SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K / A Amendment No. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): September 14, 1999
RESEARCH ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28560 22-2356861
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
(Address of Principal Executive Offices)
(714) 974-2500
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 14, 1999, Research Engineers, Inc. ("the Company")
acquired 80% of the outstanding capital stock of NetGuru Systems, Inc.
and NetGuru Consulting, Inc. (collectively, "NetGuru"). The terms of
the agreement provide for the acquisition of the remaining 20%
interest on December 15, 1999. The stock was acquired from Bharat
Manglani.
NetGuru is a provider of Information Technology ("IT") Services
headquartered in Waltham, Massachusetts.
The acquisition will be accounted for using the purchase method of
accounting. The aggregate purchase, including acquisition costs, will
be approximately $5.4 million. Approximately $4.5 million of this was
paid upon the closing of the initial 80% interest in a combination of
cash, a promissory note and shares of the Company's common stock. The
cash portion of the purchase price was obtained through the issuance
of shares of the Company's newly created Series B 5% Convertible
Preferred Stock to two investors in a private transaction not
involving a public offering. The remainder of the purchase price will
be payable upon closing the remaining 20% interest (scheduled to occur
on December 15, 1999) in a combination of cash and a promissory note.
In determining the purchase price for NetGuru, the Company took into
account the value of companies of similar industry and size to
NetGuru, comparable transactions and the market for such companies
generally.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The following combined financial statements of NetGuru are included
in this Current Report:
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................. F-1
Combined Balance Sheets as of December 31, 1997 and
1998 and as of June 30, 1999 (unaudited)................. F-2
Combined Statements of Earnings for the years ended
December 31, 1997 and 1998 and for the six month
periods ended June 30, 1998 and 1999 (unaudited)......... F-3
Combined Statements of Stockholder's Equity for the
years ended December 31, 1997 and 1998 and for the
six month period ended June 30, 1999 (unaudited)....... F-4
Combined Statements of Cash Flows for the years ended
December 31, 1997 and 1998 and for the six month
periods ended June 30, 1998 and 1999 (unaudited)......... F-5
Notes to Combined Financial Statements....................... F-6
</TABLE>
2
<PAGE>
(b) Pro forma financial information.
The following unaudited 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 NetGuru.
The unaudited pro forma combined condensed balance sheet as of June
30, 1999 gives effect to the NetGuru acquisition, as if the
acquisition had been completed on June 30, 1999 and was prepared
based upon the balance sheets of the Company and NetGuru as of June
30, 1999.
The unaudited pro forma combined condensed statements of operations
for the 3 month period ended June 30, 1999 and the year ended March
31, 1999 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 statement of
operations for the 3 month period ended June 30, 1999 was prepared
based upon the separate unaudited financial statements of the Company
and NetGuru for the 3 month period ended June 30, 1999. The unaudited
pro forma combined condensed statements of operations for the year
ended March 31, 1999 was prepared based upon the separate historical
consolidated financial statements of the Company for the year ended
March 31, 1999 and the combined financial statements of NetGuru for
the year ended December 31, 1998.
On February 26, 1999, the Company acquired all of the outstanding
stock of R-Cube Technologies, Inc. ("R-Cube") as reported on a
separate Form 8-K. This acquisition has been accounted for using the
purchase method of accounting. The unaudited pro forma combined
condensed statements of operations for the year ended March 31, 1999
includes the historical financial statements of R-Cube for the 11
months ended February 28, 1999. The results of operations of R-Cube
for the month of March 1999 were included in the historical
consolidated statements of the Company for the year ended March 31,
1999. Additionally, the results of operations of R-Cube for the 3
months ended June 30, 1999 are included in the historical
consolidated financial statements of the Company.
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 acquisitions of NetGuru and R-Cube
occurred at the beginning of the periods 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 consolidated financial statements and
the related notes, included in the Company's fiscal 1999 Form 10-KSB
and fiscal 2000 first quarter Form 10-QSB, and the financial
statements of NetGuru which are listed in item 7(a) above. The
NetGuru financial information has been prepared in accordance with
generally accepted accounting principles and include all adjustments,
consisting of normal recurring accruals considered necessary for a
fair presentation.
The NetGuru acquisition will be accounted for using the purchase
method of accounting. Accordingly, the Company's cost to acquire
NetGuru will be allocated to the assets acquired and liabilities
assumed according to their estimated fair values as of the date of
the NetGuru acquisition. As of the date of acquisition, the book
value of NetGuru's property and equipment was estimated to equal the
respective fair value.
3
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of June 30, 1999
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------------------------------------
Research
Engineers, Pro Forma Combined REI
Inc. NetGuru Adjustments and NetGuru
---------- ----------- ------------- --------------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents $ 1,727 $ 959 $ (659) (A) $ 1,704
2,600 (B)
(2,340) (C)
(160) (C)
(423) (C)
Accounts receivable, net 2,654 1,131 - 3,785
Deferred income taxes 1,133 - - 1,133
Notes and related
party loans receivable 56 3 - 59
Prepaid expenses and
other current assets 617 - - 617
--------- --------- --------- ---------
Total current assets 6,187 2,093 (982) 7,298
Property, plant and
equipment, net 4,150 68 - 4,218
Goodwill, net 3,157 - 1,194 (D) 7,527
2,923 (C)
(347) (E)
600 (M)
Other assets 715 - - 715
--------- --------- --------- ---------
$ 14,209 $ 2,161 $ 3,388 $ 19,758
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 320 $ 442 $ - $ 762
Accrued expenses 777 268 - 1,045
Current portion of
long-term debt 71 - 300 (A) 971
600 (M)
Current portion of
capital lease
obligations 101 - - 101
Income taxes payable 446 - - 446
Deferred revenue 927 55 - 982
--------- --------- --------- ---------
Total current
liabilities 2,642 765 900 4,307
Long-term bank debt 4,445 - - 4,445
Capital lease obligations 454 3 - 457
Deferred income taxes 304 - - 304
--------- --------- --------- ---------
Total liabilities 7,845 768 900 9,513
--------- --------- --------- ---------
Minority Interest - - 87 (E) 87
--------- --------- --------- ---------
Stockholders' equity:
Preferred stock, par
value $.01. Authorized
5,000,000 shares;
issued and outstanding
371,429 shares on a
pro forma basis - - 4 (B) 4
Common stock, par
value $.01. Authorized
20,000,000 shares;
issued and outstanding
5,738,210 shares and
5,908,845 shares on
a pro forma basis 57 11 2 (D) 59
(11) (E)
Additional paid-in
capital 6,623 - 1,192 (D) 10,411
2,596 (B)
Retained earnings/
(accumulated deficit) (13) 1,382 (959) (A) (13)
(423) (E)
Accumulated other
comprehensive loss (303) - - (303)
--------- --------- --------- ---------
Total stockholders'
equity 6,364 1,393 2,401 10,158
--------- --------- --------- ---------
$ 14,209 $ 2,161 $ 3,388 $ 19,758
========= ========= ========= =========
See Notes to Unaudited Pro Forma Combined Condensed Financial Information
</TABLE>
4
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1999
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1999
------------------------------------------------------
Research
Engineers, Pro Forma Combined REI
Inc. NetGuru Adjustments and NetGuru
---------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Net revenues:
Product sales $ 1,792 $ - $ - $ 1,792
IT Services 1,219 2,250 - 3,469
Maintenance services 448 - - 448
--------- --------- --------- ---------
Total net revenues 3,459 2,250 - 5,709
Cost of revenues 1,072 1,465 - 2,537
--------- --------- --------- ---------
Gross profit 2,387 785 - 3,172
--------- --------- --------- ---------
Operating expenses:
Selling, general and
administrative 1,924 327 73 (F) 2,324
Research and
development 627 - - 627
--------- --------- --------- ---------
Total operating
expenses 2,551 327 73 2,951
--------- --------- --------- ---------
Operating
income/(loss) (164) 458 (73) 221
--------- --------- --------- ---------
Other expense/(income):
Interest, net 122 (7) 19 (O) 134
Other 3 - - 3
--------- --------- --------- ---------
Total other
expense/(income) 125 (7) 19 137
--------- --------- --------- ---------
(Loss)/income before
income taxes (289) 465 (92) 84
Income tax expense/
(benefit) (100) - (37) (G) 49
186 (H)
Minority interest in
earnings of subsidiaries - - 56 (I) 56
--------- --------- --------- ---------
Net (loss)/income $ (189) 465 (297) (21)
========= ========= ========= =========
Net (loss)/income per common share:
Basic $ (0.03) $ (0.01)(P)
Diluted $ (0.03) $ (0.01)(P)
Common shares used in computing net (loss)/income per common share:
Basic 5,738,210 5,908,845 (N)
Diluted 5,738,210 5,908,845 (N)
See Notes to Unaudited Pro Forma Combined Condensed Financial Information
</TABLE>
5
<PAGE>
RESEARCH ENGINEERS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the
For the Eleven For the Pro Forma
Year Months Year Year
Ended Ended Ended Ended
March 31, February 28, December 31, March 31,
1999 1999(J) 1998 1999
---------- ----------- ---------- ----------
Pro Pro Combined
Research R-Cube Forma Forma REI,
Engineers, Technologies, Adjust- Adjust- R-Cube and
Inc. Inc. ments NetGuru ments NetGuru
---------- ----------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Product sales $ 8,345 $ - $ - $ - $ - $ 8,345
Maintenance
services 2,400 - - - - 2,400
Consulting
Income - 2,771 - 5,906 - 8,677
IT Services - 1,228 - - - 1,228
---------- --------- ------- ------- ------- ---------
Total net
revenues 10,745 3,999 - 5,906 - 20,650
Cost of revenues 1,150 3,040 - 4,184 - 8,374
---------- --------- ------- ------- ------- ---------
Gross profit 9,595 959 - 1,722 - 12,276
---------- --------- ------- ------- ------- ---------
Operating expenses:
Selling,
general and
administrative 7,630 872 137 (K) 1,066 291 (F) 9,996
Research and
development 2,415 - - 106 - 2,521
---------- --------- ------- ------- ------- ---------
Total operating
expenses 10,045 872 137 1,172 291 12,517
---------- --------- ------- ------- ------- ---------
Operating
income/(loss) (450) 87 (137) 550 (291) (241)
---------- --------- ------- ------- ------- ---------
Other expense/
(income):
Interest, net 191 3 229 (L) (29) 77 (O) 471
Other (50) (24) - - - (74)
---------- --------- ------- ------- ------- ---------
Total other
expense/(income) 141 (21) 229 (29) 77 397
---------- --------- ------- ------- ------- ---------
(Loss)/income before
income taxes (591) 108 (366) 579 (368) (638)
Income tax
expense/(benefit) (71) 27 (146)(G) - (147)(G) (105)
232 (H)
Minority interest
in earnings of
subsidiaries - - - - 69 (I) 69
---------- --------- ------- ------- ------- ---------
Net (loss)/income $ (520) $ 81 $ (220) $ 579 $ (522) (602)
========== ========= ======= ======= ======= =========
Net (loss)/income per common share:
Basic $ (0.09) $ (0.13)(P)
Diluted $ (0.09) $ (0.13)(P)
Common shares used in computing net (loss)/income per common share:
Basic 5,733,210 5,903,845 (N)
Diluted 5,733,210 5,903,845 (N)
See Notes to Unaudited Pro Forma Combined Condensed Financial Information
</TABLE>
6
<PAGE>
RESEARCH ENGINEERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
A. In accordance with the acquisition agreements the cash balance for NetGuru at
the date of acquisition was retained by the seller. The seller agreed,
however, to loan $300,000 to NetGuru on a short term note to leave enough
cash for operating purposes. For this pro forma statement the cash balance of
$959,000 was paid out of historical retained earnings. NetGuru retained
$300,000 of this and recorded a note payable to the previous owner in that
amount bearing interest at 8.5%.
B. The Company issued shares of 5% convertible preferred stock to The Shaar Fund
Ltd. and Triton Private Equities Fund, L.P. for cash payment totaling
$2,600,000. Dividends to preferred stock holders are cumulative and the
preferred shares can be converted to shares of common stock at any time
subsequent to a 90 day period from the date of closing.
C. The Company paid $2,340,000 in cash as part of the purchase price for 80% of
the outstanding stock of NetGuru, paid an additional $160,000 to certain
employees of NetGuru in settlement of outstanding stock options in NetGuru
and incurred $423,000 in acquisition-related expenses.
D. The Company issued 170,635 shares of common stock as part of the purchase
price for 80% of the outstanding stock of NetGuru. The Company issued the
shares with a fair value of $6.4465 per share but guaranteed a value to the
seller of 108.5% to the seller. The shares were recorded at the guaranteed
value.
E. The existing stockholder's equity of NetGuru at the date of the acquisition
was reduced to zero. As the Company acquired 80% of NetGuru on the
acquisition date, 80% of the eliminated equity value was included in the
calculation of goodwill and the remaining 20% was recorded as minority
interest.
F. Reflects amortization expense of $291,000 and $73,000 for the year ended
March 31, 1999 and the 3 months ended June 30, 1999, respectively, related to
the goodwill of $4,370,000 recorded in the acquisition of Net Guru. Goodwill
will be amortized over a period of 15 years.
G. Reflects the income tax expense/(benefit) of the pro forma adjustments
calculated at a rate of 40%.
H. Reflects income tax expense on the net earnings of NetGuru for the periods
calculated at a rate of 40%. Prior to the acquisition, NetGuru was an
S-Corporation and as such did not record income tax expense.
I. Reflects minority interest in the net earnings of NetGuru, calculated as 20%
of the NetGuru net earnings for the period. The calculation was performed on
net earnings before pro forma adjustments with the exception of the
adjustment for historical income tax expense (see Note H).
J. The historical consolidated statement of operations of the Company includes
one month (March 1999) of operations of R-Cube as this acquisition was
consummated on February 26, 1999. For purposes of this pro forma statement of
operations, the historical operations of R-Cube for the eleven month period
ended February 28, 1999 have been added.
K. Reflects amortization expense for the period related to the goodwill recorded
in the acquisition of R-Cube in February 1999. Goodwill recorded was
approximately $2,243,000 which is being amortized over a period of 15 years.
This adjustment of $137,000 reflects an additional 11 months of amortization.
Amortization for the month of March is included in the consolidated statement
of operations of the Company for the year ended March 31, 1999.
7
<PAGE>
L. Reflects the interest expense on outstanding borrowings of $2,320,000 under
the Company's revolving credit facility obtained as part of the acquisition
of R-Cube. Interest was calculated using the assumption that the outstanding
borrowings would remain at same balance as at the date of the acquisition.
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. This adjustment reflects 11 months of interest. Interest for the
month of March 1999 is included in the consolidated statement of operations
of the Company for the year ended March 31, 1999. A 0.125% change in the
interest rate would result in a change of $2,900 in the interest expense for
the year.
M. The Company issued a promissory note in the amount of $600,000 bearing
interest at 8.5% to the seller as part of the purchase price for 80% of the
outstanding stock of NetGuru.
N. Pro Forma basic weighted average shares was calculated by adding the 170,635
shares of common stock issued by the Company in the NetGuru acquisition to
the weighted average common shares outstanding as reported in the
consolidated financial statements of the Company for the respective periods.
No common stock equivalents were added for either pro forma period as each
pro forma statement of operations resulted in a net loss and the effects
would be antidilutive.
O. Reflects the interest expense on the separate $300,000 and $600,000 notes
issued to the seller as part of acquisition of NetGuru. These notes both bear
interest at 8.5%. This interest amounted to $77,000 and $19,000 for the year
ended March 31, 1999 and the 3 months ended June 30, 1999, respectively.
P. The effect of cumulative preferred stock dividends was factored into the
calculation of loss per common share. The effect of these dividends was to
increase pro forma net loss by $186,000 and $46,000 for the year ended March
31, 1999 and the 3 months ended June 30, 1999, respectively.
8
<PAGE>
<TABLE>
<CAPTION>
(c) Exhibits
<S> <C>
2.1 Amended and Restated Stock Purchase Agreement, without exhibits
and schedules, dated as of September 14, 1999 among the Company,
NetGuru Systems, Inc., NetGuru Consulting, Inc. and Bharat
Manglani*
2.2 Earn-Out Agreement dated as of September 14, 1999, between the
Company and Bharat Manglani*
2.3 Registration Rights Agreement dated as of September 14, 1999
between the Company and Bharat Manglani*
2.4 Securities Purchase Agreement, without exhibits and schedules,
dated as of September 14, 1999 between the Company and The Shaar
Fund Ltd.*
2.5 Registration Rights Agreement, dated as of September 14, 1999
between the Company and The Shaar Fund Ltd.*
2.6 Securities Purchase Agreement, without exhibits and schedules,
dated as of September 14, 1999 between the Company and Triton
Private Equities Fund, L.P.*
2.7 Registration Rights Agreement dated as of September 14, 1999
between the Company and Triton Private Equities Fund, L.P.*
2.8 8.5% Secured Subordinated Promissory Note for $600,000 due
September 14, 2000 issued by the Company to Bharat Manglani.
4.1 Certificate of Designation of Series B 5% Convertible Preferred
Stock of Research Engineers, Inc. dated September 14, 1999.**
4.2 Common Stock Purchase Warrant dated as of September 14, 1999
issued by the Company to The Shaar Fund Ltd.*
4.3 Common Stock Purchase Warrant dated as of September 14, 1999
issued by the Company to Triton Private Equities Fund, L.P.*
4.4 Stock Certificate B-1 issued to the Shaar Fund Ltd. for 300,000
shares of Series B 5% Convertible Preferred Stock of the Company
4.5 Stock Certificate B-2 issued to Triton Private Equities Fund, L.P.
for 71,429 shares of Series B 5% Convertible Preferred Stock of
the Company
23.1 Consent of KPMG LLP
- -------------------------------
<FN>
* Filed as an exhibit to Registrant's Form 8-K dated September 14, 1999 and
incorporated by reference herein.
** Filed as an exhibit to Registrant's Form 8-K/A No. 1 dated September 14,
1999 and incorporated by reference herein.
</FN>
</TABLE>
9
<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: November 10, 1999
RESEARCH ENGINEERS, INC.
By: /S/ WAYNE BLAIR
-----------------------------
Wayne Blair
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
10
<PAGE>
Independent Auditors' Report
The Stockholder
NetGuru Systems, Inc. and NetGuru Consulting, Inc.:
We have audited the accompanying combined balance sheets of NetGuru Systems,
Inc. and NetGuru Consulting, Inc. (collectively, the "Company"), as of December
31, 1997 and 1998, and the related combined statements of earnings,
stockholder's equity, and cash flows for the years then ended. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of NetGuru Systems,
Inc. and NetGuru Consulting, Inc. as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/S/ KPMG LLP
Boston, Massachusetts
October 21, 1999
F-1
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Balance Sheets
December 31, 1997 and 1998
<TABLE>
<CAPTION>
June 30,
1999
1997 1998 (unaudited)
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 560,435 714,003 958,903
Accounts receivable 495,505 714,711 1,130,616
Employee receivables 2,500 6,900 3,300
Prepaid expenses -- 8,070 --
----------- ----------- -----------
Total current assets 1,058,440 1,443,684 2,092,819
Property and equipment, net (note 2) 52,212 70,513 67,833
----------- ----------- -----------
$1,110,652 1,514,197 2,160,652
=========== =========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 141,059 214,996 441,966
Accrued expenses 160,368 270,244 268,112
Unearned revenue -- -- 54,720
----------- ----------- -----------
Total current liabilities 301,427 485,240 764,798
Other liabilities:
Deferred rent payable -- 2,737 2,737
----------- ----------- -----------
Total liabilities 301,427 487,977 767,535
----------- ----------- -----------
Stockholder's equity (note 3):
NetGuru Systems, Inc. Class A voting
common stock; no par value, 1,000,000
shares authorized, issued and
outstanding 10,000 10,000 10,000
NetGuru Systems, Inc. Class B
non-voting common stock;
no par value, 9,000,000 shares
authorized, 6,000,000 shares
issued and outstanding -- -- --
NetGuru Consulting, Inc. common
stock; no par value, 200,000
shares authorized, issued
and outstanding 1,000 1,000 1,000
Retained earnings 799,225 1,016,220 1,382,117
----------- ----------- -----------
810,225 1,027,220 1,393,117
Less: stockholder receivable (1,000) (1,000) --
----------- ----------- -----------
Total stockholder's equity 809,225 1,026,220 1,393,117
----------- ----------- -----------
Commitments (notes 4 and 5)
$1,110,652 1,514,197 2,160,652
=========== =========== ===========
See accompanying notes to combined financial statements.
</TABLE>
F-2
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Statements of Earnings
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Six Months Ended
December 31, June 30,
-------------------------- --------------------------
1997 1998 1998 1999
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales $ 4,268,084 5,905,624 2,769,295 3,788,264
Cost of sales (2,906,970) (4,183,888) (1,787,210) (2,550,063)
------------ ------------ ------------ ------------
Gross profit 1,361,114 1,721,736 982,085 1,238,201
------------ ------------ ------------ ------------
Operating expenses:
Selling 206,865 307,202 139,424 250,003
General and
administrative 443,887 759,171 355,753 436,748
Research and development -- 106,447 2,482 --
------------ ------------ ------------ ------------
Total operating
expenses 650,752 1,172,820 497,659 686,751
------------ ------------ ------------ ------------
Income from operations 710,362 548,916 484,426 551,450
Other income (expense):
Interest and other
income 16,273 28,849 8,914 15,447
------------ ------------ ------------ ------------
Net income $ 726,635 577,765 493,340 566,897
============ ============ ============ ============
See accompanying notes to combined financial statements.
</TABLE>
F-3
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Statements of Stockholder's Equity
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
NetGuru Systems, Inc.
--------------------------------------- NetGuru
Class A voting Class B non-voting Consulting, Inc.
common stock common stock common stock
------------------- ------------------ ---------------- Retained
Shares Amount Shares Amount Shares Amount earnings
--------- -------- --------- ------- ------- ------- ---------
Total
Stockholder stockholder's
receivable equity
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December
31, 1996 1,000,000 $ 10,000 6,000,000 $ -- -- $ -- 72,590
<C> <C>
-- 82,590
Issuance
of common
stock
(note 3) -- -- -- -- 200,000 1,000 --
(1,000) --
Net income -- -- -- -- -- -- 726,635
-- 726,635
--------- -------- --------- ------ -------- ------- ---------
------- ---------
Balance,
December
31, 1997 1,000,000 10,000 6,000,000 -- 200,000 1,000 799,225
(1,000) 809,225
Net income -- -- -- -- -- -- 577,765
-- 577,765
S-corporation
distributions
to stockholder -- -- -- -- -- -- (360,770)
-- (360,770)
--------- -------- --------- ------ -------- ------- ---------
------- ---------
Balance,
December
31, 1998 1,000,000 10,000 6,000,000 -- 200,000 1,000 1,016,220
(1,000) 1,026,220
Net income
(unaudited) -- -- -- -- -- -- 566,897
-- 566,897
Payment of
stockholder
receivable
(unaudited) -- -- -- -- -- -- --
1,000 1,000
S-corporation
distributions
to stockholder
(unaudited) -- -- -- -- -- -- (201,000)
-- (201,000)
--------- -------- --------- ---- ------- ----- ---------
------- ----------
Balance,
June 30,
1999
(unaudited) 1,000,000 10,000 6,000,000 -- 200,000 1,000 1,382,117
-- 1,393,117
========= ======== ========= ==== ======= ===== =========
======= =========
See accompanying notes to combined financial statements.
</TABLE>
F-4
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Statements of Cash Flows
Years ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Six Months Ended
December 31, June 30,
-------------------------- --------------------------
1997 1998 1998 1999
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 726,635 577,765 493,340 566,897
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 23,533 19,066 7,164 5,204
Changes in operating
assets and liabilities:
Accounts receivable (415,788) (219,206) (115,362) (415,905)
Employee receivables (2,500) (4,400) 2,500 3,600
Prepaid expenses 226 (8,070) -- 8,070
Accounts payable 103,465 73,937 1,441 226,970
Accrued expenses 160,368 109,876 (33,292) (2,132)
Unearned revenue -- -- -- 54,720
Deferred rent payable (1,811) 2,737 -- --
----------- ------------ ------------ ------------
Net cash provided by
operating activities 594,128 551,705 355,791 447,424
----------- ------------ ------------ ------------
Cash flows from investing
activity:
Purchases of property and
equipment, net (79,989) (37,367) -- (2,524)
----------- ------------ ------------ ------------
Net cashused in
investing activity (79,989) (37,367) -- (2,524)
----------- ------------ ------------ ------------
Cash flows from financing
activities:
S-corporation distributions
to stockholder -- (360,770) (106,330) (201,000)
Payment of stockholder
receivable -- -- -- 1,000
----------- ------------ ------------ ------------
Net cash used in
financing activities -- (360,770) (106,330) (200,000)
----------- ------------ ------------ ------------
Net increase in cash and
cash equivalents 514,139 153,568 249,461 244,900
Cash and cash equivalents,
beginning of period 46,296 560,435 560,435 714,003
----------- ------------ ------------ ------------
Cash and cash equivalents,
end of period $ 560,435 714,003 809,896 958,903
=========== ============ ============ ============
Noncash investing and financing activity:
Issuance of common stock
for stockholder
receivable (note 3) $ 1,000 -- -- --
=========== ============ ============ ============
See accompanying notes to combined financial statements.
</TABLE>
F-5
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
(1) Nature of Business and Summary of Significant Accounting Policies
(a) Nature of Business and Basis of Presentation
NetGuru Systems, Inc. and NetGuru Consulting, Inc. provides information
technology consulting services. NetGuru Systems, Inc., a New Hampshire
corporation, was organized on January 20, 1994, and NetGuru Consulting,
Inc., a Massachusetts corporation, was organized on May 12, 1997. The
companies are under common ownership and common management. The combined
financial statements include the accounts of both companies. All
material intercompany accounts and transactions have been eliminated in
combination. The combined financial statements include only those
assets, liabilities and results of operations which relate to the
above-named companies (collectively, the "Company"). The combined
financial statements do not include any assets, liabilities or results
of operations attributable to the sole stockholder's individual
activities.
(b) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates. These
estimates include an allowance for doubtful accounts and certain
accruals and are based upon assumptions developed by management about
the appropriate carrying value of assets and liabilities. Actual results
could differ from these estimates. The unaudited financial statements,
in the opinion of management, reflect all adjustments necessary to
fairly state the Company's financial position and the results of its
operations. Such adjustments are of a normal recurring nature.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments
with original maturities of three months or less at the date of
acquisition.
(d) Accounts Receivable and Credit Risk
The Company provides an allowance for potential doubtful accounts
receivable. At December 31, 1997 and 1998, an allowance was not deemed
necessary by management.
The Company's customers are dispersed over a wide geographic area and
various industries. The Company's customers are subject to periodic
review under the Company's credit policies. The Company does not believe
that it is subject to any unusual credit risks, other than the normal
level of risk inherent in operating the Company's businesses.
F-6
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
(e) Property and Equipment
Furniture and equipment is stated at cost. Depreciation is provided
using the straight-line method over estimated useful lives that range
from three to seven years. Leasehold improvements are amortized over the
shorter of their estimated useful life or the life of the lease.
(f) Revenue Recognition
The Company recognizes revenue from consulting services when those
services are rendered, provided that no significant obligations remain
and collection of the receivable is considered probable. Beginning in
1999, a portion of the Company's revenue resulted from services
performed under long-term contracts. Revenue on fixed-price contracts is
recognized using the percentage of completion method based on costs
incurred in relation to total estimated costs. Unearned revenue is
recognized for payments received prior to services being performed.
(g) Income Tax Status
The sole stockholder of the Company has elected to have the Company
treated as a Subchapter S Corporation. As such, the taxable income of
the Company will be reported in the federal and state income tax returns
of the stockholder. Accordingly, no tax provision is required in the
combined financial statements.
(h) Stock-Based Compensation
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 123, Accounting for
Stock-Based Compensation, the Company provides additional pro forma
disclosures (see note 3).
(i) Research and Development
Research and development costs are expensed as incurred.
(j) Comprehensive Income
Effective January 1, 1998, the Company adopted Financial Accounting
Standards Board ("FASB") Statement No. 130, Reporting Comprehensive
Income. Statement No. 130 requires the reporting of comprehensive income
in addition to net income. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. The Company had no components of
comprehensive income and, accordingly, net income is equal to
comprehensive income. As this new standard only requires additional
information in the financial statements, it does not affect the
Company's financial position or results of operations.
F-7
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
(2) Property and Equipment
Property and equipment at December 31, 1997 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1997 1998
--------- ---------
<S> <C> <C>
Office equipment $ 61,133 80,339
Furniture and fixtures 11,534 17,022
Leasehold improvements -- 12,673
--------- ---------
72,667 110,034
Less accumulated depreciation
and amortization (20,455) (39,521)
--------- ---------
$ 52,212 70,513
========= =========
</TABLE>
(3) Stockholder's Equity
(a) Common Stock
On May 12, 1997, NetGuru Consulting, Inc. was formed and 200,000 shares
of common stock were issued to the sole stockholder for $1,000. This
amount was not paid until March 1999; therefore, this amount due from
stockholder is reported as a component of stockholder's equity at
December 31, 1997 and 1998.
On March 11, 1998, the Company issued 851,000 shares of Class A voting
common stock and 6,000,000 shares of Class B non-voting common stock to
the sole stockholder in a form of stock distribution. This transaction
had no impact to retained earnings. All references in the accompanying
combined financial statements to the number of common shares have been
restated to reflect the stock distribution.
(b) 1998 Stock Option Plan
During 1998, NetGuru Systems, Inc. adopted the 1998 Stock Option Plan
(the "1998 Plan") which provides for the grant of incentive and
nonqualified stock options to purchase up to 2,000,000 shares of NetGuru
Systems, Inc.'s Class B nonvoting common stock to employees, officers,
directors and consultants of the Company. The incentive stock options
vest over three years and the nonqualified options vest as determined at
the grant date and generally expire ten years from the date of grant. At
December 31, 1998, there were 1,320,500 additional shares available for
grant under the 1998 Plan.
F-8
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
A summary of stock option activity under the 1998 Plan is as follows:
<TABLE>
<CAPTION>
Weighted-
average
Number exercise
of options price
<S> <C> <C>
Outstanding at December 31, 1997 -- $ --
Granted 750,000 0.29
Cancelled (70,500) 0.25
---------
Outstanding at December 31, 1998 679,500 $ 0.29
========= ========
</TABLE>
The following table summarized information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Outstanding
----------------------------------
Number of options Weighted- Number of options
Range of outstanding average exercisable
exercise at December 31, remaining at December 31,
prices 1998 life (in years) 1998
----------- ----------------- --------------- -----------------
<S> <C> <C> <C>
$ 0.25-0.40 679,500 9.5 --
========= ====
</TABLE>
As discussed in note 1, the Company accounts for its stock-based awards
using the minimum value method in accordance with APB No. 25 and its
related interpretations. Accordingly, no compensation expense has been
recognized in the combined financial statements for employee stock
option arrangements.
SFAS No. 123 requires the disclosure of pro forma information had the
Company adopted the fair value method. For purposes of the pro forma
disclosures, the fair value of options on their grant date was measured
using the minimum value method with the following weighted-average
assumptions: expected option life, five years; risk-free interest rate
of 5.62% in 1998; and no dividends or volatility during the expected
term. Had the Company used the fair value method to measure
compensation, reported combined net income would have been $537,000 for
the year ended December 31, 1998.
F-9
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
(4) Operating Leases
The Company leases office space under an operating lease which commenced on
October 1, 1997. The lease is scheduled to expire on September 30, 2000.
Rent expense for the years ended December 31, 1997 and 1998 was $67,647 and
$53,647, respectively. Minimum future rental payments on all noncancelable
operating leases as of December 31, 1998 are $68,592 and $47,853 for years
1999 and 2000, respectively.
(5) Line of Credit
On March 15, 1999, the Company secured a $500,000 revolving working capital
bank line of credit. Borrowings under the line of credit, which is subject
to review on or before June 15, 2000, are secured by an interest in the
assets of the Company and a personal guarantee of the sole stockholder. The
line bears interest at the prime rate (8% at June 30, 1999) and is payable
on demand. There were no borrowing against the line at June 30, 1999
(unaudited).
Under the terms of the bank agreement, the Company is required to meet
certain restrictive covenants. At the date of this report, the Company is
not in compliance with one of its nonfinancial disclosure covenants
(unaudited), but has received a waiver from the bank and has established a
repayment schedule.
(6) Business Concentrations
For the years ended December 31, 1997 and 1998, the Company's largest
customer accounted for 25% and 19% of total net sales. No other customers
represented individually more than 10% of total net sales in either period.
(7) Related Party Transactions
The Company purchases consulting services from a company that is owned by
the brother of the Company's sole stockholder. Such services totaled $19,000
and $36,275 for the years ended December 31, 1997 and 1998, respectively,
and are included in cost of sales in the accompanying combined statements of
earnings
F-10
<PAGE>
NETGURU SYSTEMS, INC.
AND NETGURU CONSULTING, INC.
Combined Financial Statements
December 31, 1997 and 1998
(8) Employee Benefits Plan
During 1996, the Company adopted a savings plan for its employees pursuant
to Section 401(k) of the Internal Revenue Code. Substantially all employees
can participate, and the plan allows a deferral up to the maximum percentage
of plan compensation permitted by law or 15%. The Company matches 20% of the
employees' elected deferral up to 5% of their compensation for the year.
Other contributions to the plan are at the discretion of the Board of
Directors. The amounts charged to operations for Company contributions to
the plan were $3,087 and $7,291 for the years ended December 31, 1997 and
1998, respectively.
(9) Subsequent Event
On September 13, 1999, the Company entered into an Amended and Restated
Stock Purchase Agreement (the "Agreement") with Research Engineers, Inc.
("REI") to sell all issued and outstanding capital stock of the Company for
approximately $5.4 million, subject to certain adjustments. The purchase
price is comprised of cash and notes. The acquisition is expected to be
accounted for using the purchase method of accounting.
F-11
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
<S> <C>
Exhibit 2.8 8.5% Secured Subordinated Promissory Note for $600,000 due
September 14, 2000 issued by the Company to Bharat Manglani.
Exhibit 4.4 Stock Certificate B-1 issued to the Shaar Fund Ltd. for 300,000
shares of Series B 5% Convertible Preferred Stock of the Company
Exhibit 4.5 Stock Certificate B-2 issued to Triton Private Equities Fund,
L.P. for 71,429 shares of Series B 5% Convertible Preferred Stock
of the Company
Exhibit 23.1 Consent of KPMG LLP
</TABLE>
<PAGE>
Exhibit 2.8
THIS NOTE MAY NOT BE SOLD OR TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE MAKER OF THIS NOTE. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION. THIS NOTE IS SUBJECT
TO A RIGHT OF OFFSET AS PROVIDED HEREIN.
THIS NOTE IS SUBORDINATED TO MAKER'S OBLIGATIONS TO IMPERIAL BANK PURSUANT TO
THE TERMS OF A SUBORDINATION AGREEMENT DATED THE DATE HEREOF BETWEEN PAYEE AND
IMPERIAL BANK.
8.5% Secured Subordinated Promissory Note
due September 14, 2000
$600,000.00 Yorba Linda, California
September 14, 1999
FOR VALUE RECEIVED, RESEARCH ENGINEERS, INC., a Delaware corporation
("Maker"), hereby promises to pay to the order of Bharat Manglani ("Payee"), at
such address as Payee shall from time to time designate in writing to Maker, the
principal sum of Six Hundred Thousand Dollars ($600,000.00), in lawful money of
the United States of America or such lesser principal amount as shall be
adjusted downward if Maker obtains a right to adjustment or offset in accordance
with Section 3 of this Note.
This Note is the Note referred to in the Restated Stock Purchase
Agreement among Maker and Payee dated September 14, 1999, as reformed ("Purchase
Agreement"). Defined terms used herein unless defined herein shall have the
meaning ascribed to them in the Purchase Agreement.
1. Principal and Interest Payments. The entire principal balance of this
Note, together with interest, which shall accrue at the rate of 8.5% per annum,
shall be payable on September 14, 2000.
2. Optional Prepayment. Maker may at any time prepay the whole or any
part of the unpaid principal balance of this Note, without penalty or premium,
but with interest accrued to the date fixed for prepayment. Notice of prepayment
shall be given by Maker by mail and shall be mailed to the holder of this Note
not less than five (5) days from the date fixed for prepayment. If this Note is
to be prepaid in part only, such Notice shall specify the amount to be prepaid,
and shall state that this Note shall be submitted to Maker for notation hereon
of the amount to be prepaid. Upon giving Notice of prepayment as aforesaid, this
Note or portion hereof so specified for prepayment shall on the prepayment date
specified in such notice become due and payable, and from and after the
prepayment date so specified (unless Maker defaults in making such prepayment)
interest on this Note or portion hereof so specified for prepayment shall cease
to accrue and, on presentation and surrender hereof to Maker for cancellation,
in the case of this Note being prepaid as a whole, or for notation hereof of the
payment of the portion of the principal amount hereof being prepaid in the case
of a prepayment of this Note in part only, this Note or portion hereof so
specified for prepayment shall be paid by Maker at the prepayment price
aforesaid. Any prepayment of this Note in part shall be applied to the
installments of principal payable hereunder in the order of maturity thereof.
3. Right of Offset. Maker shall have the right to offset against the
principal balance of this Note as provided in Section 7.3 of the Purchase
Agreement. Any such reduction in the principal balance of this Note shall be
applied against the principal hereunder with no interest being accrued on such
offset amount from the date of this Note. If such interest has been paid, the
amount of such interest so paid shall be credited to the principal balance
hereunder, with the principal being correspondingly reduced.
<PAGE>
4. Attorney's Fees. Upon any event of default hereunder, Maker agrees to
pay to Payee all expenses incurred by Payee, including, without limitation,
reasonable fees and disbursements of counsel, incurred by Payee in the
enforcement and collection of this Note.
5. Default Interest Rate. If this Note is not paid in full when due, it
shall thereafter bear interest at the maximum rate then permitted by applicable
law from its due date until paid (the "Default Rate").
6. Security. This Note is secured by a Pledge Agreement of even date
herewith executed by Maker in favor of Payee.
7. Governing Law. This Note shall be governed by and construed
in accordance with the internal laws of the State of California.
8. Notices. All communications provided for hereunder shall be sent by
facsimile or by first class mail or with any private overnight courier, postage
prepaid, as follows:
If to Maker:
Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, CA 92887
Telephone: (714) 974-2500
Facsimile: (714) 974-4771
Attn.: Jyoti Chatterjee
with a copy to:
Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626
Telephone: (714) 641-3425
Facsimile: (714) 546-9035
Attn: Gregg Amber, Esq.
If to Payee:
Bharat Manglani
82 Lexington Street
Weston, Massachusetts 02493
Telephone: (781) 894-4982
Facsimile: (781) 890-5990
with a copy to:
Gray Cary Ware & Friedenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telephone: (619) 677-1493
Facsimile: (619) 677-1477
Attn: Scott M. Stanton, Esq.
or to such other addresses as any party hereto shall specify to the others in
writing. Any such notice given by mail shall be effective three business days
after the date of mailing, and such notice given by telecopy, with confirmation
of receipt, or with a private carrier shall be effective on the date of
delivery.
2
<PAGE>
10. Successors and Assigns. This Note shall bind and inure to the benefit
of Maker's and Payee's successors and assigns.
11. Ambiguities. Each party and its counsel have participated fully in the
review and revisions of this Note. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply in
interpreting this Note.
12. Exercise of Rights. No single or partial exercise of any power granted
to Payee under this Note shall preclude any other or further exercise thereof of
the existence of any other power. No delay or omission on the part of Payee in
exercising any right under this Note shall operate as a waiver of such right or
of any other right. The release of any party liable under this Note shall not
operate to release any other party liable hereunder.
IN WITNESS WHEREOF, Maker has duly executed this Note the day and year
first above written.
RESEARCH ENGINEERS, INC.,
a Delaware corporation
By:/s/ Jyoti Chatterjee
------------------------------
Jyoti Chatterjee, President
3
<PAGE>
Exhibit 4.4
Number B-1 300,000 Shares
Series B 5% Convertible Preferred Stock
RESEARCH ENGINEERS, INC.
A Delaware Corporation
THIS CERTIFIES THAT The Shaar Fund Ltd. is the record holder of Three Hundred
Thousand shares of Series B 5% Convertible Preferred Stock of Research
Engineers, Inc., transferable only on the share register of said Corporation by
the holder, in person or by duly authorized attorney, upon surrender of this
Certificate, properly endorsed or assigned.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and the Bylaws
of said Corporation and any amendments thereto, to all of which the holder of
this certificate, by acceptance hereof, assents. The shares represented by this
certificate are subject to the legend(s) affixed to the back of this
certificate.
A statement of the rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes and/or series of shares of stock of the
Corporation and upon the holders thereof as established by the Certificate of
Incorporation may be obtained by any shareholder upon request and without
charge, at the principal office of the Corporation, and the Corporation will
furnish any shareholder, upon request and without charge, a copy of such
statement.
WITNESS the Seal of the Corporation and the signatures of its duly authorized
officers this _______ day of September, 1999.
/s/ Wayne Blair /s/ Jyoti Chatterjee
- --------------------------- -------------------------------
Wayne Blair Jyoti Chatterjee
Secretary President
SEE REVERSE SIDE FOR RESTRICTIVE LEGEND(S)
<PAGE>
FOR VALUE RECEIVED, HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO SHARES REPRESENTED
BY THIS CERTIFICATE AND DOES HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ,
ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED: , 19
--------------- -----
IN THE PRESENCE OF
------------------------ ---------------------------------
(Witness) (Shareholder)
---------------------------------
(Shareholder)
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY
STATE. THE SHARES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT COVERING THE SECURITIES REPRESENTED BY THIS CERTIFICATE, AND OTHER
FILINGS UNDER ANY APPLICABLE STATE SECURITIES LAWS, EXCEPT PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REQUIREMENTS OF THE ACT OR SUCH OTHER LAWS.
<PAGE>
Exhibit 4.5
Number B-2 71,429 Shares
Series B 5% Convertible Preferred Stock
RESEARCH ENGINEERS, INC.
A Delaware Corporation
THIS CERTIFIES THAT Triton Private Equities Fund, L.P. is the record holder of
Seventy One Thousand Four Hundred Twenty-Nine shares of Series B 5% Convertible
Preferred Stock of Research Engineers, Inc., transferable only on the share
register of said Corporation by the holder, in person or by duly authorized
attorney, upon surrender of this Certificate, properly
endorsed or assigned.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and the Bylaws
of said Corporation and any amendments thereto, to all of which the holder of
this certificate, by acceptance hereof, assents. The shares represented by this
certificate are subject to the legend(s) affixed to the back of this
certificate.
A statement of the rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes and/or series of shares of stock of the
Corporation and upon the holders thereof as established by the Certificate of
Incorporation may be obtained by any shareholder upon request and without
charge, at the principal office of the Corporation, and the Corporation will
furnish any shareholder, upon request and without charge, a copy of such
statement.
WITNESS the Seal of the Corporation and the signatures of its duly authorized
officers this _______ day of September, 1999.
/s/ Wayne Blair /s/ Jyoti Chatterjee
- ----------------------------- ----------------------------------
Wayne Blair Jyoti Chatterjee
Secretary President
SEE REVERSE SIDE FOR RESTRICTIVE LEGEND(S)
<PAGE>
FOR VALUE RECEIVED, HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO SHARES REPRESENTED
BY THIS CERTIFICATE AND DOES HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ,
ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED: , 19
-------------- -----
IN THE PRESENCE OF ---------------------- ---------------------------------
(Witness) (Shareholder)
---------------------------------
(Shareholder)
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY
STATE. THE SHARES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT COVERING THE SECURITIES REPRESENTED BY THIS CERTIFICATE, AND OTHER
FILINGS UNDER ANY APPLICABLE STATE SECURITIES LAWS, EXCEPT PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REQUIREMENTS OF THE ACT OR SUCH OTHER LAWS.
<PAGE>
Exhibit 23.1
The Board of Directors
Research Engineers, Inc.:
We consent to the use of our audit report dated October 21, 1999, with respect
to the combined balance sheets of NetGuru Systems, Inc. and NetGuru Consulting,
Inc. as of December 31, 1997 and 1998 and the related combined statements of
earnings, stockholder's equity, and cash flows for the years then ended, which
report appears in the Form 8-K/A of Research Engineers, Inc. dated September 14,
1999.
/s/ KPMG LLP
Boston, Massachusetts
November 10, 1999
