The distribution follows the Company's sale of the assets of its Research Engineers International subsidiary and STAAD product lines in November and the board of directors' subsequent decision to distribute substantially all of the net proceeds of the sale after repaying debt and setting aside reserves for taxes, continuing operations, and other contingencies.
The Company intends that the distribution constitutes a return of capital associated with partial liquidation and believes that there is a reasonable basis to take a tax position to this effect. As a result, netGuru anticipates that shareholders who are not taxed as corporations may be able to elect to report any gain or loss resulting from the distribution as a capital gain or loss for federal income tax purposes. However, this expectation is not intended to be, nor should it be interpreted as, tax advice, and shareholders should consult their qualified tax advisors regarding tax treatment of the distribution.
In connection with the distribution, the holders of options issued under the Company's stock option plans will be notified that, in accordance with the terms of the plans, plan-related options will cease further vesting and then will terminate if not exercised prior to the ex-distribution date (anticipated to be January 30, 2006). Holders of non-plan options and warrants that remain outstanding on the ex-distribution date will be notified that the board has approved an $0.85 per share reduction in the exercise prices of those options and warrants on the ex-distribution date.
netGuru Chairman and Chief Executive Amrit Das remarked: "Regarding netGuru's continuing operations, the special committee of the board is considering strategic alternatives, such as a business combination or the sale of netGuru's remaining assets, with a transaction expected to occur in the 2006 calendar year. In the interim, management intends to continue to cut costs and expenses where feasible to reduce cash usage."
netGuru is an engineering services company offering engineering business process outsourcing (EBPO) 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, go to 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 plan and terms of the distribution; planned termination of stock plan options; planned option and warrant exercise price adjustments; tax treatment of the distribution; cost and expense reductions; continuing evaluations of alternatives; and the identification and consummation of potential strategic alternatives 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 ability of the Company to complete the distribution plan, terminate stock plan options, adjust option and warrant exercise prices, reduce costs and expenses, identify and consummate a potential strategic transaction; business conditions; the demand for collaborative software and EBPO services; competition; and other factors discussed in the "Risk Factors" Section of netGuru's Form 10-KSB for the fiscal year ended March 31, 2005, and other filings made with the U.S. Securities and Exchange Commission.
netGuru, Inc. Bruce Nelson, 714-974-2500 x-5215 or Silverman Heller Associates Dan Matsui/Gene Heller, 310-208-2550