-----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, UDWg1ESosGSwSOFXBUMXrrwjaMiPzgrijr673+nOEa6OMO/KSowCMDtjOeVF0EmQ ZXYNgSEG5PlihMJq2cO+SQ== 0001017062-97-002034.txt : 19971117 0001017062-97-002034.hdr.sgml : 19971117 ACCESSION NUMBER: 0001017062-97-002034 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESEARCH ENGINEERS INC CENTRAL INDEX KEY: 0001015920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 222356861 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28560 FILM NUMBER: 97717976 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 FORM 10-QSB 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 September 30, 1997 [_] 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 22-235686 (State or other jurisdiction of (IRS. Employer Identification incorporation) No.) 22700 SAVI RANCH PARKWAY YORBA LINDA, CALIFORNIA 92887 (Address of principal executive offices) (714) 974-2500 (Registrant'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 [X] No [_] The number of shares outstanding of the registrant's only class of Common Stock, $.01 par value, was 5,704,000 on November 1, 1997 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 (Unaudited) (In thousands, except share and per share amounts)
ASSETS Current assets: Cash and cash equivalents $ 971 Short term investments 2,576 Accounts receivable (net of allowance for doubtful accounts of $39) 2,138 Deferred income taxes 402 Notes and related party loans receivable 64 Prepaid expenses and other current assets 564 ------- Total current assets 6,715 Property, plant and equipment, net 2,793 Goodwill (net of accumulated amortization of $335) 1,156 Other assets 822 ------- $11,486 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 280 Accrued expenses 356 Income taxes payable 215 Deferred maintenance revenue 818 Current portion of long-term bank debt 188 Other 55 ------- Total current liabilities 1,912 Long-term bank debt 1,883 Deferred income taxes 55 Other 3 ------- Total liabilities 3,853 ------- 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; issued and outstanding 5,704,00 shares 57 Additional paid-in capital 6,794 Retained earnings 679 Unrealized gain on investments 66 Foreign currency translation adjustment 37 ------- Total stockholders' equity 7,633 ------- $11,486 =======
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 Six Months Six Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net revenues: Product sales $ 2,646 $ 2,107 $ 5,015 $ 3,841 Maintenance and support 448 348 873 679 ---------- ---------- ---------- ---------- Total net revenues 3,094 2,455 5,888 4,520 Cost of revenues 144 187 349 339 ---------- ---------- ---------- ---------- Gross profit 2,950 2,268 5,539 4,181 ---------- ---------- ---------- ---------- Operating expenses: Selling, general and administrative 2,340 1,642 4,505 2,850 Research and development 504 313 954 789 ---------- ---------- ---------- ---------- Total operating expenses 2,844 1,955 5,459 3,639 ---------- ---------- ---------- ---------- Operating income 106 313 80 542 ---------- ---------- ---------- ---------- Other (income)/expense: Interest, net (3) (31) (22) 26 Other (29) (28) (46) (69) ---------- ---------- ---------- ---------- Income before income taxes 138 372 148 585 Income tax expense 25 84 20 157 ---------- ---------- ---------- ---------- Net income $ 113 $ 288 $ 128 $ 428 ========== ========== ========== ========== Net income per common and common equivalent share $ 0.02 $ 0.06 $ 0.02 $ .09 ========== ========== ========== ========== Weighted average number of common and common equivalent shares outstanding 5,816,647 5,204,571 5,789,052 4,710,833 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Six Months Six Months Ended Ended September 30, September 30, 1997 1996 ------------ ------------ Cash flows from operating activities: Net income $ 128 $ 428 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 361 192 Deferred income taxes (86) 127 Changes in operating assets and liabilities: Accounts receivable - (97) Notes and related party loans receivable (1) (11) Prepaid expenses and other current assets (96) (179) Other assets (563) (141) Accounts payable, accrued expenses and other current liabilities (251) (278) Deferred maintenance revenue 31 29 Income taxes payable (54) 22 Other long-term liabilities (18) (54) ---------- ---------- Net cash (used in) provided by operating activities (549) 38 ---------- ---------- Cash flows from investing activities: Purchase of property, plant and equipment (196) (93) Purchase of short-term investments (3,019) (3,034) Sale of short term investments 2,204 - Proceeds from repayment of related party note receivable - 48 ---------- ---------- Net cash used in investing activities (1,011) (3,079) ---------- ---------- Cash flows from financing activities: Net proceeds from issuance of common stock 9 6,469 Repayment of bank debt (57) (1,740) Repayment of stockholder loans - (481) ---------- ---------- Net cash (used in) provided by financing activities (48) 4,248 ---------- ---------- (Decrease) increase in cash and cash equivalents (1,608) 1,207 Cash and cash equivalents, beginning of period 2,579 528 ---------- ---------- Cash and cash equivalents, end of period $ 971 1,735 ========== ==========
See accompanying notes to consolidated financial statements. 4 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (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 and six months ended September 30, 1997 and 1996, the financial position at September 30, 1997, and the cash flows for the six months ended September 30, 1997 and 1996, 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 and six months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year ended March 31, 1998. 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. NET EARNINGS PER SHARE Net earnings per share has been determined, in accordance with the treasury stock method, by dividing net earnings by the weighted average number of common and common equivalent shares outstanding during the period. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share ("EPS")," which will require the Company to disclose basic EPS and diluted EPS for all periods for which an income statement is presented, and which will replace disclosure currently being made for primary EPS and fully-diluted EPS. The Company is required to adopt this standard in its quarter ended December 31, 1997. The impact of Statement 128 on the calculation of primary EPS and fully-diluted EPS for the three months and six months ended September 30, 1997 and 1996 is not material. 4. RECLASSIFICATIONS Certain prior quarter amounts have been reclassified to conform to the current quarter presentation. 5 ITEM 2. MANAGEMENT'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 professionals 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 and six months ended September 30, 1997, as compared to the Company's results of operations for the three months and six months ended September 30, 1996. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Net revenues - Net revenues for the quarter ended September 30, 1997 increased by $639,000 (26%) to $3,094,000, as compared to $2,455,000 for the quarter ended September 30, 1996. For the six months ended September 30, 1997, revenues increased by $1,368,000 (30%) to $5,888,000 from $4,520,000 for the six months ended September 30, 1996. These increases in net revenues were primarily attributable to the Company's continued growth in overseas markets. 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 September 30, 1997 increased to 56%, up from 43% for the quarter ended September 30, 1996. For the six months ended September 30, 1997, international revenues increased to 57%, up from 45% for the six months ended September 30, 1996. The increase in international revenues for the periods was primarily the result of increased revenues from the Asian market as the Company's products continue to gain market acceptance and the result of the acquisition of QSE (Bristol) Limited in December 1996. The Company's domestic revenues are denominated in U.S. Dollars, while 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 that were material to the Company's financial results during either the three month or the six month periods ended September 30, 1997 and 1996. Gross profit - Gross profit increased by $682,000 (30%) to $2,950,000 in the quarter ended September 30, 1997 as compared to $2,268,000 for the quarter ended September 30, 1996. Gross profit increased by $1,358,000 (32%) to $5,539,000 for the six months ended September 30, 1997 as compared to $4,181,000 for the six months ended September 30, 1996. These increases were primarily due to increased sales volume. Selling, general and administrative expense - Selling, general and administrative expense increased by $698,000 (43%) to $2,340,000 for the quarter ended September 30, 1997 as compared to $1,642,000 for the quarter ended September 30, 1996, and increased as a percentage of net revenues to 76% from 67% in the comparable quarter of the prior year. Selling, general and administrative expense increased by $1,655,000 (58%) to $4,505,000 in the six months ended September 30, 1997 as compared to $2,850,000 for the six 6 months ended September 30, 1996, and increased as a percentage of net revenues to 77% from 63% in the comparable period of the prior year. Selling expenses in both the three and six month periods increased primarily as a result of higher commissions being paid associated with higher net revenues in the overseas markets. General and administrative expenses in both the three and six month periods increased due to the addition of administrative, customer service and technical support personnel, combined with increases in professional fees, and in the six month period, due to a one time charge for severance paid to a former QSE (Bristol) Limited employee. Research and development expense - Research and development expense increased by $191,000 (61%) to $504,000 in the quarter ended September 30, 1997 as compared to $313,000 for the quarter ended September 30, 1996, and increased as a percentage of net revenues to 16% from 13% in the comparable quarter of the prior year. Research and development expense increased by $165,000 (21%) to $954,000 in the six months ended September 30, 1997 as compared to $789,000 for the six months ended September 30, 1996, and decreased as a percentage of net revenues to 16% from 17% in the comparable six months of the prior year. The increases in research and development expense are primarily due to the finalization of STAAD/Pro, the Company's next generation structural engineering product. Other (income) expense - Net interest (income) expense decreased by $28,000 to ($3,000) in the quarter ended September 30, 1997 as compared to ($31,000) for the quarter ended September 30, 1996. The Company completed its initial public offering during the second quarter of fiscal 1997, the proceeds of which were used to pay off debt and increase investments. Therefore, the Company had a decrease in interest expense during the second quarter ended September 30, 1996 as well as increased interest income from investing the offering proceeds. Net interest (income) expense increased by $48,000 to ($22,000) in the six months ended September 30, 1997 as compared to $26,000 for the six months ended September 30, 1996. This increase in net interest income is a result of an increased amount of interest income from investments during the six months ended September 30, 1997 as compared to the six months ended September 30, 1996, as well as a decrease in interest expense during the first quarter of fiscal 1998 compared to the first quarter of fiscal 1997. Income taxes - Income tax expense decreased by $59,000 to $25,000 in the quarter ended September 30, 1997 as compared to $84,000 for the quarter ended September 30, 1996. Income tax expense decreased by $137,000 to $20,000 in the six months ended September 30, 1997 as compared to $157,000 for the six months ended September 30, 1996. This decrease in interest tax expense is primarily the result of a pretax loss in the United States for the quarter and six months ended September 30, 1997 and the related tax benefit for the net operating loss that was recorded. LIQUIDITY AND CAPITAL RESOURCES Certain statements contained in this "Liquidity and Capital Resources" are "forward-looking statements" that involve risks and uncertainties. The actual future results of the Company 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, including those acquired from QSE (Bristol) Limited, and product enhancements, delays in the introduction of new products, increased costs associated with overseas markets, and risks associated with managing the Company's growth, as well as those factors discussed in the Company's Form 10-KSB/A for the fiscal year ended March 31, 1997 which was filed with the Securities and Exchange Commission on August 19, 1997 and the risks described in the "Outlook" section therein. The Company currently finances its operations (including capital expenditures) primarily through cash flows from operations as well as its cash and short-term investment balances. The Company's principal sources of liquidity at September 30, 1997 consisted of $971,000 of cash, $2,576,000 of short-term investments and $500,000 available under a line of credit with Union Bank of California. 7 The decrease in total cash and investments during the six months ended September 30, 1997 was primarily attributable to purchases of capital assets and other assets consisting mainly of purchased technology, combined with a decrease in accounts payable offset by an increase in deferred maintenance. The Company has a $500,000 line of credit with Union Bank of California. The line of credit bears interest at the prime rate. This credit line is collateralized by substantially all of the assets of the Company. The line of credit expires on November 28, 1997. As of September 30, 1997 there was no principal or accrued interest outstanding under the line of credit. The Company plans to negotiate a renewal of the line of credit, however, there can be no assurances that such negotiations will be successful. The Company believes that its current cash and short-term investment balances and cash generated from operations and borrowings available under the Company's line of credit will provide adequate working capital to fund the Company's operations at currently anticipated levels through September 30, 1998. 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. 8 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 (a) The Annual Meeting of Stockholders of the Company was held on September 25, 1997. (b) Omitted pursuant to Instruction 3 to Item 4 of Form 10-QSB. (c)(i) PROPOSAL ONE: Election of five Directors by the holders of issued and outstanding shares of Common Stock:
For Abstain Against --------- ----------- ---------- Amrit K. Das 5,391,619 0 14,758 Jyoti Chatterjee 5,391,619 0 14,758 Dan W. Heil 5,391,619 0 14,758 Bruce E. Cummings 5,391,619 0 14,758 Santanu Das 5,391,619 0 14,758
(c)(ii) PROPOSAL TWO: Ratification of the approval of the Company's 1997 Stock Option Plan: For: 4,049,203 Against: 58,246 Abstain: 54,968 Broker Non-Voting: 1,243,960
(c)(iii) PROPOSAL THREE: Ratification of the appointment of KPMG Peat Marwick LLP as the Company's indepenedent accountants for the fiscal year beginning April 1, 1997: For: 5,399,269 Against: 4,708 Abstain: 2,400 Broker Non-Voting: 0
(d) Not applicable. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K None 9 SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 14, 1997 RESEARCH ENGINEERS, INC. By: /S/ WAYNE BLAIR -------------------------------------- Wayne Blair Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer) 10 EXHIBIT INDEX ------------- Exhibit 27.1 Financial Data Schedule 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 971 2,576 2,138 39 0 6,715 4,219 1,426 11,486 1,911 0 0 0 57 7,577 11,486 5,888 5,888 349 349 (46) 0 (22) 148 20 128 0 0 0 128 .02 .02
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