NGRU Netguru

netGuru, Inc. (Nasdaq:NGRU) reported financial results for the fiscal 2007 second quarter ended September 30, 2006. Net revenues from continuing operations for the quarter were $575,000 compared to $626,000 in the second quarter of fiscal 2006. Revenues from collaborative software sales and services were $152,000 compared to $208,000 in the second quarter of last year; the decrease of $56,000, or 34%, reflects the fact that in the second quarter of fiscal 2006 a large collaborative software project was completed and revenues recognized, whereas no comparable revenues were recognized in the second quarter of fiscal 2007. Revenues from IT services were essentially flat at $423,000 compared to $418,000 in the second quarter of fiscal 2006. Gross profit was $237,000 versus $285,000 a year ago. An increase of $136,000 in total operating expenses, to $946,000 from $810,000 in the second quarter of fiscal 2006, reflects higher selling, general and administrative expenses due in part to the hiring of additional sales employees, an increase in consulting and sales-commission fees, and an increase in legal fees related to potential strategic transactions. Operating loss for the quarter was $709,000 compared to an operating loss of $525,000 in the second quarter of last year. Net loss for the quarter was $562,000, or $0.03 per share, and included a $140,000 loss from discontinued operations. For the fiscal 2006 second quarter, net loss was $994,000, or $0.05 per share, and included a $360,000 loss from discontinued operations. For the six months ended September 30, 2006, net revenues were $1,445,000 compared to $1,422,000 in the first six months of the prior fiscal year. Revenues from collaborative software sales and services were $602,000 compared to $450,000, and revenues from IT services were $843,000 compared to $972,000. Gross profit was $746,000 versus $692,000 a year ago, and loss from continuing operations was $792,000 compared to a loss of $1,048,000. Net loss was $1,014,000, or $0.05 per share, including a loss from discontinued operations of $222,000, compared to a net loss of $1,328,000, or $0.07 per share, including a loss from discontinued operations of $280,000, in the first six months of fiscal 2006. As part of the November 2005 transaction to sell the Company�s Research Engineers International business to Bentley Systems Incorporated (�Bentley�), Bentley assumed all rights under the lease of approximately 40,000 square feet of the Yorba Linda, California facility that houses the Company�s corporate headquarters, and the Company sub-leased approximately 3,000 square feet from Bentley. During the second quarter of fiscal 2007, the Company and Bentley agreed to terminate this sub-lease effective December 31, 2006 and move the Company�s headquarters to a more suitable location. Pursuant to Statement of Financial Accounting Standard No. 13, �Accounting for Leases,� the Company is recognizing the deferred gain on sale and leaseback of approximately $590,000 over the remaining term of the modified lease. For the second quarter of fiscal 2007, deferred gain on sale and leaseback recognized was approximately $295,000. On August 29, 2006, the Company entered into an Agreement and Plan of Merger with privately held BPO Management Services, Inc. ("BPOMS") and BPO Acquisition Corp., a newly created, wholly owned subsidiary of the Company specifically created to effect the merger. On August 29, 2006, the Company also entered into a separate stock and asset sale agreement pursuant to which the Company would, concurrently with the consummation of the merger transaction, sell and transfer its interest in Research Engineers Ltd., the Company�s majority-owned India subsidiary that engages in engineering business process outsourcing services ("REL"), and certain additional assets and liabilities to Das Family Holdings ("DFH"). DFH is owned and controlled by Amrit K. Das, who is the Company�s Chairman, Chief Executive Officer, President and beneficial owner of more than 10% of the Company�s outstanding common stock, Santanu K. Das, who is one of the Company�s directors and former executive officers and holds more than 10% of the Company�s outstanding common stock, and their affiliates. The closings of the proposed merger and sale transactions are subject to various conditions, including approval of the transactions by our stockholders. If all closing conditions are met, the Company anticipates that the merger and sale transactions would occur by December 22, 2006. The Company has incurred and expects to continue to incur significant costs in connection with the consummation of the proposed merger and sale transactions, much of which the Company will expend in preparation for the closings and regardless of whether the proposed transactions ultimately are consummated. The Company�s future capital requirements will depend upon many factors, including whether it consummates the proposed merger and sale transactions, sales and marketing efforts, the development of new products and services, future strategic mergers and/or divestitures/acquisitions, the progress of research and development efforts, and the status of competitive products and services. As of September 30, 2006, the Company had working capital of $2.8 million, including $1.5 million of net assets and liabilities held for sale, and an accumulated deficit of $17.6 million. As of that date, the Company had $1.4 million of cash and cash equivalents and $396,000 of accounts receivable, net of allowance for doubtful accounts. The Company�s total net cash outflow is estimated to be approximately $300,000 per month. The Company does not have any debt instruments in place that it could use for future borrowings. Thus, if the merger and sale transactions are not consummated or are not consummated on a timely basis, the Company may be forced to seek additional capital in order to continue its operations. Further, the Company and BPOMS will need financing to conduct operations and make desired acquisitions if the proposed merger and sale transactions are consummated. Financing may not be available on acceptable terms, or at all, and if available may result in significant dilution to the voting and economic rights of Company stockholders and subject the Company to covenants that restrict its ability to freely operate its business. The Company could also find it necessary to pursue a plan of complete liquidation and dissolution. In that event, the Company would incur additional costs related to the disposal of its remaining assets and businesses, which would reduce or eliminate the cash available for distribution to Company stockholders. About netGuru: netGuru is an engineering services company offering engineering business process outsourcing services for the architecture, engineering, and construction (A/E/C) industry; document/project collaboration software/solutions for A/E/C companies, enterprise software providers, software integrators, and other businesses engaged in document/project-centric operations; and technical services and support. netGuru offices are located in the United States, Europe, and India. 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, other matters discussed in this press release, including whether and when the proposed merger and sale transactions may be consummated, sufficiency of the Company�s assets and revenues, and the need for and availability, terms and effects of additional financing, 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 closing conditions (including without limitation, obtaining stockholder approval) and consummate the proposed merger and sale transactions or any other strategic transaction, netGuru's ability to conserve resources and implement reductions in ongoing expenses and/or increase revenues or obtain needed financing, market conditions regionally and worldwide, demand for collaborative and IT products and services, technological change, economic conditions, changes in governmental regulations and policies, competitive products and services, unforeseen issues, and other factors discussed in the "Risk Factors" Section and other sections of the Company's Form 10-KSB for the fiscal year ended March 31, 2006, definitive proxy statement filed November 3, 2006, and other filings made with the U.S. Securities and Exchange Commission. NETGURU, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ($ in thousands except share and per share amounts) � Three Months EndedSeptember 30, Six Months EndedSeptember 30, 2006� 2005� 2006� 2005� Net revenues: Collaborative software products and services $152� $208� $602� $450� IT services 423� 418� 843� 972� � � � � Total net revenues 575� 626� 1,445� 1,422� Cost of revenues: Collaborative software products and services 26� 1� 80� 2� IT services 312� 340� 619� 728� � � � � Total cost of revenues 338� 341� 699� 730� � � � � Gross profit 237� 285� 746� 692� � Operating expenses: Selling, general and administrative 794� 621� 1,532� 1,103� Research and development 107� 136� 215� 286� Depreciation 45� 53� 79� 109� � � � � Total operating expenses 946� 810� 1,826� 1,498� � Operating loss (709) (525) (1,080) (806) � Other (income) expense (287) 112� (288) 235� � Loss from continuing operations before income taxes (422) (637) (792) (1,041) Income tax expense -� (3) -� 7� Loss from continuing operations (422) (634) (792) (1,048) � Loss from discontinued operations (140) (360) (222) (280) � Net loss $(562) $(994) $(1,014) $(1,328) � Basic and diluted net loss per common share: Net loss per common share from continuing operations $(0.02) $(0.03) $(0.04) $(0.05) Net loss per common share from discontinued operations $(0.01) $(0.02) $(0.01) $(0.02) Basic and diluted net loss per common share (0.03) (0.05) (0.05) (0.07) � Common equivalent shares used in computing basic and diluted net loss per common share 19,235,041� 19,117,154� 19,235,041� 19,117,154� NETGURU, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) � September 30, 2006 (Unaudited) March 31, 2006 Assets Current assets: Cash and cash equivalents $ 1,421� $ 2,497� Restricted cash -� 1,070� Accounts receivable (net of allowance for doubtful accounts of $14 at September 30, 2006 and $20 at March 31, 2006) 396� 606� Note receivable 25� 103� Prepaid expenses and other current assets 80� 239� Assets held for sale 1,931� 2,133� Total current assets 3,853� 6,648� � Property and equipment, net 101� 179� Other assets 105� 109� $ 4,059� 6,936� � Liabilities and Stockholders� Equity Current liabilities: Current portion of capital lease obligations $ 118� $ 117� Accounts payable 205� 205� Accrued expenses 191� 451� Income taxes payable 31� 52� Deferred revenues 78� 199� Accrued settlement for REI sale -� 760� Other liabilities 29� 53� Current liabilities held for sale 405� 717� Total current liabilities 1,057� 2,554� � Capital lease obligations, net of current portion 76� 136� Deferred gain on sale-leaseback 295� 608� Total liabilities 1,428� 3,298� 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; 19,235,041 shares outstanding as of September 30, 2006 and March 31, 2006 192� 192� Additional paid-in capital 20,685� 20,685� Accumulated deficit (17,577) (16,563) Accumulated other comprehensive loss: Cumulative foreign currency translation adjustments (669) (676) � Total stockholders� equity 2,631� 3,638� $ 4,059� 6,936� netGuru, Inc. (Nasdaq:NGRU) reported financial results for the fiscal 2007 second quarter ended September 30, 2006. Net revenues from continuing operations for the quarter were $575,000 compared to $626,000 in the second quarter of fiscal 2006. Revenues from collaborative software sales and services were $152,000 compared to $208,000 in the second quarter of last year; the decrease of $56,000, or 34%, reflects the fact that in the second quarter of fiscal 2006 a large collaborative software project was completed and revenues recognized, whereas no comparable revenues were recognized in the second quarter of fiscal 2007. Revenues from IT services were essentially flat at $423,000 compared to $418,000 in the second quarter of fiscal 2006. Gross profit was $237,000 versus $285,000 a year ago. An increase of $136,000 in total operating expenses, to $946,000 from $810,000 in the second quarter of fiscal 2006, reflects higher selling, general and administrative expenses due in part to the hiring of additional sales employees, an increase in consulting and sales-commission fees, and an increase in legal fees related to potential strategic transactions. Operating loss for the quarter was $709,000 compared to an operating loss of $525,000 in the second quarter of last year. Net loss for the quarter was $562,000, or $0.03 per share, and included a $140,000 loss from discontinued operations. For the fiscal 2006 second quarter, net loss was $994,000, or $0.05 per share, and included a $360,000 loss from discontinued operations. For the six months ended September 30, 2006, net revenues were $1,445,000 compared to $1,422,000 in the first six months of the prior fiscal year. Revenues from collaborative software sales and services were $602,000 compared to $450,000, and revenues from IT services were $843,000 compared to $972,000. Gross profit was $746,000 versus $692,000 a year ago, and loss from continuing operations was $792,000 compared to a loss of $1,048,000. Net loss was $1,014,000, or $0.05 per share, including a loss from discontinued operations of $222,000, compared to a net loss of $1,328,000, or $0.07 per share, including a loss from discontinued operations of $280,000, in the first six months of fiscal 2006. As part of the November 2005 transaction to sell the Company's Research Engineers International business to Bentley Systems Incorporated ("Bentley"), Bentley assumed all rights under the lease of approximately 40,000 square feet of the Yorba Linda, California facility that houses the Company's corporate headquarters, and the Company sub-leased approximately 3,000 square feet from Bentley. During the second quarter of fiscal 2007, the Company and Bentley agreed to terminate this sub-lease effective December 31, 2006 and move the Company's headquarters to a more suitable location. Pursuant to Statement of Financial Accounting Standard No. 13, "Accounting for Leases," the Company is recognizing the deferred gain on sale and leaseback of approximately $590,000 over the remaining term of the modified lease. For the second quarter of fiscal 2007, deferred gain on sale and leaseback recognized was approximately $295,000. On August 29, 2006, the Company entered into an Agreement and Plan of Merger with privately held BPO Management Services, Inc. ("BPOMS") and BPO Acquisition Corp., a newly created, wholly owned subsidiary of the Company specifically created to effect the merger. On August 29, 2006, the Company also entered into a separate stock and asset sale agreement pursuant to which the Company would, concurrently with the consummation of the merger transaction, sell and transfer its interest in Research Engineers Ltd., the Company's majority-owned India subsidiary that engages in engineering business process outsourcing services ("REL"), and certain additional assets and liabilities to Das Family Holdings ("DFH"). DFH is owned and controlled by Amrit K. Das, who is the Company's Chairman, Chief Executive Officer, President and beneficial owner of more than 10% of the Company's outstanding common stock, Santanu K. Das, who is one of the Company's directors and former executive officers and holds more than 10% of the Company's outstanding common stock, and their affiliates. The closings of the proposed merger and sale transactions are subject to various conditions, including approval of the transactions by our stockholders. If all closing conditions are met, the Company anticipates that the merger and sale transactions would occur by December 22, 2006. The Company has incurred and expects to continue to incur significant costs in connection with the consummation of the proposed merger and sale transactions, much of which the Company will expend in preparation for the closings and regardless of whether the proposed transactions ultimately are consummated. The Company's future capital requirements will depend upon many factors, including whether it consummates the proposed merger and sale transactions, sales and marketing efforts, the development of new products and services, future strategic mergers and/or divestitures/acquisitions, the progress of research and development efforts, and the status of competitive products and services. As of September 30, 2006, the Company had working capital of $2.8 million, including $1.5 million of net assets and liabilities held for sale, and an accumulated deficit of $17.6 million. As of that date, the Company had $1.4 million of cash and cash equivalents and $396,000 of accounts receivable, net of allowance for doubtful accounts. The Company's total net cash outflow is estimated to be approximately $300,000 per month. The Company does not have any debt instruments in place that it could use for future borrowings. Thus, if the merger and sale transactions are not consummated or are not consummated on a timely basis, the Company may be forced to seek additional capital in order to continue its operations. Further, the Company and BPOMS will need financing to conduct operations and make desired acquisitions if the proposed merger and sale transactions are consummated. Financing may not be available on acceptable terms, or at all, and if available may result in significant dilution to the voting and economic rights of Company stockholders and subject the Company to covenants that restrict its ability to freely operate its business. The Company could also find it necessary to pursue a plan of complete liquidation and dissolution. In that event, the Company would incur additional costs related to the disposal of its remaining assets and businesses, which would reduce or eliminate the cash available for distribution to Company stockholders. About netGuru: netGuru is an engineering services company offering engineering business process outsourcing services for the architecture, engineering, and construction (A/E/C) industry; document/project collaboration software/solutions for A/E/C companies, enterprise software providers, software integrators, and other businesses engaged in document/project-centric operations; and technical services and support. netGuru offices are located in the United States, Europe, and India. 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, other matters discussed in this press release, including whether and when the proposed merger and sale transactions may be consummated, sufficiency of the Company's assets and revenues, and the need for and availability, terms and effects of additional financing, 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 closing conditions (including without limitation, obtaining stockholder approval) and consummate the proposed merger and sale transactions or any other strategic transaction, netGuru's ability to conserve resources and implement reductions in ongoing expenses and/or increase revenues or obtain needed financing, market conditions regionally and worldwide, demand for collaborative and IT products and services, technological change, economic conditions, changes in governmental regulations and policies, competitive products and services, unforeseen issues, and other factors discussed in the "Risk Factors" Section and other sections of the Company's Form 10-KSB for the fiscal year ended March 31, 2006, definitive proxy statement filed November 3, 2006, and other filings made 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 Ended Six Months Ended September 30, September 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net revenues: Collaborative software products and services $152 $208 $602 $450 IT services 423 418 843 972 ----------- ----------- ----------- ----------- Total net revenues 575 626 1,445 1,422 ----------- ----------- ----------- ----------- Cost of revenues: Collaborative software products and services 26 1 80 2 IT services 312 340 619 728 ----------- ----------- ----------- ----------- Total cost of revenues 338 341 699 730 ----------- ----------- ----------- ----------- Gross profit 237 285 746 692 ----------- ----------- ----------- ----------- Operating expenses: Selling, general and administrative 794 621 1,532 1,103 Research and development 107 136 215 286 Depreciation 45 53 79 109 ----------- ----------- ----------- ----------- Total operating expenses 946 810 1,826 1,498 ----------- ----------- ----------- ----------- Operating loss (709) (525) (1,080) (806) ----------- ----------- ----------- ----------- Other (income) expense (287) 112 (288) 235 ----------- ----------- ----------- ----------- Loss from continuing operations before income taxes (422) (637) (792) (1,041) Income tax expense - (3) - 7 ----------- ----------- ----------- ----------- Loss from continuing operations (422) (634) (792) (1,048) ----------- ----------- ----------- ----------- Loss from discontinued operations (140) (360) (222) (280) ----------- ----------- ----------- ----------- Net loss $(562) $(994) $(1,014) $(1,328) =========== =========== =========== =========== Basic and diluted net loss per common share: Net loss per common share from continuing operations $(0.02) $(0.03) $(0.04) $(0.05) Net loss per common share from discontinued operations $(0.01) $(0.02) $(0.01) $(0.02) ----------- ----------- ----------- ----------- Basic and diluted net loss per common share (0.03) (0.05) (0.05) (0.07) =========== =========== =========== =========== Common equivalent shares used in computing basic and diluted net loss per common share 19,235,041 19,117,154 19,235,041 19,117,154 =========== =========== =========== =========== *T -0- *T NETGURU, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) September 30, 2006 March 31, (Unaudited) 2006 ------------- --------- Assets Current assets: Cash and cash equivalents $ 1,421 $ 2,497 Restricted cash - 1,070 Accounts receivable (net of allowance for doubtful accounts of $14 at September 30, 2006 and $20 at March 31, 2006) 396 606 Note receivable 25 103 Prepaid expenses and other current assets 80 239 Assets held for sale 1,931 2,133 ------------- --------- Total current assets 3,853 6,648 Property and equipment, net 101 179 Other assets 105 109 ------------- --------- $ 4,059 6,936 ============= ========= Liabilities and Stockholders' Equity Current liabilities: Current portion of capital lease obligations $ 118 $ 117 Accounts payable 205 205 Accrued expenses 191 451 Income taxes payable 31 52 Deferred revenues 78 199 Accrued settlement for REI sale - 760 Other liabilities 29 53 Current liabilities held for sale 405 717 ------------- --------- Total current liabilities 1,057 2,554 Capital lease obligations, net of current portion 76 136 Deferred gain on sale-leaseback 295 608 ------------- --------- Total liabilities 1,428 3,298 ------------- --------- 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; 19,235,041 shares outstanding as of September 30, 2006 and March 31, 2006 192 192 Additional paid-in capital 20,685 20,685 Accumulated deficit (17,577) (16,563) Accumulated other comprehensive loss: Cumulative foreign currency translation adjustments (669) (676) ------------- --------- Total stockholders' equity 2,631 3,638 ------------- --------- $ 4,059 6,936 ============= ========= *T