|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: GOLD BANC CORP INC, 424B1, 1999-05-13 |
Next: OPPENHEIMER DEVELOPING MARKETS FUND, 497, 1999-05-13 |
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): February 26, 1999
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 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 1999, Research Engineers, Inc. ("the Company") acquired
all of the outstanding stock of R-Cube Technologies, Inc. ("R-Cube").
The stock was acquired from Krishna P. Reddy and Anuradha Padala,
Prakash Rao Pokala and Sucharita Pokala, and Srinivasa Reddy Malireddy
and M. Veda Vathi.
R-Cube is a provider of Information Technology ("IT") Services
headquartered in Cupertino, California.
The acquisition is being accounted for using the purchase method of
accounting. The aggregate purchase price, including acquisition costs,
was approximately $2.6 million. The acquisition was funded through a
$2.32 million line of credit from Imperial Bank, and operating capital.
In determining the purchase price for R-Cube, the Company took into
account the value of companies of similar industry and size to R-Cube,
comparable transactions and the market for such companies generally.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The following financial statements of R-Cube are included in this
Current Report:
PAGE
----
Independent Auditors' Report.............................. 3
Balance Sheet as of December 31, 1998 (unaudited)......... 4
Statements of Income for the three months ended
December 31, 1998 (unaudited) and for the years ended
September 30, 1998 and 1997............................ 5
Statements of Stockholders' Equity for the three months
ended December 31, 1998 (unaudited) and for the years
ended September 30, 1998 and 1997...................... 6
Statements of Cash Flows for the three months ended
December 31, 1998 (unaudited) and for the years ended
September 30, 1998 and 1997............................ 7
Notes to Financial Statements............................. 8
2
<PAGE>
Independent Auditors' Report
The Board of Directors
R-Cube Technologies, Inc.:
We have audited the accompanying balance sheets of R-Cube Technologies, Inc. as
of September 30, 1998 and 1997 and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R-Cube Technologies, Inc. as of
September 30, 1998 and 1997 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Orange County, California
May 8, 1999
/s/ KPMG LLP
3
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Balance Sheet
As of December 31, 1998 (unaudited)
and September 30, 1998 and 1997
<TABLE>
<CAPTION>
September 30,
December 31, ------------------------
Assets 1998 1998 1997
------------ --------- ---------
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash $270,731 128,141 94,022
Accounts receivable 407,959 542,597 133,324
Unbilled receivables 120,505 83,949 13,816
Employee advances 23,557 12,432 --
Prepaid insurance 8,012 -- --
-------- ------- -------
Total current assets 830,764 767,119 241,162
Property and equipment, less accumulated
depreciation 22,322 23,284 11,204
Other assets 10,730 10,730 --
-------- ------- -------
$863,816 801,133 252,366
======== ======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $133,020 219,788 47,970
Notes payable to stockholders -- 24,000 --
Accrued expenses 181,037 149,478 32,543
Income taxes payable 2,418 9,392 3,850
-------- ------- -------
Total current liabilities 316,475 402,658 84,363
Notes payable to stockholders' -- -- 24,000
Deferred income taxes 166,708 103,734 17,890
-------- ------- -------
166,708 103,734 41,890
Commitment (note 7)
Subsequent events (notes 5, 6 and 10)
Stockholders' equity:
Common stock, without par value; 10,000,000
shares authorized, 3,300,000 shares issued 66,000 66,000 66,000
Retained earnings 314,633 228,741 60,113
-------- ------- -------
Total stockholders' equity 380,633 294,741 126,113
-------- ------- -------
$863,816 801,133 252,366
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Statements of Income
For the three months ended December 31, 1998 (unaudited)
and the years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
For the three
months ended Years Ended September 30,
December 31, ---------------------------------
1998 1998 1997
-------------- --------- ---------
(unaudited)
<S> <C> <C> <C>
Revenue $1,187,952 3,354,376 1,046,236
Operating expenses:
Payroll 714,994 1,818,208 491,297
Consulting fees 223,973 852,952 342,351
Other operating expenses 103,554 435,899 134,554
---------- --------- ---------
Total operating expenses 1,042,521 3,107,059 968,202
---------- --------- ---------
Operating income 145,431 247,317 78,034
Other income, net 7,461 11,787 3,819
--------- --------- ---------
Income before taxes 152,892 259,104 81,853
Income tax provision 67,000 90,476 21,740
--------- --------- ---------
Net income $ 85,892 168,628 60,113
========== ========= =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Statements of Stockholders' Equity
For the three months ended December 31, 1998 (unaudited)
and the years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Common stock Total
--------------------- Retained stockholders'
Shares Amount earnings equity
--------- ------- -------- ------------
<S> <C> <C> <C> <C>
Initial issuance of common stock 1,650,000 $33,000 $ -- $ 33,000
Issuance of common stock 1,650,000 33,000 -- 33,000
Net income -- -- 60,113 60,113
--------- ------- -------- --------
Balance, September 30, 1997 3,300,000 66,000 60,113 126,113
Net income -- -- 168,628 168,628
--------- ------- -------- --------
Balance, September 30, 1998 3,300,000 66,000 228,741 294,741
Net income (unaudited) -- -- 85,892 85.892
--------- ------- -------- --------
Balance, December 31, 1998 (unaudited) 3,300,000 $66,000 $314,633 $380,633
========= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Statements of Cash Flows
For the three months ended December 31, 1998 (unaudited)
and the years ended September 30, 1998 and 1997
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
For the three
months ended
December 31,
1998 1998 1997
-------------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Cash Flows from operating activities:
Net income $ 85,892 168,628 60,113
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,937 6,836 1,363
Changes in assets and liabilities:
Accounts receivable 134,638 (409,273) (133,324)
Prepaid insurance (8,012) -- --
Unbilled receivables (36,556) (70,133) (13,816)
Employee advances (11,125) (12,432) --
Other assets -- (10,730) --
Accounts payable (82,352) 171,818 47,970
Accrued expenses 27,143 116,935 32,543
Income taxes payable (6,974) 5,542 3,850
Deferred income taxes 62,974 85,844 17,890
-------- -------- --------
Net cash provided by operating activities 167,565 53,035 16,589
-------- -------- --------
Cash flows from investing activities capital expenditures (975) (18,916) (12,567)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 66,000
Proceeds from (repayments of) notes payable to stockholders (24,000) -- 24,000
-------- -------- --------
Net cash provided by (used in) financing activities (24,000) -- 90,000
-------- -------- --------
Net increase in cash 142,590 34,119 94,022
Cash, beginning of year 128,141 94,022 --
-------- -------- --------
Cash, end of year $270,731 128,141 94,022
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,430 -- --
Income taxes 11,000 96,288 18,290
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Notes to Financial Statements
(1) General Information and Summary of Significant Accounting Policies
(a) General
R-Cube Technologies, Inc. (the Company) provides software consulting
and contracting services, principally in the San Francisco Bay Area.
The Company was incorporated under the laws of the State of California
and began operations in October 1996.
(b) Quarterly Financial Information
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which are normal recurring
accruals) necessary to present fairly the financial position as of
December 31, 1998, and the statements of income, stockholders' equity
and cash flows for the three months ended December 31, 1998. The
results of operations for the three months ended December 31, 1998 are
not necessarily indicative of the results to be expected for the entire
fiscal year.
(c) Revenue Recognition
The Company provides engineering consulting services on a time and
material basis. Revenue from consulting engagements is recognized when
services are performed. Direct costs, and other general and
administrative expenses are charged to expense as incurred. The delay
between the service performance and invoicing generates unbilled
accounts receivable.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets which range from three to five years.
(e) 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 reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(f) Income Taxes
The Company provides for income taxes using the asset and liability
method. Deferred tax assets and liabilities arise from temporary
differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements that will result in
taxable or deductible amounts in future years.
8
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Notes to Financial Statements, continued
(g) Comprehensive Income
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," which establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption had no
impact on the Company's results of operations or stockholders' equity.
For the three months ended December 31, 1998, total comprehensive
income equaled the net income for the period.
(h) Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be considered cash
equivalents.
(2) Cash
During the year ended September 30, 1998, the Company maintained deposits
in a single bank that exceeded the Federally insured deposit limit of
$100,000.
(3) Significant Customers
For the year ended September 30, 1998, the Company performed substantial
services for two clients which amounted to approximately 25% and 27% of the
Company's revenues, respectively. For the year ended September 30, 1997,
the Company performed substantial services for one client which amounted to
approximately 58% of the Company's revenues. At September 30, 1998 and
1997, accounts receivable included approximately $240,000 and $66,000,
respectively due from these major customers.
(4) Property and Equipment
Property and equipment at September 30, 1998 and 1997 consists of:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Computer equipment $21,439 10,514
Office furniture and equipment 10,044 2,054
------- -------
31,483 12,568
Less accumulated depreciation (8,199) (1,364)
------- -------
$23,284 11,204
======= =======
</TABLE>
(5) Related Party Transactions
On October 1, 1996, the Company entered into agreements with its three
stockholders to borrow $8,000 from each individual stockholder. The notes
accrue interest at 8% annually and were due and payable on November 2,
1998. The amount outstanding under these agreements was $24,000 at
September 30, 1997 and 1998. The outstanding amounts accrued plus interest
were paid in full in November 1998.
9
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Notes to Financial Statements, continued
(6) Retirement Plan
October 1, 1998, the Company implemented a 401(k) retirement plan for the
benefit of all eligible employees. The Company plans to maintain its 401(k)
retirement plan independently following the sale of its outstanding stock
to Research Engineers, Inc. (see note 10).
(7) Operating Lease
The Company leases certain facilities under noncancelable operating leases.
The facility leases include options to extend the lease terms and
provisions for payment of property taxes, insurance and maintenance
expenses.
The future minimum annual rental commitments under these lease obligations
were as follows:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Year ending September 30:
1999 $25,656
2000 2,138
-------
$27,794
=======
</TABLE>
Rent expense was $49,913 and $19,572 for the years ended September 30, 1998
and 1997, respectively.
(8) Accrued Expenses
Accrued expenses consist of:
<TABLE>
<CAPTION>
1998 1997
-------- ------
<S> <C> <C>
Consulting fees $ 48,665 7,700
Salaries and bonuses 49,488 14,253
Vacation 40,000 --
Other accruals 11,325 10,590
-------- ------
$149,478 32,543
======== ======
</TABLE>
(9) Income Taxes
The provision for income taxes is comprised of the following for the years
ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Current:
Federal $ 7,389 2,287
State 5,835 1,563
------- ------
</TABLE>
10
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Notes to Financial Statements, continued
<TABLE>
<S> <C> <C>
Total current 13,224 3,850
------- ------
Deferred:
Federal 62,701 11,693
State 14,551 6,197
------- ------
Total deferred 77,252 17,890
------- ------
Total taxes on income $90,476 21,740
======= ======
</TABLE>
A reconciliation of the U.S. Federal tax expense to the amounts computed using
the statutory U.S. Federal tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Expected U.S. Federal tax $34.0% 34.0%
State taxes, net of Federal benefit 5.7 7.1
Benefit of lower tax brackets (0.6) (14.4)
Other (0.8) (0.1)
----- ------
Total taxes on income $38.3% 26.6%
===== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
State taxes $ 8,592 --
--------- --------
Gross deferred tax assets 8,592 --
Valuation allowance -- --
--------- --------
Deferred tax assets, net of valuation
allowance 8,592 --
--------- --------
Depreciation (4,662) --
Cash to accrual adjustment (99,072) (17,890)
--------- --------
Gross deferred tax liabilities
(103,734) (17,890)
--------- --------
Net deferred tax liability $ (95,142) (17,890)
========= ========
</TABLE>
The deferred tax assets are included in other assets in the accompanying
balance sheets. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is
11
<PAGE>
R-CUBE TECHNOLOGIES, INC.
Notes to Financial Statements, continued
dependent upon the generation of future taxable earnings in specific tax
jurisdictions during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred
tax liabilities, projected future taxable earnings and tax planning
strategies in making this assessment.
Based upon the level of historical taxable earnings and projections of
future taxable earnings over the periods in which the deferred tax assets
are deductible, management has concluded that it is more likely than not
that the Company will realize the benefits of these deductible
differences.
(10) Subsequent Event
On February 26, 1999, Research Engineers, Inc., acquired all of the
Company's outstanding stock for cash.
12
<PAGE>
(b) Pro forma financial information.
The following pro forma combined condensed financial information is
based upon the historical financial statements of the Company and has
been prepared to illustrate the effects of the acquisition of R-Cube.
The unaudited pro forma combined condensed balance sheet as of
December 31, 1998 gives effect to the R-Cube acquisition, as if the
acquisition had been completed on December 31, 1998 and was prepared
based upon the balance sheets of the Company and R-Cube as of December
31, 1998.
The unaudited pro forma combined condensed statements of operations
for the 9 month period ended December 31, 1998 and the year ended
March 31, 1998 give effect to the transaction described above as if
the transaction had been completed at the beginning of each period
presented. The unaudited pro forma combined condensed statements of
operations for the 9 month period ended December 31, 1998 were
prepared based upon the separate unaudited financial statements of the
Company and R-Cube for the 9 month period ended December 31, 1998. The
unaudited pro forma combined condensed statements of operations for
the year ended March 31, 1998 were prepared based upon the separate
historical financial statements of the Company and R-Cube for the year
ended March 31, 1998.
The unaudited pro forma combined condensed financial information is
provided for comparative purposes only and is not indicative of the
results of operations or financial position of the combined companies
that would have occurred had the acquisition occurred at the beginning
of the period presented or on the date indicated, nor is it indicative
of future operating results or financial position. The unaudited pro
forma adjustments are based upon currently available information and
upon certain assumptions that management of the Company believes are
reasonable under the circumstances. The unaudited pro forma combined
condensed financial information and the related notes thereto should
be read in conjunction with the Company's financial statements and the
related notes, included in the Company's fiscal 1998 Form 10-KSB and
fiscal 1999 third quarter Form 10-QSB, and the financial statements of
R-Cube which are listed in item 7(a) above. The R-Cube financial
information has been prepared in accordance with generally accepted
accounting principles and the instructions to Form 10-QSB and Article
10 of Regulation S-X. All adjustments, consisting of normal recurring
accruals considered necessary for a fair presentation, have been
included.
The R-Cube acquisition will be accounted for using the purchase method
of accounting. Accordingly, the Company's cost to acquire R-Cube will
be allocated to the assets acquired and liabilities assumed according
to their estimated fair values as of the date of the R-Cube
acquisition.
13
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of December 31, 1998
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------------------------------
Research R-Cube Pro Forma Combined REI
Engineers, Inc. Technologies, Inc. Adjustments and R-Cube
--------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 1,314 $271 $ 2,320 (A) $ 1,302
(2,603) (B)
Short term investments 270 - - 270
Accounts receivable, net 2,226 528 - 2,754
Deferred income taxes 923 - - 923
Notes and related party loans receivable 77 24 - 101
Prepaid expenses and other current assets 400 8 - 408
------- ---- ------- -------
Total current assets 5,210 831 (283) 5,758
Property, plant and equipment, net 3,266 22 - 3,288
Goodwill, net 1,204 - 2,222 (B) 3,426
Other assets 865 11 - 876
------- ---- ------- -------
$10,545 $864 $ 1,939 $13,348
======= ==== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of l/t debt $ 145 $ - $ - $ 145
Accounts payable 356 133 - 489
Accrued expenses 463 181 - 644
Income taxes payable 312 2 - 314
Deferred maintenance revenue 716 - - 716
Other 30 - - 30
------- ---- ------- -------
Total current liabilities 2,022 316 - 2,338
Long-term bank debt 1,753 - 2,320 (A) 4,073
Deferred income taxes 72 167 - 239
------- ---- ------- -------
Total liabilities 3,847 483 2,320 6,650
------- ---- ------- -------
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 66 (66) (B) 57
Additional paid-in capital 6,602 - - 6,602
Retained earnings 294 315 (315) (B) 294
Accumulated other comprehensive loss (255) - - (255)
------- ---- ------- -------
Total stockholders' equity 6,698 381 (381) 6,698
------- ---- ------- -------
$10,545 $864 $ 1,939 $13,348
======= ==== ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial
Information
14
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Nine Months Ended December 31, 1998
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended December 31, 1998
-----------------------------------------------------------------
Research R-Cube Pro Forma Combined REI
Engineers, Inc. Technologies, Inc. Adjustments and R-Cube
--------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Product sales $ 5,762 $ - $ - $ 5,762
Maintenance and services 1,379 3,349 - 4,728
--------- ------ ----- ---------
Total net revenues 7,141 3,349 - 10,490
Cost of revenues 716 2,459 - 3,175
--------- ------ ----- ---------
Gross profit 6,425 890 - 7,315
--------- ------ ----- ---------
Operating expenses:
Selling, general and administrative 5,053 720 171 (C) 5,944
Research and development 1,820 - - 1,820
--------- ------ ----- ---------
Total operating expenses 6,873 720 171 7,764
--------- ------ ----- ---------
Operating income/(loss) (448) 170 (171) (449)
--------- ------ ----- ---------
Other expense/(income):
Interest, net 50 3 187 (D) 240
Other (10) (18) - (28)
--------- ------ ----- ---------
Total other expense/(income) 40 (15) 187 212
--------- ------ ----- ---------
(Loss)/income before income taxes (488) 185 (358) (661)
Income tax expense/(benefit) (143) 71 (45) (E) (117)
--------- ------ ----- ---------
Net (loss)/income $ (345) $ 114 $(313) $ (544)
========= ====== ===== =========
Net (loss)/income per common share:
Basic $ (0.06) $ (0.10)
Diluted $ (0.06) $ (0.10)
Common shares used in computing net (loss)/income
per common share:
Basic 5,680,377 5,680,377
Diluted 5,680,377 5,680,377
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial
Information
15
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1998
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Year Ended March 31, 1998
-----------------------------------------------------------------
Research R-Cube Pro Forma Combined REI
Engineers, Inc. Technologies, Inc. Adjustments and R-Cube
--------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Product sales $ 10,610 $ - $ - $ 10,610
Maintenance and services 1,736 1,940 - 3,676
--------- ------ ----- ---------
Total net revenues 12,346 1,940 - 14,286
Cost of revenues 799 1,271 - 2,070
--------- ------ ----- ---------
Gross profit 11,547 669 - 12,216
--------- ------ ----- ---------
Operating expenses:
Selling, general and administrative 8,929 409 228 (C) 9,566
Research and development 2,115 - - 2,115
Acquired in-process research and
development costs 450 - - 450
--------- ------ ----- ---------
Total operating expenses 11,494 409 228 12,131
--------- ------ ----- ---------
Operating income/(loss) 53 260 (228) 85
--------- ------ ----- ---------
Other expense/(income):
Interest, net (49) - 249 (D) 200
Other (55) - - (55)
--------- ------ ----- ---------
Total other expense/(income) (104) - 249 145
--------- ------ ----- ---------
(Loss)/income before income taxes 157 260 (477) (60)
Income tax expense/(benefit) 69 27 (57) (E) 39
--------- ------ ----- ---------
Net (loss)/income $ 88 $ 233 $(420) $ (99)
========= ====== ===== =========
Net (loss)/income per common share:
Basic $ 0.02 $ (0.02)
Diluted $ 0.02 $ (0.02)
Common shares used in computing net (loss)/income
per common share:
Basic 5,695,457 5,695,457
Diluted 5,784,740 5,695,457
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial
Information
16
<PAGE>
RESEARCH ENGINEERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
A. The Company borrowed $2,320,000 under a new credit facility to finance
the acquisition. This revolving facility bears interest at a floating
rate based on the Prime Rate + 3% payable in monthly interest only
payments through maturity on September 1, 2000.
B. The Company paid $2,320,000 in cash to acquire all outstanding shares
of R-Cube and incurred $283,000 in acquisition-related expenses. The
existing stockholders' equity of R-Cube at the date of the acquisition
was reduced to zero and the excess of total cash paid, including
acquisition-related expenses, over the net assets acquired was recorded
as goodwill. The allocation of fair value is preliminary. This goodwill
will be amortized over a period of ten years.
C. Reflects amortization expense, which is being recognized for a period
of 10 years, for the period related to the goodwill recorded in the
acquisition as discussed in note B above.
D. Reflects the interest expense on outstanding borrowings under the new
revolving credit facility. The interest was calculated using the
assumption that the outstanding borrowings would remain at same balance
as at the date of the acquisition. As mentioned in note A above the
credit facility bears interest at a floating rate based on the Prime
Rate + 3%. For purposes of this Pro Forma calculation, an effective
rate of 10.75% was used.
E. Reflects the estimated impact on income tax expense/(benefit) related
to the pro forma adjustments, with the exception of the goodwill
amortization adjustment as it was determined to not be tax deductible.
For each of the periods presented, the effective income tax rate for
the combined REI and R-Cube statements of operations prior to pro forma
entries was used in the calculation. The rates used were 24% and 23%
for the nine-month period ended December 31, 1998 and the year ended
March 31, 1998, respectively.
17
<PAGE>
(c) Exhibits
2.1 Stock Purchase Agreement dated as of January 18, 1999 among the
Company, R-Cube Technologies, Inc. and Krishna P. Reddy *
2.2 Stock Purchase Agreement dated as of January 18, 1999 among the
Company, R-Cube Technologies, Inc. and Prakash Rao Pokala *
2.3 Stock Purchase Agreement dated as of January 18, 1999 among the
Company, R-Cube Technologies, Inc. and Srinivasa Reddy Malireddy *
2.4 Credit Agreement dated February 26, 1999 by and between the
Company and Imperial Bank *
2.5 General Security Agreement dated February 26, 1999 by and between
the Company and Imperial Bank *
2.6 General Security Agreement dated February 26, 1999 by and between
the Company and Imperial Bank *
2.7 Note Secured by Deed of Trust in the principal amount of
$2,320,000 dated February 26, 1999 made by the Company in favor
of Imperial Bank *
* Filed with the Securities and Exchange Commission on March 5, 1999
as an exhibit to Registrant's Form 8-K dated February 26, 1999 and
incorporated by reference herein.
18
<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: May 12, 1999
RESEARCH ENGINEERS, INC.
By: /S/ WAYNE BLAIR
---------------
Wayne Blair
Chief Financial Officer, Secretary
and Treasurer
19
|
|