As filed with the Securities and Exchange Commission on October 13, 1999.
Registration No. __________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RESEARCH ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2356861
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
22700 Savi Ranch Parkway
Yorba Linda, California 92887
(714) 974-2500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------------------------
Jyoti Chatterjee, President Copy to:
Research Engineers, Inc. Gregg Amber, Esq.
22700 Savi Ranch Parkway Rutan & Tucker LLP
Yorba Linda, California 92887 611 Anton Boulevard, Suite 1400
(714) 833-3838 Costa Mesa, California 92626
(714) 641-5100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time to time
after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [/]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------=============
<CAPTION>
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered(1) Per Share (2) Offering Price Fee
- -------------------------------------------------------------------=============
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value(3) 1,149,208 $9.25 $10,630,174 $2,955
- -------------------------------------------------------------------=============
<FN>
(1) In the event of a stock split, stock dividend, anti-dilution adjustment or
similar transaction involving common stock of the registrant, in order to
prevent dilution, the number of shares registered shall be automatically
increased to cover the additional shares in accordance with Rule 416(a)
under the Securities Act.
(2) Estimated solely for the purpose of determining the registration fee.
Calculated pursuant to Rule 457(c), on the basis of the market price per
share on October 11, 1999.
(3) Includes 50,000 shares of common stock underlying outstanding common stock
purchase warrants and 928,573 shares of common stock underlying Series B
5% Convertible Preferred Stock.
</FN>
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION DATED OCTOBER 13, 1999
RESEARCH ENGINEERS, INC.
1,149,208 Shares
Common Stock
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
This prospectus relates to 1,149,208 shares of our common stock, $.01 par
value per share which are being offered by the selling stockholders, including
shares of common stock underlying warrants and shares of Series B 5% Convertible
Preferred Stock which we previously issued to certain selling stockholders.
The shares offered hereby were acquired by the selling stockholders in
private transactions and are "restricted securities" under the Securities Act of
1933. This prospectus has been prepared for the purpose of registering the
shares under the Securities Act of 1933 to allow for future sales by the selling
stockholders to the public without restriction. To our knowledge, the selling
stockholders have made no arrangement with any brokerage firm for the sale of
the shares. The selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933. Any commissions received by a broker
or dealer in connection with resales of the shares may be deemed to be
underwriting commissions or discounts under the Securities Act of 1933. We
agreed to indemnify the selling stockholders against certain liabilities,
including certain liabilities under the Securities Act of 1933. See "Plan of
Distribution."
The price of the common stock being offered by the selling stockholders may
vary, depending on market conditions. We will not receive any of the proceeds
from the sale of the shares by the selling stockholders.
There is an existing market for these shares. Our common stock is traded on
the Nasdaq National Market System under the symbol "RENG." The last reported
sales price on October 11, 1999 was $9.25 per share.
----------------------------------------
The common stock offered hereby involves a high degree of risk. See "Risk
Factors" beginning on page 4.
----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------
The date of this prospectus is October 13, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Company....................................................... 3
Risk Factors...................................................... 4
Special Note Regarding Forward-Looking Statements................. 11
Plan of Distribution.............................................. 12
Selling Stockholders.............................................. 14
Use of Proceeds................................................... 16
Experts........................................................... 17
Legal Matters..................................................... 17
Where You Can Find More Information............................... 17
Incorporation of Certain Documents by Reference................... 17
</TABLE>
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
prospectus, in connection with the offering contemplated hereby, and, if given
or made, such information or representations must not be relied upon as having
been authorized by us or the selling stockholders. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in our affairs since the date hereof or that the
information contained or incorporated by reference herein is correct as of any
time subsequent to its date.
2
<PAGE>
THE COMPANY
Research Engineers, Inc. was incorporated in 1981 and is headquartered in
Yorba Linda, California. We are a leading provider of technically advanced
engineering software solutions. Our software products provide fully integrated
easy-to-use design automation and analysis solutions for use by engineering
analysis and design professionals worldwide. Our comprehensive line of
structural, mechanical, civil and process/piping engineering software products
is designed to fully integrate the functions of model generation, analysis,
design drafting and data presentation. All of our products utilize a proprietary
Windows-based graphics engine, allowing the software to be used with or without
third-party CAD software. Our products assist engineers in performing a myriad
of mission-critical engineering tasks, including the analysis and design of
industrial, commercial, transportation and utility structures, pipelines,
machinery, automotive and aerospace products, and survey, contour and digital
terrain modeling. Suggested list prices for most of our products range from
approximately $995 to $7,000.
Through the acquisitions of R-Cube Technologies in February 1999 and NetGuru
Systems in September 1999, we have expanded into the $90 billion information
technology services industry, providing expertise in data-mining and embedded
technologies to Internet/Intranet design and communications. In addition, in
April 1999, we announced that we had launched the first of several e-commerce
special interest portals targeting the 90 million expatriate professionals of
the Asia Pacific region now living throughout Europe and North America.
We currently license our software products to more than 19,000 customers
accounting for over 47,000 software installations and 140,000 concurrent users
worldwide. A selected list of our customers include: Bechtel Corporation, Boston
Edison, British Telecom, California Department of Resources, California
Institute of Technology, Jet Propulsion Laboratories, Exxon Corporation, Fluor
Daniel, Inc., General Dynamics, NASA, Rocketdyne, Siemens AG and Toyo
Engineering. Our products are sold and supported domestically and
internationally through our network of branch offices, subsidiaries and
representatives in the United States, United Kingdom, Germany, Japan, France,
Scandinavia, Australia, China, Singapore, India, Indonesia, Korea, Thailand,
Malaysia, South Africa, Mexico, Russia, the Middle East and Latin America. Our
structural and civil engineering products provide eight international language
options and local design codes required by our worldwide markets.
3
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating us and our business before
purchasing the common stock offered by this prospectus. An investment in the
common stock offered hereby is speculative in nature and involves a high degree
of risk.
Risks Related to Our Business
Our success depends on our retention of our current key management and
technical personnel.
Our future success depends to a large extent upon the continued services of
key managerial and qualified technical and marketing employees and on our
ability to attract, assimilate or retain other highly qualified employees.
Competition for such personnel is intense, and there can be no assurance that we
will be able to attract, assimilate or retain such personnel. The loss of the
services of any of our key employees or our inability to recruit quality
personnel could have a material adverse effect on our business. We do not
currently maintain life insurance on the lives of any of our key employees.
If we are unable to effectively manage our expanded operations our business
could be adversely affected.
We expect to experience rapid growth over the next several years. This could
place a significant strain on our management and other resources. Our ability to
manage our growth will require us to continue to improve our operational,
financial and management information systems, and to motivate and effectively
manage our employees. Among other things, we will need to hire and integrate new
managers and install and operate new or enhanced accounting and financial
management systems. If we are unable to manage growth effectively, the quality
of our products and services, our ability to identify, hire and retain key
personnel and our business and results of operations could be adversely
affected.
The markets in which we compete are highly competitive and we expect them to
become more competitive in the future, which could result in significant price
competition, reduced revenues, lower profit margins or loss of market share.
The CAD, computer aided engineering software and information technology
industries are highly competitive. These industries may experience pricing and
margin pressure which as a result, could adversely affect our operating results
and financial position. A number of companies offer products and services that
target the same markets as we target. Some of our competitors and potential
competitors have larger technical staffs, more established and larger marketing
and sales organizations and significantly greater financial resources than ours.
Our competitors may develop products that are superior to ours or that achieve
greater market acceptance. Our future success will depend significantly upon our
ability to increase our share of our target markets and to sell additional
products, product enhancements and services to our existing customers. We may
not be able to compete successfully, and competition may result in decreases in:
- the prices we receive for our products and services
4
<PAGE>
- our revenues
- our profit margins
- our market share
Any such decreases would adversely affect our business and results of
operations.
The majority of our revenues are currently derived from the engineering
design industry so a decline in this industry or related industries may
adversely affect our business.
Although we are in the process of diversifying our business through
acquisitions and through expansion into information technology and other lines
of business, during the fiscal year ended March 31, 1999, approximately 96% of
our revenues were derived from sales of engineering software products to the
construction and plant design industries. Companies in these industries will
continue to account for significant amounts of our revenue for the foreseeable
future, and we depend on continued demand for our products from those
industries. While those industries are cyclical, downturns in those industries
are difficult to predict and it could be difficult for us to react quickly if
and when downturns occur. Any such downturns could adversely affect our business
and results of operations.
If we are unable to successfully implement our acquisition strategy, our
expectations of our growth or operating results may not be met.
To expand our markets, our business strategy includes growth through
acquisitions. For instance, through the acquisitions of R-Cube in February 1999
and NetGuru in September 1999, we have expanded into the $90 billion IT services
industry. Identifying and pursuing strategic acquisition opportunities and
integrating acquired products and businesses requires a significant amount of
management time and skill. There can be no assurance that we will be able to
identify suitable acquisition candidates, consummate any acquisition on
acceptable terms or successfully integrate any acquired business into our
operations. There also can be no assurance that any future acquisition will not
have an adverse effect upon our operating results, particularly in the fiscal
quarters immediately following consummation of the acquisition while the
acquired business is being integrated into our operations.
We have recently expanded into new lines of business, and those lines of
business may be difficult to integrate with our core business.
We have been in the engineering software business since 1981. We have only
recently entered the information technology, Internet special interest portal
and digital animation fields. Our expansion into these lines of business may be
particularly difficult for us to manage, acquisitions in these fields may be
more difficult for us to integrate, at least initially, because they involve
different disciplines and require different expertise than our core business. If
we are not able to attain the level of expertise and reputation in these fields
that we feel we have attained in the engineering software field, our business
and results of operations could be adversely affected.
5
<PAGE>
Our intellectual property protections may not be adequate and could adversely
affect our business.
We rely primarily on a combination of contract, copyright, trademark and
trade secret laws, license and confidentiality agreements and software security
measures to protect our proprietary technology. We distribute our products under
"shrink-wrap" software license agreements, which grant end-users licenses to
(rather than ownership of) our products and which contain various provisions
intended to protect our ownership and confidentiality of the underlying
technology. In addition, our software is distributed with a third party
"hardware lock." We also require all of our employees and other parties with
access to our confidential information to execute agreements prohibiting the
unauthorized use or disclosure of our technology. In addition, we periodically
review our proprietary technology for patentability, although we do not have any
current patents. Despite these precautions, we believe that existing laws
provide limited protection for our technology and that it may be possible for a
third party to misappropriate our technology or to independently develop similar
technology. In addition, effective copyright and trade secret protection may not
be available in every jurisdiction where we distribute our products,
particularly in foreign countries where the laws generally offer no protection
or less protection than those of the United States. Due to our significant
reliance upon international sales of our products, this lack of copyright and
trade secret protection could adversely affect our business and results of
operations if a third party were successful in copying our products and
marketing products similar to ours. Moreover, "shrink-wrap" licenses, which are
not signed by the end-user, may be unenforceable in certain jurisdictions.
We believe that, due to the rapid pace of technological innovation and change
within the engineering industry, legal protections afforded our technology are
less significant in affecting our business and results of operations than
factors such as our reputation, our products, the knowledge, ability and
experience of our personnel, the frequency of product enhancements and the
timeliness and quality of our customer service and support.
In order to compete successfully, we must keep pace with the rapid changes to
which our industries are subject.
The engineering software and information technology industries are
characterized by rapid technological advances, changes in customer requirements
and frequent new product and services introductions and enhancements. Our future
success will depend upon our ability to enhance our current products and
services and to develop and introduce new products and services that keep pace
with technological developments, respond to evolving customer requirements and
achieve market acceptance. In particular, we believe we must continue to respond
quickly to users' needs for broad functionality and to advances in hardware and
operating systems. Any failure on our part to anticipate or respond adequately
to technological developments and customer requirements, or any significant
delays in product development or introduction, could result in a loss of
competitiveness or revenues. New products or product enhancements which we
develop might not achieve market acceptance.
6
<PAGE>
Risks Related to our International Operations
A substantial portion of our sales are made in foreign markets and, as a result,
we are subject to a number of risks associated with international business
activities.
Sales of our products and services to customers located outside the United
States accounted for approximately 45% of our net revenue for the fiscal year
ended March 31, 1999. We anticipate that international sales will continue to
account for a significant portion of our total software sales. As a result, our
financial results could be impacted by weakened general economic conditions,
such as the recent condition in the Asian markets, differing technological
advances or preferences, volatile foreign exchange rates and government trade
restrictions in any country in which we do business.
We have increasingly relied on distributors and representatives to market our
products, particularly in the Asia-Pacific market. Our revenue in any particular
quarter may be negatively impacted by a lower than anticipated performance of
any significant distributor or representative. We do not offer a right of return
to distributors or representatives. We do, however, provide extended payment
terms of up to 90 days and commissions to these distributors and
representatives. Commissions range from 20% to 70% of gross sales. These
commissions are recorded at the time of sale and are reflected in selling
expenses in our consolidated statements of operations. Sales in other regions
such as North America and Europe are generally made without commissions. We
continue to assess the costs and benefits of continuing to offer these
commissions and to evaluate means whereby the amounts can be reduced. Means by
which commissions may be reduced include, but are not limited to, opening
additional foreign sales offices, establishing new foreign subsidiaries and
renegotiating current commission amounts with foreign distributors and
representatives. We may, however, find it necessary in the future to continue to
provide commissions at current levels or possibly increase them in order to
expand international sales, which could negatively impact our operating income.
There are a number of risks inherent in our international business
activities, including:
- unexpected changes in regulatory requirements
- tariffs, duties and other trade barriers and restrictions
- longer account receivable payment cycles
- potentially adverse tax consequences
- the burdens of compliance with foreign laws
- lack of international market data
- difficulties in managing the staffing of international operations
- establishing or maintaining international distribution channels
- increased collection risks
- uncertain political, regulatory and economic developments
Any of these risks could adversely affect our business and results of
operations.
7
<PAGE>
If we are unable to meet the regulatory standards of foreign governments on a
timely basis, our foreign operations and sales could be delayed and revenues
negatively impacted.
While we believe our current products and services are designed to meet the
regulatory standards of foreign markets, our inability to maintain or to obtain
foreign regulatory approvals on a timely basis in the future could adversely
affect our business.
Because the financial statements of our foreign subsidiaries are prepared
using the relevant foreign currency which must be converted into U.S. dollars
for inclusion in our consolidated financial statements, exchange rate
fluctuations may adversely impact our reported earnings.
We have established and acquired several international subsidiaries, which
prepare their balance sheets in the relevant foreign currency. In order to be
included in our consolidated financial statements, these balance sheets are
converted, at the then current exchange rate, into U.S. dollars and the
statements of operations are converted using weighted average exchange rates for
the applicable period. Therefore, exchange rate fluctuations can have a
detrimental effect on our earnings or on our ability to compete. We do not
engage in hedging activities to protect against the risk of currency
fluctuations. Foreign currency denominated sales may result in gains and losses
on the conversion to U.S. dollars. We have historically denominated sales by our
foreign subsidiaries in the local currency. In addition, we expect that in the
future many of our European subsidiaries will denominate their revenues in the
Euro. The Euro is an untested currency and may be subject to economic risks that
are not currently contemplated and which could have a harmful effect on our
business.
Risks Related to this Offering
The market price of our stock has fluctuated and may continue to fluctuate
due to changes in revenue and operating results and general market conditions.
Our operating results have fluctuated in the past and may fluctuate
significantly in the future. Future results could be impacted by factors such as
customer order delays, a slower growth rate in the market, increased competition
or adverse changes in general economic conditions in any of the countries in
which we do business. While no single customer has accounted for more than 10%
of our revenues, the loss of a major distributor or a reduction in orders from a
major distributor could have a significant impact on our results of operations
in any particular quarter or fiscal year.
Our quarterly results of operations may also vary significantly depending on
a number of other factors, including the timing of the introduction or
enhancement of products by us or our competitors, market acceptance of new
products, customer order deferrals in anticipation of new products, changes in
our operating expenses, personnel changes, mix of products sold, changes in
product pricing, acquisitions of additional products or businesses and general
business and economic conditions. There can be no assurance that we will be able
to grow or sustain our profitability on a quarterly or annual basis.
In addition, certain of our expenses are based, in part, on our future
revenue expectations. We continue to increase our operating expense levels to
meet the growing customer demand for our products and services. If revenue is
below expectations, our operating results could be adversely and materially
affected. Net income may be disproportionately affected by an unexpected
reduction in revenue because certain expenses are generally committed in
advance.
8
<PAGE>
Our stock price may fluctuate significantly as a result of fluctuations in
our quarterly performance, and may also fluctuate due to other factors, many of
which are beyond our control, such as analysts' expectations and our performance
relative to those expectations, global economic conditions and general market
conditions. During the past year, our stock price has fluctuated from a low of
$1.87 per share during the week of December 31, 1998, to a high of $11.50 during
the week of April 30, 1999. Any of the following factors could have a
significant impact on the market price of our common stock:
- variations in our revenue
- variations in our earnings and cash flows
- announcements of technological innovations or price reductions by us,
our competitors, or providers of alternative products and processes
- the gain or loss of significant customers
- changes in analysts' earnings estimates
- general conditions in the engineering software and information
technology markets
In addition, the securities markets have recently experienced significant
price and volume fluctuations that have particularly affected technology-based
companies, and resulted in changes in the market prices of the stocks of many
companies that have not been directly related to the operating performance of
those companies. Such broad market fluctuations may adversely affect the market
price of our common stock. In the past, following periods of volatility in the
market price of a company's securities, securities class action litigation has
sometimes been instituted against the issuing company. If securities litigation
is brought against us, it could result in substantial costs and a diversion of
management's attention and resources, which could adversely affect our business
and results of operations. Any adverse determination in such litigation could
also subject us to substantial liabilities.
We may need additional capital in the future and adequate financing may not
be available.
Our future capital requirements will depend upon many factors, including the
development of new products, possible future strategic acquisitions, the
progress of our research and development efforts, the expansion of our sales and
marketing efforts and the status of competitive products. We believe that
current and future available capital resources will be adequate to fund our
operations for the foreseeable future. However, to the extent we are in need of
any additional financing after such time, there can be no assurance that any
such additional financing will be available to us on acceptable terms, or at
all. If additional funds are raised by issuing equity securities, further
dilution to the existing stockholders may result. If adequate funds are not
available, we may be required to delay, scale back or eliminate our research and
development program or to obtain funds through arrangements with partners or
others that may require us to relinquish rights to certain of our technologies
or potential products or other assets. Accordingly, the inability to obtain such
financing could adversely affect our business, financial condition and results
of operations.
9
<PAGE>
Our stock has historically been thinly traded, and the ability of the
selling stockholders to sell their shares in the open market could depress our
stock price.
During 1999, our trading volume on the Nasdaq National Market has averaged
less than 60,000 shares per week, and during the quarter ended September 30,
1999 averaged less than 30,000 shares per week. By virtue of this prospectus,
the selling stockholders will be able to resell publicly up to 1,149,208 shares
of our common stock. If they were to do so in large volumes during short periods
of time, our stock price on the Nasdaq National Market could be significantly
depressed. Furthermore, the formula for calculating the conversion price of the
Series B 5% Convertible Preferred Stock and the exercise price of the warrants
held by certain of the selling stockholders is tied to a percentage of the
then-current market price of our common stock, so those selling stockholders
have no incentive to try to help support our stock price by selling in small
blocks over a period of time or otherwise in a manner that would avoid a
depression in the market price. See "Selling Stockholders--The Selling Funds."
Our preferred stock may delay or prevent a takeover of our company possibly
preventing you from obtaining higher stock prices for your shares.
Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights of those shares without any further vote or action by
our stockholders. The rights of the holders of our common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desired flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of the company.
Furthermore, such preferred stock may have other rights, including economic
rights senior to the common stock, and, as a result, the issuance thereof could
adversely affect the market value of our common stock. We have no present plans
to issue shares of preferred stock.
The concentration of ownership of our common stock and the antitakeover
effects of Delaware law could adversely affect the performance of our stock.
Our executive officers and directors and their family members together
beneficially own approximately 62.9% of the issued and outstanding shares of our
common stock. As a result, such persons will have the ability to elect a
majority of directors and exert control over our affairs, irrespective of how
our other stockholders may vote. This concentration of ownership may have the
effect of delaying or preventing a change in control of the company. In
addition, Section 203 of the General Corporation Law of Delaware prohibits us
from engaging in certain business combinations with interested stockholders, as
defined by statute. These provisions may have the effect of delaying or
preventing a change in control of the company without action by our
stockholders, and therefore could adversely affect the price of our common
stock.
10
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements, including among
others (i) the projected growth in the engineering software market; (ii)
anticipated trends in our financial condition and results of operations; (iii)
our business strategy for expanding our presence in the engineering software
industry; and (iv) our ability to distinguish ourselves from our current and
future competitors. These forward-looking statements are based largely on our
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking statements. In
addition to the other risks described in the Risk Factors discussion, important
factors to consider in evaluating such forward-looking statements include (i)
changes in external competitive market factors or in our internal budgeting
process which might impact trends in our results of operations; (ii)
unanticipated working capital or other cash requirements; (iii) changes in our
business strategy or an inability to execute our strategy due to unanticipated
changes in the engineering software or information technology industry; and (iv)
various competitive factors that may prevent us from competing successfully in
the marketplace. In light of these risks and uncertainties, many of which are
described in greater detail elsewhere in this Risk Factors discussion, there can
be no assurance that the events predicted in forward-looking statements
contained in this prospectus will in fact transpire.
11
<PAGE>
PLAN OF DISTRIBUTION
The shares being offered hereby will be offered and sold by the selling
stockholders for their own accounts. We will not receive any of the proceeds
from the sale of the shares pursuant to this prospectus. We have agreed to bear
the expenses of the registration of the shares, including legal, accounting,
printing and filing fees, and such expenses are estimated to be $20,000.
The shares offered by this prospectus may be sold from time to time by the
selling stockholders and those persons' pledgees, donees, transferees or other
successors in interest. The selling stockholders may sell the shares on the
Nasdaq National Market or otherwise, at market prices or at negotiated prices.
They may sell shares by one or a combination of the following:
- a block trade in which a broker or dealer so engaged will attempt to sell
the shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus; and
- ordinary brokerage transactions and transactions in which a broker
solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from selling stockholders in amounts to be
negotiated prior to the sale. The selling stockholders and any broker-dealers
that participate in the distribution may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any proceeds or
commissions received by them, and any profits on the resale of shares sold by
broker-dealers, may be deemed to be underwriting discounts and commissions.
Regulation M under the Securities Exchange Act of 1934 prohibits participants
in a distribution and their affiliates from bidding for or purchasing any of the
securities that are the subject of the distribution. It also governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
If any selling stockholder notifies us that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file, a prospectus supplement, if required
pursuant to Rule 424(c) under the Securities Act of 1933, setting forth:
- the name of each of the participating broker-dealers,
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the broker-
dealers, where applicable,
12
<PAGE>
- a statement to the effect that the broker-dealers did not conduct any
investigation to verify the information set out or incorporated by
reference in this prospectus, and
- any other facts material to the transaction.
We have agreed to indemnify the selling stockholders against liabilities,
including certain liabilities under the Securities Act of 1933 or to contribute
to payments which the selling stockholders may be required to make in respect of
these liabilities.
13
<PAGE>
SELLING STOCKHOLDERS
General
There are three selling stockholders. We sometimes refer to The Shaar Fund,
Ltd. and Triton Private Equities Fund, L.P. as the selling funds. The selling
stockholders are acting individually, not as a group. None of the selling
stockholders or their affiliates has held any position, office or other material
relationship, other than as a stockholder, with us, except that Bharat Manglani
became a non-executive officer employee of ours after our acquisition of NetGuru
Systems, Inc. and NetGuru Consulting, Inc. The identity of the selling
stockholders and the maximum number of shares of common stock offered under this
prospectus by each of them are as follows:
<TABLE>
<S> <C>
The Shaar Fund, Ltd. 790,000 shares (1)
Triton Private Equities
Fund, L.P. 188,573 shares (1)
Bharat Manglani 170,635 shares
- ----------
<FN>
(1) This number of shares is the initial number that these funds has the right
to require us to register for them. The actual number of shares that these funds
will acquire and then sell under this prospectus is determined, in part, by a
formula described below under "The Selling Funds," although the maximum number
of shares of common stock offered under this prospectus by these funds will not
exceed the amounts shown above. If the conversion formula yields a greater
number of shares, then we will file a new registration statement covering those
additional shares.
</FN>
</TABLE>
The Selling Funds
Shares Offered Under this Prospectus
The Shaar Fund, Ltd. is offering up to 790,000 shares of our common stock and
Triton Private Equities Fund, L.P. is offering up to 188,573 shares of our
common stock. They have the right to acquire those shares under the terms of
371,429 shares of Series B 5% Convertible Preferred Stock, and 50,000 warrants
that they acquired on September 14, 1999.
The number of shares offered under this prospectus by the selling funds
consists of the following three components:
- 40,000 shares of our common stock which The Shaar Fund, Ltd. can
acquire under a warrant which is exercisable at $9.7076 per share.
- 750,000 shares of our common stock into which Series B 5% Convertible
Preferred Stock held by The Shaar Fund, Ltd. is assumed to be
convertible. Under our agreement with The Shaar Fund, Ltd., we are
required initially to register this number of shares. This number is
determined based upon the assumption that the conversion of the
Series B 5% Convertible Preferred Stock into common stock will occur
at a conversion price of $4.00 per share.
- 10,000 shares of our common stock which Triton Private Equities Fund,
L.P. can acquire under a warrant which is exercisable at $9.7076 per
share.
14
<PAGE>
- 178,573 shares of common stock into which the Series B 5% Convertible
Preferred Stock is assumed to be convertible. Under our agreement with
Triton Private Equities Fund, L.P., we are required initially to
register this number of shares. This number is determined based upon
the assumption that the conversion of the Series B 5% Convertible
Preferred Stock into common stock will occur at a conversion price of
$4.00 per share.
Series B 5% Convertible Preferred Stock
The Series B 5% Convertible Preferred Stock has a stated value of $10.00 per
share, which is credited towards the purchase of shares of our common stock at
an agreed-upon conversion price. The conversion price is the lesser of $12.8438
per share or a discount to the "market price" of our common stock at the time of
conversion. For these purposes, the "market price" is the average of the three
lowest closing bid prices of our common stock during the ten trading days
immediately preceding the conversion.
The conversion price of the Series B 5% Convertible Preferred Stock can never
exceed $12.8438 per share, but may be less than that ceiling, based upon the
following:
<TABLE>
<S> <C>
Time of Conversion Conversion Price
90 - 120 days after purchase 105% of market price
120 - 150 days after purchase 103% of market price
150 - 180 days after purchase 100% of market price
180 - 210 days after purchase 97% of market price
210 days or more after purchase 95% of market price
</TABLE>
If at any time our common stock is delisted from the Nasdaq National Market,
the conversion price will be reduced to 65% of market price.
The selling funds may elect when to convert the Series B 5% Convertible
Preferred Stock; however, on September 14, 2002, the selling funds must convert
all outstanding shares of Series B 5% Convertible Preferred Stock at the
applicable conversion price.
At any time after 180 days from the purchase date (September 14, 1999), we
may redeem any unconverted Series B 5% Convertible Preferred Stock from the
selling funds for 100% of the stated value, upon 60 days written notice.
All shares being offered by the selling funds are being registered under
registration rights agreements between the selling funds and us.
Examples of the Effect of the Formula Conversion Price
The following tables give several examples of the number of shares of common
stock into which the 371,429 shares of Series B 5% Convertible Preferred Stock
could be converted, depending on the market price of the common stock.
15
<PAGE>
Since there are maximum conversion prices for the Series B 5% Convertible
Preferred Stock, the selling funds will always be able to acquire a substantial
number of shares of common stock, even if the market price of our common stock
is high.
After December 13, 1999, the selling funds will be able to acquire at least
289,189 shares of common stock upon conversion of the Series B 5% Convertible
Preferred Stock, no matter how high our market price may be at that time,
because the $12.8438 maximum conversion price for the Series B 5% Convertible
Preferred Stock will apply.
Assuming all 371,429 shares of the Series B 5% Convertible Preferred Stock
are converted at the lower of 95% of market price (which applies after 210 days
following the purchase of the Series B 5% Convertible Preferred Stock) or the
$13.1562 maximum conversion price:
<TABLE>
<S> <C> <C>
Number of
Market Price Conversion Price Common Shares
$2.00 (1) $ 1.30 (1) 2,857,146
5.00 4.75 781,956
7.50 7.125 521,304
10.00 9.50 390,978
15.00 (2) 12.8438 (2) 289,189
- ----------
<FN>
(1) At $2.00 per share, it is likely that our common stock will have been
delisted from the Nasdaq National Market, in which case the 65% of market price
conversion factor would apply.
(2) At any market price greater than $13.52, the maximum conversion price of
$12.8438 applies to the Series B 5% Convertible Preferred Stock.
</FN>
</TABLE>
The exact number of shares that the selling funds will actually sell pursuant
to this prospectus may be less than the full 978,573 because the selling funds
have the discretion to determine when and whether they will sell any shares
under this prospectus, and also because the actual number of shares which the
selling funds will acquire by converting the Series B 5% Convertible Preferred
Stock is not known. If the selling funds acquire a greater number of shares upon
conversion of the Series B 5% Convertible Preferred Stock, then we will file a
new registration statement covering those additional shares. Also, we must file
another registration statement covering additional shares of our common stock
underlying the Series B 5% Convertible Preferred Stock if the market price of
our common stock falls below $5.00 per share on any day.
Bharat Manglani
Mr. Manglani is offering shares of our common stock that he acquired from
us in connection with our acquisition of NetGuru Systems, Inc. and NetGuru
Consulting, Inc. from Mr. Manglani.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of common
stock offered hereby.
16
<PAGE>
EXPERTS
The consolidated financial statements of Research Engineers, Inc. and
subsidiaries as of March 31, 1999, and for the years ended March 31, 1999 and
1998, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for Research Engineers, Inc. by Rutan &
Tucker, LLP, Costa Mesa, California.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 covering the shares of
common stock offered pursuant to this prospectus. This prospectus omits certain
information and exhibits included in the registration statement, copies of which
may be obtained upon payment of a fee prescribed by the Commission or may be
examined free of charge at the principal office of the Commission in Washington,
D.C.
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith file reports and other information with
the Commission. Reports, proxy statements and other information filed by us with
the Commission may be inspected at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 7 World Trade Center, 13th Floor, New York,
New York 10048, and at Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can request copies of these documents upon
payment of a duplicating fee, by writing to the Commission. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our filings, including the registration statement, will
also be available to you on the Commission's Internet site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have filed the documents listed below with the Commission. These documents
are incorporated herein by reference: (a) our Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1999; (b) our Current Report on Form 8-K dated
September 28, 1999; (c) our Proxy Statement dated October 13, 1999; (d) our
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999; and (e) the
description of our common stock contained in the registration statement on Form
8-A filed pursuant to Section 12 of the Securities Exchange Act of 1934 on June
11, 1996 (incorporating by reference information contained in our registration
statement on Form SB-2 filed pursuant to the Securities Act of 1933).
All reports and documents which we subsequently file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference into this prospectus and to be part hereof from
the date of filing of those reports and documents. Any statement contained in a
17
<PAGE>
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated herein modifies
or supersedes that statement. Any modified or superseded statement shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon the written or oral
request, a copy of any or all of the documents referred to above which have been
incorporated into this prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
any such document). Requests for such copies should be directed to Wayne Blair,
Research Engineers, Inc., 22700 Savi Ranch Parkway, Yorba Linda, California
92887; Telephone: (714) 974-2500.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses payable in connection with the distribution of the securities being
registered (estimated except for the registration fee), all of which will be
borne by the registrant, are as follows:
<TABLE>
<S> <C>
Registration fee......................... $2,955
Printing expenses........................ 500
Legal fees and expenses.................. 10,000
Accounting fees.......................... 4,000
Miscellaneous expenses................... 2,545
Total......................... $20,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The liability of the registrant's controlling persons, officers or directors
is or may be affected in such capacity by the following:
The registrant's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The registrant's
Bylaws provide that the registrant shall indemnify its officers and directors
and may indemnify its employees and other agents to the fullest extent permitted
by Delaware law.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Item 16. Exhibits.
<TABLE>
<S> <C>
Exhibit
Number Description of Exhibit
------- ----------------------
5 Opinion of Rutan & Tucker, LLP as to the legality of the
shares of common stock registered hereunder.
23.1 Consent of KPMG LLP.
23.2 Consent of Rutan & Tucker, LLP (included in Exhibit Number 5).
</TABLE>
19
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided however, that paragraphs (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment to this
registration statement any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions or otherwise,
20
<PAGE>
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Yorba Linda, State of California, on October 13,
1999.
RESEARCH ENGINEERS, INC.
By: /S/JYOTI CHATTERJEE
---------------------------
Jyoti Chatterjee, President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jyoti Chatterjee and Wayne Blair, or either of them, his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this registration statement on Form S-3 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as each
might or could do in person, hereby ratifying and confirming each act that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the following
capacities on October 13, 1999.
<TABLE>
<S> <C> <C>
Name Title Date
- ---------------------- ------------------------ ----------------
/S/AMRIT K. DAS Chairman of the Board October 13, 1999
- -------------------- and Director
Amrit K. Das
/S/JYOTI CHATTERJEE President (principal October 13, 1999
- -------------------- executive officer) and
Jyoti Chatterjee Director
/S/WAYNE BLAIR Chief Financial Officer October 13, 1999
- -------------------- (principal accounting
Wayne Blair officer)
/S/DAN W. HEIL Director October 13, 1999
- --------------------
Dan W. Heil
/S/BRUCE E. CUMMINGS Director October 13, 1999
- --------------------
Bruce E. Cummings
/S/SANTANU DAS Director October 13, 1999
- --------------------
Santanu Das
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C>
Exhibit Number Description of Exhibit Page Number
- -------------- ---------------------- -----------
5 Opinion of Rutan & Tucker, LLP as
to the legality of the shares of
common stock registered hereunder.
23.1 Consent of KPMG LLP.
23.2 Consent of Rutan & Tucker, LLP
(included in Exhibit Number 5).
</TABLE>
23
<PAGE>
EXHIBIT 5
RUTAN & TUCKER, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626
(714) 641-5100
October 13, 1999
Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
Re: Form S-3 Registration Statement
Gentlemen:
We have acted as special counsel to Research Engineers, Inc., a
Delaware corporation (the "Company"), in connection with the registration by the
Company on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended, of 1,149,208 shares of the Company's common stock, $.01 par
value (the "Shares"). The Shares are being offered for sale by certain
stockholders of the Company (the "Selling Stockholders") identified in the
Registration Statement.
On the basis of such investigations as we have deemed necessary, we
are of the opinion that the Shares to be offered for sale by the Selling
Stockholders have been duly authorized and are (or, upon exercise of warrants or
conversion of Series B 5% Convertible Preferred Stock, as the case may be, in
accordance with their terms, will be) fully paid and nonassessable and have been
(or, upon the execution and delivery of certificates representing Shares after
exercise of warrants or conversion of Series B 5% Convertible Preferred Stock,
as the case may be, in accordance with their terms, will be) validly issued.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" contained in the prospectus that forms a part of the
Registration Statement.
Very truly yours,
RUTAN & TUCKER, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Research Engineers, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Research Engineers, Inc. of our report dated May 17, 1999, relating
to the consolidated balance sheet of Research Engineers, Inc. and subsidiaries
as of March 31, 1999, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss) and cash flows for the
years ended March 31, 1999 and 1998, which report appears in the March 31, 1999
Annual Report on Form 10-KSB of Research Engineers, Inc.
KPMG LLP
Orange County, California
October 13, 1999
