-----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, Ox49EJpe7zIokGkBW6i+NSOPR91X3NSENmvvz6kZvnZ4VvNCvksm/RD+6l2J+FHp NW+mVg3/fktCSbqOYIhKBw== 0001017062-98-002282.txt : 19981118 0001017062-98-002282.hdr.sgml : 19981118 ACCESSION NUMBER: 0001017062-98-002282 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 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: 98749841 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 FOR THE PERIOD ENDED 9/30/1998 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, 1998 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 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) 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 5,680,710 on October 31, 1998. PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RESEARCH ENGINEERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1998 (Unaudited) (In thousands, except share and per share amounts) Assets Current assets: Cash and cash equivalents $ 811 Short-term investments 1,672 Accounts receivable (net of allowance for doubtful accounts of $376) 1,574 Deferred income taxes 852 Notes and related party loans receivable 81 Prepaid expenses and other current assets 521 ------- Total current assets 5,511 Property, plant and equipment, net 3,210 Goodwill (net of accumulated amortization of $651) 937 Other assets 854 ------- $10,512 ======= Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term bank debt $ 144 Accounts payable 281 Accrued expenses 424 Income taxes payable 398 Deferred maintenance revenue 732 Other 32 ------- Total current liabilities 2,011 Long-term bank debt 1,785 Deferred income taxes 72 ------- Total liabilities 3,868 ------- 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 5,680,710 shares 57 Additional paid-in capital 6,602 Retained earnings 310 Accumulated other comprehensive income (325) ------- Total stockholders' equity 6,644 ------- $10,512 =======
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, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Net revenues: Product sales $ 1,643 $ 2,646 $ 3,295 $ 5,015 Maintenance and support 465 448 919 873 ---------- ---------- ---------- ---------- Total net revenues 2,108 3,094 4,214 5,888 Cost of revenues 230 180 478 422 ---------- ---------- ---------- ---------- Gross profit 1,878 2,914 3,736 5,466 ---------- ---------- ---------- ---------- Operating expenses: Selling, general and administrative 1,560 2,304 2,971 4,432 Research and development 607 504 1,222 954 ---------- ---------- ---------- ---------- Total operating expenses 2,167 2,808 4,193 5,386 ---------- ---------- ---------- ---------- Operating (loss) income (289) 106 (457) 80 ---------- ---------- ---------- ---------- Other (income)/expense: Interest, net 22 (3) 37 (22) Other (5) (29) (21) (46) ---------- ---------- ---------- ---------- Total other (income)/expense 17 (32) 16 (68) ---------- ---------- ---------- ---------- (Loss)/income before income taxes (306) 138 (473) 148 Income tax (benefit)/expense (101) 25 (144) 20 ---------- ---------- ---------- ---------- Net (loss)/income $ (205) $ 113 $ (329) $ 128 ========== ========== ========== ========== Net (loss)/income per common share: Basic $ (0.04) $ 0.02 $ (0.06) $ 0.02 Diluted $ (0.04) $ 0.02 $ (0.06) $ 0.02 Common shares used in computing net (loss)/income per common share: Basic 5,680,710 5,703,446 5,680,210 5,703,446 Diluted 5,680,710 5,816,647 5,680,210 5,789,052
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, 1998 1997 ------------- ------------- Cash flows from operating activities: Net (loss)/income $ (329) $ 128 Adjustments to reconcile net (loss)/income to net cash used in operating activities: Depreciation and amortization 482 401 Deferred income taxes (241) (86) Gain on investments (30) (1) Changes in operating assets and liabilities: Accounts receivable 652 - Notes and related party loans receivable 25 (1) Prepaid expenses and other current assets (96) (96) Other assets (112) (563) Accounts payable, accrued expenses and other current liabilities (147) (251) Deferred maintenance revenue (300) 31 Income taxes payable (23) (54) Other long-term liabilities - (18) ------ ------- Net cash used in operating activities (119) (510) ----- ------ Cash flows from investing activities: Purchase of property, plant and equipment (320) (196) Purchase of short-term investments (733) (3,381) Sale of short term investments 639 2,567 ----- ------ Net cash used in investing activities (414) (1,010) ----- ------ Cash flows from financing activities: Proceeds from bank debt 76 9 Repayment of bank debt (57) (57) Common stock issuance from exercise of options 8 - ----- ------ Net cash provided by (used in) financing activities 27 (48) ----- ------ Effect of exchange rate changes on cash and cash equivalents (23) (40) ----- ------ Decrease in cash and cash equivalents (529) (1,608) Cash and cash equivalents, beginning of period 1,340 2,579 ----- ------ Cash and cash equivalents, end of period $ 811 971 ===== ======
See accompanying notes to consolidated financial statements. 4 RESEARCH ENGINEERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (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, 1998 and 1997, the financial position at September 30, 1998, and the cash flows for the six months ended September 30, 1998 and 1997, 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, 1998 are not necessarily indicative of the results to be expected for the full year ended March 31, 1999. 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. RECLASSIFICATIONS Certain prior quarter amounts have been reclassified to conform to the current quarter presentation. 4. SOFTWARE REVENUE RECOGNITION In October 1997, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue Recognition, which supercedes SOP 91-1. SOP 97-2 distinguishes between significant and insignificant vendor obligations as a basis for recording revenue with a requirement that each element of a software licensing arrangement be separately identified and accounted for based on relative fair values of each element. The Company adopted SOP 97-2 in the first quarter of fiscal 1999, the implementation of which resulted in no material changes to the Company's previous practice. 5. COMPREHENSIVE INCOME As of April 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's reported net (loss)/income or stockholders' equity. SFAS No. 130 requires changes in unrealized gains or losses on the Company's available-for-sale investments and foreign currency translation adjustments, which are reported separately in stockholders' equity, to be included in other comprehensive income. The prior year Consolidated Statement of Stockholders' Equity will be reclassified at year-end fiscal 1999 to conform to the requirements of SFAS No. 130. For the three months ended September 30, 1998 and 1997, total comprehensive (loss)/income was ($221,000) and $146,000, respectively, and was ($503,000) and $149,000 for the six months ended September 30, 1998 and 1997, respectively. 5 6. NET (LOSS)/INCOME PER SHARE In December 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, Earnings per Share ("EPS"). SFAS No. 128 replaced the calculation of primary and fully diluted EPS with basic and diluted EPS. Unlike primary EPS, basic EPS excludes any dilutive effects of common stock equivalents, such as options and warrants. Diluted EPS is very similar to the previously reported fully diluted EPS. All EPS amounts for all periods have been restated to conform to the SFAS No. 128 requirements. The following table illustrates the computation of basic and diluted net income/(loss) per share (dollars in thousands):
Three Months Three Months Six Months Six Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Numerator: Numerator for basic and diluted net (loss)/income per share - net (loss)/income $ (205) $ 113 $ (329) $ 129 ====== ====== ====== ====== Denominator: Denominator for basic net (loss)/income per share - average number of common shares outstanding during the period 5,681 5,703 5,680 5,703 Incremental common shares attributable to exercise of outstanding options - 114 - 86 ------ ------ ------ ------ Denominator for diluted net (loss)/income per share 5,681 5,817 5,680 5,789 ====== ====== ====== ====== Basic net (loss)/income per share $(0.04) $ 0.02 $(0.06) $ 0.02 ====== ====== ====== ====== Diluted net (loss)/income per share $(0.04) $ 0.02 $(0.06) $ 0.02 ====== ====== ====== ======
The computation of diluted loss per share for the three months and six months ended September 30, 1998 excluded the effect of 219,000 and 234,000, respectively, of incremental common shares attributable to the exercise of outstanding common stock options because their effect was antidilutive. Warrants issued to the underwriters as part of the Company's initial public offering to purchase 130,000 shares of common stock at $6.00 per share were outstanding during the three months and six months ended September 30, 1998 and 1997 but were not included in the computation of diluted EPS because the warrants' exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. 7. SUBSEQUENT EVENT On October 23, 1998, the Company signed a definitive agreement (the "Agreement") to acquire Engineering Physics Software, Inc., dba COADE. Under the terms of the Agreement, the Company will acquire all of the outstanding stock of COADE for $5,250,000 in cash and 980,000 shares of the Company's common stock. 6 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 flagship structural analysis and design software; STAAD/Pro, the first comprehensive structural design office solution; 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, 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, 1998, as compared to the Company's results of operations for the three months and six months ended September 30, 1997. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 AND SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 Net revenues - Net revenues for the quarter ended September 30, 1998 decreased by $986,000 (32%) to $2,108,000, as compared to $3,094,000 for the quarter ended September 30, 1997. For the six months ended September 30, 1998, revenues decreased by $1,675,000 (28%) to $4,214,000 from $5,888,000 for the six months ended September 30, 1997. These decreases in net revenues were primarily attributable to the decline in economic conditions in Southeast Asia that started during the latter part of fiscal 1998. Revenues to Southeast Asia for the three months and six months ended September 30, 1997 represented 30% for both periods of the Company's total revenues, compared to only 16% and 13% for the three months and six months ended September 30, 1998, respectively. 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. In accordance with the American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2, Software Revenue Recognition, issued in 1997, which supercedes SOP 91-1, product maintenance revenues are amortized over the length of the maintenance contract, which is usually twelve months. The implementation of SOP 97-2 did not result in any material changes from the Company's previous practice. International net revenues as a percentage of total revenues for the quarter ended September 30, 1998 decreased to 47%, from 59% for the quarter ended September 30, 1997. For the six months ended September 30, 1998, international revenues decreased to 44%, from 60% for the six months ended September 30, 1997. The decrease in international revenues for the periods was primarily the result of the decline in economic conditions in Southeast Asia that started during the latter part of fiscal 1998. The Company expects this trend to continue for at least the next several quarters, and therefore, remains cautious about its short-term Southeast Asia prospects. The previous sentence is a forward-looking statement. The state of the Asian economy at any particular point in the future depends on a large number of factors which are beyond the control of the Company, and is impossible for the Company to predict accurately. 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 into U.S. Dollars. There were no foreign exchange gains or losses that were material to the Company's financial results during the three months and six months ended September 30, 1998 and 1997. Cost of revenues - Cost of revenues increased by $50,000 (28%) to $230,000 in the quarter ended September 30, 1998 as compared to $180,000 for the quarter ended September 30, 1997. Cost of revenues 7 increased by $56,000 (13%) to $478,000 for the six months ended September 30, 1998 as compared to $422,000 for the six months ended September 30, 1997. These increases were primarily due to increased capitalized software amortization as a result of additions to the capitalized software balance during fiscal years 1998 and 1999. Gross profit - Gross profit decreased by $1,036,000 (36%) to $1,878,000 in the quarter ended September 30, 1998 as compared to $2,914,000 for the quarter ended September 30, 1997. Gross profit decreased by $1,731,000 (32%) to $3,736,000 for the six months ended September 30, 1998 as compared to $5,467,000 for the six months ended September 30, 1997. These decreases were primarily due to decreased sales volume. Selling, general and administrative expense - Selling, general and administrative expense decreased by $744,000 (32%) to $1,560,000 for the quarter ended September 30, 1998 as compared to $2,304,000 for the quarter ended September 30, 1997, and decreased as a percentage of net revenues to 74% from 75% in the comparable quarter of the prior year. Selling, general and administrative expense decreased by $1,461,000 (33%) to $2,971,000 in the six months ended September 30, 1998 as compared to $4,432,000 for the six months ended September 30, 1997, and decreased as a percentage of net revenues to 71% from 75% in the comparable period of the prior year. The majority of the fluctuation is due to a decrease in sales commissions being paid associated with declining net revenues in the Southeast Asia markets, which are among the Company's highest commission rate markets. General and administrative expenses in the six-month period decreased due to a one-time charge for severance paid to a former QSE (Bristol) Limited employee during the first quarter of fiscal 1998, combined with a decrease in royalties paid to outside companies due to the expiration of certain royalty agreements. Research and development expense - Research and development expense increased by $103,000 (20%) to $607,000 in the quarter ended September 30, 1998 as compared to $504,000 for the quarter ended September 30, 1997, and increased as a percentage of net revenues to 29% from 16% in the comparable quarter of the prior year. Research and development expense increased by $268,000 (28%) to $1,222,000 in the six months ended September 30, 1998 as compared to $954,000 for the six months ended September 30, 1997, and increased as a percentage of net revenues to 29% from 16% in the comparable six months of the prior year. The increases in research and development expense are primarily due to the addition of research and development personnel since the first two quarters of fiscal 1998, as well as additional costs paid to outside consultants for research and development projects. Other (income) expense - Net interest (income) expense decreased by $25,000 to $22,000 in the quarter ended September 30, 1998 as compared to ($3,000) for the quarter ended September 30, 1997. Net interest (income) expense decreased by $59,000 to $37,000 in the six months ended September 30, 1998 as compared to ($22,000) for the six months ended September 30, 1997. The decreases result from a decline in the Company's short-term investment balances since the second quarter of fiscal 1998 and the resulting decrease in interest income. Other (income) expense decreased by $24,000 to ($5,000) in the quarter ended September 30, 1998 as compared to ($29,000) for the quarter ended September 30, 1997. Other (income) expense decreased by $25,000 to ($21,000) in the six months ended September 30, 1998 as compared to ($46,000) for the six months ended September 30, 1997. During October 1997, one of the Company's tenants who was renting space in the Corporate building terminated its lease, resulting in a decrease in rental income. Income taxes - The Company had income tax benefit of $101,000 and $144,000 for the three months and six months ended September 30, 1998, respectively, as compared to income tax expense of $25,000 and $20,000 for the three months and six months ended September 30, 1997, respectively. These fluctuations are primarily due to a pretax loss in the United States for the three months and six months ended September 30, 1998 and the related tax benefit for the net operating loss that was recorded. The Company increased its deferred tax asset during the current quarter by $164,000 and believes that this asset will be realizable against future earnings and could potentially be realized against prior earnings. 8 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 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 Form 10-KSB for the fiscal year ended March 31, 1998 which was filed with the Securities and Exchange Commission on June 29, 1998 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, 1998 consisted of $811,000 of cash, $1,672,000 of short-term investments and $500,000 available under a line of credit with Union Bank of California. The decrease in total cash and investments during the six months ended September 30, 1998 was primarily attributable to the purchase of capital assets, primarily in India in connection with the occupation of a new building in Calcutta, combined with decreases in accounts payable, accrued expenses, deferred maintenance revenue and other current liabilities, and increases in prepaid and other current assets, offset by a decrease in accounts receivable. 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 December 1, 1998, at which time the Company plans to renew the agreement. As of September 30, 1998, there were no amounts outstanding under the line of credit. During fiscal 1998 and the first two quarters of fiscal 1999, the Company experienced a decrease in Southeast Asia revenues as a result of a downturn in economic conditions in key Asian markets. Payment from the Company's customers in these markets has been hampered by difficulty in obtaining favorable foreign exchange resulting in approximately $780,000 in past-due receivables from Asian customers at September 30, 1998. The Company expects to collect the past-due receivables from Asian customers throughout fiscal 1999 net of the allowance for doubtful accounts. 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, 1999. The Company, however, is currently working with their investment banker to raise all or a significant portion of the cash component of the COADE purchase price through a combination of long-term secured and unsecured borrowings. 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. IMPACT OF YEAR 2000 Many existing software programs use only two digits to identify the year in the date field. If such programs are not corrected, date data concerning the Year 2000 could cause many computer applications to fail, lock-up or generate erroneous results. The Company is in the process of identifying and assessing its mission-critical systems related to the Year 2000 and will commit the resources necessary to resolve any potential Year 2000 issues. This identification and assessment also involves identification of vendors that may have a significant impact on the Company's operations and their expected completion of any conversions. Although the Company is addressing such issues in what it considers to be sufficient time prior to the century rollover, there can be 9 no assurance that there will be no interruption of operations or other limitations of system functionality, or that the Company will not incur substantial costs to avoid such occurrences. The Company has determined that it will not need to modify or replace significant portions of its software sold to customers, as it does not contain any date-specific material, and does not believe its significant vendors will require significant modification of their internal systems. The Company anticipates that its systems, equipment and processes will be substantially Year 2000 ready by the end of March 1999. The Company is currently assessing the cost to remediate its Year 2000 issues. Although the actual cost to remediate these issues is not yet fully known, based upon information to date, it is expected that the remediation will not have a material impact on the Company's financial condition or operating results. Presently, the Company does not have a contingency plan for Year 2000 issues. The Company expects to have a plan in place by the third quarter of fiscal 1999. In addition, the Company has initiated communications with its significant suppliers and large customers to determine the extent to which the Company's internal applications and other interface systems are vulnerable to those third parties' failure to remedy their own Year 2000 issues. There can be no assurance that other companies' systems on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The most reasonably likely worst case scenario would be that the Company's significant customers' inability to remedy their own Year 2000 issues would prevent them from purchasing the Company's products. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS As of April 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's reported net (loss)/income or stockholders' equity. SFAS No. 130 requires changes in unrealized gains or losses on the Company's available-for-sale investments and foreign currency translation adjustments, which are reported separately in stockholders' equity, to be included in other comprehensive income. The prior year Consolidated Statement of Stockholders' Equity will be reclassified at year-end fiscal 1999 to conform to the requirements of SFAS No. 130. During the second quarter of fiscal 1999 and 1998, total comprehensive (loss)/income was ($221,000) and $146,000, respectively, and was ($503,000) and $149,000 for the six months ended September 30, 1998 and 1997, respectively. In December 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which requires the Company to disclose certain information about reportable operating segments in complete sets of financial statements of the Company and in condensed financial statements of interim periods. The Company adopted SFAS No. 131 in the first quarter of fiscal 1999 with no material impact on the financial statements. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments embedded in other contracts and for hedging activities. SFAS 133 is effective for all fiscal quarters or fiscal years beginning after June 15, 1999. Application of this accounting standard is not expected to have a material impact on the Company's consolidated financial position, results of operations or liquidity. 10 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 FORM 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K None 11 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 13, 1998 RESEARCH ENGINEERS, INC. By: /S/ WAYNE BLAIR --------------- Wayne Blair Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer) 12 EXHIBIT INDEX ------------- EXHIBIT 27.1 FINANCIAL DATA SCHEDULE 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAR-31-1999 APR-01-1998 SEP-30-1998 811 1,672 1,950 376 0 5,511 4,264 1,054 10,512 2,011 0 0 0 57 6,587 10,512 4,214 4,214 478 478 (21) 30 37 (473) (144) (329) 0 0 0 (329) (0.06) (0.06)
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