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, 1996

[    ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF 
        THE EXCHANGE ACT 

	For the transition period from _______ to _______

                    Commission file Number 0-11596

                       EXPERTELLIGENCE, INC.
               (Exact name of small business issuer)
           California                      95-3506403
  (State of incorporation)         IRS Employer Identification 					number

         203 Chapala Street,  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:  $1,270,773   

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 $6.1 million based on a $6.00 per share closing bid price as 
of November 27,1996.

State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practical date.

Class Outstanding at September, 30 1996
        Preferred stock, no par        159,244
        Common stock, no par         1,331,321

Documents incorporated by reference:  Issuers Proxy Statement for its 
Annual Meeting on August 15, 1996 is incorporated by reference into Part 
III.


<PAGE>

                             ExperTelligence, Inc.
                         Annual Report on Form 10-KSB
                 For the Fiscal Year Ended September 30, 1996

                              Table of Contents


	Item number                                    Page Number

Part I

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

Part II

5.	Market for Common Equity and Related Stockholder 
        Matters                                              viii
6.	Management's Discussion and Analysis	             x
7.	Financial Statements                                 1-13
8.	Changes In and Disagreements With 
        Accountants on Accounting and Financial
        Disclosure                                           xii

Part III

9.	Directors, Executive Officers, Promoters and Control 
        Persons;  Compliance with Section 16(a) of the 
        Exchange Act                                         xii
10.	Executive Compensation                               xii	
11.	Security Ownership of Certain Beneficial Owners and 
		Management                                   xiii
12.	Certain Relationships and Related Transactions       xiv
13.	Exhibits and Reports on Form 8-K                     xiv



Part I

Item 1. Description of Business

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

Last year the company successfully completed its transition to the Internet 
market by successfully introducing its web data-base server, WebBase TM, 
and its internet compatible mail merge tool, 
E-Merge TM.  The Company will devote considerable resources this next 
year to further refining its existing internet products and developing and 
introducing new ones.  WebBase TM, is now being distributed through our 
internet/telephone sales organization, as well as normal retail distribution 
channels, a major accomplishment achieved this year.

We concluded our first major OEM WebBase TM license with GemStone, 
Inc., to resell Gem Builder for the Web, to the Global 2000 business 
objects market.  In addition to opening up the UNIX market to WebBase, 
it delivers the first web server based on persistent business objects.  In 
addition to cash advances the Company will realize royalties based on 
product sales.  GemStone expects to deliver this product in the first quarter 
of 1997.  In addition ExperTelligence will be able to resell WebBase 
coupled with GemStone's object data base engine.

The Company has established a presence in the telecommunications 
industry through sale of ANDE TM (Ameritech Network Design Expert).  
ANDE  has been licensed to Southwestern Bell  and Bell Canada, and is 
marketed to other telephone companies  by our development partner, 
Ameritech.  

It is estimated that the internet is growing at over 100% a year, and that 
the database market is growing at around 40% a year.  ExperTelligence is 
now well positioned to take advantage of both of these markets.

Next year will be devoted to further developing our distribution channels 
and continuing our technical development efforts for WebBase TM.  The 
Company has signed a distribution agreement with Open Technologies of 
Japan and expects to introduce a Japanese language version of WebBase 
early in 1997.  In addition we expect to introduce several new internet 
software products here in the United States.  We will pursue our OEM 
strategy for our WebBase "engine."

ExperTelligence employs thirteen people full time and two people 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 with 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.webbase.com/.

WebBase provides 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.

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.  

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.  Many companies 
are entering this market.
	
The rapidly changing nature of the software industry requires that a 
significant effort be devoted to constantly developing new goods and 
services.  

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 property.  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

An annual meeting was held on August 15, 1996.  During that meeting the 
items presented below were submitted to a vote of security holders through 
solicitation of proxies.

                     For       Against     Withheld     Abstained

a.)  Election of the Board of Directors

Robert W. Reali     1,258,812        0       2,108             0
Denison W. Bollay   1,258,812        0       2,108             0
Karl A. Marlantes   1,258,812        0       2,108             0
George Mueller      1,258,812        0       2,108             0
Mario Perry         1,258,812        0       2,108             0

	
b.)  Approval of 1996 Equity Participation Plan
                    1,006,835   10,091           0         3,204

c.)  Approved Amendment of Articles of Incorporation to increase the 
number of shares of common stock.
                    1,230,472   11,529           0         2,104

d.)   Approved Amendment of Articles of Incorporation to limit director 
liability.
                    1,242,199   11,529           0         2,104

e.)   Approved indemnification agreements for officers, directors, and 
agents of the company.
                    1,228,301   12,725           0        3,539

f.)         	Retention of McGowan Guntermann, Independent Certified Public 
Accountants, as auditors for the company.
                    1,256,427      688           0        3,805


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, 1996 there were 
approximately 1,112 holders of record (1,110 holding common stock and 2 
holding preferred stock).

As of September 30, 1996 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,
                               1996             1995
                            High     Low    High     Low
<S>                       <C>      <C>      <C>     <C>
First Quarter             $ 1.00   $0.75    $0.10   $0.10
Second Quarter            $14.00   $8.00    $0.10   $0.10
Third Quarter             $13.00   $8.50    $0.40   $0.10
Fourth Quarter            $ 5.00   $4.00    $6.00   $0.40
</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 financial strengthening for 
ExperTelligence.  The Company has reduced debt to zero while 
maintaining a commitment to investing in new products.  We have cash in 
the bank, sales have doubled, and we are profitable.

Having secured the Company's financial base, our attention is now focused 
on growth.  We have made a successful transition to the Internet market.  
It is the Company's current goal to create and distribute additional Internet 
products to meet the needs of this expanding market and grow with it.

Results of Operations


Comparison of Fiscal Year 1996 to Fiscal Year 1995

Sales roughly doubled, increasing 103%.  Income from operations 
increased 42%.  Net income after taxes increased by 525% to $427,707 
from $68,466.  (See Note 6.)  These results are consistent with the 
Company's plan to grow with the internet market.

The increase in net income before taxes over the prior year is largely 
attributable to the sales of WebBase and ANDE licenses.  The change in 
net income after taxes is attributable to a deferred income tax benefit of 
$238,000 for 1996.

Liquidity and Capital Resources

Cash increased to $523,422 in 1996 from $37,716 in 1995.  The difference 
is caused by sale of stock of $300,000 and increased profits.  Working 
capital increased over the same period to $779,513 from $250,383 . 

The net value of property and equipment increased to $59,769 in 1996 
from $32,567 in 1995 due to the purchase of capital equipment for 
development work.

The net value of Capitalized Product Development Costs decreased by 
$22,125 due to pro-rata amortization of development associated with 
ANDE.  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, 1996 and 1995 are presented 
on the pages that follow.


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

        None.

<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  44    President, Chairman of the Board    1980
Robert Reali    35    Vice President, Director            1988
Karl Marlantes  51    Chief Operating Officer, Director   1996


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 was appointed to the board on August 15, 1996.  He is 
Chief Operating Officer and has been with ExperTelligence since August 
15, 1996.  He received his B.A. in Economics from Yale University in 1967 
and a Master of Arts Degree in Politics, Philosophy, and Economics from 
Oxford University in 1972.

Dr. Mueller and Mr. Perry have resigned as directors until the company 
provides officers and directors liability insurance.


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 1996 fiscal year.

Name & Position      Year    Salary    Bonus  Other Annual Compensation	

Denison Bollay, CEO l996 $137,274.00  $3,000   0     $137,274.98
Karl Marlantes, COO 1996 $ 15,000.00     0     0     $ 15,000.00
Robert Reali,VP Dev 1996 $ 60,000.00  $3,000   0     $ 61,125.00

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, 
1996, (ii) the number of options exercised prior to September 30, 1996, iii) 
the number of options currently exercisable as of September 30, 1996, and 
iv) the average per share option exercise price.   As of September 30, 1996 
195,000 options had been exercised.

<TABLE>
<CAPTION>
                          (i)      (ii)      (iii)        (iv)
                        Options   Options    Options     Average
Identity of group       Granted exercised  exercisable  exercise price
<S>                     <C>       <C>         <C>        <C>
Denison Bollay  CEO,Dir  75,000    75,000          0       $0.11
Robert Reali    VP,Dir   45,000    45,000          0       $0.10
Bernadette Bagley        35,000    35,000          0       $0.10
George Barilla           30,000    30,000          0       $0.10
Karl Marlantes  COO,Dir  60,000         0          0       $4.00
Brian Colvin             20,000         0          0	   $4.00
Officers and
Directors as a Group    180,000   120,000          0       $1.40
</TABLE>

Item 11. Security Ownership of Certain Beneficial Owners and 
Management


On September 30, 1996, no person owned beneficially more than five 
percent (5%) of the outstanding shares of the common and preferred
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 Beneficial Owner  Shares Owned    Class

Denison Bollay, CEO
P.O. Box 5117, Montecito, CA 93150      395,163       26.5%

BNP Venture Capital Corporation
c/o Bank of the West
50 W. San Fernando, 2nd Floor
San Jose, CA  95113                     150,000       10.1%

George Mueller                           74,622        5.0%
875 Park Lane
Montecito, CA 93108

Officers and Directors as a Group       470,163       31.5%


Item 12. Certain Relationships and Related Transactions

         None.

Item 13.	Exhibits and Reports on Form 8-K. 

Resignations of Registrant's Directors 
On September 3, 1996 the board accepted the resignations of Mario J. 
Perry and Dr. George Mueller from the Board of Directors. These 
individuals expressed their concern about the company not having officers 
and directors insurance.  The cost of officers and directors insurance is 
prohibitive and both people stated their interest in serving on the board of 
ExperTelligence once liability insurance is in place.


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.




December 27, 1996  Denison Bollay, 
                   President, Chief Financial Officer and 
                   Chairman of the Board



		
December 27, 1996  Robert Reali, Director



		
December 27, 1996  Karl Marlantes, Director

 

<PAGE>


                           FINANCIAL STATEMENTS

                        September 30, 1996 and 1995


                           EXPERTELLIGENCE, INC.

<PAGE>

TABLE OF CONTENTS

                                   Page

Independent Auditor's Report        1
Financial Statements:
Balance Sheets                      2
Statements of Income                3
Statements of Shareholders' Equity  4
Statements of Cash Flows            5
Notes to Financial Statements    6 - 15

<PAGE>

INDEPENDENT AUDITOR'S REPORT


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

We have audited the accompanying balance sheets of 
ExperTelligence, Inc., a California corporation, as of 
September 30, 1996 and 1995, and the related statements of 
income, shareholders' equity, and cash flows for the years 
then ended.  These financial statements are the responsibility 
of the Company's management.  Our responsibility is to 
express an opinion on these 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 financial statements are free of material 
misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the 
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 financial statements referred to above 
present fairly, in all material respects, the financial position of 
ExperTelligence, Inc., at September 30, 1996 and 1995, and 
the results of its operations and its cash flows for the years 
then ended, in conformity with generally accepted accounting 
principles.


                             December 4, 1996

                                   -1-
<PAGE>
<TABLE>
<CAPTION>
                    EXPERTELLIGENCE, INC.
	               BALANCE SHEETS
                  September 30, 1996 and 1995

                          ASSETS

                                       1996       1995
<S>                                 <C>          <C>
CURRENT ASSETS
 Cash:
  Non-interest bearing             $   56,653  $   13,557
  Interest bearing                    466,768      24,159

   Total Cash                         523,422      37,716

  Accounts receivable-related party 
    (Note 9)                            7,167        -
  Accounts receivable-net of allow 
    (Note 1E)                         202,526     217,183
  Inventory (Note 1C)                  68,300      34,583
  Prepaid expenses and other current 
    assets                             17,280       4,362
  Deferred tax assets                  85,000      44,000
    (Note 1J and 6)
   Total Current Assets               903,695     337,844

PROPERTY AND EQUIPMENT, NET (Note 2)   59,769      32,567

OTHER ASSETS
  Product development costs, net 
    (Note 1D)                         530,258     552,383
  Deferred tax assets                 227,000      30,000
    (Note 1J and 6)
   Total Other Assets                 757,258     582,383

     TOTAL ASSETS                 $ 1,720,722   $ 952,794	

             LIABILITIES AND SHAREHOLDERS' EQUITY
                                      1996        1995
CURRENT LIABILITIES
  Accounts payable                 $   57,932    $  14,393
  Accrued payroll taxes                   178        5,398
  Accrued vacation                     40,072       29,377
  Deferred revenue                     26,000          -
  Line of credit (Note 10)              -           25,000
  Notes payable (Note 9)                -           13,293
 
   Total Current Liabilities          124,182       87,461
                            

SHAREHOLDERS' EQUITY
 (Notes 3 and 4):
 Preferred stock, no par value, 
 authorized 1,000,000 shares;
 issued and outstanding 159,244
 shares for 1996 
 and 348,248 shares for 1995 
(liquidation preference is $3
 per share, see Note 3)               318,487      696,488
Common stock, no par value, 
authorized 2,000,000 shares; 
issued and outstanding 
1,331,321 shares for 1996 and
949,451 shares for 1995             3,189,727    2,808,226
Common stock subscribed (Note 5)      300,000        -
Accumulated deficit                (2,211,674)  (2,639,381)			
  
  Total Shareholders' Equity        1,596,540      865,333	
   TOTAL LIABILITIES AND 
    SHAREHOLDERS' EQUITY           $1,720,722   $  952,794	
	
</TABLE>

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

<TABLE>
<CAPTION>
                     EXPERTELLIGENCE, INC.

                     STATEMENTS OF INCOME
      For the Years Ended September 30, 1996 and 1995


                                  1996     1995
<S>                          <C>         <C>
INCOME (Note 7)              $1,270,773  $   626,437

OPERATING COSTS AND EXPENSES
  Cost of sales                 364,808      183,245
  Selling and marketing          62,839        1,793
  General and administration    564,887      280,164
  Research and development       99,363       35,559

    Total Operating Costs 
      and Expenses            1,091,897      500,761


INCOME FROM OPERATIONS          178,876      125,676

OTHER EXPENSES (INCOME)
  Interest expense                  931        3,424
  Interest income               (10,051)      (2,014) 	                  
  Miscellaneous income           (2,511)         -

  Total Other Exp (Income)      (11,631)       1,410


INCOME BEFORE INCOME TAXES      190,507      124,266

INCOME TAXES (Note 6)          (237,200)      55,800

NET INCOME                 $    427,707   $   68,466


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

INCOME BEFORE INCOME TAXES    $   .1368   $  0.0987
INCOME TAXES                     (.1703)     0.0443

NET INCOME                    $   .3071   $  0.0544

EQUIVALENT NUMBER OF SHARES   1,392,621    1,258,859

</TABLE>


SEE AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS
                          -3-
<PAGE>
<TABLE>
<CAPTION>
                                                 EXPERTELLIGENCE, INC.
                                        STATEMENTS OF SHAREHOLDERS' EQUITY
                                 For the Years Ended September 30, 1996 and 1995

                                                               Common Stock
	             Preferred Stock          Common Stock      Subscribed		           Net
                                                                                  Accumulated Shareholders
                    Shares       Amount     Shares     Amount  Shares  Amount	    (Deficit)     Equity
<S>              <C>          <C>       <C>         <C>        <C>      <C>       <C>          <C>
Balance, 9/30/94  34,824,381  $696,488  77,442,256  $2,790,726     -       -      $(2,707,847)  $ 779,367

Stock issued          -            -    17,500,000      17,500     -       -            -          17,500
 
Rev. stock split (34,476,133)      -   (93,992,805)      -         -       -            -            -
100:1 (Note 3)

Net income            -            -	      -	          -	   -       -           68,466	   68,466

Balance, 9/30/95     348,248   696,488     949,451   2,808,226     -       -       (2,639,381)    865,333

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

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

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

Stock reissued        -            -       142,866       -         -       -            -            -

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

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

Net income             -	   -	      -           -        -       -          427,707     427,707

Balance, S9/30/96   159,244   $ 318,487  1,331,321 $ 3,189,727	 100,000 $300,000 $(2,211,674) $1,596,540

</TABLE>

SEE AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS
                                              -4-
<PAGE>
<TABLE>
<CAPTION>

                  EXPERTELLIGENCE, INC.

                 STATEMENTS OF CASH FLOWS
      For the Years Ended September 30, 1996 and 1995

                                     1996      1995
CASH FLOWS FROM OPERATING ACTIVITIES  
<S>                               <C>        <C>
 Net income                       $ 427,707  $   68,466
 Adjustments to reconcile net 
 income to net cash provided by 
 operating activities:
 Depreciation and amortization       94,781      36,384
 Common stock issued as a bonus        -         17,500
 Deferred tax expense (benefit)    (238,000)     55,000
  Decrease (increase) in: 
  Accounts receivable                 7,490    (126,784)
  Inventory                         (33,717)      6,796
  Prepaid expenses and other 
   current assets                   (12,918)        898
  Estimated earnings in excess of 
   billings on uncompleted contracts   -          8,784
 Increase (decrease) in:
  Accounts payable and accrued 
    expenses                           38,319    (12,075)
  Income taxes payable                  -          (800)
  Accrued vacation                     10,695      3,238
  Deferred revenue                     26,000    (32,167)

NET CASH PROVIDED BY OPERATING 
  ACTIVITIES                          320,357     25,240

CASH FLOWS FROM INVESTING ACTIVITIES
 Increase in product development 
   costs                              (60,160)   (88,157)
 Purchase of property and equipment   (39,698)   (25,966)

NET CASH USED BY INVEST. ACTIVITIES   (99,858)  (114,123)

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds (repayments) on line of 
   credit                             (25,000)    25,000
 Repayments of notes payable          (13,293)    (3,098)
 Common stock subscribed              300,000        -
 Common stock issued                    3,500        -
 Repayments of capital lease 
  obligations                             -      (14,196)

NET CASH PROVIDED BY FINANCING 
  ACTIVITIES                          265,207      7,706

NET INCREASE (DECREASE) IN CASH       485,706    (81,177)
CASH AND EQUIVALENTS - 
   BEGINNING OF YEAR                   37,716    118,893
CASH AND EQUIVALENTS - END OF YEAR  $ 523,422  $  37,716

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
  (Note 11)
Cash paid during the year for:
  Interest                         $      931  $   3,402
  Income taxes                            800        800
</TABLE>
SEE AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS
                    -5-
<PAGE>
              EXPERTELLIGENCE, INC.

         NOTES TO FINANCIAL STATEMENTS
          September 30, 1996 and 1995


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 $242,883 and $242,883, has been provided 
for 1996 and 1995, 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 greater of 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, 1996 and 1995, aggregated $60,160 and 
$88,157, respectively.  Related amortization, utilizing the 
straight-line method, for the year ended September 30, 1996 
and 1995, aggregated $82,285 and $15,824, respectively.  
Accumulated amortization of product development costs 
aggregated $231,143 and $148,858, at September 30, 1996 
and 1995, respectively.

E. Allowance For Doubtful Accounts

The allowance for doubtful accounts at September 30, 1996 
and 1995, is $18,000 and $0, respectively.


               -6-
<PAGE>

        EXPERTELLIGENCE, INC.

     NOTES TO FINANCIAL STATEMENTS
      September 30, 1996 and 1995


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, 1996 and 1995, 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, 
1996 and 1995.  Stock options were not considered in the 
computation of common equivalent shares for 1995, 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.

     NOTES TO FINANCIAL STATEMENTS
      September 30, 1996 and 1995


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.


Note 2 - PROPERTY AND EQUIPMENT

Depreciation expense at September 30, 1996 and 1995, is 
$12,496 and $20,560, respectively.  Property and equipment at 
September 30, 1996 and 1995, is summarized as follows:

                          1996         1995

Furniture and fixtures $   33,982  $   33,730
Purchased software          3,467       3,467
Equipment                 366,855     336,693
                          404,304     373,890

Less: Accumulated 
      depreciation        344,535     341,323

                       $   59,769  $   32,567


Note 3 - HAREHOLDERS' EQUITY

In September, 1995, the Company's Board of Directors 
authorized a 100 to 1 reverse stock split of the Company's 
common and preferred stock.  As a result of the reverse stock 
split, total common shares issued and outstanding were reduced 
to 949,451, and total preferred shares issued and outstanding 
were reduced to 348,248.  All references in the accompanying 
financial statements to the number of common and preferred 
shares and per-share amounts for 1995 have been restated to 
reflect the reverse stock split.

17,500,000 shares of common stock (prior to the reverse stock 
split) in the amount of $17,500, were issued to the employees of 
the Company as a bonus in the fiscal year ended September 30, 
1995.

                 -8-
<PAGE>

         EXPERTELLIGENCE, INC.

      NOTES TO FINANCIAL STATEMENTS
       September 30, 1996 and 1995


Note 3 - SHAREHOLDERS' EQUITY (continued)

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, 
1996 and 1995.  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, 1996 
and 1995, no dividends have been declared.


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, 1996 and 1995, the board 
has not granted any options under the NSOP.  As of 
September 30, 1996 and 1995, there are no options  
outstanding under the 1983 ISOP.

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 has reserved 
200,000 shares of common stock for the exercise of options 
under this plan.  For the year ended September 30, 1995, 
there were 195,000 options outstanding 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).  No options were exercised 
during the years ended September 30, 1995.

                   -9-
<PAGE>

              EXPERTELLIGENCE, INC.

          NOTES TO FINANCIAL STATEMENTS
           September 30, 1996 and 1995


During the year ended September 30, 1996, the remaining 
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.

At September 30, 1996 and 1995, options to purchase -0- 
shares and 195,000 shares, respectively, of the Company's 
common stock were exercisable under the 1988 ISOP.

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.  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).  As of September 30, 1996, options to purchase 
87,500 of the Company's common stock were exercisable 
under the 1996 Incentive Stock Option Plan.  No options 
were granted under the Nonqualified Stock Option Plan.

The Company has elected not to adopt early implementation 
of Statement of Financial Accounting Standards No. 123 
"Accounting For Stock-Based Compensation."


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.


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.


                 -10-
<PAGE>

            EXPERTELLIGENCE, INC.

        NOTES TO FINANCIAL STATEMENTS
         September 30, 1996 and 1995

<TABLE>
<CAPTION>
Note 6 - INCOME TAXES (continued)

Income tax expense (benefit) for the years ended September 30, 
1996 and 1995, are as follows:

                         1996         1995
<S>                     <C>         <C>
  Current             $       800  $      800
  Deferred               (238,000)     55,000

    Total             $  (237,200) $   55,800

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

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)
</TABLE>
                      -11-
<PAGE>

              EXPERTELLIGENCE, INC.

         NOTES TO FINANCIAL STATEMENTS
          September 30, 1996 and 1995


Note 6 - INCOME TAXES (continued)

As of September 30, 1996, 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   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
200        768,000       14,000        -      16,000
2008           -         10,000        -         -

        $2,516,000     $184,000    $274,000  $25,000

</TABLE>
Components of the deferred tax assets and (liabilities) 
recognized in the balance sheet at September 30, 1995, 
are as follows:
                                   Current  Non-current
  
Accrued vacation pay              $ 13,000   $    -		
Property and equipment                 -       (11,000)
Software costs                         -      (239,000)
Deferred state tax                    4,000     (5,000)
Net operating losses                 27,000    959,000
Deferred tax credits                   -       208,000
                                     44,000    912,000
Deferred tax assets valuation 
  allowance                            -      (882,000)

Deferred tax asset                 $ 44,000  $  30,000


                  -12-
<PAGE>

             EXPERTELLIGENCE, INC.

          NOTES TO FINANCIAL STATEMENTS
           September 30, 1996 and 1995


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, 1995, is as follows:

Income taxes computed at Federal statutory 
  tax rate                                   $    43,000
State tax provision                               11,000
Graduated tax rates                               13,000
Net operating loss and deferred credits           22,000
Valuation allowance                              (33,200)

Provision for income taxes                   $    55,800


Note 7 - SIGNIFICANT CUSTOMERS AND CREDIT RISK

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.  
For the year ended September 30, 1995, 96% of accounts receivable 
was concentrated with one customer and this same customer 
individually accounted for approximately 86% of total revenue.


Note 8 - CASH AND CASH EQUIVALENTS - CONCENTRATION OF 
         CREDIT RISK
 
Uninsured cash balances were $379,309 at September 30, 1996, 
and $-0- at September 30, 1995.


Note 9 - RELATED PARTY TRANSACTIONS

During the year ended September 30, 1995, computer equipment 
totaling $7,570 was purchased 	from the president of the Company.

During the year ended September 30, 1995, the president and 
shareholder of the Company loaned $14,000 to the Company.  
The $14,000 was repaid without interest to the president during 
the year ended September 30, 1995.

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.




                -13-
<PAGE>


         EXPERTELLIGENCE, INC.

      NOTES TO FINANCIAL STATEMENTS
       September 30, 1996 and 1995


Note 9 - RELATED PARTY TRANSACTIONS (continued)

At September 30, 1995, the Company had a note payable due to 
a related party (a significant 		shareholder) in the 
amount of $13,293.  The note was a demand note with monthly 
payments of $909, with an annual interest rate of 10%.  
Interest paid during the year totaled $528 and $1,721 for 
996 and 1995, respectively.  The note was paid off 
during the year ended September 30, 1996.


Note 10 - LINE OF CREDIT

During 1995, the Company obtained a $40,000 collateralized 
bank line of credit with Sanwa Bank bearing interest at the 
current prime rate plus 2%, payable monthly, and was secured by 
all assets of the Company.  At September 30, 1995, the interest 
rate was 10.75% and withdrawals against the line of credit were 
$25,000, which was paid of subsequent to that.  The line of 
credit expired January 31, 1996.


Note 11 - NON-CASH TRANSACTIONS

During the year ended September 30, 1995, the Company issued 
$17,500 of common stock to employees as a bonus (See note 3).

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 4).


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.


                    -14-
<PAGE>

            EXPERTELLIGENCE, INC.

        NOTES TO FINANCIAL STATEMENTS
          September 30, 1996 and 1995


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, 1996, does not differ materially from the carrying values 
of its financial instruments recorded in the accompanying
balance sheet.  Considerable judgement 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.


                          -15-