<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): December 3, 1996
RESEARCH ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-28560 22-2356861
(State or other jurisdiction of (Commission file number) (IRS. Employer Identification
incorporation) No.)
</TABLE>
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
(Address of principal executive offices)
(714) 974-2500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The accompanying financial statements of QSE (Bristol) Limited, a
United Kingdom company, reflect the financial position and results
of operations as of and for the years ended May 31, 1996 and 1995.
(b) Pro forma financial information.
The accompanying unaudited pro forma combined financial data
presents the Pro Forma Combined Statements of Operations for the
nine months ended December 31, 1996, and the year ended March 31,
1996, giving effect to the acquisition of one hundred percent (100%)
of the shares of QSE (Bristol) Limited as if it was consummated on
April 1, 1995. The pro forma data is based on the historical
financial statements of QSE (Bristol) Limited and the Registrant
giving affect to the transaction under the assumptions and
adjustments outlined in the accompanying Notes to Unaudited Pro
Forma Combined Financial Data.
The unaudited pro forma data is provided for comparative purposes
only. It does not purport to be indicative of the results that
actually would have occurred if the acquisition had been consummated
on the date indicated or which may be obtained in the future. The
pro forma combined financial data should be read in connection with
the notes thereto contained elsewhere herein, the audited financial
statements of QSE (Bristol) Limited with the notes thereto contained
elsewhere herein and the consolidated financial statements of the
Company and the related notes thereto.
The historical financial statements of QSE (Bristol) Limited were
prepared in local currency and converted into U.S. dollars at the
average exchange rate for the reporting periods reflected in the
Unaudited Pro Forma Combined Statements of Operations.
[SIGNATURE PAGE TO FORM 8-K/A FOLLOWS]
2
<PAGE>
SIGNATURES
----------
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 hereunto duly authorized.
Date: March 7, 1997
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)
3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
[BARNES HUNTER LETTERHEAD]
The Board of Directors
Research Engineers, Inc.:
We consent to the use of our report on our audit of the financial statements of
QSE (Bristol) Limited for the year ended 31 May 1996 in the Form 8-K/A of
Research Engineers, Inc.
/s/ Barnes Hunter
- -----------------
Barnes Hunter
Bristol, England
3 March 1997
4
<PAGE>
QSE (BRISTOL) LIMITED
Report and Accounts
31 May 1996
5
<PAGE>
QSE (Bristol) Limited
- ------------------------------------------------------------------------------
Registered No. 2168740
DIRECTORS
C B Groves
W S Park
P Stone
SECRETARY
W S Park
REGISTERED OFFICE
Cambrian House
51 Broad Street
Chipping Sodbury
Bristol
BS17 6AD
AUDITORS
Barnes Hunter
Mariner House
62 Prince Street
Bristol
BS1 4QD
BANKERS
National Westminster Bank Plc
77 Broad Street
Chipping Sodbury
Bristol
BS17 6AE
6
<PAGE>
QSE (Bristol) Limited
- -------------------------------------------------------------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS
The directors present their report and the audited accounts for the year ended
31 May 1996.
RESULTS AND DIVIDENDS
The profit for the year attributable to shareholders amounts to (Pounds)9,396
(1995 - loss (Pounds)5,669). The directors do not recommend the payment of a
dividend.
PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS DEVELOPMENTS
The principal activity of the company is the development of computer software
for use in the construction industry
Since the year end, the company has continued to develop and market software.
FIXED ASSETS
Movements on fixed assets are shown in notes 9 and 10 to the accounts.
DIRECTORS AND THEIR INTERESTS
The directors at 31 May 1996 and their interests in the share capital of the
company were as follows:
<TABLE>
<CAPTION>
At 31 May At 1 June
1996 1995
Ordinary shares Ordinary shares
<S> <C> <C>
D M Brohn (Resigned 5 January 1996 ) - 40
C B Groves 40 40
W S Park 40 20
P Stone (Appointed 4 April 1996) - -
</TABLE>
PURCHASE OF OWN SHARES
On 5 January 1996 the company purchased 20 of its own shares from D M Brohn, a
director, for a consideration of (Pounds)14,375. These shares were subsequently
cancelled by the company.
DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period. In preparing those accounts,
the directors are required to:
. select suitable accounting policies and then apply them consistently;
. make judgements and estimates that are reasonable and prudent;
. state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the accounts;
. prepare the accounts on the going concern basis unless it is inappropriate to
presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the accounts comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
AUDITORS
A resolution to reappoint Barnes Hunter as auditors will be made at the Annual
General Meeting.
QSE (Bristol) Limited
- -------------------------------------------------------------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS
SMALL COMPANY EXEMPTIONS
The directors have taken advantage of the exemptions conferred by Part II of
Schedule 8 to the Companies Act 1985.
By order of the board
/s/ W S Park
- ---------------------
Secretary
2 December 1996
7
<PAGE>
REPORT OF THE AUDITORS
TO THE MEMBERS OF QSE (BRISTOL) LIMITED
We have audited the accounts on pages 6 to 14, which have been prepared under
the historical cost convention and on the basis of the accounting policies set
out on page 8.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 4 the company's directors are responsible for the
preparation of the accounts. It is our responsibility to form an independent
opinion, based on our audit, on those accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of affairs of
the company as at 31 May 1996 and of its profit for the year then ended and have
been properly prepared in accordance with the Companies Act 1985.
/s/ Barnes Hunter
- ---------------------
Chartered Accountants
Registered Auditor
Bristol
3 December 1996
8
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
PROFIT AND LOSS ACCOUNT
for the year ended 31 May 1996
<TABLE>
<CAPTION>
Notes 1996 1995
(Pounds) (Pounds)
<S> <C> <C> <C>
TURNOVER 2 521,981 486,206
Operating costs 3 (493,175) (481,011)
-------- --------
OPERATING PROFIT 4 28,806 5,195
Interest payable 7 (10,332) (11,155)
Bank interest receivable 922 567
-------- --------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES 19,396 (5,393)
BEFORE TAXATION
Tax on profit/(loss) on ordinary activities 8 10,000 (276)
-------- --------
PROFIT/(LOSS) FOR THE FINANCIAL YEAR 9,396 (5,669)
======== ========
</TABLE>
A statement on the movement on reserves is given in note 20.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 May 1995
There are no recognised gains or losses other than the profit attributable to
the shareholders of the company of (Pounds) 9,396 in the year ended 31 May 1996
and the loss of (Pounds)5,669 in the year ended 31 May 1995.
9
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
BALANCE SHEET
at 31 May 1996
<TABLE>
<CAPTION>
Notes 1996 1995
(Pounds) (Pounds)
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets 9 44,751 -
Tangible assets 10 26,685 26,641
------- -------
71,436 26,641
------- -------
CURRENT ASSETS
Debtors 11 125,239 117,073
Cash at bank and in hand 60,783 12,086
------- -------
186,022 129,159
CREDITORS: amounts falling due within one year 12 152,037 70,427
------- -------
NET CURRENT ASSETS 33,985 58,732
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 105,421 85,373
------- -------
CREDITORS: amounts falling due after more than one year 13 66,055 49,911
ACCRUALS AND DEFERRED INCOME 30,847 21,964
------- -------
8,519 13,498
======= =======
CAPITAL AND RESERVES
Called up share capital 16 80 100
Capital Redemption Reserve 20 20 -
Share premium 20 7,980 7,980
Profit and loss account 20 439 5,418
------- -------
8,519 13,498
======= =======
</TABLE>
The directors have taken advantage of the exemptions conferred by Part I of
Schedule 8 to the Companies Act 1985, on the grounds that the company is
entitled to the benefit of those exemptions as a small company.
/s/ W S PARK )
) Directors
/s/ C B GROVES )
2 December 1996
10
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
1. ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The accounts are prepared under the historical cost convention.
DEPRECIATION
Depreciation is provided on all tangible fixed assets, at rates calculated to
write off the cost less estimated residual value, of each asset evenly over
its expected useful life, as follows:
Office furniture and equipment, computer equipment and motor vehicles
4 years
RESEARCH AND DEVELOPMENT
Development expenditure incurred on individual projects is carried forward
when its future recoverability can reasonably be regarded as assured and
written off over its expected useful life of 3 years.
PATENTED SOFTWARE
Rights to software purchased from third parties are capitalised in the
balance sheet and are depreciated over their useful lives.
LEASING AND HIRE PURCHASE COMMITMENTS
Assets held under hire purchase agreements are capitalised in the balance
sheet and are depreciated over their useful lives.
The interest element of the rental obligations is charged to the profit and
loss account over the period of the agreement and represents a constant
proportion of the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight line
basis over the term of the lease.
DEFERRED TAXATION
Deferred taxation is provided on the liability method on all timing
differences which are expected to reverse in the future without being
replaced, calculated at the rate at which it is anticipated timing
differences will reverse.
PENSIONS
The company operates a defined contribution pension scheme. Contributions are
charged to the profit and loss account as they become payable in accordance
with the rules of the scheme.
GOVERNMENT GRANTS
Grants of a revenue nature are credited to income in the period to which they
relate.
11
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
2. TURNOVER
Turnover comprises the invoice value of goods and services supplied by the
company, exclusive of VAT. Turnover is attributable to one activity, the
development of computer software for use in the construction industry.
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
United Kingdom 461,679 332,610
Overseas 60,302 153,596
------- -------
521,981 486,206
======= =======
3. OPERATING COSTS
1996 1995
(Pounds) (Pounds)
Other external charges 30,693 48,826
Staff costs - wages and salaries 208,602 241,082
- social security costs 19,872 19,548
- other pension costs 90,872 19,711
Depreciation - tangible fixed assets 18,127 12,596
Amortisation - intangible fixed assets 6,999 -
Other operating charges 118,010 139,248
------- -------
493,175 481,011
======= =======
4. OPERATING PROFIT
Operating loss is stated after charging/(crediting): 1996 1995
(Pounds) (Pounds)
Depreciation of owned assets 16,096 12,596
Depreciation of assets held under hire purchase agreements 2,031 -
Auditor's remuneration 2,550 2,500
Operating lease rentals - plant and equipment 11,753 9,601
- land and buildings 3,170
Government grants (93,407) (68,084)
======= =======
5. DIRECTORS' REMUNERATION
1996 1995
(Pounds) (Pounds)
Remuneration, including pension contributions and
benefits in kind 147,276 88,262
======= =======
</TABLE>
12
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
Director's emoluments, excluding pension contributions, fell within the
following ranges:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
(Pounds)Nil - (Pounds)5,000 - 1
(Pounds)5,001 - (Pounds)10,000 1 -
(Pounds)10,001 - (Pounds)15,000 1 -
(Pounds)15,001 - (Pounds)20,000 1 -
(Pounds)20,001 - (Pounds)25,000 - 2
(Pounds)25,001 - (Pounds)30,000 1 -
(Pounds)30,001 - (Pounds)35,000 - 1
==== ====
The emoluments, excluding pension contrbutions, of the chairman, were (Pounds)17,777 (1995 (Pounds)23,131). The emoluments of the
highest paid director, were (Pounds)29,821 (1995 - (Pounds)31,628).
6. STAFF NUMBERS
The average number of persons employed by the company including directors, during the year, was as follows:
1996 1995
No No
Management 2 3
Administration 3 3
Other 5 6
---- ----
10 12
==== ====
7. INTEREST PAYABLE
1996 1995
(Pounds) (Pounds)
Bank overdraft 1,029 133
Bank loan 8,159 10,201
Finance charges payable under hire purchase agreements 1,144 821
------ ------
10,332 11,155
====== ======
8. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
1996 1995
(Pounds) (Pounds)
Based on profit for the year:
Corporation tax @ 24.83% (1995 - 25%) 17,500 (800)
Deferred tax (7,500) -
------- -------
10,000 (800)
Corporation tax underprovided in previous years 1,076
------- -------
10,000 276
======= =======
</TABLE>
13
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
<TABLE>
<CAPTION>
9. INTANGIBLE FIXED ASSETS
Capitalised software Patented
development expenditure Software Total
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Cost:
At 1 June 1995 138,333 8,000 146,333
Additions 51,750 - 51,750
------- ------ -------
At 31 May 1996 190,083 8,000 198,083
------- ------ -------
Amortisation:
At 1 June 1995 138,333 8,000 146,333
Provided during the year 6,999 - 6,999
------- ------ -------
At 31 May 1996 145,332 8,000 153,332
------- ------ -------
Net book value:
At 31 May 1996 44,751 - 44,751
======= ====== =======
At 1 June 1995 - - -
======= ====== =======
10. TANGIBLE FIXED ASSETS
Office furniture Computer Motor
and equipment equipment vehicles Total
(Pounds) (Pounds) (Pounds) (Pounds)
Cost:
At 1 June 1995 14,577 77,997 4,099 97,526
Additions 1,440 10,093 7,500 19,033
Disposals - - (4,099) (4,099)
------ ------- ------ -------
At 31 May 1996 16,870 88,091 7,500 112,461
------ ------- ------ -------
Depreciation:
At 1 June 1995 12,964 55,876 2,045 26,641
Provided during the year 1,945 12,960 3,221 18,126
Disposals - - (3,235) (3,235)
------ ------- ------ -------
At 31 May 1996 14,909 68,836 2,031 85,776
------ ------- ------ -------
Net book value:
At 31 May 1996 1,961 19,255 5,469 26,685
====== ======= ====== =======
At 1 June 1995 1,613 22,121 2,054 26,641
====== ======= ====== =======
</TABLE>
The net book value of Motor Vehicles above includes an amount of
(Pounds)5,469 (1995 - (Pounds)nil) in respect of assets held under hire
purchase contracts.
14
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
<TABLE>
<CAPTION>
11. DEBTORS
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Trade debtors 95,574 106,870
Other Debtors 25,164 8,880
Prepayments and accrued income 4,501 1,323
------- -------
125,239 117,073
======= =======
12. CREDITORS: amounts falling due within one year
1996 1995
(Pounds) (Pounds)
Bank overdraft 17,875 -
Obligations under hire purchase agreements 2,000 1,090
Current instalments due on bank loan 36,471 38,324
Trade creditors 30,091 16,769
Other taxes and social security costs 13,185 9,967
Accruals and deferred income 24,505 4,277
Directors' current accounts 11,318 -
Corporation tax 16,592 -
------- -------
152,037 70,427
======= =======
13. CREDITORS: amounts falling due after more than one year
1996 1995
(Pounds) (Pounds)
Obligations under hire purchase agreements 2,667 1,000
Bank loans - repayable between one and two years 44,141 36,324
- repayable between two and five years 15,746 6,971
- repayable after more than five years 3,501 5,616
------- -------
66,055 49,911
======= =======
</TABLE>
The loan with National Westminster Bank plc is secured by a fixed charge on
the leasehold property of the company.
The bank loan is repayable in monthly instalments of (Pounds)2,471.
The small firms loan guarantee loan of (Pounds)34,000 is repayable
in monthly instalments of (Pounds)3,000.
The small firms loan guarantee of (Pounds)50,000 is repayable in 12
monthly instalments of (Pounds)4,167 commencing 10 August 1997.
15
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
<TABLE>
<CAPTION>
14. OBLIGATIONS UNDER HIRE PURCHASE AGREEMENTS
The maturity of these amounts is as follows:
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Amounts payable:
Within one year 2,316 1,500
Within two to five years 3,127 1,368
----- -----
5,443 2,868
Less: finance charges allocated to future periods 776 778
----- -----
4,667 2,090
===== =====
Current obligations 2,000 1,090
Non-current obligations 2,667 1,000
----- -----
4,667 2,090
===== =====
15. PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED TAXATION
The components of the provision for deferred taxation are as follows:
1996 1995
(Pounds) (Pounds)
Capital allowances in advance of depreciation 4,118 -
Other timing differences (11,618) -
--------- --------
(7,500) -
========= ========
16. SHARE CAPITAL
Authorised Allocated, called up
and fully paid
1996 1995 1996 1995
(Pounds) (Pounds) (Pounds) (Pounds)
Ordinary shares of (Pounds)1 each 1000 1000 80 100
======== ======== ======== ========
</TABLE>
17. POST BALANCE SHEET EVENTS
In December 1996 the company is committed to make a payment of
(Pounds)70,000 in order to terminate a consultancy agreement.
A letter of support has been received from Research Engineers Inc.
undertaking to provide financial assistance to enable the company to meet
its liabilities as they fall due (see note 22).
16
<PAGE>
QSE (Bristol) Limited
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 May 1996
<TABLE>
<CAPTION>
18. FINANCIAL COMMITMENTS
The annual commitment under non-cancellable operating leases was as follows:
Plant and equipment
1996 1995
(Pounds) (Pounds)
<S> <C> <C>
Operating leases which expire:
within one year 10,167 10,168
within two to five years 9,976 14,007
------ --------
20,143 24,175
====== ========
19. PENSION COMMITMENTS
The company operates a defined contribution pension scheme for its
directors and employees. The assets of the scheme are held separately from
those of the company in an independently administered fund.
20. RESERVES
Share Capital Share Profit and
Capital Redemption Premium loss account
Reserve Account
(Pounds) (Pounds)
At 1 June 1995................. 100 - 7,980 5,418
Purchase of Own Shares (20) 20 - (14,375)
Retained profit for the year - - - 9,396
-------- -------- -------- ---------
80 20 7,980 439
======== ======== ======== =========
</TABLE>
21. RELATED PARTY TRANSACTIONS
Professional fees included an amount of (Pounds)2,333 paid to K. Park, the
father of one of the directors.
22. ULTIMATE HOLDING COMPANY With effect from 3 December 1996 Research Engineers
Inc., a company incorporated in the USA acquired 100% of the share capital
of this company.
17
<PAGE>
RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1996
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Historical Pro forma
----------------------------------- ------------------------------------
Research QSE (Bristol) Combined
Engineers Limited Adjustments Total
------------ --------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenues:
Product sales $ 6,191 $ 542 $ $ 6,733
Maintenance and support 1,059 1,059
------------ --------------- -------------- -------------
Total net revenues 7,250 542 7,792
Cost of revenues 561 561
------------ --------------- -------------- -------------
Gross profit 6,689 542 7,231
Operating expenses:
Selling, general and administrative 5,068 567 14 b,c 5,649
Research and development 871 179 1,050
In-process research and development 715 (715) a
------------ --------------- -------------- -------------
Total operating expenses 6,654 746 (701) 6,699
------------ --------------- -------------- -------------
Operating income (loss) 35 (204) 701 532
Other (income) expense:
Interest (income) expense, net (30) 10 (20)
Other (91) (91)
------------ --------------- -------------- -------------
Income (loss) before income taxes 156 (214) 701 643
Income tax expense 236 5 (23) d 218
------------ --------------- -------------- -------------
Net (loss) income $ (80) $ (219) $ 724 $ 425
============ =============== ============== =============
Net (loss) income per share $ (0.02) $ 0.08
============ =============
Weighted average common shares outstanding 5,014,889 5,014,889
============ =============
See accompanying notes to unaudited pro forma combined financial data
</TABLE>
18
<PAGE>
RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Historical Pro forma
-------------------------------- ----------------
Research QSE (Bristol) Combined
Engineers Limited Adjustments Total
------------ --------------- -------------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Product sales $ 6,044 $ 797 $ $ 6,841
Maintenance and support 1,279 1,279
------------ --------------- -------------- ------------
Total net revenues 7,323 797 8,120
Cost of revenues 524 524
------------ --------------- -------------- ------------
Gross profit 6,799 797 7,596
Operating expenses:
Selling, general and administrative 4,469 607 191 c 5,267
Research and development 1,360 151 1,511
In-process research and development 89 89
------------ --------------- -------------- ------------
Total operating expenses 5,918 758 191 6,867
------------ --------------- -------------- ------------
Operating income 881 39 (191) 729
Other (income) expense:
Interest expense, net 246 15 261
Other (125) (125)
------------ --------------- -------------- ------------
Income before income taxes 760 24 (191) 593
Income tax expense 262 13 (70) d 205
------------ --------------- -------------- ------------
Net Income $ 498 $ 11 $ (121) $ 388
============ =============== ============== ============
Net income per share $ 0.12 $ 0.09
============ ============
Weighted average common shares outstanding 4,139,384 4,139,384
============ ============
See accompanying notes to unaudited pro forma combined financial data
</TABLE>
19
<PAGE>
RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(In thousands)
1. PURCHASE PRICE ALLOCATION
The following outlines the current estimate for the purchase price of the
acquisition of QSE (Bristol) Limited. Management believes that there will be
no material adjustments to this allocation which is based upon an independent
appraisal of the assets purchased and liabilities assumed as follows:
Goodwill $ 721
In process research and development 715
Existing technology 169
Other intangibles 64
--------
1,669
Net book value of liabilities (156)
--------
$ 1,513
========
2. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
combined statements of operations as described below. The pro forma
adjustments outlined below assume that the acquisition of QSE (Bristol)
Limited took place at the beginning of the Company's last fiscal year,
specifically April 1, 1995.
(a) To eliminate non-recurring charge of $715 related to in process research
and development.
(b) To eliminate non-recurring charge of $113 by QSE (Bristol) Limited
related to an exceptional bonus paid prior to the acquisition.
(c) To record amortization charges of $127,000 and $191,000 for the periods
ended December 31, 1996 and March 31, 1996, respectively, related to
acquired intangibles (Note 1). The amortization period for these
intangibles is five years.
(d) To adjust provision for income taxes for the effect of the proforma
adjustments.
3. IN PROCESS RESEARCH AND DEVELOPMENT
In connection with the acquisition of QSE (Bristol) Limited, the Company
obtained an appraisal of the assets acquired which indicated that these
assets combined include approximately $715 of research and development in
process. In the opinion of management and the appraiser, the technological
feasibility of the acquired technology had not yet been established and the
technology had no future alternative uses at the time of the acquisition, and
accordingly, this amount was charged to expense. These costs are considered
non-recurring expenses and the Company is not able to determine if any such
costs will be incurred in the future.
20
