE AUDITOR'S REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      -3-
<PAGE>

<TABLE>
<CAPTION>

                     EXPERTELLIGENCE, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                For the Years Ended September 30, 1997 and 1996


                                  Preferred Stock          Common Stock
                                Shares      Amount     Shares      Amount
<S>                            <C>        <C>        <C>         <C>       
Balance, September 30, 1995     348,248  $ 696,488    949,451  $ 2,808,226

1988 ISOP shares issued for cash      -          -     35,000        3,500

1988 ISOP shares issued for stock     -          -    160,000            -

Stock redeemed to issue stock         -          -   (145,000)           -

Stock reissued                        -          -    142,866            -

Preferred shares converted to
Common shares                  (189,004)  (378,001)   189,004      378,001

Common stock subscribed (Note 5)      -          -          -            -

Net income                            -          -          -            -

Balance, September 30, 1996     159,244    318,487   1,331,321   3,189,727

Stock issued                          -          -      41,300     163,900

Common stock subscribed (Note 5)      -          -     100,000     300,000

Net lost                              -          -           -           -

Balance, September 30, 1997     159,244  $ 318,487   1,472,621 $ 3,653,627
</TABLE>

SEE AUDITOR'S REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                -4.1-

<PAGE>
<TABLE>
<CAPTION>

                   EXPERTELLIGENCE, INC. AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            For the Years Ended September 30, 1997 and 1996


                                  Preferred   Stock     Common       Stock
                                  Shares      Amount    Shares       Amount

<S>                              <C>        <C>        <C>         <C>       
Balance, September 30, 1995              -   $     -  $(2,639,381) $  865,333

1988 ISOP shares issued for cash         -         -            -       3,500

1988 ISOP shares issued for stock        -         -            -          -

Stock redeemed to issue stock            -         -            -          -

Stock reissued                           -         -            -          -

Preferred shares converted to
Common shares                            -         -            -          -

Common stock subscribed (Note 5)   100,000   300,000            -    300,000

Net income                               -         -      427,707    427,707

Balance, September 30, 1996        100,000   300,000   (2,211,674) 1,596,540

Stock issued                             -         -            -    163,900

Common stock subscribed (Note 5)  (100,000) (300,000)           -          -

Net loss                                 -          -   (146,909)   (146,909)

Balance, September 30, 1997              -   $      -$(2,358,583) $1,613,531

</TABLE>

SEE AUDITOR'S REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      -4.1-

<PAGE>
<TABLE>
<CAPTION>

                 EXPERTELLIGENCE, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Years Ended September 30, 1997 and 1996


                                                  1997          1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                          <C>             <C>

 Collections from customers                 $    893,627    $ 1,278,263
 Interest collected                               10,916         10,051
 Cash paid to suppliers and employees         (1,211,615)      (967,957)

NET CASH PROVIDED (USED) BY OPERATING 
 ACTIVITIES                                     (307,072)       320,357

CASH FLOWS FROM INVESTING ACTIVITIES
 Increase in product development costs          (176,791)       (60,160)
 Purchase of property and equipment              (12,094)       (39,698)

NET CASH USED BY INVESTING ACTIVITIES           (188,885)       (99,858)

CASH FLOWS FROM FINANCING ACTIVITIES
 Repayments on line of credit                          -        (25,000)
 Repayments of notes payable                           -        (13,293)
 Common stock subscribed                               -        300,000
 Common stock issued                                   -          3,500

NET CASH PROVIDED BY FINANCING ACTIVITIES              -        265,207

NET INCREASE (DECREASE) IN CASH                 (495,957)       485,706
CASH AND EQUIVALENTS - BEGINNING OF YEAR         523,422         37,716
CASH AND EQUIVALENTS - END OF YEAR         $      27,465    $   523,422

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:

Net income (loss)                           $   (146,909)   $   427,707
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
    Depreciation and amortization                 64,832         94,781
    Deferred tax expense (benefit)              (126,000)      (238,000)
    Decrease (increase) in:
      Accounts receivable                        (61,619)         7,490
      Inventory                                    3,122        (33,717)
      Prepaid expenses and other current assets  (10,803)       (12,918)
   Increase (decrease) in:
      Accounts payable and accrued expenses      (21,036)        38,319
      Accrued vacation
      Deferred revenue                           (26,000)        26,000

NET CASH PROVIDED (USED) BY OPERATING
     ACTIVITIES                                $(307,072)    $  320,357

</TABLE>

SEE AUDITOR'S REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  -5-
<PAGE>
    

                 EXPERTELLIGENCE, INC. AND SUBSIDIARY
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     September 30, 1997 and 1996


Note 1    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.    Business

ExperTelligence, Inc., (the Company) was incorporated in California 
on March 31, 1980.  The Company develops custom software 
applications for telecommunication and transportation companies 
and publishes general purpose software products for the Internet.

B.    Cash and Cash Equivalents

The Company considers all highly-liquid investments with a maturity 
of three months or less at the time of purchase to be cash equivalents.

C.    Inventory

Inventory consists primarily of product manuals, CD ROMs, and 
processing boards and is stated at the lower of average cost 
(determined on the FIFO basis) or market.  A reserve for obsolescence 
of $230,874 and $242,883, has been provided for 1997 and 1996, 
respectively. 

D.    Product Development Costs

Product development costs represent the costs of new products and 
new application enhancements to existing products incurred 
subsequent to establishing technological feasibility of the product 
and prior to the date the product is available for release to customers. 
Amortization is calculated using the straight-line method over its 
economic useful life, approximately five years, or on a product-by-
product basis in the ratio that current period sales bear to the total of 
current and anticipated revenues.  This policy was adopted by the 
Company as of April 1, 1986, in accordance with the provisions of 
Financial Accounting Standards Board Statement No. 86, "Accounting 
for Software Development Costs."  Total costs capitalized during the 
fiscal years ended September 30, 1997 and 1996, aggregated $336,791 
and $60,160, respectively.  Related amortization, utilizing the 
straight-line method, for the year ended September 30, 1997 and 1996, 
aggregated $46,916 and $82,285, respectively.  Accumulated 
amortization of product development costs aggregated $278,059 and 
$231,143, at September 30, 1997 and 1996, respectively.

E.    Allowance For Doubtful Accounts

The allowance for doubtful accounts at September 30, 1997 and 1996, 
is $0 and $18,000, respectively.



                                     -6-

<PAGE>

                   EXPERTELLIGENCE, INC. AND SUBSIDIARY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       September 30, 1997 and 1996


Note 1    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

F.    Revenue

Revenue from software sales is recognized on delivery of the software 
when no further obligations remain under the sales or licensing 
agreement.  Revenue from software license agreements that include 
significant product development is recognized upon the percentage of 
completion method.  As of September 30, 1997 and 1996, there were no 
costs and estimated earnings in excess of billings or billings in excess 
of costs on uncompleted contracts.  Product development services 
include postcontract customer support and software services.  
Revenue from postcontract customer support is recognized ratably 
over the period of the postcontract support arrangement.  Revenue 
from software services is recognized as the services are performed.
    
G.    Earnings Per Share

Earnings per common share and common equivalent share is 
computed by dividing net income by the weighted average number of 
shares of common stock and common stock equivalents outstanding 
during the year.  Preferred shares are considered in the computation 
of earnings per common and common equivalent shares for the years 
ended September 30, 1997 and 1996.  Stock options were not considered 
in the computation of common equivalent shares for 1997, because 
the stock options were considered antidilutive.

H.    Research and Development

Research and development expenses, not subject to capitalization, are 
charged to expense as incurred.

I.    Property and Equipment

Property and equipment is recorded at cost.  Depreciation expense is 
provided over the useful lives of the assets, which range from three to 
five years, using the straight-line method.

J.    Income Taxes

The Company uses Statement of  Financial Accounting Standards No. 
109, "Accounting for Income Taxes"(SFAS No. 109) in reporting 
deferred income taxes.  SFAS No. 109 requires a company to recognize 
deferred tax liabilities and assets for the expected future income tax 
consequences of events that have been recognized in the company's 
financial statements.  Under this method, deferred tax assets and 
liabilities are determined based on temporary differences between the 
financial carrying amounts and the tax basis of assets and liabilities 
using enacted tax rates in effect in the years in which the temporary 
differences are expected to reverse.

                                      -7-
<PAGE>

                    EXPERTELLIGENCE, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 1997 and 1996


Note 1    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

K.    Use of Estimates

The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make 
estimates and assumptions that affect certain reported amounts and 
disclosures.  Accordingly, actual results could differ from those 
estimates.

L.     Principles of Consolidation

The 1997 consolidated financial statements include the accounts of 
ExperTelligence, Inc. and its wholly-owned subsidiary, 
ExperTelligence Canada, Inc.  All inter-company accounts and 
transactions have been eliminated in consolidation.

M.    Reclassification

Certain prior year amounts have been reclassified to conform to the 
September 30, 1997 financial statement presentation.

N.    Stock-Based Compensation

The Company accounts for compensation costs related to employee 
stock options and other forms of employee stock-based compensation 
plans in accordance with the requirements of Accounting Principles 
Board Opinion 25 ("APB 25").  APB 25 requires compensation  costs for 
stock-based compensation plans to be recognized based on the 
difference, if any, between the fair market value of the stock on the 
date of the grant and the option exercise price.  In October 1995, the 
Financial Accounting Standards Board issued Statement of Financial 
Accounting Standards 123, Accounting for Stock-Based Compensation 
("SFAS 123").  SFAS 123 established a fair value-based method of 
accounting for compensation costs related to stock options and other 
forms of stock-based compensation plans.  However, SFAS 123 allows 
an entity to continue to measure compensation costs using the 
principles of APB 25 if certain pro forma disclosures are made.  SFAS 
123 is effective for fiscal years beginning after December 15, 1995.  The 
Company adopted the provisions of pro forma disclosure requirements 
of SFAS 123 in fiscal 1997.  Options granted to non-employees are 
recognized at their estimated fair value at the date of grant.


                                 -8-

<PAGE>

                    EXPERTELLIGENCE, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 1997 and 1996


Note 2    -    PROPERTY AND EQUIPMENT

Depreciation expense for the years ended September 30, 1997 and 1996, is 
$17,916 and 12,496, respectively.  Property and equipment at September 
30, 1997 and 1996, is summarized as follows:

                                       1997                1996

   Furniture and fixtures          $   33,983          $   33,982
   Purchased software                   8,929               3,467
   Equipment                          373,486             366,855
                                      416,398             404,304

   Less: Accumulated depreciation     362,451             344,535

                                   $   53,947          $   59,769


Note 3 -    SHAREHOLDERS' EQUITY

During the year ended September 30, 1996, the majority of employees 
under the 1988 Incentive Stock Option Plan (ISOP) used their previously 
issued shares of the Company's common stock to exercise their options 
and purchase the common shares (Note 4).  In total, 145,000 shares of 
common stock were redeemed by employees at a price of $7.50 per share 
which was the fair market value of the shares on June 27, 1996.  These 
shares were canceled and 2,134 shares were used to exercise 160,000 shares 
of common stock under the 1988 ISOP at a price of $.10 per share.  
Subsequently, 142,866 shares (145,000 shares - 2,134 shares) of common 
stock were reissued to the same employees at $7.50 per share. The 
remaining 35,000 shares under the 1988 ISOP were exercised with cash.

The preferred stockholders have voting rights equal to that of common 
stockholders.  The preferred stock is convertible into common stock on a 
one-for-one basis at any time.  No shares of preferred stock were issued 
during the year ended September 30, 1997 and 1996.  During the year ended 
September 30, 1996, 189,004 shares of preferred stock were converted to 
189,004 shares of common stock.  The preferred stock is nonredeemable, 
has a preference in liquidation equal to $3 per share plus any declared but 
unpaid dividends and provides for dividends to be declared at 
management's discretion.  As of September 30, 1997 and 1996, no 
dividends have been declared.


                                    -9-
<PAGE>

                     EXPERTELLIGENCE, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 1997 and 1996


Note 4 -    STOCK OPTION PLANS

A.    1983 Incentive Stock Option Plan

In June 1983, the Company adopted an employee Incentive Stock 
Option Plan (1983 ISOP) and a Nonqualified Stock Option Plan (NSOP). 
Under the 1983 ISOP, the Company reserved a maximum of 55,000 
shares to be issued upon the exercise of options.  The number of shares 
that may be issued pursuant to the NSOP is subject to determination of 
the Board of Directors.  Both plans are administered by the Board of 
Directors.  As of September 30, 1997 and 1996, the board has not 
granted any options under the NSOP.  As of September 30, 1997 and 
1996, there are no options outstanding under the 1983 ISOP. This plan 
was terminated as of September 30, 1997.

B.    1988 Incentive Stock Option Plan

In August 1988, the Board of Directors adopted a new ISOP (1988 ISOP), 
whereby options may be granted to management and key employees 
at exercise prices equal to or greater than the fair market value of the 
Company's common stock on the date of grant.  The Company had 
reserved 200,000 shares of common stock for the exercise of options 
under this plan.   195,000 options were granted at exercise prices per 
share of $.10 for options with a ten-year term and $.11 for those 
options with five-year terms (the estimated fair market value at the 
date of the grant). 

During the year ended September 30, 1996, the stock options of 195,000 
shares were exercised.  35,000 shares were issued for cash and 160,000 
shares were issued in exchange for stock of the Company. This plan 
was terminated as of September 30, 1997.

C.    1996 Equity Participation Plan

On August 15, 1996, the Board of Directors adopted the 1996 Equity 
Participation Plan, whereby options may be granted to employees, 
consultants, or independent directors.  For Incentive Stock Options 
the exercise price shall be equal to or greater than the fair market 
value of the Company's common stock on the date of the grant.  For 
Nonqualified Stock Options, the exercise price shall be not less than 
85% of the fair market value of a share of common stock on the date 
the option is granted.  The board of directors shall determine whether 
options granted under this plan are to be Incentive Stock Options or 
Nonqualified Stock Options.  The Company has reserved a total of 
475,000 shares of common stock for the exercise of options under this 
Plan. 


                                     -10-
<PAGE>
    

                   EXPERTELLIGENCE, INC. AND SUBSIDIARY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 1997 and 1996


Note 4 -    STOCK OPTION PLANS (continued)

C.    1996 Equity Participation Plan (continued)

On August 23, 1996, 87,500 of options were granted under the Incentive 
Stock Option Plan to purchase the Company's common stock at $4 per 
share (the fair market value on the date of the grant).  The weighted-
average grant date fair value is $4.00 per share.  As of September 30, 
1996, options to purchase 7,500 shares of the Company's common 
stock were exercisable under the 1996 Incentive Stock Option Plan.  No 
options were exercised, forfeited, or expired. The exercise prices for all 
of these options is $4.00 per share, with the weighted-average exercise 
price being the same. The contractual life of all the outstanding 
options is ten years.  No options were granted under the Nonqualified 
Stock Option Plan.

During the year ended September 30, 1997, 191,000 options were 
granted under the Incentive Stock Option Plan to purchase the 
Company's common stock at a range of $4.00 to $5.00 per share (the 
fair market values on the date of the grant) with a weighted-average 
exercise price of $4.10 per share.  At September 30, 1997, outstanding 
options were 198,500 with a weighted-average grant date fair value of 
$4.78 per share.  As of September 30, 1997, options to purchase 7,500 
shares of the Company's common stock were exercisable with a 
weighted-average exercise price of $4.00 per share.  No options were 
exercised, 80,000 options that were granted in 1996 were forfeited, and 
no options expired. The contractual life of all outstanding options is 
ten years. No options were granted under the Nonqualified Stock 
Option Plan.

Statement of Financial Accounting Standards 123, "Accounting for 
Stock-Based Compensation", encourages but does not require 
companies to record compensation cost for stock-based employee 
compensation plans at fair value.  The Company has chosen to 
continue to account for stock-based compensation using the intrinsic 
value method prescribed in Accounting Principles Board Opinion 25, 
"Accounting for Stock Issued to Employees", and related 
interpretations.  Accordingly, compensation cost for stock options is 
measured as the excess, if any, of the quoted market price of the 
Company's stock at the date of grant over the amount an employee 
must pay to acquire the stock.

Had compensation costs for the plan been determined based on the 
fair value of the options at the grant dates consistent with the method 
of SFAS 123, the Company's net income and earnings per share 
would have been:

                                         1997                1996
   Net income (loss)
     As reported                      (146,909)             427,707
     Pro forma                        (231,904)             310,361

   Primary earnings per share
     As reported                        (.0929)               .3071
     Pro forma                          (.1467)               .2228
    

                                        -11-

<PAGE>

                    EXPERTELLIGENCE, INC. AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       September 30, 1997 and 1996


Note 4 -    STOCK OPTION PLANS (continued)

C.    1996 Equity Participation Plan (continued)

These pro forma amounts may not be representative of future 
disclosures because they do not take into effect pro forma 
compensation expense related to grants made before 1996.  In 
addition, potential deferred tax expense and benefits of 
approximately $34,100 and $47,100, respectively, have not been 
reflected in the pro forma amounts.  The fair value of these options 
was estimated at the date of the grant using the Black-Scholes 
option-pricing model with the following weighted average 
assumptions for 1997 and 1996:

    Expected life (years)              10
    Risk-free interest rate             6%
    Volatility                         25%
    Expected dividends                None


Note 5 -    COMMON STOCK SUBSCRIBED

On February 26, 1996, the Company signed a stock subscription agreement 
for 100,000 shares of common stock at a price of $300,000.  As of September 
30, 1996, the Company received the $300,000, but issued the common 
shares in October 1996. There were no stock subscription agreements 
outstanding at September 30, 1997.


Note 6 -    INCOME TAXES

Temporary differences have resulted between financial statement and 
income tax reporting including depreciation, capitalized software costs, 
non-deductibility of accrued vacation wages not paid within seventy-five 
days of year end, and net operating loss carryforwards.

Income tax expense (benefit) for the years ended September 30, 1997 and 
1996, are as follows:

                                            1997            1996

   Current                               $      800     $       800
   Deferred                                (126,000)       (238,000)

     Total                               $ (125,200)    $  (237,200)



                                        -12-

<PAGE>


                     EXPERTELLIGENCE, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         September 30, 1997 and 1996


Note 6 -    INCOME TAXES (continued)

Components of the deferred tax assets and (liabilities) recognized in the 
balance sheet at September 30, 1997, are as follows:
<TABLE>
<CAPTION>                        
                                            Current            Non-current
<S>                                        <C>                 <C>
  Accrued vacation pay                    $   24,000         $           -
  Property and equipment                           -                (8,000)
  Software costs                                   -              (355,000)
  Deferred state tax                           8,000                 2,000
  Net operating losses                        78,000               992,000
  Deferred tax credits                             -               223,000
    110,000    854,000
  Deferred tax assets valuation allowance          -              (526,000)

  Deferred tax asset                       $ 110,000          $    328,000
</TABLE>

Reconciliation of the difference between income taxes computed at 
Federal statutory tax rates and provision for income taxes, for the year 
ended September 30, 1997, is as follows:

  Income taxes computed at Federal statutory tax rate         $   (93,000)
  State tax provision                                              10,000
  Graduated tax rates                                             (16,000)
  Net operating loss and deferred credits                           1,000
  Valuation allowance                                             (27,200)

  Provision for income taxes                                   $ (125,200)


                                    -13-
<PAGE>



                  EXPERTELLIGENCE, INC. AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1997 and 1996


Note 6 -    INCOME TAXES (continued)

As of September 30, 1997, the Company had the following approximate net 
operating loss and tax credit carryforwards available to reduce future 
federal and state income taxes:
<TABLE>
<CAPTION>

                      Federal       Federal       State           State
    Expiring      Net Operating       Tax      Net Operating       Tax
    Sept.  30        Losses         Credits       Losses         Credits
    <S>           <C>              <C>           <C>            <C>
    1998         $        -       $       -     $   49,000     $        -
    1999             28,000          56,000              -              -
    2000            487,000          30,000              -              -
    2001            390,000               -              -              -
    2002            309,000               -        275,000              -
    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              -              -
    2009                  -               -              -              -
    2010                  -           1,000              -              -
    2001                  -           4,000              -          8,000
    2012            551,000               -              -              -

                $ 3,053,000       $ 190,000      $ 324,000       $ 33,000
</TABLE>

Components of the deferred tax assets and (liabilities) recognized in the 
balance sheet at September 30, 1996, are as follows:

                                              Current          Non-current

  Accrued vacation pay                        $ 17,000         $          -
  Property and equipment                             -              (20,000)
  Software costs                                     -             (229,000)
  Deferred state tax                             5,000                1,000
  Net operating losses                          63,000              818,000
  Deferred tax credits                               -              211,000
                                                85,000              781,000
  Deferred tax assets valuation allowance            -             (554,000)

  Deferred tax asset                          $ 85,000            $ 227,000



                                         -14-
<PAGE>


                       EXPERTELLIGENCE, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 1997 and 1996


Note 6 -    INCOME TAXES (continued)

Reconciliation of the difference between income taxes computed at 
Federal statutory tax rates and provision for income taxes, for the year 
ended September 30, 1996, is as follows:

   Income taxes computed at Federal statutory tax rate     $    65,000
   State tax provision                                          11,000
   Graduated tax rates                                           8,000
   Net operating loss and deferred credits                      42,000
   Valuation allowance                                        (363,200)

   Provision for income taxes                               $ (237,200)


Note 7 -    SIGNIFICANT CUSTOMERS AND CREDIT RISK

For the year ended September 30, 1997, 69% of accounts receivable was 
concentrated among three customers.  These same three customers 
accounted for approximately 54% of total revenue.

For the year ended September 30, 1996, 71% of accounts receivable was 
concentrated among two customers.  No one customer accounted for more 
than 17% of total revenue.


Note 8 -    CASH AND CASH EQUIVALENTS - CONCENTRATION OF CREDIT RISK

Uninsured cash balances were $0 at September 30, 1997, and $379,309 at 
September 30, 1996.


Note 9 -    RELATED PARTY TRANSACTIONS

During the year ended September 30, 1996, the Company performed work 
for another entity that is owned 50% by the Company's president.  Total 
revenue for this project is $294,792 and accounts receivable is $7,167 at 
September 30, 1996. No revenue was earned from this entity  during the 
year ended September 30, 1997.  Accounts receivable is $-0- at September 
30, 1997. The prior year's accounts receivable balance of $7,167 was 
written off as bad debt expense during the year ended September 30, 1997.

The Company paid interest of $528 to a related party (a significant 
shareholder) during the year ended September 30, 1996.  The note payable 
was a demand note with monthly payments of $909, with an annual 
interest rate of 10%.  The note was paid off during the year ended 
September 30, 1996.



                                   -15-

<PAGE>


                  EXPERTELLIGENCE, INC. AND SUBSIDIARY
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     September 30, 1997 and 1996


Note 10  -    LINE OF CREDIT

At September 30, 1996, the Company had a line of credit that expired 
January 31, 1996. The Company did not reactivate this line of credit 
until October 14, 1997.  The limit on this line of credit is $30,000.  
The Company subsequently borrowed $30,000 on December 4, 1997.


Note 11  -    NON-CASH TRANSACTIONS

During the year ended September 30, 1996, the Company exercised 1988 
Stock Options for 160,000 shares of common stock at $.10 per share 
option price by redeeming 2,134 shares of previously issued common 
stock at $7.50 per share (Note 4B).

During the year ended September 30, 1997, the Company issued 40,000 
shares of common stock at $4.00 per share to acquire a wholly owned 
subsidiary (see Note 14).

During the year ended September 30, 1997, the Company issued 1,300 
shares of common stock at $3.00 per share to pay for legal expenses.


Note 12  -    SOFTWARE DEVELOPMENT, LICENSE, AND DISTRIBUTION AGREEMENT

On September 30, 1996, the Company signed a contract with another 
company (licensee)  to develop and license the Company's software to 
operate within the licensee's own software (New Product).  As part of this 
contract, the licensee will additionally advance $250,000 as prepaid 
royalties.  The licensee will pay the Company royalties for sub-licensing 
the New Product.  For the later of 90 days following the licensee's 
acceptance of the New Product or March 31, 1997, the licensee may 
convert any then outstanding advance balance into an equivalent 
number of shares of the Company's common stock.  The conversion 
price will be $5.25 per share. The licensee did not convert any of the 
outstanding advance balance during the year ended September 30, 1997.


Note 13  -    FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has various financial instruments, none of which are held 
for trading purposes.  The Company estimates that the fair value of all 
financial instruments at September 30, 1997 and 1996, does not differ 
materially from the carrying values of its financial instruments 
recorded in the accompanying balance sheet.  Considerable judgment 
is necessarily required in interpreting market data to develop the 
estimates of fair value, and accordingly, the estimates are not 
necessarily indicative of amounts the Company could realize in a 
current market exchange.


                                    -16-
<PAGE>


                    EXPERTELLIGENCE, INC. AND SUBSIDIARY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1997 and 1996


Note 14  -    BUSINESS ACQUISITION

On March 12, 1997, the Company acquired Cerebral Systems 
Development Corporation (formerly CSD, now ExperTelligence Canada, 
Inc.) for an aggregate purchase price of $188,052 (excluding acquisition 
costs of $44,473), consisting of $28,052 cash and the issuance of 40,000 
shares of common stock of the Company at $4.00 per share. 
ExperTelligence Canada, Inc. (ET Canada) is a Canadian company that 
develops software which is sold worldwide, mainly over the Internet.

The acquisition was accounted for as a purchase and, accordingly, the 
acquired assets and liabilities were recorded at their estimated fair 
market values at the date of acquisition.  The purchase price plus costs 
directly attributable to the completion of the acquisition have been 
allocated to the assets and liabilities acquired.  Approximately $210,000 
of acquisition costs represents product development costs that have 
reached the technological feasibility stage.  There is no goodwill 
deemed to be a part of the aggregate purchase price. The Company's 
consolidated results of operations include the operating results of ET 
Canada from the acquisition date.

The following unaudited pro forma condensed combining balance 
sheet as of September 30, 1996, and the unaudited pro forma 
condensed combining statements of operations of the Company and 
ET Canada for the year ended September 30, 1997 and 1996 have been 
prepared to illustrate the effect of the acquisition which is being 
accounted for as a purchase, as if the acquisition had occurred on 
October 1, 1995.  Adjustments have been made including the issuance 
of common stock as part of the acquisition.  The pro forma 
information is presented for illustrative purposes only, and is not 
necessarily indicative of what actual results of operations would have 
been during such periods.

                                                     1996
Balance Sheet        
  Assets                                         $ 1,742,976
  Liabilities                                        131,986
  Equity                                           1,610,990


                                     Year Ended    Year Ended
                                      09/30/97      09/30/96

Income Statement
  Net sales                       $    993,204    $ 1,344,144
  Net income (loss)                   (131,570)       431,259
  Net income (loss) per share           (.0833)         .3097



                                  -17-
<PAGE>



                  EXPERTELLIGENCE, INC. AND SUBSIDIARY
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1997 and 1996


Note 15 -    COMMITMENTS AND CONTINGENCIES

Leases

Starting on January 1, 1997, the Company leased its office space under a 
non-cancelable operating lease through December 31, 1998 for monthly 
rental payments of $2,350.  The monthly rental rate will be adjusted on 
January 1st of each subsequent year to reflect the year-to-year 
percentage change in the Los Angeles Consumer Price Index for 
September.  Total office rent expense for the years ended September 30, 
1997 and 1996 is $28,200 ($21,150 under the non-cancelable lease) and 
$24,000, respectively.

Future minimum lease payments for the year ending September 30, are 
as follows:

      1998                             $ 28,200
      1999                                7,050

      Total                            $ 35,250

<PAGE>

Part III


Item 9. Directors, Executive Officers, Promoters and 
Control Persons; Compliance with Section 16(a) of the 
Exchange Act
                    Year first
Name    Age    Position    elected Director

Denison Bollay    45    President, Chairman of the 
                        Board 1980
Robert Reali      36    Vice President, Director 1988

Mr. Denison Bollay is the founder and has been the President 
of the Company and Chairman of its Board of Directors since 
March 1980.  He received his Bachelor of Science Degree in 
Engineering in 1974 from Harvey Mudd College.

Mr. Robert Reali was appointed to the Board on August 1, 
1988. He is Vice President of Development.  He has been with 
ExperTelligence, Inc. since 1981.  He majored in Computer 
Science Engineering at the University of California, Santa 
Barbara.

Mr. Karl Marlantes resigned on September 26, 1997.
Mr. David Swan resigned on October 3, 1997.

<PAGE>

Item 10. Executive Compensation

The following table sets forth as required all compensation 
to officers for services rendered in all capacities to the 
Company during or with respect to the 1997 fiscal year.

Name & Position        Year   Salary  Bonus     Annual 
                                             Compensation    
Denison Bollay, CEO    1997  $151,200    $0   $151,200
Robert Reali, VP Dev   1997 $  64,500    $0  $  64,500
Karl Marlantes, COO    1997 $  96,250    $0  $  96,250    
David Swan, VP Sales   1997 $  80,462    $0  $  80,462    

The table on the following page sets forth, as to 
individuals having received greater than 5% of options 
granted and as to all executive officers and directors as a 
group, the following information with respect to  stock 
options: (i) the aggregate number of shares of the Company's 
common stock subject to options granted under the 1988 
Incentive Stock Option Plan and the 1996 Incentive Stock 
Option Plan through September 30, 1997, (ii) the number of 
options exercised prior to September 30, 1997, iii) the 
number of options currently exercisable as of September 30, 
1997, and iv) the average per share option exercise price.   
As of September 30, 1997 198,500 options had not been 
exercised.

<TABLE>
<CAPTION>
                   (i)      (ii)        (iii)       (iv)
                 Options   Options     Options     Average
Identity of grp  Granted  exercised   exercisable  exercise
                                                   price
<S>               <C>        <C>          <C>      <C>
Denison Bollay    80,000      0            0       $4.00
Robert Reali      10,000      0            0       $4.00
Ofelia Garcia      5,000      0            0       $4.00
George Barilla     8,000      0            0       $4.00
Beverly Pierson    8,000      0            0       $4.00
David Swan        60,000      0            0       $4.00
Steven Owens      20,000      0            0       $5.00
</TABLE>

<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners 
and Management


On September 30, 1997, no person owned beneficially more 
than five percent (5%) of the outstanding shares of the 
common stock of the Company except as set out below.  The 
Company has no securities other than its preferred stock and 
common stock.

                                Number of    Percent of
Name and Address of           Shares Owned     Class
Beneficial Owner

Denison Bollay, CEO
203 Chapala Street
Santa Barbara, CA 93101           395,463     29.7%

BNP Venture Capital Corporation
c/o Bank of the West
50 W. San Fernando, 2nd Floor
San Jose, CA  95113               150,000     11.3%

George Mueller        
875 Park Lane
Montecito, CA 93108                89,622      6.7%

Officers and Directors            440,463     33.1%
 as a Group

Item 12. Certain Relationships and Related Transactions

    None.

Item 13.    Exhibits and Reports on Form 8-K. 
     By reference
      3/18/97 Acquisition of Cerebral Systems Development
              Corp. of Ontario Canada
     12/12/97 Reorganization agreement with Electronic Offsite
              Services



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.
Denison Bollay, 
President, Chief Financial Officer and Chairman of the Board
December 23,1997


Robert Reali
Director
December 23,1997