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Expert System: Board of Directors approves interim financial report of June 30, 2014

Sept 26, 2014

• Value of Production amounted to 6.48 million Euros (€6.68 million in 1H2013)

• EBITDA amounted to 0.11 million Euros (€1.21 million in 1H2013)

• Net Financial Position active at Euro 1,77 million (negative €5.77 million in 1H 2013)

Modena, September 26, 2014 – Today, the Board of Directors of Expert System, a leader in semantic technology for the effective management of information, and listed on the AIM Italia market, approved the financial report of June 30, 2014.

Stefano Spaggiari, CEO of Expert System, commented:
“The first half of 2014 was affected by the significant investment policy which the company adopted to enhance both the technological and commercial bases in light of the company’s future development in international business. February’s listing on Italy’s AIM was very successful; not only by giving standing and visibility to the company, but by providing substantial financial resources which will contribute to the continuous development of Cogito technology, making it more competitive on the global market. Our sales network has expanded to include new partners abroad, which will act as distributors and system integrators. In regards to our internationalization strategy, our subsidiary Expert System Cogito, Ltd., was founded to manage the UK market and our presence in the American market was strengthened by several private and governmental entities which make scrupulous use of our advanced tools for text analytics. In fact, we opened a new office in Silicon Valley (Palo Alto, California) to ensure our constant presence in the heart of IT world. Just a few months after establishing our partnership with Cloudera, a world leader in cloud services, we are already seeing the first significant results. Other results, related to the acceleration of the internationalization process, can be noted in the major changes to the commercial pipeline mix, where the share of foreign opportunities has doubled1 in the last six months, from 23% to 46%. For this reason, we are confident that our strategy of development will bring positive results in the near future. ”

Key Results as of June 30, 2014

The Value of Production amounts to 6.48 million Euros, in line with first half of 2013 (€6.68 million).

EBITDA amounts to 0.11 million Euros (€1.21 million at June 30, 2013); this change was influenced by the increased costs of: labor, the professional services involved in the development of the investment plan, the expansion of the technological platform and the launch of new international operations.

EBIT is negative at 0.59 million Euros compared to 0.82 million Euros at June 30, 2013. Amortization of intangible assets amounted to 0.61 million Euros (€0.30 million in 2013) due to the extraordinary costs associated with the listing and the variations in the accounting principles adopted for the assessment of the contributions to research and development.

The Net Result was a loss of EUR 0.52 million compared to EUR 0.34 million in the first half of 2013.

The Net Financial Position is active and equal to 1.77 million Euros (on December 31, 2013 it was negative €5.77 million); available cash amounts to 8.22 million Euros. The significant improvement of the financial situation is due mainly to the revenue related to the listing.

Investments in R & D focused on the development of the Cogito linguistic platform and its related functions (the Cogito platform in Spanish and German in particular), the further development the advanced product Cogito Taxonomy Studio (which integrates technologies of self-learning and cognitive computing) and the realization of Cogito API which will be launched in the second half of the year.

Other relevant research during this period was conducted on the self-learning of relationships between entities, the improvement of the understanding of tone and sentiment in texts (in social network contexts, in particular) and the automatic generation of categorization rules aimed at reducing the development costs of those projects created with Cogito Studio.

Significant events which occurred during the first half of 2014

March 25, 2014: The enhanced integration of Cogito semantic technology into Microsoft’s SharePoint platform is announced.

May 21, 2014: Expert System and 3M Italy Health Information Systems, the division of 3M that specializes in the development of advanced information technology tools for the classification of hospital activities and health planning systems, signed an agreement for the joint development of advanced systems dedicated to the control and coding of health-related documentation so as to improve the management and control of hospital activities.

June 5, 2014
: The Company continues its international expansion with the opening of a new office in Silicon Valley, California, in addition to its offices in Washington and Chicago, thus strengthening its presence at the heart of worldwide technological development.

June 11, 2014: Expert System and Digital Magics, an incubator for innovative startups, announce a framework agreement which will contribute to sustain innovation in Italy. Together, they will support Italian digital startups and encourage the launch of innovative projects with high technological value.


Significant events which occurred after June 30, 2014

July 3, 2014: Presence abroad is strengthened with the opening of the 100% controlled company, Expert System Cogito Ltd, in Great Britain. The UK market is particularly captivating due to the intense concentration of companies in sectors in which Expert System has already acquired much experience such as: Finance, Oil & Gas and Publishing. The Company’s presence in Britain is favorable to the consolidation of several partnerships launched with leading technology and consulting entities, and will guarantee direct contact with British customers.

July 29, 2014: Expert System is included in the top positions of the Gartner Magic Quadrant for solutions related to corporate searches. Once again, the Company is the only Italian business to receive this important international recognition.

August 27, 2014: Partnership with Cloudera, leader in data management solutions for businesses based on Apache Hadoop, is announced. The powerful semantic processing of Cogito technology will be integrated with Cloudera Enterprise 5 so that Cloudera customers will be able to extend and improve their analysis skills by taking advantage of unstructured content through the automatic generation of metadata.


Business outlook

The Company will continue to implement the 3 main lines of strategic development cited in the listing project:

• the consolidation on the international markets (US and UK, in particular) where the company is already established thanks to the innovative nature of the software solutions;

• the launch of new strategic agreements to guarantee better penetration of Cogito software on already existing and widespread platforms;

• the evolution of the technological platform in new areas of “cognitive computing” related to the topic of artificial intelligence in the cognitive field.


The interim financial report at June 30, 2014 will be made available to the public in accordance with the procedures established by Regolamento Emittenti AIM Italia, and on the company’s website, expertsystem.com/it, under Investor Relations – Financial Reports.

Expert System, listed on the Borsa Italiana AIM Italia market, is a leading developer of software used by companies to effectively manage information and extract strategic knowledge. All products are based on Cogito® proprietary technology and offer advanced solutions to search, sort, organize and analyze large quantities of documents. Thanks to the ability to automatically comprehend text, Cogito allows companies to give value to the data and information which is available to them, thus increasing their competitive advantage and supporting their decision making processes. Some key clients are: Eni Group, ANSA, Telecom Italia, Intesa Sanpaolo, Il Sole 24 ORE and Microsoft.

1 The commercial pipeline includes confirmed projects as well as those in an advanced stage of negotiation.

Attachments (Italian):
– Income Statement as of June 30, 2014
– Statement of Assets as of June 30, 2014
– Statement of Net Financial Position as of June 30, 2014