NGRU Netguru

netGuru, Inc. (Company) (Nasdaq:NGRU) reported financial results from continuing operations for fiscal 2006 second quarter and six months ended September 30, 2005. Continuing operations for fiscal 2006 and comparable periods in fiscal 2005 exclude the Company's Research Engineers International (REI) business. The assets of REI are expected to be sold to Bentley Systems, Incorporated (Bentley) pending shareholder approval and therefore have been classified as assets held for sale. Correspondingly, results of the Company's REI operations were reported as discontinued operations, as described below. Fiscal 2006 second-quarter net revenues from continuing operations were $916,000, compared to $1.2 million for fiscal 2005 second quarter. Collaborative software and services revenues were $172,000 versus $185,000, and revenues from IT services were $744,000 versus $1.03 million. Operating and other expenses from continuing operations for fiscal 2006 second quarter totaled $1.2 million versus $1.0 million for second quarter last year. Net loss for fiscal 2006 second quarter was $994,000, or $(0.05) per share, and included a loss from continuing operations of $856,000 and a loss from discontinued operations of $138,000. For fiscal 2005 second quarter, net loss was $73,000, or $0.00 per share, and included a $444,000 loss from continuing operations and $371,000 of income from discontinued operations. Fiscal 2006 six-month net revenue from continuing operations was $1.9 million, compared to $2.4 million for fiscal 2005 six months. Collaborative software and services revenues were $380,000 versus $268,000, and revenues from IT services revenues were $1.5 million versus $2.1 million. Six-month operating and other expenses totaled $2.2 million in fiscal 2006, compared to $2.1 million in fiscal 2005. Net loss for fiscal 2006 six months was $1.3 million, or $(0.07) per share, and included a loss from continuing operations of $1.5 million and income from discontinued operations of $154,000. For fiscal 2005 six months, net loss was $691,000, or $(0.04) share, and included a $1.2 million loss from continuing operations and income from discontinued operations of $522,000. Discontinued operations of asset held for sale: In August 2005, the Company entered into an asset purchase agreement to sell the assets of REI, REI's STAAD lines of software, and related operations to Bentley. Pending stockholder approval, the sale is scheduled to be completed by December 31, 2005. Expenses related to the agreement and proposed sale totaled $411,000 and were accounted for in discontinued operations for the three months ended September 30, 2005. netGuru Chairman and Chief Executive Amrit Das commented: "We believe the pending sale of REI represents an important step toward realizing stockholders' value and liquidity. Because of REI's ongoing growth and longer-term possibilities, we were able to negotiate a price of approximately $23.5 million for the proposed sale, and because it became apparent that significantly greater resources would be needed to realize that growth potential, we are pleased to have entered into the agreement with Bentley. Assuming we obtain stockholder approval of the sale, we anticipate a closing no later than December 31, 2005. A portion of the sale proceeds is expected to be allocated to transaction costs, applicable taxes, and the retirement of outstanding debt. We anticipate that the proceeds will strengthen our balance sheet with a substantial cash position and therefore provide us with the financial resources to allow management to explore a broad range of opportunities for allocating capital for strategic purposes or the return of capital to netGuru stockholders." In connection with the proposed sale of REI, a proxy statement was filed with the Securities and Exchange Commission (SEC), was mailed to netGuru stockholders, and is otherwise available to provide details and additional information, including date, time, and location for the stockholders meeting. Security holders are advised to read the proxy statement, because it contains important information about the proposed transaction. A copy of the proxy statement and other documents filed by netGuru with the SEC may be found free of charge at the SEC's web site at www.sec.gov. Copies of the proxy statement and other documents filed by netGuru with the SEC may also be obtained free of charge from netGuru by directing a request to netGuru, Inc., Attention: Bruce Nelson, Chief Financial Officer, and (714) 974-2500. netGuru and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of netGuru in favor of the transaction. Information regarding netGuru's officers and directors is included in netGuru's annual report on Form 10-KSB filed with the SEC on July 14, 2005. This document is available free of charge at the SEC's website at www.sec.gov and from netGuru. Security holders may obtain additional information regarding the interests of netGuru's executive officers and directors in the transaction by reading the proxy statement. Teleconference information: The Company will hold a teleconference today at 1:30 p.m. PST (4:30 p.m. EST) to review the financial results, followed by a live Q&A session. To participate in the teleconference, please call toll-free 800-608-3625 (or 706-634-0478 for international callers) approximately 10 minutes prior to the above start time. For those unable to attend, the company will host an archive of the call on its web site, www.netguru.com (requires RealPlayer streaming audio software, available at www.real.com). Additionally, a telephone playback will be available for 48 hours beginning today at 4:30 p.m. PST. The playback can be accessed by dialing 800-642-1687 (or 706-645-9291 for international callers) and providing Conference ID 2291721. About netGuru netGuru is an engineering information technology and services company offering engineering analysis and design software, collaborative software solutions, and professional and technical information technology services and support to businesses worldwide. netGuru serves its global markets and clients through offices located in the United States, Europe, Asia, and the Middle East, and through distributors in 40 countries. The Company licenses its engineering software and solutions to more than 19,000 businesses in 100 countries. For more information please visit www.netguru.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 With the exception of historical or factual information, the matters discussed in this press release, including the anticipated terms, timing and completion of the asset purchase agreement, the anticipated use of proceeds, and the ability of management to identify and take advantage of appropriate strategic opportunities and/or to realize stockholder value and liquidity, are forward looking statements that involve risks and uncertainties. Actual future results may differ. Factors that could cause or contribute to such differences in results include, but are not limited to, the parties' willingness and ability to fulfill the various conditions to closing of the asset purchase agreement, the availability and feasibility of strategic opportunities, and other factors discussed in the "Risk Factors" Section of netGuru's Form 10-KSB for the fiscal year ended March 31, 2005, as filed with the U.S. Securities and Exchange Commission. -0- *T NETGURU, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share amounts) Three Months Three Months Six Months Six Months Ended Ended Ended Ended September September September September 30, 2005 30, 2004 30, 2005 30, 2004 ------------ ------------ ----------- ----------- Net revenues: Collaborative software products and services $172 $185 $380 $268 IT services 744 1,034 1,517 2,109 ------------ ------------ ----------- ----------- Total net revenues 916 1,219 1,897 2,377 Cost of revenues: Collaborative software products and services 1 1 2 71 IT services 570 657 1,175 1,388 ------------ ------------ ----------- ----------- Total cost of revenues 571 658 1,177 1,459 ------------ ------------ ----------- ----------- Gross profit 345 561 720 918 ------------ ------------ ----------- ----------- Operating expenses: Selling, general and administrative 737 722 1,344 1,397 Research and development 138 135 291 273 Bad debt expense 165 - 221 156 Depreciation 48 71 95 139 ------------ ------------ ----------- ----------- Total operating expenses 1,088 928 1,951 1,965 ------------ ------------ ----------- ----------- Operating loss (743) (367) (1,231) (1,047) ------------ ------------ ----------- ----------- Other expense (income): Interest, net 127 98 250 216 Other (11) (24) (6) (58) ------------ ------------ ----------- ----------- Total other expense 116 74 244 158 ------------ ------------ ----------- ----------- Loss from continuing operations before income taxes (859) (441) (1,475) (1,205) Income tax (benefit) expense (3) 3 7 8 ------------ ------------ ----------- ----------- Loss from continuing operations (856) (444) (1,482) (1,213) (Loss) income from discontinued operations (138) 371 154 522 ------------ ------------ ----------- ----------- Net loss $(994) $(73) $(1,328) $(691) ============ ============ =========== =========== Basic and diluted loss per common share: Loss per common share from continuing operations $(0.04) $(0.02) $(0.08) $(0.07) (Loss) income from discontinued operations (0.01) 0.02 0.01 0.03 ------------ ------------ ----------- ----------- Basic and diluted loss per common share $(0.05) $(0.00) $(0.07) $(0.04) ============ ============ =========== =========== Common shares used in computing basic and diluted loss per common share: 19,117,154 18,833,350 19,117,154 18,730,323 ============ ============ =========== =========== See accompanying notes to condensed consolidated financial statements. NETGURU, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) September 30, March 31, 2005 2005 (Unaudited) ------------- --------- Assets Current assets: Cash and cash equivalents $ 2,753 $ 3,681 Accounts receivable (net of allowance for doubtful accounts of $166 and $199, as of September 30, 2005 and March 31, 2005, respectively) 806 1,491 Income tax receivable 12 15 Notes and related party loans receivable 12 12 Deposits 38 54 Prepaid expenses and other current assets 773 967 Current assets held for sale 3,549 4,274 ------------- -------- Total current assets 7,943 10,494 Property, plant and equipment, net 895 924 Goodwill 2,929 2,931 Other assets 135 144 ------------- -------- $ 11,902 $ 14,493 ============= ======== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt, net of discount of $209 and $222 as of September 30, 2005 and March 31, 2005, respectively $ 1,361 $ 1,297 Related party loans payable - 100 Current portion of capital lease obligations 16 15 Accounts payable 405 179 Accrued expenses 410 469 Income taxes payable 24 19 Deferred revenues 317 579 Other liabilities 157 179 Liabilities held for sale 2,976 3,530 -------- -------- Total current liabilities 5,666 6,367 Long-term debt, net of current portion and net of discount of $99 and $200, as of September 30, 2005 and March 31, 2005, respectively 1,644 2,108 Capital lease obligations, net of current portion 47 55 Deferred gain on sale-leaseback 643 678 -------- -------- Total liabilities 8,000 9,208 -------- -------- Stockholders' equity: Preferred stock, par value $.01 (Authorized 5,000,000 shares; no shares issued and outstanding) - - Common stock, par value $.01; (Authorized 150,000,000 shares; 19,117,154 shares outstanding as of September 30, 2005 and March 31, 2005) 191 191 Additional paid-in capital 36,869 36,869 Accumulated deficit (32,560) (31,232) Accumulated other comprehensive loss: Cumulative foreign currency translation adjustments (598) (543) -------- -------- Total stockholders' equity 3,902 5,285 -------- -------- $ 11,902 $ 14,493 ======== ======== See accompanying notes to condensed consolidated financial statements. *T Notes to condensed consolidated financial statements: In August 2005 the Company entered an asset purchase agreement to sell its engineering software business, REI; REI's STAAD line of software; and all related operations to Bentley Systems, Inc. Therefore REI has been classified as an asset held for sale, and, correspondingly, results of REI operations are reported as discontinued operations.