-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BOZG2duGOsxoq2DhL+flzra8XWowWbnowIOCQFzgJ8QcFnrpsect0nXTcS0tG7w2 AKTM/LjdAZqPY77sTYB0Jg== 0001017062-96-000179.txt : 19960923 0001017062-96-000179.hdr.sgml : 19960923 ACCESSION NUMBER: 0001017062-96-000179 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960903 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESEARCH ENGINEERS INC CENTRAL INDEX KEY: 0001015920 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 222356861 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28560 FILM NUMBER: 96625119 BUSINESS ADDRESS: STREET 1: 22700 SAVI RANCH PARKWAY CITY: YORBA LINDA STATE: CA ZIP: 92687 BUSINESS PHONE: 7149742500 MAIL ADDRESS: STREET 1: 22700 SAVI RANCH PKWY CITY: YORBA LINDA STATE: CA ZIP: 92687 10QSB 1 QUARTERLY REPORT 06-30-96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-28560 RESEARCH ENGINEERS, INC. (Exact name of small business issuer as specified in its charter) Delaware 22-2356861 (State or other jurisdiction of (IRS. Employer Identification No.) incorporation or organization) 22700 SAVI RANCH PARKWAY YORBA LINDA, CALIFORNIA 92887 (Address of principal executive offices) (714) 974-2500 (Issuer's telephone number, including area code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter 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 [_] No [X] The number of shares outstanding of the registrant's only class of Common Stock, $.01 par value, was 5,506,000 on August 29, 1996. PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share and per share amounts)
Pro forma ASSETS June 30, 1996 June 30, 1996 (Note 5) ----------------- ----------------- Current assets: Cash and cash equivalents $ 670 4,095 Accounts receivable (net of allowance for doubtful accounts of $33) 905 905 Deferred income taxes 379 379 Notes and related party loans receivable 88 88 Prepaid and other current assets 145 145 ----------------- ----------------- Total current assets 2,187 5,612 Property, plant and equipment, net 2,555 2,555 Goodwill (net of accumulated amortization of $44) 470 470 Deferred offering costs 204 204 Other assets 211 211 ----------------- ----------------- $ 5,627 9,052 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 444 444 Accrued expenses 661 661 Current portion of notes payable and loans to stockholders 325 16 Income taxes payable 315 315 Deferred maintenance revenue 593 593 Current portion of long-term bank debt 112 84 Other 131 131 ----------------- ----------------- Total current liabilities 2,581 2,244 Long-term bank debt 1,839 159 Notes payable and loans to stockholders 228 70 Deferred Income taxes 19 19 Other liabilities 122 122 Stockholders' equity: Preferred stock, par value $.01. Authorized 5,000,000 shares; - - issued and outstanding none Common stock, par value $.01. Authorized 20,000,000 shares; 42 55 issued and outstanding 4,206,000 (5,506,000 pro forma) Additional paid-in capital 331 5,918 Retained earnings 469 469 Foreign currency translation adjustment (4) (4) ----------------- ----------------- Total stockholders' equity 838 6,438 ----------------- ----------------- $ 5,627 9,052 ================= =================
See accompanying notes to consolidated financial statements. 2 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except share and per share amounts)
Three months Three months ended ended June 30, 1996 June 30, 1995 --------------- --------------- Net revenues: $ Product sales 1,734 1,096 Maintenance and support 331 276 --------------- --------------- Total net revenues 2,065 1,372 Cost of revenues 152 113 --------------- --------------- Gross profit 1,913 1,259 Operating expenses: Selling, general and administrative 1,333 827 Research and development 351 338 --------------- --------------- Total operating expenses 1,684 1,165 --------------- --------------- Operating income 229 94 Other (income) expense: Interest expense, net 57 66 Other (41) (35) --------------- --------------- Income before income taxes 213 63 Income tax expense 73 6 --------------- --------------- Net income $ 140 57 =============== =============== Pro forma net income data (Note 5): Income before income taxes as reported $ - 63 Pro forma provision for income tax expense - 21 --------------- --------------- Pro froma net income $ - 42 =============== =============== Net income per share $ 0.03 =============== Weighted average common shares outstanding 4,206,000 ===============
See accompanying notes to consolidated financial statements 3 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three months Three months ended ended June 30, 1996 June 30, 1995 -------------- -------------- Cash flows from operating activities: Net income $ 140 57 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 104 49 Deferred income taxes (91) Changes in operating assets and liabilities: Accounts receivable 40 93 Notes and related paty loans receivable - 17 Prepaid expenses and other current assets 18 45 Other assets (98) 2 Accounts payable, accrued expenses and other current liabilities 230 (150) Deferred maintenance revenue (12) 40 Income taxes payable 100 (22) Other long-term liabilities (4) 1 -------------- -------------- Net cash provided by operating activities 427 132 -------------- -------------- Cash flows from investing activities: Purchase of property, plant and equipment, net (37) (64) -------------- -------------- Cash flows from financing activities: Proceeds from bank debt 71 Repayment of bank debt (32) (19) Repayment of stockholder loans (12) (85) Deferred offering costs (204) - -------------- -------------- Net cash used by financing activities (248) (33) -------------- -------------- Increase in cash and cash equivalents 142 35 Cash and cash equivalents, beginning of period 528 433 -------------- -------------- Cash and cash equivalents, end of period $ 670 468 ============== ============== Supplemental cash flow information: Amounts paid for: Interest $ 53 41 ============== ============== Income taxes $ - - ============== ==============
See accompanying notes to consolidated financial statements 4 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (Unaudited) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Research Engineers, Inc. (the "Company") and its wholly-owned subsidiaries. These consolidated financial statements have been prepared by the Company, without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three months ended June 30, 1996 and 1995, the financial position at June 30, 1996, and the cash flows for the three months ended June 30, 1996 and 1995, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Results of operations for the three months ended June 30, 1996 are not necessarily indicative of the results to be expected for the full year. 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 3. INITIAL PUBLIC OFFERING On July 26, 1996, the Company completed an initial public offering of 1,300,000 shares of its common stock at $5.00 per share. The net proceeds of the offering, after deducting underwriter's commissions and offering costs, were approximately $5,600,000. Proceeds to the Company were used to repay approximately $2,175,000 of indebtedness to stockholders and banks. The remaining proceeds are anticipated to be used to further repay indebtedness, to fund research and development activities, to augment the Company's sales, marketing and customer support activities and to acquire related businesses, products and technologies. At June 30, 1996 $204,000 in costs had been incurred in connection with such offering. These amounts were included in deferred offering costs at June 30, 1996 and were offset against proceeds on July 26, 1996. 4. INCOME PER SHARE Income per share is based upon net income for the quarter ended June 30, 1996. Income per share has been determined, in accordance with the treasury stock method, by dividing net income by the weighted average number of common and dilutive common equivalent shares outstanding during the period. 5 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (Continued) (Unaudited) 5. PRO FORMA DATA The pro forma balance sheet as of June 30, 1996 has been presented to reflect the sale by the Company of 1,300,000 shares of common stock at the initial public offering price of $5.00 per share net of approximate offering costs of $900,000 and the repayment of $2,175,000 of indebtedness to stockholders and banks (Note 3). Prior to October 1995, the Company operated as an S corporation for Federal tax purposes. Therefore, the tax expense was related to state and foreign taxes only. In October 1995, the Company converted to a C corporation. The pro forma net income data for the quarter ended June 30, 1995 has been presented to reflect the Company's provision for income tax expense as if the Company had been a C corporation at such date. 6 ITEM 2. MANAGMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL Research Engineers, Inc. (the "Company") is a leading provider of technically sophisticated stand-alone and network-based engineering software products that provide fully-integrated easy-to-use design automation and analysis solutions for use by engineering analysis and design professional worldwide. The Company's comprehensive line of Windows-based engineering software products includes STAAD-III, the Company's structural analysis and design software, as well as mechanical, civil and process/piping engineering products. The Company's software products assist engineers in performing a myriad of mission- critical engineering tasks, including analysis and design of industrial, commercial, transportation and utility structures, pipelines, machinery and automotive and aerospace products and survey, contour and digital terrain modeling. The following discussion and analysis addresses the results of the Company's operations for the three months ended June 30, 1996, as compared to the Company's results of operations for the three months ended June 30, 1995. On July 26, 1996, the Company consummated an initial public offering (the IPO) of 1,300,000 shares of its common stock, resulting in gross proceeds (net of discounts and commissions) of approximately $5,600,000. Since the closing of the IPO was after the period covered in this report, the Company's results and the following discussion do not reflect the IPO unless noted otherwise. This quarterly report on Form 10-QSB contains forward-looking statements that involve risks and uncertainties. The actual future results of Research Engineers, Inc. could differ materially from those statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report, uncertainties regarding market acceptance of new products and product enhancements, delays in the introduction of new products, and risks associated with managing the Company's growth, as well as those factors discussed in the Company's Registration Statement on Form SB-2 and related Prospectus dated July 25, 1996, and the "Risk Factors" described therein. RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996 AND 1995 Net Revenues - Net revenues for the quarter ended June 30, 1996 increased by $693,000 (51%) to $2,065,000, as compared to $1,372,000 for the quarter ended June 30, 1995. This increase in product sales and maintenance and support revenues was attributable to (i) market acceptance of the new 32-bit Windows 95 and Windows NT versions of the Company's software products, (ii) the Company's continued growth in overseas markets, and (iii) the Company's strategic acquisitions of products and technologies that took place during the fiscal year ended March 31, 1996. Revenues are derived primarily from sales of the Company's engineering software products and, to a lesser extent, from sales of software maintenance contracts relating to its products. Software product revenues are recognized upon shipment. Product maintenance revenues are amortized over the length of the maintenance contract which is usually twelve months. International net revenues as a percentage of total revenues for the quarter ended June 30, 1996 increased by approximately 15% to 54%, up from 39% for the quarter ended June 30, 1995. The Company's revenues are primarily denominated in U.S. Dollars. However, revenues and expenses for the Company's foreign subsidiaries and sales offices, are usually recorded in the applicable foreign currency and translated with any applicable foreign exchange adjustments. There were no foreign exchange gains or losses which were material to the Company's financial results in either of the quarters ended June 30, 1996 and 1995. 7 Gross Profit - Gross profit increased by $654,000 (52%) to $1,913,000 in the first quarter ended June 30, 1996 as compared to $1,259,000 for the quarter ended June 30, 1995. Gross profit as a percentage of revenues increased to 92.6% for the quarter ended June 30, 1996 as compared to 91.8% for the quarter ended June 30, 1995. Cost of goods sold are not normally significant as a percentage of net revenues due to the nature of the Company's products. Selling, general and administrative expense - Selling, general and administrative expense increased by $506,000 (61%) to $1,333,000 in the first quarter ended June 30, 1996 as compared to $827,000 for the quarter ended June 30, 1995, and increased as a percentage of net revenues to 64.6% from 60.3%, in the comparable quarter of the prior year. Selling expenses increased as a result of higher commissions associated with higher net revenues, an increased number of telesales professionals and expanded worldwide sales operations. General and administrative expenses increased due to the addition of administrative, customer service and technical support personnel and increased professional fees. Research and development expense - Research and development expense, increased by $13,000 (4%) to $351,000 in the first quarter ended June 30, 1996 as compared to $338,000 for the quarter ended June 30, 1995, and decreased as a percentage of net revenues to 16.9% from 24.6%, in the comparable quarter of the prior year. Research and development expenses, consist primarily of software developers' wages and from time to time the costs of software development performed by outside parties. During the quarter ended June 30, 1995 the Company incurred significantly higher costs for outside development as compared with the quarter ended June 30, 1996. This combined with the effect of increased headcount of in-house professionals resulted in the minor fluctuation within research and development expense. Other expense - Net interest expense decreased by $9,000 (14%) to $57,000 as compared to $66,000 for the quarter ended June 30, 1995 as a result of a decrease in the Company's debt from 1995 levels. Income taxes - Income tax expense increased by $67,000 to $73,000 in the first quarter ended June 30, 1996 as compared to $6,000 for the quarter ended June 30, 1995. In 1995, the Company operated as an S corporation for Federal tax purposes. Therefore, the tax expense was related to state and foreign taxes only. In October 1995, the Company converted to a C corporation. Therefore, tax expense for the quarter ended June 30, 1996 includes Federal tax expense on operations subsequent to conversion. The pro forma net income data for the quarter ended June 30, 1995 has been presented to reflect the Company's provision for income tax expense as if the Company had been a C corporation at such date. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations and capital outlays primarily through capital contributions from its stockholders, bank financing and loans from stockholders. The Company's principal sources of liquidity at June 30, 1996, consisted of $670,000 of cash and $150,000 available under a line of credit with Wells Fargo Bank, N.A.. The Company had a working capital deficiency of $394,000 at June 30, 1996. Cash provided by operations for the quarter ended June 30, 1996 was $427,000, and was generated primarily by current earnings for the period combined with the impact of improved cash collections and cash management. Cash used in investing activities, which consists of purchases of property and equipment, was $37,000. Cash used in financing activities was $248,000 and consisted primarily of expenses incurred in connection with the IPO. Such expenses are classified as "Deferred offering costs" on the balance sheet for the quarter ended June 30, 1996 and were offset against proceeds from the IPO on July 26, 1996. The Company has a $150,000 line of credit with Wells Fargo Bank, N.A. bearing interest at prime plus 2% per annum. the line of credit is collateralized by substantially all of the assets of the Company. The line of credit matures on March 10, 1997. As of June 30, 1996 there were no amounts of principal or accrued interest outstanding relating to this line of credit. The Company is 8 currently negotiating an increase in the amount of this line of credit, however there can be no assurances that such negotiations will be successful. The Company consummated its IPO on July 26, 1996. This transaction is reflected in the pro forma balance sheet. The net proceeds to the Company of $5,600,000 were used to repay approximately $2,175,000 of indebtedness to stockholders and banks. The remaining proceeds, which are held in a short term highly liquid money market account, are anticipated to be used to further repay indebtedness, to fund research and development activities, to augment the Company's sales, marketing and customer support activities and to acquire related businesses, products and technologies. Management believes that unused proceeds from the IPO, cash generated from operations and borrowings available under the Company's existing line of credit will provide adequate working capital to fund the Company's operations at currently anticipated levels through June 30, 1997. To the extent that such amounts are insufficient to finance the Company's working capital requirements, the Company will be required to raise additional funds through public or private equity or debt financings. There can be no assurance that such additional financings will be available, if needed, or, if available, will be on terms satisfactory to the Company. 9 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K (a) EXHIBITS 27.1 Financial Data Schedule (b) Reports on Form 8-K None 10 SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: September 3, 1996 RESEARCH ENGINEERS, INC. By: /s/ AMRIT K. DAS -------------------------------------- Amrit K. Das Chairman of the Board, President, Chief Executive Officer and Director (principal executive officer) By: /s/ BRIAN PAUL -------------------------------------- Brian Paul Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 670 0 905 0 0 2,187 2,555 0 5,627 2,581 0 0 0 42 796 5,627 2,065 2,065 152 1,684 (41) 0 57 213 73 140 0 0 0 140 .03 .03
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