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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
 (Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2000

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the transition period from __________ to
         __________

                         Commission file number: 0-28560

                                  NETGURU, INC.
              (Exact name of small business issuer in its charter)

              DELAWARE                                 22-2356861
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)

22700 SAVI RANCH PARKWAY, YORBA LINDA, CA               92887
 (Address of principal executive offices)             (Zip Code)

                    Issuer's telephone number: (714) 974-2500

          Securities registered pursuant to Section 12 (b) of the Act:

       Title of each class                 Name of exchange on which registered
              NONE                                         NONE

          Securities registered pursuant to Section 12 (g) of the Act:

                          COMMON STOCK, $0.01 PAR VALUE
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $19,936,000.

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 26, 2000 was $102,004,508.

The number of shares outstanding of the registrant's only class of Common Stock,
$.01 par value, was 13,370,933 on May 26, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      NONE

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.


INTRODUCTION

         We were incorporated in 1981 under the name Research Engineers, Inc.
and changed our name to netGuru, Inc. in 2000. We are an integrated Internet
technology and services company providing:

    o     Internet-based information technology, or IT, services to companies
          worldwide;

    o     Internet and personal computer based engineering software products to
          businesses worldwide; and

    o     Internet content and commerce through our city- and region-oriented
          portal network, NETGURUINDIA.COM, which is focused on the "global
          Indian" community, consisting of resident Indians and persons of
          Indian origin, or PIOs.

         We have been providing computer-aided engineering software solutions to
our customers for over 18 years. For the past 15 years, we have supported our
engineering software business with our India-based software programming and IT
resources. In 1999, we acquired two IT services companies in the U.S., further
expanding our IT resources and capabilities. With our experience in India and
our understanding of the global Indian community, we began offering our Internet
portal services in 1999. In addition, based upon our knowledge and understanding
of the engineering software market, combined with our Internet technology
resources and experience, we recently launched WEB4ENGINEERS.COM, an engineering
portal hosting our engineering software applications online and providing
applications services provider, or ASP, services to engineering software
providers and their licensees worldwide.

         Our Internet portal, NETGURUINDIA.COM currently provides Internet
content and commerce services, including travel, telecommunications and gifts,
to PIOs through city- and region-oriented destinations that address the specific
Indian cultural and ethnic needs of the targeted communities. Our portal network
provides comprehensive digitally-rich media content and e-commerce services for
PIOs, including direct-to-customer fulfillment and Internet tools such as chat
rooms and other digital communication capabilities.

         We are in the process of providing our Internet access and commerce
services to the resident Indian business and consumer markets. In May 2000, we
acquired a 74% interest (49% held as a direct investment and 25% held as an
indirect investment through our subsidiary in India) in Interra Global Limited,
an Indian company with a 15-year Class A License. This Class A License enables
us to provide Internet access services throughout India from points of presence,
or POPs, which are access facilities allowing the two-way transfer of
information and data. We are currently building our network of POPs, which will
be strategically located in India's largest metropolitan areas. We intend to
expand our network by adding additional POPs in the future.

         We provide a full suite of Internet-based IT consulting services to our
customers from our IT services divisions in the Silicon Valley and the Boston
area. We support our IT services operations with our offshore facility in India.
Our IT consulting customers include companies such as General Electric,
Fidelity, Netscape, Sun Microsystems, Cisco Systems and Hewlett Packard. We have

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positioned our company to capitalize on our IT services methodology in order to
provide Internet-based IT consulting services to businesses worldwide and to
enable us to provide business-to-business Web solutions in India.

         We develop and market cost-effective, high-quality engineering software
solutions. Our comprehensive line of structural, mechanical, civil and
process/piping engineering software products provide our customers with
fully-integrated, easy-to-use design automation and analysis solutions. We
currently license our software products to more than 20,000 companies accounting
for over 50,000 software installations. Based on our customer surveys, we
estimate that there are approximately 150,000 users at these installations
worldwide. Our customers include: Bechtel Corporation, British Telecom, Jet
Propulsion Laboratories, Exxon Corporation, Fluor Daniel, Inc., General
Dynamics, NASA, Rocketdyne, Siemens AG and Toyo Engineering.

         We recently acquired Allegria Software, Inc., a company with Internet
technology resources and online collaborative software. This recent acquisition,
combined with our Web-enabling technology, allows us to offer to our current and
prospective customers our engineering software products online with real-time,
online collaboration through our WEB4ENGINEERS.COM portal. Our WEB4ENGINEERS.COM
portal offers ASP services, including applications hosting, data hosting and
portal services for engineering companies worldwide.

INDUSTRY OVERVIEW

     THE INTERNET

         Our business is dependent upon the continued growth of the Internet.
The Internet has evolved into a global mass medium, allowing millions of
individuals and entities throughout the world to communicate, access and share
information, provide entertainment and engage in commerce transactions
electronically. The Internet is an interactive environment that facilitates the
exchange of information among users worldwide. According to International Data
Corporation, or IDC, the total number of Internet users worldwide is expected to
grow from approximately 140 million in 1998 to 400 million by 2002.

     THE GLOBAL INDIAN COMMUNITY

         Our integrated Internet technology and service offerings are targeted
at the global Indian community, consisting of resident Indians and PIOs.

         According to India's National Association of Software and Service
Companies, India will experience the greatest percentage growth in Internet
users of all countries. Alternative Internet access mechanisms such as broadband
delivery may further accelerate Internet growth in India. IDC estimates that the
number of Internet users in India will increase from 1.0 million in 1999 to over
11.3 million in 2003, a compounded annual growth rate of 84%.

         India's economy continues to modernize and expand. The growth of the
Indian economy is leading to an increase in the number of personal computers and
wired homes and businesses in India. We believe this will result in an increased
demand for Internet services, including e-commerce. IDC estimates that
e-commerce spending in India will increase from US $9.7 million in 1999 to US
$1.6 billion in 2003. In addition, the Indian telecommunications and Internet
industry, which was highly regulated by the Indian government, has been
deregulated and thus more open to competition from private entities. Until
November 1998, the only Internet service provider in India was Videsh Sanchar
Nigam Limited, or VSNL, an entity that is sponsored and majority-owned by the
Indian government. As of March 31, 2000, the Indian government has granted 270

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15-year licenses to provide Internet service provider services, 44 of which
enable the licensee to offer these services on a national level. As of March 31,
2000, only 15 of these national licensees had commenced operations.

         Of the approximately 987 million people comprising India's population,
IDC estimates that approximately 150 million people are middle class (earning in
excess of $20,000 annually), many of whom are English-speaking and high-school
and university-educated. We believe that this segment of the population
represents the highest growth segment of Internet users in India. We also
believe that these demographics, along with the low penetration rate,
demonstrate the potential for growth in this market.

         In addition to the opportunities presented within the resident Indian
community, we believe that the PIO community provides us with a significant and
well-defined target market opportunity for our Internet content and commerce
offerings. According to IDC, there are presently approximately 22 million Indian
expatriates worldwide. We believe that a significant segment of the PIO
population, especially that portion located in the U.S., is relatively young,
well educated and affluent.

     IT SERVICES

         Businesses worldwide are facing competitive pressures to Web-enable
their operations. Many businesses, in particular, small and mid-sized
businesses, are seeking to outsource these services. According to Dataquest, a
third party information provider, the worldwide market for IT consulting,
development, integration and outsourcing will continue to grow, increasing from
$177 billion in 1998 to $291 billion in 2001. The IT consulting industry is
highly fragmented and consists primarily of: (i) large systems integration
firms, including the consulting divisions of the national accounting firms, (ii)
information systems vendors which focus on services relating to the software
solutions they offer; and (iii) general management consulting firms, many of
whom focus on selected specialty areas, such as strategic planning or
vendor-specific implementation.

     ENGINEERING SOFTWARE PRODUCTS

         The engineering design industry is comprised of a broad range of
organizations including small, medium and large-sized engineering consulting
firms, manufacturing companies, construction/fabrication companies,
architectural firms, utility companies, transportation companies and government
agencies. It is characterized by rapidly changing market demands as a result of
evolving quality/safety regulations, increasing complexity of engineering
projects, increasing demand for interdisciplinary information integration and
increasing competition. In addition, this industry has increasingly relied on
powerful desktop personal computer ("PC") commercial software. We believe that
this shift to PC-based software has resulted in demand for
technically-sophisticated, easy-to-use engineering software products that
automate, simplify and integrate analysis and design functions in a cost
effective manner.

         The increased use of PC-based, multi-functional engineering software
has increased the volume and complexity of information analysis and exchange
between engineering design organizations and organizations in related
disciplines, such as procurement, construction, fabrication and production.
Consequently, engineering design firms require more powerful and better
integrated software products for their analysis and design activities.
Engineering design firms are looking for ways to better coordinate their
analysis and design activities through collaborative software. In particular,
the Internet offers an attractive platform for collaborative
engineering--allowing engineers in multiple locations to review designs online
on a real-time basis. We believe, as more engineering software products are
offered on the Internet with collaborative software products, engineering design
firms will increasingly turn to Internet-based engineering software solutions to
meet their design and analysis needs.

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BUSINESS STRATEGY

         Our goal is to become one of the leading integrated Internet technology
and service companies addressing the global Indian community, the worldwide IT
services market and the worldwide Internet engineering software market. To
achieve our objectives, we plan to build upon our competitive advantages and
pursue the following strategies:

         BUILD NETGURU BRAND AWARENESS AND EXPAND OUR INTERNET USER BASE. We
plan to make the netGuru brand name synonymous with leading integrated Internet
technology and services in the global Indian community. We have embarked on a
brand-building campaign utilizing online and offline media and strategic
alliances. We also plan to build brand recognition and develop new commerce
opportunities through the marketing and packaging of our content through
co-branding, licensing, cooperative marketing and affiliation programs. We
intend to expand our Internet access user base and increase usage through
promotions, interactive services and affiliate relationships. By employing
alternative delivery models that do not require a large initial capital outlay
by the user, we seek to reach the larger market of resident Indian users who may
not own a personal computer. For example, subsequent to the year ended March 31,
2000, we opened five, and plan to open additional, franchised netGuru-branded
"cyber cafes" within India, providing Internet access to a much larger resident
Indian Internet user base, whose members are computer literate but who do not
own personal computers. We believe that our strategy of bringing the Internet
within the reach of these users will enhance our market penetration and user
loyalty.

         IMPLEMENT AND OPTIMIZE USAGE OF OUR INTERNET NETWORK INFRASTRUCTURE. We
plan to rapidly develop our Internet network infrastructure to capitalize on the
growth of the Internet in India. We are in the process of installing POPs which
will enable us to provide Internet access to India's largest metropolitan areas
and intend to expand our network in the future. Our network is designed to be
utilized both for Internet access and for telecommunications services.

         UTILIZE OUR DIGITAL MULTI-MEDIA STUDIOS TO EXPAND AND ENHANCE OUR
CONTENT AND COMMERCE ON OUR CITY- AND REGION-ORIENTED DESTINATIONS. We attract
and retain users to NETGURUINDIA.COM with a broad array of relevant and in-depth
local and nostalgic digitally-rich content. We plan to continue to enhance these
offerings with our in-house multi-media digital studios in Calcutta, India and
in the U.S. With these media resources and our expertise, combined with our
strategic technology and content alliances, we plan to provide video-on-demand
libraries, full-length movies and animation features.

         BUILD AN ATTRACTIVE PLATFORM FOR ADVERTISING AND COMMERCE. By focusing
on the well-defined, rapidly growing market of resident Indians and PIOs, we
believe that we will create an attractive advertising and commerce platform.
Recognizing the travel, communication and financial needs of the global Indian
community, we plan to focus on airlines, communication companies and banks as
our primary sources of advertising and commerce revenue. We plan to enter into
relationships with Internet advertising agencies in India, North America, the
Asia/Pacific Region and Europe, to provide us with the ability to market our
advertising network to a broad scope of advertisers and enable us to provide
relevant content to our target markets.

         PURSUE STRATEGIC RELATIONSHIPS AND ACQUISITIONS. We plan to use
strategic relationships with third parties and acquisitions to complement and
enhance our product and service offerings, including alliances with leading
content, technology, electronic commerce, advertising and telecommunications
service providers. Through these relationships, we plan to enhance our
offerings, expand our community of users, increase the number of visitors to our
portal network and provide enhanced Internet-based IT business-to-business
service offerings. We have recently acquired other businesses which expand and
enhance our service offerings and plan to pursue additional strategic
acquisitions in the future.

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         LEVERAGE OUR IT EXPERIENCE AND INFRASTRUCTURE TO PROVIDE INTERNET-BASED
BUSINESS-TO-BUSINESS SOLUTIONS TO THE RESIDENT INDIAN MARKET. We have an
established IT services infrastructure strategically located in the Silicon
Valley and the Boston area, which is supported by our offshore facilities in
India. We intend to leverage our IT experience in the United States to provide
IT consulting services to businesses on a worldwide basis and to become the
leading single-source provider of end-to-end business solutions to the resident
Indian market. Our strategy is to differentiate ourselves from our competitors
by:

    o    marketing our business-to-business solutions to our installed base of
         2,000 companies in India who license our engineering software products;

    o    offering a comprehensive end-to-end solution to our customers;

    o    utilizing our established IT infrastructure and expertise; and

    o    taking advantage of the lower costs derived from our facilities in
         India.

         LEVERAGE OUR SOFTWARE ENGINEERING EXPERIENCE AND INTERNET TECHNOLOGIES
TO OFFER OUR SOFTWARE PRODUCTS ONLINE AND ESTABLISH A FULL-SERVICE ENGINEERING
ASP. With our extensive experience and understanding of the engineering software
market gained from over 18 years of experience providing quality software
solutions to architectural, engineering and construction businesses, combined
with our proprietary collaborative software and Web-enabling technologies, we
have established WEB4ENGINEERS.COM as our engineering ASP portal. This portal
allows us to offer our engineering software solutions online, as well as hosting
engineering applications software from other software vendors and providing data
hosting services. We believe that this engineering ASP will provide an
attractive platform for customers in the architectural, engineering and
construction marketplace who are increasingly seeking online, collaborative
solutions.

PRODUCTS AND SERVICES

         Our products and services can be classified in the following three
major categories:

    o     netGuru Internet Access and Portal Network;

    o     IT Services; and

    o     Engineering Software Products and ASP.

     NETGURU INTERNET ACCESS AND PORTAL NETWORK

         We currently provide Internet content and commerce services through a
city- and region-oriented portal network to PIOs and plan to expand these
offerings, including offering Internet access services, to the resident Indian
community in the near future. We are in the process of installing our Internet
network in India, initially consisting of POPs located in India's largest
metropolitan areas.

         INTERNET ACCESS SERVICES

         We are building an Internet network in India to offer a wide range of
Internet access and other network services to both consumer and corporate
customers. Our planned service offerings can be broadly divided into the
following categories:

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    o    consumer access services;

    o    business access services; and

    o    alternative access services.

         CONSUMER ACCESS SERVICES. We plan to provide Internet access services
to consumers in India. We expect that our access services product offerings will
be available in a number of packages, based on monthly service charges and
"fixed-hour" access. Our product packages will emphasize ease-of-use backed by
quality technical support and value additions through bundling of useful
Internet tools for no additional charge. We are establishing a network of
customer care centers throughout India to provide technical support to our users
on a 24x7x365 basis. In addition, we are entering into strategic partnerships
with certain software developers to add value to our products and services.

         BUSINESS ACCESS SERVICES. We plan to provide Internet access services
to businesses throughout India. In May 2000, we reached an understanding with
Vital Communications Ltd., an information and communications technology company
with approximately 10,000 customers, to acquire a 30% ownership interest in
Vital Communications. Upon the closing of this transaction, Vital Communications
will become our Internet access and services representative in India. Vital
Communications has agreed to use its best efforts to convert a majority of its
customers, most of which are businesses that currently obtain access services
from VSNL, to our Internet services provider network. In addition, we have 2,000
licensees of our engineering software products that are located in India. We
believe that these licensees are also candidates for our business access
services. In addition to our Internet access services, we intend to market our
Internet-based IT business-to-business solutions to Vital Communications'
customers, our engineering software licensees and our future business access
customers.

         ALTERNATIVE ACCESS SERVICES. In addition to providing access services
to those resident Indians who own PCs, our plan includes a delivery model for
these services which specifically targets the large number of middle-class
resident Indians who may desire Internet access but who may not have the
resources necessary to buy a personal computer. We have opened, with our
franchisees, five netGuru-branded cyber cafes in Delhi, Calcutta and Ahmedabad.
We plan to franchise additional netGuru-branded cyber cafes in the future. The
netGuru-branded cyber cafes are designed to provide PCs to users on a fee basis
in a social setting in their local communities, initially through third party
Internet service providers and, in the future, through our access services. We
believe that these cyber cafes have the potential to be an important
distribution channel for our products and services because customers can access
the Internet by paying only for actual Internet usage. Additionally, we have
been granted the exclusive rights by two educational institutions in India,
Bengal Engineering College in Calcutta and Indian Institute of Technology in
Kharagpur, to operate cyber cafes on campus and intend to pursue similar
opportunities at other educational institutions in India. We are currently in
the process of designing additional access delivery methods to reach the
resident Indian Internet user who does not own a PC. We believe that by
utilizing alternative delivery channels to provide Internet access to this
segment of the resident Indian population, we will have a competitive advantage
in the resident Indian market.

         NETGURU INTERNET PORTAL NETWORK

         Our city and region-oriented portal network provides our PIO users with
a one-stop Internet gateway which enables them to access local and nostalgic
India-focused content and commerce. We plan to expand our portal network to
provide access and commerce to resident Indians in the future. To date, we have
developed NETGURUINDIA.COM portal destinations for the major metropolitan cities
in India, including Delhi, Mumbai, Chennai and Calcutta. Our city- and

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region-oriented portal destinations are designed using a standard template
enabling us to "plug-in" relevant applications and links on each destination.
Using this standardized design enables us to create and modify our sites in a
cost-effective manner while maintaining a consistent "look and feel" across
destinations.

         CONTENT OFFERINGS. Through our portal network, we provide the PIO
community with local events, news and music in both English and the local
language of the Indian city on which the particular destination is based, and
offer products and services to suit the community's needs. We are expanding
access to our portal network to permit resident Indians to access our content
offerings. We also provide special interest integrated content and e-commerce
activities and Internet tools for our users. We believe that we will achieve
significant content differentiation by enriching our content with proprietary
animation and digital multimedia technology from our in-house studios.

         Currently, we provide news, sports, information and astrology updated
daily through on-demand streaming video technology, broadcasted in both English
and the relevant local Indian language. We plan to provide travel, health,
education, entertainment and cultural content offerings, as well as personal
service offerings such as restaurant guides, career placement and financial
services.

         We plan to further enrich our content offerings by providing full
motion video and sound allowing users to view the content in full-screen format
on a user's computer without distortion or degradation of either video or sound
quality. We also plan to integrate automatic voice recognition and streaming
text-to-speech technologies into our portal.

         DIGITAL MULTI-MEDIA STUDIOS. We have developed proprietary digital
multi-media expertise and resources in our studios in Calcutta, India and in the
U.S. to offer our subscribers and users digitally-rich multi-media content on
our NETGURUINDIA.COM portal network and to offer our entertainment, advertising
and corporate customers digital multi-media, animation software and features and
other digital products and services worldwide.

         COMMERCE. Through our portal network, we offer electronic commerce,
designed to appeal to the global Indian community and to serve its needs.
Currently, we offer e-commerce to the PIO community and plan to provide
e-commerce offerings in India to the resident Indian community. We have
identified three primary e-commerce opportunities within the global Indian
community: travel-related services; communications; and gifts and merchandising.

                  TRAVEL-RELATED SERVICES. We have identified travel to India as
a significant need for the PIO community. In January 2000, we acquired
e-Destinations, Inc., a U.S.-based travel agency which has been in the travel
business for over 19 years. e-Destinations focuses on the travel needs of the
PIO community in the U.S. Through e-Destinations, we provide online travel
services, including air tickets, cruises, packaged tours and stopover packages.

                  COMMUNICATIONS. We currently offer to our PIO users pre-paid
telephone cards for long distance phone calls to India directly through our
NETGURUINDIA.COM portal. Currently, we purchase access, on a wholesale basis,
from international carriers to offer our customers competitive pricing.
Beginning in July 2000, we plan to use our own telephony infrastructure to send
our customers' long distance calls to India, which we believe will further
improve our competitive pricing. Our telephone cards allow our customers to use
a unique PIN and an 800 number to dial long distance from any telephone in the
U.S.

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                  GIFTS AND MERCHANDISE. Currently, we sell gifts and
merchandise on our Internet portal, sourced from merchants in targeted Indian
cities, to PIOs for delivery to their family and friends in India. We plan to
expand our gift and merchandise offerings in the future by providing Indian
products from U.S. merchants for PIOs and by providing e-commerce opportunities
in India for our resident Indian subscribers and users. We are in the process of
establishing our netGuru Alliance Program, or NAP, a program to aggregate
leading merchants, service providers and religious and educational entities in
India and in the major PIO communities around the world. This program is
designed to provide our PIO users cultural and nostalgic gifts, merchandise,
audio/visual equipment, clothing, books, educational, religious and social
services. Our NAP partners will offer their products and services on our
NETGURUINDIA.COM portal for sale to our PIO users. We will assist our NAP
partners in converting their existing inventories to online catalogues, thus
Web-enabling their businesses and increasing their market reach.

         INTERNET TOOLS. We seek to develop a loyal and strong customer base by
providing our subscribers in India with useful Internet tools through our
portal. Once we implement our subscription program in India, each registered
subscriber will receive a personal "Netsecretary" which will be provided without
additional charge. Netsecretary will also be available to our U.S. portal users.
Netsecretary is our proprietary virtual Internet secretary, designed to
encourage our users to make our NETGURUINDIA.COM Web page their homepage,
thereby encouraging them to return to our Web site repeatedly. Netsecretary
provides users with many features including, support of all major e-mail servers
and operating systems; selectable media, including pager, fax, digital cellular
phone and e-mail; programmable schedule interface; remote call-in facility; and
selectable notification data. Through Netsecretary, we intend to offer the
following tools to our users at no cost:


    o    personal e-mails;

    o    personal electronic organizer;

    o    personal unified messaging system allowing for delivery of messages
         over the media selected by a user; and

    o    remote access to e-mail through toll-free number in incorporating
         text-to-speech and automatic voice recognition technologies.

         We also plan to provide the following additional Internet tools for our
subscriber and user base:

                  COMMUNITY CHAT ROOMS. We believe that interaction with peers
is an important part of an online community. Our portal network will be designed
to include community chat rooms to encourage subscriber and user exchange and
interaction. We also plan to provide our subscribers with occasional chat
opportunities with our celebrity representatives. We believe that this will
enhance subscriber participation and result in additional traffic on our portal
network.

                  NEWSGROUPS AND BULLETIN BOARDS. We plan to actively encourage
community participation on our portal network through the creation of electronic
forums such as newsgroups and bulletin boards.

         TELEPHONY SERVICES

         We are in the process of establishing a transpacific, carrier-grade
managed communications network to support our planned telephony services
offerings. We are designing our managed communications network to be a premium
communications and data network built with carrier-grade communications switches
and equipment linked by a combination of the Internet, international leased

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lines and satellite access to and from India. We will monitor and control our
network on a 24x7x365 basis to deliver high quality voice communications. In the
U.S., our communications gateway and switch will be located in our corporate
headquarters in Yorba Linda, California and our leased communications facility
in Los Angeles, California. In India, we will utilize government-approved
telecommunications facilities.

         Initially, we will provide our telephony services through traditional
voice international leased lines and satellite access. Our Internet network,
which we are currently installing for Internet access services in India, is
being designed to have the capability to transfer long distance calls to and
from India at, what we believe will be, a lower cost than traditional voice
methods, if the Indian government permits Internet-based telephony services in
India.

         Our plan includes providing communications services to and from India
to consumers, carriers and corporations. We currently offer to our PIO users,
through our NETGURUINDIA.COM portal, pre-paid telephone cards for long distance
calls to India. We have initially purchased access, on a wholesale basis, from
telecommunications companies to offer our customers what we believe to be
competitive pricing for long distance calls to India. Beginning in July 2000, we
plan to use our own managed communications network to provide these long
distance call termination services. We also plan to offer our PIO users long
distance call-back cards which they can purchase for their family and friends in
India to use to place long distance calls from India.

         We plan to offer to communications service providers long distance call
termination services in India through our gateway in the U.S. by traditional
delivery methods such as international leased lines and satellite access. Upon
our receipt of the long distance calls in India, the calls will be routed
through the Public Switched Telephone Network to the call termination
destination in India.

         We also intend to be the preferred provider of integrated
communications services to corporate customers in India. We have approximately
2,000 businesses in India who license our engineering software products. In
addition, we expect that many of the customers of Vital Communications will
become users of our Internet service provider services upon the closing of our
investment in Vital Communications and upon completion of our initial Internet
network. We believe our engineering software licensees together with a portion
of Vital Communications' customers constitutes a captive base to whom we will be
able to offer integrated communications services using our managed
communications network.

     IT SERVICES

         Our IT services group provides business-to-business Web/Internet
software related technical services to companies in North America, India and the
Asia/Pacific region. Our IT expertise consists of:

    o    Web/Internet Solutions - strategic consulting, Web/Internet software
         application development (Java/C++, HTML, CORBA, COM, DCOM, NAS, IIS
         technologies), creative Web design and digital media;

    o    Embedded systems - firmware;

    o    ERP/Database Solutions - SAP, Oracle Applications; and

    o    Software Application Developments - C, C++, VC++, Java, J++, Oracle,
         Sybase, DB2, PB, VB and other GUIs, Windows, NT, Unix.

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         We offer our services both on a project basis and through on-site
consulting. When we provide IT services on a project basis, we assume full
project management responsibility. Typically, projects are of a fixed duration
and are charged at a fixed price. We also offer on-site consulting services for
which we bill clients on a time and material basis.

         Our IT consulting services feature the following:

    o    customized approach based on client's needs;

    o    qualified, trained and experienced Web/Internet and software
         professionals and account managers;

    o    professional screening and training of our consultants;

    o    confidentiality and intellectual property protection for clients;

    o    continued support for completed jobs; and

    o    cost-effective outsourcing of projects supported by our offshore
         facility in India.

         Our IT services division operates out of the Silicon Valley and the
Boston area and is supported by our offshore operations in India. These
strategic locations allow us to effectively position ourselves in the mainstream
of Internet/Web/e-commerce and IT sectors in North America and India.

         We plan to leverage our U.S. IT services experience and capabilities as
well as our Indian IT resources to provide business-to-business Internet-based
IT solutions to companies in India. Initially, we intend to market our
Internet-based business-to-business solutions to our installed base of 2,000
companies in India who license our engineering software products and to a
significant portion of Vital Communications' business customers upon the
consummation of our investment in Vital Communications.

         ENGINEERING SOFTWARE PRODUCTS AND ASP

         Our technically sophisticated stand-alone and network-based engineering
software products provide fully integrated, easy-to-use design automation and
analysis solutions for use by engineering analysis and design professionals
worldwide. We have developed a comprehensive line of structural, mechanical,
civil and process/piping engineering software products, including STAAD/Pro(R)
family of products, FabriCAD, ADLPIPE, STARDYNE(R), CIVILSOFT and
CIVILMASTER(R). Our products assist engineers in performing mission-critical
functions, including analysis and design of industrial, commercial,
transportation and utility structures, pipelines, machinery and automotive and
aerospace products and survey, contour and digital terrain modeling. All of our
products use our proprietary Windows-based graphics engine that provides a
modern graphics environment for model development, visualization/verification
and drawing generation. These products are also designed for use with
third-party CAD drafting systems, including AutoCAD and MicroStation. Our
structural and civil engineering products provide eight international language
options and twelve local design codes required by our worldwide markets.
Suggested list prices for most of our software products range from approximately
$995 to $7,000.

                                       10
<PAGE>

     The following table describes our engineering software products:

<TABLE>
<CAPTION>
------------------ ------------------- ------------------------------------------- ----------------------------------
PRODUCT CATEGORY
                   PRODUCT NAME                         FUNCTION                             APPLICATIONS
------------------ ------------------- ------------------------------------------- ----------------------------------
<S>                <C>                 <C>                                         <C>
Structural         STAAD/Pro(R)        Comprehensive workflow integrated           Engineering/architectural firms,
Engineering                            solution for structural engineers.          consulting engineers,
                                       Includes STAAD Analysis/Design, STARDYNE(R) construction companies, building
                                       Advanced Finite Element Analysis and        designers, industrial plant
                                       drawing generation. Extensions for          designers, offshore/marine
                                       structural component design, concurrent     engineering, petrochemical
                                       piping engineering, and detailing.          industry, power industry,
                                       Supports US and all major international     manufacturing/ heavy industries,
                                       structural design codes.                    transportation, facilities,
                                                                                   government/municipal agencies,
                                                                                   etc.

                   QSE - Quick         Integrated analysis and design for 2D/3D    Light industrial and residential
                   Structural          frame structures; steel/concrete design     applications, Engineering/
                   Engineering         per US and British codes; links to          architectural consulting firms;
                                       detailing software.                         construction companies.

                   FabriCAD Suite      Full-scale structural fabrication drawing   Construction engineering,
                                       and detailing; estimating, production       fabrication shops, steel
                                       control, inventory control and purchase     detailers, mechanical equipment
                                       orders.                                     fabrication.

                   STAAD.etc.          A comprehensive array of structural         Light industrial and residential
                                       component design software tools ideal for   applications, Engineering/
                                       efficient design and analysis of steel      architectural consulting firms;
                                       and concrete structural accessories,        construction companies.
                                       timber and masonry.
------------------ ------------------- ------------------------------------------- ----------------------------------
Mechanical         STARDYNE(R)         Finite element analysis of mechanical/      Aerospace, nuclear, machine
Engineering        and                 structural components; machine and          tools, machinery, manufacturing,
                   VISUAL SOLID        equipment design;                           auto-motive, civil/structural,
                                       static/dynamic/non-linear/buckling/         offshore/ marine, electrical,
                                       transient/random                            chemical, processing,
                                       vibration/thermal/fracture/fatigue          power/energy, mining.
                                       analysis. 3D solid modeling in design
                                       automation; integrated with finite
                                       element analysis
------------------ ------------------- ------------------------------------------- ----------------------------------
Process/Piping     ADLPIPE             Analysis, design and code checking of       Power, process, industrial plant
Engineering                            piping systems; static/dynamic/seismic/     design.
                                       non-linear analysis; transient/thermal
                                       analysis; U.S. and major international
                                       codes.
------------------ ------------------- ------------------------------------------- ----------------------------------
Civil              CIVILSOFT /         Surveying, contouring, highway design,      Civil engineering consulting
Engineering        CIVILMASTER(R)      digital terrain modeling, earthwork         firms; government/municipal
                                       calculations, water network design,         agencies; utilities;
                                       sewer/storm drainage systems, hydraulics.   transportation; facilities;
                                                                                   construction companies.
------------------ ------------------- ------------------------------------------- ----------------------------------
Collaborative      ForReview           View and markup system: viewing,            Architectural, engineering,
Software                               checking, comparing and redlining of 250    construction, automotive and
                                       file formats                                manufacturing companies

                   e-Review            Online meeting and conference system to     Architectural, engineering,
                                       review, view and annotate drawings and      construction, automotive and
                                       documents in real time collaboratively      manufacturing companies
------------------ ------------------- ------------------------------------------- ----------------------------------
</TABLE>

         We are in the process of enhancing the delivery of our engineering
software products by providing them in an online format. We recently acquired
Allegria Software, Inc., a developer of Web-based document management and
collaborative tools (e-Review, ForReview) for engineers and manufacturers. We
now offer our engineering products and solutions online on WEB4ENGINEERS.COM.
On this site, we offer Web-enabled versions of our current software products

                                       11
<PAGE>

such as STAAD/Pro(R), CIVILMASTER(R) and FabriCAD in addition to Web-enabled
collaborative document review and management tools. We intend to extend our
offerings by providing ASP services to engineering and construction software
companies and their customers to Web-host their applications software and their
data.

CUSTOMERS

         In the past year, we provided IT consulting services to over 150
corporate customers in the U.S., including General Electric, Fidelity, Netscape,
Sun Microsystems, Cisco Systems and Hewlett Packard. No single customer
represented more than 5% of our business.

         We currently license our engineering software products to more than
20,000 customers accounting for over 50,000 software installations. Based on our
customer surveys, we estimate that there are approximately 150,000 users at
these installations worldwide. Our engineering software customers include:
Bechtel Corporation, British Telecom, Jet Propulsion Laboratories, Exxon
Corporation, Fluor Daniel, Inc., General Dynamics, NASA, Rocketdyne, Siemens AG
and Toyo Engineering.

SALES AND MARKETING

         NETGURU INTERNET ACCESS AND PORTAL NETWORK. Our marketing goal is to
increase traffic to our NETGURUINDIA.COM Internet portal and to develop a strong
brand name as a leading integrated Internet technology and services company for
the global Indian community. Our marketing plan includes the use of multiple
advertising media, such as national network and cable television, network radio,
national print and Web-based advertising initially in the U.S. and India, and
subsequently in PIO communities around the world.

         Cultural and social events traditionally constitute a significant
component of community life. We plan to create a marketing campaign that will
focus on sponsoring Indian community events as a way of developing and
maintaining awareness of our business and services. Currently, our Internet
portal destinations provide free space on our Web pages for announcements of
community events. During July 1999, we sponsored a major North American cultural
conference aimed at PIOs in Northern California. More than 5,000 people attended
the event and we believe the event generated significant awareness for our pilot
portal destinations. We will sponsor the 2000 North American Indian Cultural
Conference to be held in Atlanta, Georgia in July 2000. Our long-term objective
is to develop relationships with representative community organizations and
remain involved in community activities to maintain and enhance awareness of our
brand name.

         We seek to establish strategic alliances with leading businesses in our
target market. We are in the process of finalizing our investment in Vital
Communications. Currently, Vital Communications has approximately 10,000
customers, who receive their Internet services from VSNL. Upon consummation of
our investment and upon completion of our initial Internet network, Vital
Communications will use its best efforts to convert a majority of its customers,
including most of its major business customers, to our Internet service provider
network. Vital Communications will then exclusively represent and sell our
Internet service provider services in India.

         IT SERVICES. We market our IT services offerings primarily through
industry-focused print advertisements, direct mailings to targeted prospects and
online on our Internet portals. We market and sell our IT services on a direct
basis and through customer referrals.

         ENGINEERING SOFTWARE. We market and sell our engineering analysis and
design software products domestically and internationally through our network of
branch offices, subsidiaries and representatives in the U.S., United Kingdom,
Germany, Japan, France,

                                       12
<PAGE>

Scandinavia, Australia, China, Singapore, India, Indonesia, Korea, Thailand,
Malaysia, South Africa, Mexico, Russia, the Middle East and Latin America. We
also plan to market and sell our engineering software products online through
our engineering portal, WEB4ENGINEERS.COM. We use extensive print advertising,
trade show participation and direct mail campaigns to generate sales leads. In
response to product inquiries generated through these activities, and through
our engineering portal, elaborate evaluation/demonstration software packages,
complete with full user manuals and working programs are created. Finally, our
telesales professionals and international distributors close the sales.

         We utilize this sales approach in connection with the marketing and
sales of product enhancements, upgrades and new products to current customers.
We also generate awareness for our products by posting banners on the Web pages
of professional engineering societies, newsgroups and similar forums on the
Internet. Our Internet strategy includes providing online product demonstrations
and online use of our products for discrete projects.

CUSTOMER SERVICE AND SUPPORT

         Customer service and support are essential to our continued success and
brand development efforts. In our Internet access, portal and telephony
businesses, we intend to take full advantage of our established experience and
infrastructure to further enhance our users' experience and foster user loyalty.
We have established user support teams in our local offices to enable us to
rapidly respond to e-mail inquiries and provide technical advice on a 24x7x365
basis in English and the relevant local language. We will also proactively
solicit feedback from our users in order to understand their preferences and to
enhance their experience on our network.

         Our IT services are primarily project-based and time and
materials-based technology consulting services which do not generally involve
on-going customer service and support. Our IT services group can provide, on a
project-basis, on-going high quality support as contracted by the customer on a
24x7x365 basis to meet the customer's information management needs from our
facilities in Boston, Massachusetts and San Jose, California.

         Purchasers of our engineering software products are typically provided
with 120 days of product support without charge and a multimedia training
CD-ROM. Following the 120-day period, customers may elect to purchase ongoing
support either on a one-year contract basis or on an as-used fee basis. To
provide quality technical support worldwide, we employ engineers and software
specialists and maintain product support centers in North America, Europe, the
Asia/Pacific region and India. In addition, through our Web site we provide
e-mail technical support to users of these products.

NETWORK INFRASTRUCTURE

         We have designed our Internet and managed communications network to
meet the needs of our consumer, carrier and corporate customers and fully
support our product and services offerings. Our network is a premium quality
voice and data network built with commercial quality Internet and communications
equipment, linked to the public Internet, international leased lines and
satellite access. We monitor, control and support our managed network on a
24x7x365 basis to deliver high quality data and voice services to our customers.
We have designed our network with complete redundancies for all major
components, including twin live counterparts for all switches, routers, servers,
power supplies, network interface cards, disk storage units, and cabling
components. Routers and servers have been designed with dual or triple
hot-pluggable power supplies and hard disks are mirrored in either Raid Level 1
or Raid Level 5. In addition, our Southern California data center is designed to
operate as a complete back-up for the Internet server network we are installing

                                       13
<PAGE>

in India. If we experience a major disaster in India, our servers in our
Southern California data center will step in to provide uninterrupted service.
We are building our network using components from the leading suppliers, or
best-of-breed components, such as Cisco Systems switches and routers and Dell
servers. We have fully tested our integrated system in the U.S. prior to
shipment to India, where installation is in process. We have fast, high storage
tape backup systems designed to hold data in the event of server failure. Our
network employs automatic backup and restore software to save data and minimize
downtime in the event of a disaster. Our Web and e-mail services will be
maintained on our servers with load balancing software to distribute traffic to
redundant servers in the event of an increase in traffic. We will provide
network security by screening and controlling traffic flows on our private
network through the use of a firewall system. We will protect our network by
perimeter security at all points of public interconnection and will lockdown our
servers according to industry standard security checklists. All of these
procedures are designed to ensure the availability, reliability, quality and
integrity of our managed network.

RESEARCH AND DEVELOPMENT

         Our current research and development efforts are focused on Internet
access and service technologies, applications software Web-enabling and
collaboration technologies and enhancements to our current engineering software
product offerings. During fiscal years 2000 and 1999, we spent $2.5 million and
$2.4 million, respectively, on research and development activities.

         We offer a broad range of products and services designed to keep pace
with the latest technological advances and address the increasingly
sophisticated needs of our customers in all of our targeted markets. We
continually focus on expanding our existing product and service offerings with
acquired, upgraded and new products and services. We specifically seek
opportunities to expand our product and service offerings through acquisitions
and strategic alliances.

         Our research and development group includes specialists in Internet,
telecommunications, IT services, engineering software and ASP technologies. We
have established research and development facilities in the U.S., India and the
United Kingdom. Our offshore research and development facilities in India are
used to develop content and technologies for our Internet portal, to develop our
digital media and animation technology, to provide IT services resources for our
projects in the U.S. and to develop and maintain local engineering software
design codes. These projects require significant man-hours. Due to the
availability of skilled technical resources in India at a fraction of the cost
for comparable personnel in the U.S., these projects can be completed with the
assistance of our Indian facility at a significantly lower cost. We believe our
offshore technical resources provide a significant competitive advantage.

         INTERNET TECHNOLOGY DEVELOPMENT. Our research and development efforts
with respect to Internet technologies have been focused on creating, developing
and implementing our NETGURUINDIA.COM and WEB4ENGINEERS.COM Web sites. We
employed our resources in our U.S. and Indian research and development centers
for these initiatives. We have a staff of trained graphics and Web design
professionals in India dedicated to designing and developing content for our
NETGURUINDIA.COM portal. We developed a comprehensive Java-based content
management system in order to manage content, live broadcasts and video on a
remote basis. Audio and video compression technologies have also been developed
to increase the speed over which audio and video can be broadcast over the
Internet. We are developing a personal information management system to allow
users to manage their online address book, e-mail, contacts and to-do lists as
well as utilize text-to-speech technology to route e-mails to pagers and cell
phones. We use an interactive viewing, markup and collaboration tool on Java
Servlet and RMI technologies on our WEB4ENGINEERS.COM portal to conduct
real-time viewing and mark-up conferences. We have developed this system to
permit integration with major document management and ERP systems, including an
in-house system developed in Java.

                                       14
<PAGE>

         IT SERVICES TECHNOLOGY DEVELOPMENT. Our IT services business delivers
Internet-based information technology consulting services to businesses.
Therefore, our major technological focus is on providing the best technology
expertise to our clients. We emphasize and require continued technology training
and education of our employees to ensure that our services are the best
available in the industry.

         ENGINEERING SOFTWARE TECHNOLOGY DEVELOPMENT. Our engineering software
products automate engineering calculations that are performed by structural,
mechanical, civil and process/piping engineers. We support our engineering
software products on a wide range of hardware platforms and operating systems.
All of our products are supported on PCs, and STAAD(R), STARDYNE(R) and ADLPIPE
are supported on UNIX-based workstations, including IBM, Sun Microsystems,
Hewlett Packard, Digital Equipment Corporation and Integraph. All of our
products are available in single user, network-based and client-server models.
We have Web-enabled all of our engineering software products, which are now
available online on our WEB4ENGINEERS.COM portal. To ensure that all of our
products meet the requirements of our users and that our software development,
validation and maintenance processes meet applicable regulatory guidelines on
software development, we have established an extensive quality assurance and
quality control process. Our quality control system has recently been validated
by our receipt of ISO 9001 certification from the American National Standards
Institute/American Society of Quality Control Standards. We believe we are the
first structural engineering firm to receive ISO 9001 certification.

         With our recent acquisition of Allegria Software, we have acquired the
ForReview and e-Review software products, which permit our licensees to access
the software on a real-time, collaborative basis. ForReview permits project
managers, engineers and architects to access designs, models and reports on a
concurrent basis and make edits, changes and improvements collaboratively,
thereby saving time and improving efficiencies in the engineering and design
process. The e-Review software permits collaboration online on our portal to
permit concurrent review in a virtual environment.

COMPETITION

         We face competition within our target markets, which include Internet
access for resident Indians; Internet portal services targeting PIOs and
resident Indians; traditional telephony services to and from India;
Internet-based IT services for businesses worldwide; and engineering software
products and ASP services for the worldwide engineering community. We expect
that competition will intensify as the market for Internet-based solutions aimed
at the global Indian community develops and expands. We compete primarily on the
basis of service, reliability and customer support, as well as price, ease of
use and content.

         INTERNET ACCESS AND PORTAL SERVICES. Our principal competitors for
Internet access services in India are VSNL and Satyam Infoway Limited. As of
March 31, 2000, 44 national licenses to provide Internet service provider
services in India had been granted. As of that date, only 15 of the holders of
these licenses were in operation, however, there can be no assurance that
additional Internet service providers will not emerge. With the recent
deregulation of the Indian telecommunications industry, we expect competition to
increase as the Indian Internet market develops.

         For our Internet portal services focused on the PIO market, we compete
primarily with Indolink, Rediff.com, NRIOL.com and Indiatimes.com. We may face
additional competition in the future from major online services such as Yahoo!
and America Online if they enter these markets and develop products focused on
the Indian market. When we expand our portal services to the resident Indian
market, we will face competition from VSNL, Satyam Infoway Limited, Rediff.com,
MSN India and other Indian portals.

                                       15
<PAGE>

       TELEPHONY SERVICES. For our current long distance calling card telephony
business, we face competition primarily from international long distance
telecommunications carriers and wholesale carriers. Although these competitors
often have significantly greater resources than we do, we believe that in the
PIO market which we address, their relative size advantages are less
significant. We believe that our understanding of our target market and our
ability to advertise our calling card offerings directly on our global
Indian-focused portal allow us to compete effectively in this niche market.
Further, when we expand our telecommunications service offerings in the future
to long distance carrier service to India, call origination services in India
and corporate telephony services in India, we believe that our unique
understanding of our targeted market will permit us to compete effectively.

         IT SERVICES. Our competitors in the IT consulting services industry
include IT services companies, large accounting firms and their consulting
affiliates, other technology companies and in-house MIS departments. We believe
that the continuing shortage of Internet and IT resources and expertise,
combined with the rapid growth of the Internet in business applications, has
reduced the significance of competition in this segment.

         ENGINEERING SOFTWARE PRODUCTS. The engineering software industry is
intensely competitive and rapidly changing. A number of companies offer products
that target the same markets as we do. In addition, our products occasionally
compete with analysis tools that are developed internally by engineering firms.
We believe that we have significant competitive advantages in the industry based
on our high caliber development effort, demonstrated understanding of the needs
of the engineering design industry, ability to attract and retain customers,
capability to develop, acquire and implement emerging technologies, ability to
provide technical support and demonstrated capability to provide attractive
price points for our products. There can be no assurance, however, that our
competitors will not develop products that are superior to ours or that achieve
greater market acceptance or that we will be able to continue to compete
successfully in these markets.

         In general, we face competition in each of our business segments. Many
of our existing and potential competitors have competitive advantages over us,
including, but not limited to, the following:

    o    longer operating histories;

    o    greater name recognition;

                                       16
<PAGE>

    o    larger customer base;

    o    significantly greater financial, technical and other resources; and

    o    broader service and/or product offering.

         To be competitive, we must be able to keep up with technological
advances and continue to enhance our products and services. We may not be able
to successfully compete in one or more of our target markets. Our inability to
do so could have a material and adverse impact on our business, financial
condition and results of operations.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

         Our intellectual property rights are an important aspect of our
business. We rely primarily on a combination of contract, copyright, trademark
and trade secret laws, domain registration, license and confidentiality
agreements and software security measures to protect our proprietary technology.
We require all of our employees and other parties with access to our
confidential information to execute agreements prohibiting the unauthorized use
or disclosure of our technology. In addition, we periodically review our
proprietary technology for patentability, although we do not have any current
patents. Despite these precautions and even though we have not experienced any
misappropriation of our technology over the 18-year history of our company, we
believe that existing laws provide limited protection for our technology and
that it may be possible for a third party to misappropriate our technology or to
independently develop similar technology. Our protective measures may be even
less effective in the emerging Internet law field. Internet law is a new and
developing area of the law and on line contracting, privacy and liability
issues, among others, are still being resolved. This lack of certainty is
further exacerbated in India, where the use of the Internet is less evolved. In
addition, effective copyright and trade secret protection may not be available
in every jurisdiction where we distribute our products, particularly in foreign
countries where the laws generally offer no protection or less protection than
those of the U.S. The laws of India, and other foreign countries in which we
operate do not protect intellectual property rights to the same extent as those
of the U.S. For example, Indian statutory law does not protect service marks.
Due to our significant reliance upon international sales of our products and
services, particularly in India, this lack of copyright and trade secret
protection could adversely affect our business and results of operations if a
third party were successful in copying our products and services and marketing
products and services similar to ours. We distribute our engineering software
products under "shrink-wrap" software license agreements, which grant end-users
licenses to (rather than ownership of) our products and which contain various
provisions intended to protect our ownership and confidentiality of the
underlying technology. In addition, our software is distributed with a third
party "hardware lock." "Shrink-wrap" licenses, which are not signed by the
end-user, may be unenforceable in certain jurisdictions.

         Our trademarks include netGuru.com, NETGURUINDIA.COM,
WEB4ENGINEERS.COM, Allegria Software, ForReview, e-Review, QSE, FabriCAD,
STAAD.etc. and ADLPIPE. Our registered trademarks include STAAD(R),
STAAD/Pro(R), STARDYNE(R) and CIVILMASTER(R). We may not be able to secure
adequate protection for our trademarks in the United States and in the other
countries in which we do business.

                                       17
<PAGE>

GOVERNMENT REGULATION

     REGULATION OF THE INTERNET

         UNITED STATES. The U.S. Congress has recently passed or is considering
legislation regulating certain aspects of the Internet, including online
content, copyright infringement, user privacy, taxation, access charges, digital
signatures and liability for third-party activities. The European Union also has
recently enacted several directives relating to the Internet, including
directives that address the use of personal data, e-commerce activities,
security, commercial piracy, consumer protection and taxation of e-commerce
transactions. Various states have adopted and are considering Internet related
legislation and regulations. Governmental authorities in the U.S. and abroad are
considering other legislative and regulatory proposals to further regulate the
Internet. Areas of potential regulation include libel, pricing, quality of
products and services and intellectual property ownership. We cannot predict
what new laws will be enacted, or how courts will interpret existing and new
laws, and therefore are uncertain as to how new laws or the application of
existing laws will affect our business. In addition, our business may be
indirectly affected by legislation that affects the ability of our customers to
engage in e-commerce activities. Increased regulation of the Internet may
decrease the growth in the use of the Internet, which could decrease the demand
for our products and services, increase our cost of doing business or otherwise
harm our business, results of operations and financial condition.

         INDIA. Our business is also subject to comprehensive regulation by the
Ministry of Communications through the Telecom Commission and the Department of
Telecommunications pursuant to the provisions of the Indian Telegraph Act of
1885, or Telegraph Act, the India Wireless Telegraphy Act, 1933, or Wireless
Act, and the terms of the Class A Internet service provider license agreement
under which we operate, which our subsidiary, Interra Global Limited (acquired
subsequent to March 31, 2000), entered into with the Department of
Telecommunications. Pursuant to the Telegraph Act, the provision of any
telecommunications services in India requires a license from the government of
India, obtained through the Department of Telecommunications. While the
Telegraph Act sets the legal framework for regulation of the telecommunications
sector and the Wireless Act regulates the possession of wireless telegraphy
equipment, much of the supervision and regulation of the Internet service
provider segment of our company is implemented more informally through the
general administrative powers of the Department of Telecommunications, including
those reserved to the Department of Telecommunications and other governmental
agencies under our license.

         In March 1997, the government of India established the Telecom
Regulatory Authority, an independent regulatory authority under the provisions
of the Telecom Regulatory Authority of India Act. The Telecom Regulatory
Authority is an autonomous body consisting of a chairperson and at least two and
not more than four members, and has primary responsibility for the following:

    o    facilitating competition and promoting efficiency;

    o    protecting the interests of consumers;

    o    regulating revenue sharing among service providers;

    o    ensuring compliance with license conditions;

    o    setting and ensuring compliance with the time period applicable to
         service providers for providing local and long-distance
         telecommunications lines;

                                       18
<PAGE>

    o    ensuring technical compatibility and effective interconnectivity among
         different service providers;

    o    settling differences between service providers;

    o    advising the government of India on matters relating to the development
         of the telecommunications industry; and

    o    ensuring effective compliance with universal service obligations.

         The Telecom Regulatory Authority also has the authority to, from time
to time, set the rates at which domestic and international telecommunications
services are provided in India. The Telecom Regulatory Authority does not have
authority to grant licenses to service providers or renew licenses, functions
that remain with the Department of Telecommunications. The Telecom Regulatory
Authority, however, has the following powers:

    o    to call on service providers to furnish information relating to their
         operations;

    o    to appoint persons to make official inquiries;

    o    to inspect the books of service providers; and

    o    to issue directives to service providers to ensure their proper
         functionality.

Failure to follow Telecom Regulatory Authority directives may lead to the
imposition of fines. Decisions of the Telecom Regulatory Authority may be
appealed to High Courts in India.

         The authority of the Telecom Regulatory Authority has been the subject
of recent litigation, particularly with respect to its role in introducing new
telecommunications licenses and the scope of its authority to settle disputes
regarding the grant by the Department of Telecommunications of
telecommunications licenses. The Delhi High Court has held that the authority of
the Department of Telecommunications to issue or amend licenses is not subject
to any prior recommendations of the Telecom Regulatory Authority, and that any
such recommendations are not mandatory. In addition, the Delhi High Court
determined that the Telecom Regulatory Authority does not have jurisdiction to
decide disputes regarding the grant or amendment of a Department of
Telecommunications license. The government of India has formulated the New
Telecom Policy, 1999, or NTP. The NTP was cleared by the Union Cabinet in March
1999 and contemplates a new regime for the telecom operators, a larger role for
the Telecom Regulatory Authority, a restructuring of the Department of
Telecommunications and opening up of the market for long-distance calls.

         In May 2000, we acquired a 74% interest in Interra Global Limited, an
Indian Internet service provider, which has a Class A license to provide
national Internet service provider services in India under an agreement with the
Department of Communications. The license has a 15-year term and can be revoked
by the Department of Telecommunications if we breach the license. The Department
of Telecommunications retains the right to take over our network and to modify,
revoke, terminate or suspend the terms and conditions of the license at any time
if, in its opinion, it is necessary or expedient to do so in the interest of
general public, or for the proper operation of the telecommunications sector or
for security considerations. The Department of Telecommunications also retains
the right to review the terms of our license based on changes in national
telecommunications policy. We are not permitted to assign or transfer our rights
under our license without the prior written consent of the Department of

                                       19
<PAGE>

Telecommunications. Our license also requires us to ensure that objectionable,
obscene and unauthorized content, or any other content, messages or
communications infringing copyrights, intellectual property rights and domestic
and international cyberlaws or which are inconsistent with the laws of India,
are not carried on our network. Although under the terms of our license we are
free to fix the prices we charge our subscribers, the Telecom Regulatory
Authority may set prices for the provision of Internet access services
generally. We are permitted to use encryption to safeguard information
transmitted over our network. However, if we use a higher level of encryption
than that specified by the government of India, our license requires us to
deposit a set of keys with the government of India. Our obligations under the
license are secured by a performance bank guarantee in the amount of 20.0
million rupees ($475,000).

     TELECOMMUNICATIONS SERVICES

         UNITED STATES. The Communications Act of 1934 and FCC regulations
govern the international long distance telecommunications services that we
provide over circuit-switched networks. The FCC distinguishes providers of long
distance services as either "dominant" or "non-dominant." We are classified by
the FCC as a non-dominant carrier and are regulated as such. The FCC generally
does not exercise direct oversight over non-dominant carriers, although it has
the statutory power to do so. While the FCC does not regulate the specific rates
that we charge for our international long distance services, non-dominant
carriers are required to offer such services under rates, terms, and conditions
that are just, reasonable and not unreasonably discriminatory. The FCC possesses
jurisdiction to act upon complaints filed by third parties, or brought on the
FCC's own motion, against any common carrier, including non-dominant carriers,
for failure to comply with its statutory obligations.

         Until recently, all non-dominant carriers were required to file tariffs
listing the rates, terms and conditions of service; that requirement was
eliminated by virtue of a decision from a federal appellate court upholding the
right of the FCC to forbear from requiring tariff filings. The FCC also has the
authority to impose more stringent regulatory requirements and change a
carrier's regulatory classification from non-dominant to dominant. The FCC is
more likely to impose more stringent requirements for carriers that provide
facilities-based service, as we do, and carriers that provide service to other
carriers. In the current regulatory atmosphere, however, we believe that the FCC
is unlikely to do so.

         The FCC imposes only minimal reporting requirements on non-dominant
carriers, although we are subject to certain reporting, accounting and
record-keeping obligations. At present, the FCC exercises its regulatory
authority to set rates primarily with respect to the rates of dominant carriers,
and it has increasingly relaxed its control in this area.

         INDIA. Our current plans for our telecommunications offerings
contemplate using third parties in India to provide required call termination
and call origination services. Such third parties are properly licensed in India
to provide such services and we are not required to comply with the Indian
government's regulations concerning telecommunications. Telephony on the
Internet is not permitted in India, and our Class A license requires us to take
measures to ban carriage of telephone traffic over the Internet.

RISK FACTORS

         An investment in our common stock involves a high degree of risk. In
addition to the other information in this Form 10-KSB, you should carefully

                                       20
<PAGE>

consider the following risk factors before deciding to invest in shares of our
common stock. This Form 10-KSB contains forward-looking statements which involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Form 10-KSB. If any of the following risks actually occur, it is likely that our
business, financial condition and operating results would be harmed. As a
result, the trading price of our common stock could decline, and you could lose
part or all of your investment.

         WE HAVE RECENTLY EXPANDED INTO NEW LINES OF BUSINESS AND PLAN TO EXPAND
         INTO OTHER LINES OF BUSINESS. WE HAVE A LIMITED OPERATING HISTORY AND
         LACK EXPERIENCE IN THESE NEW LINES OF BUSINESS MAKING IT DIFFICULT FOR
         US TO PREDICT OUR FUTURE SUCCESS.

         We have only recently diversified our business and are now offering
Internet content and commerce services for the PIO community, Internet-based IT
business-to-business services, telephony services to the PIO community and ASP
services to engineering software providers and their users worldwide. We intend
to provide Internet access and content services to the resident Indian consumer
and business markets and integrated communications services to and from India to
consumers, carriers and businesses. As a result, we have limited or no operating
histories in each of these new or proposed lines of business and therefore, our
historical financial information is of limited value in projecting our future
results. Our future success in these new markets which we have recently entered
and plan to enter in the future is, therefore, difficult to evaluate.

         OUR NEW LINES OF BUSINESS MAY BE DIFFICULT TO INTEGRATE WITH OUR
         HISTORICAL CORE BUSINESSES.

         We have been in the engineering software business for approximately 18
years and our two recently acquired IT consulting businesses have a combined 10
years of operating experience. We have only recently entered the Internet
content and commerce services, Internet-based IT business-to-business services,
telephony services and engineering ASP services markets. In the future, we plan
to expand into the Internet service provider and integrated Indian-focused
communications markets. Our expansion into these new and proposed lines of
business may be particularly difficult for us to manage and acquisitions in
these fields may be more difficult for us to integrate, at least initially,
because they involve different disciplines and require different expertise than
our core businesses. In addition, this expansion may detract management's time
and attention away from our core businesses. If we are not able to attain the
level of expertise and reputation in these fields that we believe we have
attained in the engineering software field, and, through our acquisitions within
the IT consulting field, our business, financial condition and operating results
could be adversely affected.

         IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR EXPANDED OPERATIONS, OUR
         BUSINESS COULD BE ADVERSELY AFFECTED.

         We have experienced rapid growth in the past year in some of our new
lines of business and expect to continue to experience rapid growth in all of
our new and proposed lines of business over the next several years. This growth
has placed, and will continue to place, a significant strain on our management
and other resources. Our ability to manage our growth will require us to
continue to improve our operational, financial and management information
systems, and to motivate and effectively manage our employees. Among other
things, we will need to hire and integrate new managers and install and operate
new or enhanced accounting, financial management and information systems. If we
are unable to manage our growth effectively, the quality of our products and
services, our ability to identify, hire and retain key personnel and our
business, financial condition and operating results could be adversely affected.

                                       21
<PAGE>

         OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR CURRENT MANAGEMENT
         TEAM AND RECRUIT ADDITIONAL KEY MANAGEMENT AND TECHNICAL PERSONNEL.

         Our future success depends to a large extent upon the continued
services of key managerial and technical employees and our ability to recruit,
assimilate and retain other highly qualified employees. Competition for
personnel is intense. There can be no assurance that we will be able to recruit,
assimilate and retain such personnel. The loss of the services of any of our key
employees or our inability to recruit and retain quality personnel could have a
material adverse effect on our business. We do not currently maintain life
insurance on the lives of any of our key employees.

         THE MARKETS IN WHICH WE CURRENTLY AND PLAN TO COMPETE ARE HIGHLY
         COMPETITIVE AND WE EXPECT THEM TO BECOME MORE COMPETITIVE IN THE
         FUTURE, WHICH COULD RESULT IN SIGNIFICANT PRICE COMPETITION, REDUCED
         REVENUES, LOWER PROFIT MARGINS OR LOSS OF MARKET SHARE.

         The Internet access and portal services, Internet-based IT
business-to-business consulting services, Internet-based engineering software
products and services and telephony services markets are each highly
competitive. These markets may experience pricing and margin pressure, which as
a result, could adversely affect our operating results and financial position. A
number of companies offer products and services within the same markets that we
target. The market for Internet-based products and services is characterized by
an increasing number of entrants due to low start-up costs. Some of our
competitors and potential competitors have larger technical staffs, more
established and larger marketing and sales organizations and significantly
greater financial resources than us. Our competitors may develop products and
services that are superior to ours or that achieve greater market acceptance.
Our future success will depend significantly upon our ability to increase our
share of our target markets and to sell additional products, product
enhancements and services to our customers. We may not be able to compete
successfully, and competition may result in decreases in:

    o    the prices we receive for our products and services;

    o    our revenues;

    o    our advertising rates;

    o    the number of visitors to our site;

    o    our profit margins; or

    o    our market share.

Any of these decreases could adversely affect our business and results of
operations.

         IN ORDER TO COMPETE SUCCESSFULLY, WE MUST KEEP PACE WITH THE RAPID
         CHANGES INVOLVING TECHNOLOGY AND THE INTERNET.

         We currently compete in the Internet content and commerce services,
Internet-based IT business-to-business consulting services, Internet-based
engineering software products and services and telephony services markets. We
plan to compete in the Internet service provider and integrated communications
markets. Each of these markets is characterized by rapid technological advances,
changes in customer requirements and frequent new product and services
introductions and enhancements. Our future success will depend upon our ability
to enhance our current products and services and to develop and introduce new

                                       22
<PAGE>

products and services that keep pace with technological developments, respond to
the growth in the Internet, encompass evolving customer requirements and achieve
market acceptance. Any failure on our part to anticipate or respond adequately
to technological developments and customer requirements, or any significant
delays in product development or introduction, could result in a loss of
competitiveness, revenues, profit margins or market share. There is no assurance
that new products or product enhancements which we develop will achieve market
acceptance.

         IF WE ARE UNABLE TO DEVELOP STRATEGIC RELATIONSHIPS WITH CONTENT AND
         COMMERCE PROVIDERS, OUR INTERNET PORTAL BUSINESS COULD BE ADVERSELY
         AFFECTED.

         Strategic relationships with content and commerce providers are
critical to our success in our Internet portal business. We are in the process
of negotiating a number of third party relationships with content and commerce
providers. We expect that most of these relationships will not be exclusive and
will be short-term or can be terminated for convenience. We cannot assure you
that we will be successful in entering into any of these relationships or, if we
do, that any such relationship will result in attractive content and commerce
offerings. If we are unable to deliver valuable content and commerce through our
Internet portal, we will be unable to attract and retain a significant number of
users, subscribers and advertisers, and, as a result, our revenue from commerce
and advertising will not meet our expectations, and our business, financial
condition and operating results would be adversely affected.

         IF WE DO NOT BUILD BRAND NAME AND REPUTATION QUICKLY, OUR ABILITY TO
         ATTRACT AND RETAIN CUSTOMERS COULD BE ADVERSELY AFFECTED.

         We believe it is critical to establish, maintain and strengthen our
reputation and brand in order to establish and expand our customer base. We also
believe that as the markets in which we currently compete and plan to compete
become increasingly competitive, the importance of reputation and brand will
increase. If our initial brand-building efforts are unsuccessful, we may not
experience an increase in Internet traffic needed to generate sufficient
revenues to offset the increase in marketing expenses. As a result, our
operating results and financial condition could be adversely affected. Our
Internet portal will be more attractive to advertisers if we have a large
audience of consumers with demographic characteristics that advertisers perceive
as favorable. Therefore, we intend to introduce additional and enhanced content
and commerce offerings, interactive tools and other services and features in the
future in an effort to retain our current subscribers and users and to attract
new ones. Our reputation and brand name could be adversely affected if we are
unable to enhance our Internet portal successfully.

         THE UNPREDICTABILITY OF OUR QUARTERLY OPERATING RESULTS MAY CAUSE THE
         PRICE OF OUR COMMON STOCK TO FLUCTUATE.

         Our quarterly operating results have varied in the past and may
continue to fluctuate significantly in the future due to a number of factors,
many of which are beyond our control. If our operating results do not meet the
expectations of securities analysts or investors, our stock price may decline.
Fluctuations in our operating results may result from a number of factors,
including the following:

    o    the level of advertising and e-commerce activity on our special
         interest portal;

    o    the number of purchasers of our phone cards and the level of usage by
         those purchasers;

    o    the level of demand for Internet-based IT business-to-business
         consulting services and Internet-based engineering software products
         and services;

                                       23
<PAGE>

    o    the acceptance of online hosting of engineering applications;

    o    the prices which we are able to charge for our products and services;

    o    costs related to possible acquisitions of new technologies and
         businesses;

    o    changes affecting the telecommunication infrastructure in India, the
         Internet generally or the operation of our Web sites;

    o    the amount and timing of capital expenditures and other costs relating
         to the expansion of our Internet network; and

    o    general economic conditions.

         We plan to increase our expenditures for our sales and marketing
operations, expand and develop content and enhance our technology and
infrastructure development. Many of our expenses are relatively fixed in the
short-term. We cannot assure you that our revenues will increase in proportion
to the increase in our expenses. We may be unable to adjust spending quickly
enough to offset any unexpected revenues shortfall. This could lead to a
shortfall in revenues in relation to our expenses.

         WE RELY ON A THIRD-PARTY COMMUNICATIONS INFRASTRUCTURE OVER WHICH WE
         HAVE NO CONTROL.

         If the quality and maintenance of the third-party communications
infrastructure on which we rely suffers, our service could be disrupted, our
reputation could be harmed and we could lose customers. This infrastructure is
used to carry our voice traffic. We have no control over whether the
infrastructure on which we rely will be adequately maintained by these third
parties or whether these third parties are able to upgrade or improve their
equipment and prevent it from becoming obsolete. If these third parties fail to
maintain, upgrade or improve their equipment, our business may be materially
harmed.

         WE COULD EXPERIENCE SYSTEM FAILURES THAT PREVENT US FROM OPERATING OUR
         INTERNET BUSINESS.

         Our business depends on the efficient and uninterrupted operation of
our computer hardware and software systems. In addition, we rely on the Internet
and, accordingly, depend upon the continuous, reliable and secure operation of
Internet servers, related hardware and software and network infrastructure such
as lines leased from service providers operated by the government of India. We
have a back-up data facility. Although we have designed our system for complete
redundancies of all major computer components, we cannot assure that our system
will be fail-safe. As a result, failure of key primary or back-up systems to
operate properly could lead to a loss of customers, damage to our reputation and
violations of our Internet service provider license and contracts with corporate
customers. These failures could also lead to a decrease in the value of our
common stock, significant negative publicity and litigation.

         Our Internet service provider license requires that we provide an
acceptable level of service quality and that we remedy customer complaints
within a specified time period. Our computer and communications hardware are
protected through physical and software safeguards. However, they remain
vulnerable to fire, storm, flood, power loss, power surges, telecommunications
failures, physical or software break-ins, software viruses and similar events.
We do not carry business interruption insurance to protect us in the event of a
catastrophe, even though such an event could lead to a significant negative
impact on our business. Any sustained disruption in Internet access provided by
third parties could also have a material adverse effect on our business.

                                       24
<PAGE>

         FINANCIAL STATEMENTS OF OUR FOREIGN SUBSIDIARIES ARE PREPARED USING THE
         RELEVANT FOREIGN CURRENCY WHICH MUST BE CONVERTED INTO U.S. DOLLARS FOR
         INCLUSION IN OUR CONSOLIDATED FINANCIAL STATEMENTS. AS A RESULT,
         EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY IMPACT OUR REPORTED RESULTS OF
         OPERATIONS.

         We have established and acquired several international subsidiaries,
which prepare their balance sheets in the relevant foreign currency. In order to
be included in our consolidated financial statements, these balance sheets are
converted, at the then current exchange rate, into U.S. dollars and the
statements of operations are converted using weighted average exchange rates for
the applicable periods. Therefore, exchange rate fluctuations can have a
detrimental effect on our reported earnings. We do not engage in hedging
activities to protect against the risk of currency fluctuations. Foreign
currency denominated sales may result in gains and losses on the conversion to
U.S. dollars. We have historically denominated sales by our foreign subsidiaries
in the local currency.

         OUR COMMITMENT OF SIGNIFICANT RESOURCES AND EXPANSION OF OUR ACTIVITIES
         IN INDIA COULD PROVE TO BE UNPROFITABLE DUE TO RISKS INHERENT IN
         INTERNATIONAL BUSINESS ACTIVITIES.

         Sales of our products and services to customers located outside the
U.S. accounted for approximately 28.9% and 55.3% of our net revenue for the
fiscal years ended March 31, 2000 and March 31, 1999, respectively. We
anticipate that international sales will account for a significantly increased
portion of our total revenues in the future. Consequently, we are subject to a
number of risks associated with international business activities that could
adversely affect our operations in India and slow our growth. These risks
generally include, among others:

    o    difficulties in managing and staffing our Indian operations;

    o    difficulties in obtaining or maintaining regulatory approvals or in
         complying with Indian laws;

    o    reduced or less certain protection for intellectual property rights;

    o    increased collection risks;

    o    differing technological advances, preferences or requirements;

    o    trade restrictions;

    o    foreign currency fluctuations; and

    o    general economic conditions, including instability, in the Indian
         market.

         Any of these risks could adversely affect our business and results of
operations.

         THE INDIAN GOVERNMENT MAY CHANGE ITS REGULATION OF OUR BUSINESS OR THE
         TERMS OF OUR LICENSE TO PROVIDE INTERNET ACCESS SERVICES, EITHER OF
         WHICH COULD NEGATIVELY IMPACT OUR OPERATING RESULTS.

         Our business is subject to regulation under Indian law and our Internet
service provider license is also subject to regulation. These regulations
include the following:

                                       25
<PAGE>

    o    Our Internet service provider license has a term of 15 years; we have
         no assurance that the license will be renewed. If we are unable to
         renew our Internet service provider license in 2015 for any reason, we
         will be unable to operate as an Internet service provider in India and
         will lose one of our sources of revenue.

    o    The government of India and the Telecom Regulatory Authority of India,
         or TRAI, maintain the right to regulate the prices we charge our
         subscribers. The success of our business model depends on our ability
         to price our services at levels that we believe are appropriate. If the
         government or the TRAI sets a price floor, we may not be able to
         attract and retain subscribers. Likewise, if the government or the TRAI
         sets a price ceiling, we may not be able to generate sufficient
         revenues to fund our operations.

    o    The government of India maintains the right to take over our entire
         operations or revoke, terminate or suspend our license for national
         security and similar reasons without compensation to us. If the
         government of India were to take any of these actions, we would be
         prevented from conducting a significant part of our business.

         We had outstanding performance guarantees for various statutory
purposes totaling approximately $475,000 as of May 31, 2000. These guarantees
are generally provided to government agencies, as security for compliance with
and performance of terms and conditions contained in an Internet service
provider license towards the supply and installation of an e-commerce platform.
These guarantees may be seized by the governmental agencies if they suffer any
losses or damage by reason of our failure to perform our obligations. Any
failure on our part to comply with governmental regulations and the terms of our
Internet service provider license could result in the loss of our license and
any amount outstanding as performance guarantees, which would also prevent us
from carrying on a significant part of our business. Further, additional laws
regulating telecommunications, electronic records, the enforceability of
electronic documents and the liability of network service providers are under
consideration and if enacted, could impose additional restrictions on our
business.

         IF THERE IS A CHANGE IN THE CURRENT INDIAN GOVERNMENT POLICY FAVORING
         DEREGULATION, OUR BUSINESS COULD BE HARMED.

         During the past decade, the government of India has pursued policies of
economic liberalization, including significant relaxation of restrictions on the
private business sector. Although the Indian government has changed three times
since 1996, the policies of economic liberalization have continued. The current
government has continued these policies of liberalization and deregulation,
which have resulted in significantly increased opportunities for publicly and
privately held businesses in the Internet access and telecommunications markets
in which we operate in India. Although there are no indications that these
trends will not continue, there can be no assurance that the current government
will remain in power or that these policies will continue. A significant change
in the Indian government's policies could materially adversely affect our
business and results of operations.

         CONFLICTS INVOLVING INDIA COULD ADVERSELY AFFECT THE INDIAN ECONOMY AND
         HARM OUR BUSINESS.

         South Asia has from time to time experienced civil unrest and
hostilities among neighboring countries, including India and Pakistan. In April
1999, India and Pakistan conducted long-range missile tests. Since May 1999,
military confrontations between India and Pakistan have occurred in the disputed
Himalayan region of Kargill. Further, in October of 1999, the leadership of
Pakistan changed as a result of a coup led by the military. If a conflict

                                       26
<PAGE>

involving India and any of its neighboring countries should occur, it could have
an adverse affect on the Indian economy and our business would be advesely
affected.

         BANDWIDTH CAPACITY IN INDIA IS LIMITED AND MAY LIMIT THE GROWTH OF THE
         INTERNET IN INDIA AND SLOW OUR GROWTH.

         Bandwidth capacity, which is the measurement of the volume of data
capable of being transported in a communications system in a given amount of
time, is limited in India. The current limited bandwidth capacity in India may
severely limit the quality and desirability of using the Internet in India and,
in turn, may slow our growth.

         THE LIMITED INSTALLED PERSONAL COMPUTER BASE IN INDIA LIMITS THE NUMBER
         OF POTENTIAL CUSTOMERS AND RESTRICTS THE AMOUNT OF REVENUES THAT WE CAN
         GENERATE.

         The market penetration rates of PCs and online access in India are very
low. According to IDC, at the end of 1998, the Indian market contained 1.9
million PC owners or less than 1% of the total population in India of 987
million. Alternate methods of obtaining access to the Internet, such as through
cable television modems or set-top boxes for televisions, are currently
unavailable in India. There can be no assurance that the number or penetration
rate of PCs in India will increase rapidly, or at all, or that alternate means
of accessing the Internet will develop and become widely available in India. If
the market penetration rates of PCs and online access in India do not increase
rapidly, or we are unable to provide alternative means of Internet access to the
Indian market, we will be unable to generate significant revenue in India and we
will not generate the revenue which we expect to generate from this line of
business.

         WE MAY BE LIABLE TO THIRD PARTIES FOR INFORMATION RETRIEVED FROM THE
         INTERNET.

         Because users of our Internet access services and visitors to our
portal network may distribute our content to others, third parties may sue us
for defamation, negligence, copyright or trademark infringement, personal injury
or other matters. We could also become liable if confidential information is
disclosed inappropriately. Others could also sue us for the content and services
that are accessible from our portal network through links to other Web sites or
through content and materials that may be posted by our users in chat rooms or
bulletin boards. We do not carry insurance to protect us against these types of
claims, and there is no precedent on Internet service provider liability under
Indian law.

         OUR BUSINESS MAY NOT BE COMPATIBLE WITH DELIVERY METHODS OF INTERNET
         ACCESS SERVICES DEVELOPED IN THE FUTURE.

         We face the risk that fundamental changes may occur in the delivery of
Internet access services. Currently, Internet services are accessed primarily by
computers and are delivered by modems using telephone lines. As the Internet
becomes accessible by cellular telephones, personal data assistants, television
set-top boxes and other consumer electronic devices, and becomes deliverable
through other means involving coaxial cable or wireless transmission media, we
will have to develop new technology or modify our existing technology to
accommodate these developments. Our pursuit of these technological advances,
whether directly through internal development or by a third party license, may
require substantial time and expense. We may be unable to adapt our Internet
service business to alternate delivery means and new technologies may not be
available to us at all.

                                       27
<PAGE>

         OUR PRODUCT AND SERVICE OFFERINGS MAY NOT BE COMPATIBLE WITH INDUSTRY
         STANDARDS DEVELOPED IN THE FUTURE.

         Our ability to compete successfully depends upon the continued
compatibility and interoperability of our services with products and
architectures offered by various vendors. Although we intend to support emerging
standards in the market for Internet access, industry standards may not be
established and, if they become established, we may not be able to conform to
these new standards in a timely fashion or maintain a competitive position in
the market. The announcement or introduction of new products or services by us
or our competitors and any change in industry standards could cause customers to
defer or cancel purchases of existing products or services.

         ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS.

         Security breaches of our systems and network infrastructure, or the
perception that they could occur, could harm our business and reputation.
Despite the implementation of security measures, our infrastructure may be
vulnerable to physical break-ins, computer viruses, programming errors or
similar disruptive problems. If our security measures are circumvented, the
security of confidential information stored on our systems could be jeopardized,
proprietary information could be misappropriated and interruptions in our
operations could result. We may be required to make significant additional
investments and efforts to protect against or remedy security breaches. A
material security breach could damage our reputation or result in liability to
us, and we do not carry insurance that protects us from this kind of loss.

         THE TELECOMMUNICATIONS INFRASTRUCTURE IN INDIA IS DEVELOPING AND MAY
         NOT BE RELIABLE.

         The legal framework for telecommunications businesses in India is
developing and may change in ways that would adversely affect our ability to
operate and grow our business in India. Laws and regulations may be introduced
in India governing various aspects of the industry and the use of the Internet
as a medium for conducting business. We cannot predict the effect of further
developments in the Indian legal system, particularly with regard to the
Internet, including the promulgation of new laws, changes to existing laws or
their interpretation or enforcement, or the preemption of local regulations by
national laws.

         U.S. FEDERAL OR STATE GOVERNMENTS MAY INCREASE TELEPHONY REGULATION,
         WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

         Our provision of telecommunications services is subject to government
regulation in the U.S. Federal law regulates international and interstate
telecommunications, while states have jurisdiction over telecommunications that
originate and terminate within the same state. Changes in existing policies or
regulations by Congress, by the FCC or any state could materially adversely
affect our financial condition or results of operations. There can be no
assurance that the regulatory authorities in one or more states or the FCC will
not take action having an adverse effect on our business, financial condition or
operating results.

         OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL
         LOSSES FOR INVESTORS PURCHASING SHARES OF OUR COMMON STOCK.

         The market prices of securities of other technology-based companies,
particularly Internet-related companies, currently are highly volatile. The

                                       28
<PAGE>

market price of our common stock has fluctuated significantly in the past. Our
market price may continue to exhibit significant fluctuations in response to the
following factors, some of which are beyond our control:

    o    variations in our quarterly operating results;

    o    deviations in our results of operations from the estimates of
         securities analysts;

    o    changes in securities analysts' estimates of our financial performance;

    o    changes in market valuations of similar companies and stock market
         price and volume fluctuations generally;

    o    economic conditions specific to the Internet and online commerce
         products and services;

    o    announcements by us or our competitors of new or enhanced products,
         technologies or services or significant contracts, acquisitions,
         strategic relationships, joint ventures or capital commitments;

    o    regulatory developments;

    o    additions or departures of key personnel; and

    o    future sales of our common stock or other securities.

         In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.

         WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADEQUATE FINANCING MAY
         NOT BE AVAILABLE.

         Our future capital requirements will depend upon many factors,
including the expansion of our sales and marketing efforts, the development of
new products and services, possible future strategic acquisitions, the progress
of our research and development efforts, and the status of competitive products
and services. We believe that current and future available capital resources
will be adequate to fund our operations for the foreseeable future. However, to
the extent we are in need of any additional financing, there can be no assurance
that any such additional financing will be available to us on acceptable terms,
or at all. If additional funds are raised by issuing equity securities, further
dilution to the existing stockholders may result. If adequate funds are not
available, we may be required to delay, scale back or eliminate our research and
development program and our marketing efforts or to obtain funds through
arrangements with partners or others that may require us to relinquish rights to
certain of our technologies or potential products or other assets. Accordingly,
the inability to obtain such financing could adversely affect our business,
financial condition and results of operations.

         OUR PREFERRED STOCK MAY DELAY OR PREVENT A TAKEOVER OF OUR COMPANY
         POSSIBLY PREVENTING YOU FROM OBTAINING HIGHER STOCK PRICES FOR YOUR
         SHARES.

         Our board of directors has the authority to issue up to 5,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights of those shares without any further vote
or action by our stockholders. Of these shares, 12,000 have been designated

                                       29
<PAGE>

Series B Cumulative Convertible Preferred Stock, all of which are issued and
outstanding. The rights of the holders of our common stock are subject to the
rights of the holders of our Series B Cumulative Convertible Preferred Stock and
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that we may issue in the future. The issuance of
preferred stock, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock, thereby delaying, deferring or preventing a change in control of our
company. Furthermore, such preferred stock may have other rights, including
economic rights senior to the common stock, and, as a result, the issuance
thereof could adversely affect the market value of our common stock. We have no
present plans to issue additional shares of preferred stock.

         THE CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AND THE
         ANTI-TAKEOVER EFFECTS OF DELAWARE LAW COULD ADVERSELY AFFECT THE
         PERFORMANCE OF OUR STOCK.

         As of May 26, 2000, our executive officers and directors and their
family members together beneficially owned approximately 58.7% of the issued and
outstanding shares of our common stock. As a result, such persons will have the
ability to elect a majority of directors and exert control over our affairs,
irrespective of how our other stockholders may vote. This concentration of
ownership may have the effect of delaying or preventing a change in control of
our company. In addition, Section 203 of the General Corporation Law of Delaware
prohibits us from engaging in certain business combinations with interested
stockholders, as defined by statute. These provisions may have the effect of
delaying or preventing a change in control of our company without action by our
stockholders, and therefore could adversely affect the price of our common
stock.


EMPLOYEES

         As of March 31, 2000, we had 318 employees, including 52 in product
development and related support services, 108 in IT consulting, 34 in digital
media production, 51 in sales and marketing and 73 in finance and
administration. As of that date, 169 of our employees were located in the United
States and 149 were located in international locations.


ITEM 2.  DESCRIPTION OF PROPERTY.

         Our corporate headquarters are located in Yorba Linda, California, in a
facility consisting of approximately 41,000 square feet of office and warehouse
space. On December 15, 1999, we entered into a 15-year operating lease for this
facility. The terms of this lease provides for initial monthly payments of
approximately $25,000. The monthly payment is adjusted every 3 years based on
the consumer price index. We are responsible for payment of any property taxes
and are required to maintain property insurance for the remainder of the lease.

         We own a 22,000 square foot research and development facility in
Calcutta, India. In addition, a new 20,452 square feet building is under
construction in Calcutta, adjacent to the existing facility, primarily to house
our digital media and Internet operations. We expect the construction of the
facility to be completed by the end of July 2000.

                                       30
<PAGE>

         We also lease office space in various other locations domestically and
internationally where our operations are located. We believe that our existing
facilities are adequate to meet our current needs and that suitable additional
or alternative space will be available in the future on commercially reasonable
terms.


ITEM 3.  LEGAL PROCEEDINGS.

         On March 24, 2000, Video Pioneers Corporation ("VPC") initiated an
action in Orange County Superior Court (Case No. 00CC03790) against us alleging
breach of contract, conversion, and interference with economic advantage,
constructive and actual fraud, trade secret misappropriation and breach of
promise. VPC alleges that we failed to pay amounts due for its services,
obtained materials and information by fraud and conversion, interfered with its
prospective business relationships and used its confidential information and
vendors for improper purposes. VPC claims damages in excess of $1,000,000.

         On May 15, 2000, we filed our answer to the complaint denying all of
VPC's allegations and filed a cross-complaint against VPC and its president
alleging fraud, rescission, breach of contract, conspiracy to breach fiduciary
duty and unfair competition and seeking declaratory relief. The litigation is in
its initial stages and discovery has yet to commence. We intend to vigorously
defend this action and pursue our cross-complaint. At this point, we cannot
determine what impact, if any, the ultimate resolution of this matter would have
on our financial position or results of operations.

         We are not presently involved in any other significant legal
proceedings.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the quarter ended March 31, 2000, no matters were submitted for
vote to our common stockholders.

                                       31
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         To better reflect our strategic direction and the broadening of our
technology and e-commerce offerings, we changed our name from Research
Engineers, Inc. to netGuru, Inc. in February 2000. On March 3, 2000, our common
stock began trading on the Nasdaq National Market under the new ticker symbol,
NGRU. Our common stock had traded on the Nasdaq National Market under the ticker
symbol RENG from July 26, 1996 until March 2, 2000.

         As of May 26, 2000, there were approximately 139 holders of record of
our common stock. Within the holders of record of our common stock are brokerage
firms which, in turn, hold shares of stock for beneficial owners.

         We have reinvested our earnings in the business and have not paid any
dividends to holders of our common stock. The declaration and payment of
dividends are at the sole discretion of the Board of Directors and will depend
upon our profitability, financial condition, cash requirements, future prospects
and other factors deemed relevant by the Board of Directors.

         The high and low closing sales prices of a share of our common stock,
as reported by the Nasdaq National Market, for each quarter of fiscal 2000 and
1999 are as follows:

<TABLE>
<CAPTION>
                                                     Fiscal 2000            Fiscal 1999
                                                 ------------------     ------------------
                                                   High      Low          High      Low
                                                 --------- --------     --------- --------
       <S>                                          <C>      <C>           <C>      <C>
       1st  Quarter (April 1 - June 30)             $5.50    $3.94         $3.59    $2.50
       2nd Quarter (July 1 - September 30)           5.25     4.25          3.06     2.25
       3rd Quarter (October 1 - December 31)        24.50     4.47          2.47     1.50
       4th Quarter (January 1 - March 31)           55.75    22.75          4.38     1.50
</TABLE>

On February 7, 2000, we effected a 2-for-1 split of our common stock. The above
high and low closing sales prices have been adjusted to reflect this stock
split.

                                       32
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION.

GENERAL

         We were incorporated in 1981 under the name Research Engineers, Inc.
and changed our name to netGuru, Inc. in 2000. We are an integrated Internet
technology and services company providing:

    o    Internet-based IT services to companies worldwide;

    o    Internet and PC-based engineering software products to businesses
         worldwide; and

    o    Internet content and commerce through our city- and region-oriented
         portal network, NETGURUINDIA.COM, which is focused on the "global
         Indian" community, consisting of resident Indians and PIOs.

         We have been providing computer-aided engineering software solutions to
our customers for over 18 years. For the past 15 years, we have supported our
engineering software business with our India-based software programming and IT
resources. In 1999, we acquired two IT services companies in the U.S., further
expanding our IT resources and capabilities. With our experience in India and
our understanding of the global Indian community, we began offering our Internet
portal services in 1999. In addition, based upon our knowledge and understanding
of the engineering software market, combined with our Internet technology
resources and experience, we recently launched WEB4ENGINEERS.COM , an
engineering portal hosting our engineering software applications online and
providing ASP, services to engineering software providers and their licensees
worldwide.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of our net revenues.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                                       ----------------------------------------------
                                                                2000                     1999
                                                                ----                     ----

              <S>                                                <C>                      <C>
              Net revenues                                       100.0%                   100.0%
              Cost of revenues                                    43.7                     10.7
                                                       ---------------------      -------------------

              Gross profit                                        56.3                     89.3
                                                       ---------------------      -------------------

              Selling, general and
               administrative expenses                            51.8                     71.0
              Research and development expenses                   12.3                     22.5
                                                       ---------------------      -------------------

              Operating loss                                      (7.8)                    (4.2)

              Interest expense, net                               (2.0)                    (1.8)
              Other income, net                                    0.1                      0.5
                                                       ---------------------      -------------------

              Loss before income taxes                            (9.7)                    (5.5)
              Income tax benefit                                   2.9                      0.7
                                                       ---------------------      -------------------

              Net loss                                            (6.8)%                   (4.8)%
                                                       =====================      ===================
</TABLE>

                                       33
<PAGE>

         NET REVENUES. Net revenues for the fiscal year ended March 31, 2000
increased by $9,191,000 (85.5%) to $19,936,000, as compared to $10,745,000 for
the fiscal year ended March 31, 1999. Our total revenues for the current year
primarily consisted of (1) IT services, (2) engineering software products,
maintenance and services, and (3) Internet content, e-commerce and digital media
products and services. IT services net revenues represented 52.7% of total net
revenues for the fiscal year ended March 31, 2000 compared to 4.0% for the
fiscal year ended March 31, 1999. This increase is primarily due to a full year
of revenue from R-Cube in fiscal 2000 compared to one month's revenue in fiscal
1999, and the addition of approximately six months of revenue from NetGuru
Systems, Inc. which was acquired during fiscal 2000.

         Our revenues from software sales, maintenance and services declined as
a percentage of total revenues to 44.9% in fiscal 2000 from 96.0% in fiscal
1999, largely due to the growth of our other business segments. In dollar terms,
revenues from software sales, maintenance and services were $8,953,000 in fiscal
2000 compared to $10,310,000 in fiscal 1999, a decline of 13.2%. Software
product sales represented most of the decline, decreasing to $7,175,000 in
fiscal 2000 compared to $8,345,000 in fiscal 1999, a change of $1,170,000 or
14.0%. This decrease was experienced across all of our software product lines
and across all geographic regions, due in part to delayed releases and general
slowdown in the worldwide CAD/CAE software market. We are expediting new
releases of our software products and developing satellite products to generate
additional revenue from our core group of users. In addition, we have begun to
offer Web-enabled versions of our software on our new WEB4ENGINEERS.COM Web
site, all of which, we believe, will contribute to an increase in software
revenues for fiscal 2001. Maintenance and services revenues were relatively flat
as we continue to sell maintenance contracts for new and old versions of our
software products.

         Internet content, e-commerce, and digital media products and services
comprise an emerging business segment for our company. Revenues for fiscal 2000
amounted to $471,000 compared to no revenues from this segment for fiscal 1999.
These revenues were generated primarily through digital media services and
through products and services sold as part of our NETGURUINDIA.COM portal
business, which include travel services, phone cards and other gift items.

         We recognize revenues from IT services as services are performed.
Revenues from software products are recognized when products are shipped and
collectibility is reasonably certain. In accordance with the American Institute
of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2,
SOFTWARE REVENUE RECOGNITION, issued in 1997, as modified by SOP 98-9,
MODIFICATION OF SOP 97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN
TRANSACTIONS, product maintenance revenues are amortized over the length of the
maintenance contract, usually twelve months. The implementation of SOP 98-9
during fiscal 2000 did not result in any material changes from our previous
practice.

         Our domestic revenues and sales to foreign customers originating in the
U.S. are denominated in U.S. dollars. However, revenues and expenses for our
foreign subsidiaries and sales offices are usually recorded in the applicable
foreign currency and translated to U.S. dollars with any applicable foreign
exchange adjustments recorded as a component of accumulated other comprehensive
income (loss). Foreign exchange gains and losses were not material to our
financial results during the fiscal years ended March 31, 2000 and 1999.

         GROSS PROFIT. Gross profit as a percentage of net revenues decreased to
56.3% for the fiscal year ended March 31, 2000 as compared to 89.3% for the
fiscal year ended March 31, 1999. The gross profit percentage from the IT
services segment is typically lower, 30.3% in fiscal 2000, than the gross profit
percentage from the software sales, maintenance and services segment, 88.7% in
fiscal 2000. In dollar terms, total gross profit increased by $1,626,000 (16.9%)

                                       34
<PAGE>

to $11,221,000 for fiscal 2000 compared to $9,595,000 for fiscal 1999, largely
as a result of the increase in IT services revenues. Gross profit for IT
services increased $3,007,000 to $3,190,000 for fiscal 2000 compared to $183,000
for fiscal 1999. The total gross profit increase included an additional $88,000
due to the emergence of the Internet content, e-commerce, digital media products
and services segment during fiscal 2000. These increases were partially offset
by a decrease of $1,469,000 in gross profit for the software sales, maintenance
and services segment, primarily attributable to the decline in sales for the
segment.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased by $2,692,000 (35.3%) to $10,322,000
for the fiscal year ended March 31, 2000 as compared to $7,630,000 for the
fiscal year ended March 31, 1999. The increase is largely attributable to costs
associated with the businesses acquired during fiscal 2000. Increases also
resulted from the addition of personnel dedicated to the development of our new
Internet portal. Despite this increase in total dollars, SG&A expenses as a
percentage of net revenues decreased to 51.8% for fiscal 2000 from 71.0% for
fiscal 1999 due in large part to the significant increase in net revenues.

         RESEARCH AND DEVELOPMENT EXPENSES. Research and development ("R&D")
expenses consist primarily of software developers' wages. R&D expenses remained
relatively constant, increasing by $37,000 (1.5%) to $2,452,000 for fiscal 2000
as compared to $2,415,000 for fiscal 1999. As a percentage of net revenues, R&D
expenses decreased from 22.5% in fiscal 1999 to 12.3% in fiscal 2000 due to the
significant increase in net revenues in fiscal 2000.

         OTHER INCOME. Net interest expense was $408,000 for the fiscal year
ended March 31, 2000, compared to $191,000 for the fiscal year ended March 31,
1999. The increase in interest expense is related to the use of capitalized
leases and bank credit lines to finance equipment purchases and debt incurred to
finance the acquisition of R-Cube and NetGuru Systems (see Note 2 to the
Consolidated Financial Statements).

         INCOME TAXES. Income tax benefit increased by $516,000 to $587,000 in
fiscal 2000 compared to an income tax benefit of $71,000 in the fiscal year
ended March 31, 1999. The benefit resulted largely from operating loss
carryforwards generated as a result of the pretax loss in the U.S. Net deferred
tax assets increased during the fiscal year by $681,000. Although we believe
that most of these assets will be realizable against future earnings, we have
established a valuation reserve of $71,000 against certain of these assets which
may expire before we are able to utilize them.

LIQUIDITY AND CAPITAL RESOURCES

         We currently finance our operations (including capital expenditures)
primarily through existing cash and cash equivalent balances. Our principal
sources of liquidity at March 31, 2000 consisted of $13,265,000 of cash and cash
equivalents. Cash and cash equivalents increased by $11,254,000 during the
fiscal year ended March 31, 2000. The increase was largely due to an increase in
cash provided by financing activities offset by increases in cash used in
operations and investing activities.

         Cash provided by financing activities increased as a result of many
factors. A major portion of the increase was due to funds obtained through
preferred stock issuances amounting to approximately $13,980,000. In September
1999, we obtained $2,600,000 through the issuance of 371,429 shares of our
Series B 5% convertible preferred stock and warrants to purchase 100,000 shares
of our common stock. These proceeds were used to fund a portion of the purchase
price of NetGuru Systems. In March 2000, we obtained an additional $11,380,000,
net of related costs, through the issuance of 12,000 shares of 5% convertible
preferred stock and warrants to purchase 102,000 shares of our common stock to
fund the growth of our Internet portal and Indian Internet service provider

                                       35
<PAGE>

businesses. In addition to the funds obtained through preferred stock issuances,
we obtained approximately $4,896,000 in cash from the exercise of stock options
and stock warrants during this period. Increased borrowings in India for the
continued development of the Internet portal and digital media services
businesses also contributed to the increase in cash provided by financing
activities. The increase in cash was partially offset by repayment of
outstanding debt and capital lease obligations.

         The increase in cash used in investing activities is largely
attributable to the acquisition of NetGuru Systems. Payments to acquire
companies, net of cash acquired, accounted for approximately $3,701,000 of the
net cash used in investing activities. Approximately $906,000 was spent to
purchase property, plant and equipment. Cash proceeds of approximately
$2,696,000, net of transaction costs, resulting from the sale-leaseback of our
Yorba Linda facility in December 1999 partially offset the net cash used in
investing activities.

         Net cash used in operations was $2,464,000 in fiscal 2000 compared to
$101,000 in fiscal 1999. Through March 31, 2000, approximately $2,381,000 has
been forwarded to third parties towards the acquisition of a 74% interest in
Interra Global Limited, and towards the licensing and infrastructure necessary
to commence business in India, which is reflected as a substantial increase in
deposits on the consolidated balance sheet. Although the acquisition of our
controlling interest in Interra Global Limited was not consummated as of March
31, 2000, we had made investments in the development of the business during
fiscal 2000, including obtaining the necessary government approvals and
licensing. Currently we estimate that at least $6,000,000 will be expended
towards the development of the business and infrastructure for the ISP network.
The higher net loss for the period as compared to the prior year also
contributed to a higher net cash used in operations in fiscal 2000. Increases in
accounts receivable also contributed, offset by increases in accrued expenses,
deferred revenues, and accounts payable.

         We believe that our current cash and cash equivalents balances will
provide adequate working capital to fund our operations at currently anticipated
levels through March 31, 2001. Additionally, we currently have $2,320,000
available under an existing line of credit. To the extent that such amounts are
insufficient to finance our working capital requirements, we will be required to
raise additional funds through public or private equity or debt financing. There
can be no assurance that such additional financing will be available, if needed,
or, if available, will be on terms satisfactory to us.

IMPACT OF YEAR 2000

         Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems may recognize a date using "00" as the year 1900 rather than the
year 2000. As a result, computer systems and/or software used by many companies
and governmental agencies may need to be upgraded to comply with such Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.

         We have operated and evaluated our internal systems since January 1,
2000, and have not identified any errors or experienced any system malfunctions.
We have not been informed of any Year 2000 problems experienced by any of our
vendors or other third parties on whom our operations rely. We will continue to
monitor our systems to assess whether we are at risk for any Year 2000
compliance issues. The costs associated with correcting our non-compliant
systems have not been material.

         However, it is our opinion that it is too soon to conclude that there
will not be any problems arising from the Year 2000 issue, particularly with
respect to third parties. We are continuing to monitor our operations, our
significant vendors and other third parties for Year 2000 problems. We do not
believe at this time that potential Year 2000 issues will materially affect our
business, although we cannot provide any assurance that this will be the case.

                                       36
<PAGE>

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The provisions of the statement
require the recognition of all derivatives as either assets or liabilities in
the consolidated balance sheet and the measurement of those instruments at fair
value. The accounting for the changes in fair value of a derivative depends on
the intended use of the derivative and the resulting designation. We are
required to adopt the statement, as amended by SFAS 137, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, in the first quarter of fiscal
year 2002. We are currently studying the impact of this pronouncement on our
consolidated financial statements and results of operations. At this time, we
are unable to assess the impact of adopting SFAS 133.

         In December 1999, the SEC staff issued Staff Accounting Bulletin No.
101 ("SAB 101"), "Revenue Recognition in Financial Statements" and in March
2000, the SEC staff issued Staff Accounting Bulleting No. 101 A "Implementation
Issues Related to SAB 101." These bulletins summarize certain of the staff's
views about applying generally accepted accounting principles to revenue
recognition in financial statements. The provisions of these pronouncements are
effective for our company commencing with the first quarter of fiscal 2001. We
are in the process of analyzing the implications of these bulletins and do not
believe the adoption will have a material impact on our consolidated financial
position or results of operations.

FORWARD LOOKING STATEMENTS

         The preceding "Description of Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" sections contain
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act"). We intend that such forward-looking
statements be subject to the safe harbors created thereby. These forward-looking
statements generally include the plans and objectives of management for future
operations, including plans and objectives relating to our future economic
performance. The forward-looking statements and associated risks may include,
relate to or be qualified by other important factors, including, without
limitation,

    o    our ability to transition into new lines of business as planned;
    o    our ability to become a leading integrated Internet technology and
         services company addressing the global Indian market, the worldwide
         information technology services market and the worldwide Internet
         engineering software market;
    o    our ability to successfully market and sell ASP services through our
         recently launched engineering portal;
    o    market growth;
    o    new competition;
    o    competitive pricing;
    o    new technologies;
    o    our ability to successfully implement our future business plans;
    o    statements about our business strategy and our expansion strategy;
    o    our ability to attract strategic partners, alliances and advertisers;
    o    uncertainties relating to economic conditions in the markets in which
         we currently operate and in which we intend to operate in the future;
    o    our ability to hire and retain qualified personnel;
    o    our ability to obtain capital, if required;
    o    our ability to successfully implement our brand building campaign;
    o    the risks of uncertainty of trademark protection;
    o    our plans for expanding our Internet portal network and the services
         offered through such network;

                                       37
<PAGE>

    o    our plans regarding our telephony infrastructure and service offerings;
    o    our beliefs regarding the growth of Internet usage within the global
         Indian community;
    o    our beliefs regarding the demand for our products and our competitive
         advantages;
    o    the negative impact of economic slowdowns and recessions; and
    o    risks associated with existing and future government regulation to
         which we are subject.

We do not undertake to update, revise or correct any forward-looking statements.

         Results actually achieved may differ materially from expected results
in these statements. Several of these risks are discussed in greater detail in
the "Risk Factors" section of the preceding "Description of Business" section.
Any of the factors described alone or in the "Risk Factors" section could cause
our financial results, including our net income or growth in net income, to
differ materially from prior results.


ITEM 7.  FINANCIAL STATEMENTS.

Our consolidated financial statements are filed with this Form 10-KSB beginning
on page F-1 following the signature page.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

                                       38
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

     Our directors, executive officers and key employees are as follows:

<TABLE>
<CAPTION>
                 Name                    Age                        Position
                 ----                    ---                        --------

<S>                                      <C>    <C>
Amrit K. Das........................     55     Chairman of the Board, Chief Executive Officer and Director
Jyoti Chatterjee....................     44     President, Chief Operating Officer and Director
Wayne L. Blair......................     60     Senior Vice President, Finance, Chief Financial Officer, and
                                                Treasurer
Santanu Das.........................     27     Vice President, New Technology and Director
Eric L. Christensen.................     54     Vice  President, Corporate Strategies, General Counsel and
                                                Secretary
Stephen Owen........................     41     Senior Vice President, European Operations
Charles Sleichter III...............     54     Vice President, Marketing Communications and Marketing
                                                Strategies
Clara Young.........................     45     Vice President, Administration
Dan W. Heil.........................     67     Director
Bruce E. Cummings...................     51     Director
</TABLE>

AMRIT K. DAS is the founder of our company and has served as our Chief Executive
Officer and Director since its inception in 1981. Mr. Das also served as our
President since our inception until March, 1999. Mr. Das holds a B.S. in
Civil/Structural Engineering from Calcutta University, India and an M.S. in
Structural Engineering from the University of South Carolina.

JYOTI CHATTERJEE has served as our President since March, 1999 and has served as
our Chief Operating Officer and a Director since April 1990. From April 1990 to
March 1999, Mr. Chatterjee served as our Executive Vice President. From 1985 to
1990, Mr. Chatterjee served as our Chief Consulting Engineer. Mr. Chatterjee
holds a B.S. in Structural Engineering from the Indian Institute of Technology
and an M.S. in Structural Engineering from the University of Pennsylvania.

WAYNE L. BLAIR has served as our Senior Vice President, Finance, Chief Financial
Officer, and Treasurer since October 1999. He served as Chief Financial Officer,
Treasurer and Secretary from September 1997 to September 1999. Prior to that Mr.
Blair was the Chief Financial Officer for National Electronics Corporation from
1994 to 1997. Mr. Blair holds a B.S. in Accounting from California State
University, Long Beach.

SANTANU DAS has served as our Vice President, New Technology since July, 1999
and as a Director since September 1996. Mr. Das served as Manager of New
Technology from May 1997 until June 1999. Prior to that Mr. Das served as a
Senior Engineering Analyst for our company from 1991 to April 1997. Mr. Das
holds a B.S. in Structural Engineering from the University of Southern
California and an M.S. in Structural Engineering from the Massachusetts
Institute of Technology. Santanu Das is the son of Amrit Das.

                                       39
<PAGE>

ERIC L. CHRISTENSEN has served as our Vice President of Corporate Strategies,
General Counsel and Secretary since March 2000. Prior to joining us, Mr.
Christensen served as an attorney and legal advisor from December 1997 to March
2000 for select corporate clients on a variety of business matters. Prior to
that, Mr. Christensen served as Assistant General Counsel and Director, Contract
Administration for MAI Systems Corporation, a computer software company. Mr.
Christensen holds a B.A. in History from the University of California Los
Angeles and a J.D. from Loyola Law School of Los Angeles.

STEPHEN OWEN has served as our Senior Vice President of European Operations
since October 1999. He served as our Director of European Operations from 1987
to 1999. Mr. Owen holds a B.S. in Civil Engineering from the University College
Swansea, United Kingdom.

CHARLES SLEICHTER, III has served as our Vice President, Marketing
Communications and Marketing Strategies since January 2000. Prior to joining us,
Mr. Sleichter served, as an independent contractor, as Chief Operating Officer,
Senior Executive-Creative & Marketing Strategy for VPC Communications from
August 1999 to December 1999. From September 1997 to July 1999, Mr. Sleichter
served as Director of Business Development for J.B. Research/Relaxor. From 1996
to 1997, he served as an adjunct professor in the Department of Communications,
Film and Television of California State University, Fullerton. Mr. Sleichter
holds a B.A. in Communications and an M.A. in Mass Communications, Electronic
Media from California State University, Fullerton.

CLARA YOUNG has served as our Vice President of Administration since December
1987. Ms. Young holds a B.S. in Computer Science from California State
University, Fullerton.

DAN W. HEIL has served as a Director of our company since 1990. Mr. Heil has
been the President and Chief Executive Officer of Willdan Associates, an
engineering and planning company, since its founding in 1965. Mr. Heil holds a
B.S. in Civil Engineering from Stanford University. Mr. Heil resigned from the
position of Director on May 31, 2000.

BRUCE E. CUMMINGS has served as a Director of our company since 1996. Mr.
Cummings is the Principal of Bruce Cummings Associates, management and marketing
consultants. Prior to that, Mr. Cummings was the President and Chief Executive
Officer of Portrait Display Labs, Inc., a manufacturer of special purpose
computer monitors, which he co-founded, from 1992 to June 1997. Mr. Cummings is
currently a member of the Advisory Board for Europe Direct, the European Direct
Marketing Conference. Mr. Cummings holds a B.S. in Marketing from California
State University at Long Beach.

         All directors hold office until the next annual stockholders' meeting
or until their respective successors are elected or until their earlier death,
resignation or removal. Officers are appointed by, and serve at the discretion
of, the Board of Directors.

COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES

         Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than 10% of a registered class of our common stock to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("Commission"). Such officers, directors and
stockholders are required by Commission regulations to furnish our company with
copies of all such reports that they file.

         Based solely upon a review of copies of such reports furnished to us
during the fiscal year ended March 31, 2000 and thereafter, or any written
representations received by us from directors, officers and beneficial owners of
more than 10% of our common stock ("reporting persons") that no other reports
were required, we believe that, during our 2000 fiscal year, we complied with
all Section 16(a) filing requirements applicable to our reporting persons.

                                       40
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

     Information concerning the annual and long-term compensation for services
in all capacities to our company of our Chief Executive Officer and our other
executive officers whose aggregate cash compensation exceeded $100,000
(collectively, the "Named Executives") during the fiscal years ended March 31,
2000, 1999 and 1998 is shown below.

<TABLE>
                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                         Long-Term
                                                                       Compensation
                                                                       ------------
                                        Annual Compensation               Awards
                                        -------------------               ------

                                                                        Securities
                                                     Other Annual       Underlying      All Other
         Name and                       Salary      Compensation(1)      Options       Compensation
    Principal Position       Year         ($)            ($)               (#)              ($)
    ------------------       ----       -------     ---------------    -----------     ------------
<S>                          <C>        <C>              <C>             <C>             <C>
Amrit K. Das                 2000       322,400           ---              ---           28,055(2)
  Chief  Executive Officer   1999       260,000           ---            120,000         16,506(2)
                             1998       260,000          66,071            ---           15,824(2)

Jyoti Chatterjee             2000       209,160           ---              ---           11,116(3)
  President and Chief        1999       156,000           ---            100,000          9,360(3)
  Operating Officer          1998       156,000           ---             30,000          9,360(3)

Wayne L. Blair
  Sr. Vice President, Chief  2000       161,046           ---              ---            9,338(3)
  Financial Officer,         1999       125,000           ---             60,000          2,019(3)
  Treasurer                  1998        60,096           ---             80,000            ---

Clara Young                  2000       121,100           ---              ---            8,111(3)
  Vice President,            1999       104,000           ---             25,500          6,040(3)
  Administration             1998       104,000           ---             15,000          6,240(3)

Stephen Owen (4)             2000       111,002           ---              ---           51,094(5)
  Sr. Vice President,
  European Operations
</TABLE>
------------------------
(1)  The costs of certain benefits are not included because they did not exceed,
     in the case of each Named Executive, the lesser of $50,000 or 10% of the
     total annual salary and bonus as reported above.
(2)  Represents 401(k) contributions as well as premiums paid by us pursuant to
     a split-dollar life insurance policy established for the benefit of Mr. Das
     in the amount of $16,855 in 2000, $7,006 in 1999 and $6,324 in 1998.
(3)  Represents 401(k) contributions made by us on behalf of the Named
     Executive.
(4)  Information related to fiscal 1999 and 1998 omitted since Mr. Owen did not
     meet the criteria to be included in this table during those years.
(5)  Represents contribution to pension plan of $36,619 and car allowance of
     $14,475.


STOCK OPTION GRANTS IN 2000

         No individual stock option grants were made to any of the Named
Executives in fiscal 2000. We have never granted any stock appreciation rights.

                                       41
<PAGE>

OPTION EXERCISES AND FISCAL YEAR-END VALUES

         Shown below is information with respect to the number of shares of our
company's common stock acquired upon the exercise of options, the value realized
therefor, the number of unexercised options at March 31, 2000 and the value of
unexercised in-the-money options at March 31, 2000 for the Named Executives in
the Summary Compensation Table above. The Named Executives did not hold any
stock appreciation rights during fiscal 2000.


<TABLE>
                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

<CAPTION>
                                                            Number of Securities           Value of Unexercised In-the-Money
                                                       Underlying Unexercised Options        Options at Fiscal Year-End ($)
                                                          at Fiscal Year-End (#)
                          Shares
                       Acquired on        Value
        Name           Exercise(#)     Realized($)      Exercisable      Unexercisable      Exercisable        Unexercisable
        ----           -----------     -----------      -----------      -------------      -----------        -------------

<S>                       <C>            <C>              <C>                <C>             <C>                  <C>
Amrit K. Das               ---             ---             90,000            80,000          2,430,500            2,136,000

Jyoti Chatterjee           ---             ---            149,333            76,667          4,056,000            2,070,500

Wayne L. Blair            7,000          162,313           66,333            66,667          1,837,688            1,810,000

Clara Young                ---             ---             55,333            21,667          1,503,250              585,000

Stephen Owen               ---             ---             53,333            26,667          1,525,000              760,000
</TABLE>


DIRECTORS' COMPENSATION

         Our directors do not currently receive any cash compensation for
service on the Board of Directors or any committee thereof, but directors may be
reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings.

EMPLOYMENT AGREEMENTS

         As of May 1, 1996, we entered into five-year employment agreements with
each of Amrit Das, Jyoti Chatterjee and Clara Young. Those agreements, which
became effective upon the closing of our initial public offering of our common
stock, provide that Mr. Das, Mr. Chatterjee and Ms. Young will receive minimum
base annual salaries of $260,000, $156,000 and $104,000, respectively. Each
employment agreement also provides for the grant of an annual bonus with such
bonuses, if any, to be determined by the Compensation Committee of the Board of
Directors.

                                       42
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth as of May 26, 2000, certain information
with respect to (i) each director of our company, (ii) the Named Executives and
(iii) all directors and executive officers of our company as a group, and (iv)
each person known to our company to be the beneficial owner of more than 5% of
our common stock. The information with respect to each person specified is as
supplied or confirmed by such person or based upon statements filed with the
Commission.

<TABLE>
<CAPTION>
NAME AND ADDRESS             AMOUNT AND NATURE OF BENEFICIAL         PERCENT OF CLASS OF
OF BENEFICIAL OWNER           OWNERSHIP OF COMMON STOCK (1)            OF COMMON STOCK
----------------              -----------------------------            ---------------

<S>                                   <C>                                   <C>
Amrit K. Das (2)(3)(4)                2,649,518                             19.8%

Jyoti Chatterjee (2)(3)(5)              424,623                              3.2%

Wayne L. Blair (2)(6)                    66,333                               *

Clara Young (2)(7)                       95,705                               *

Stephen Owen (2) (8)                    136,857                              1.0%

Santanu Das (3)(9)                    2,684,900                             20.0%

Dan W. Heil (3)(10)                     200,576                              1.5%

Bruce E. Cummings (3)(11)                20,000                               *

Sormistha Das                         1,862,924                             14.0%
1043 Taylor Court
Anaheim Hills, CA 92808

All Directors and Executive           6,278,512                             45.3%
Officers of the Company as
a Group (10 persons) (12)
</TABLE>

---------------
* Less than 1%
(1)    Beneficial ownership is determined in accordance with the rules of the
       Securities and Exchange Commission and generally includes voting or
       investment power with respect to securities. Except as indicated by
       footnote, and subject to community property laws where applicable, the
       persons named in the table above have sole voting and investment power
       with respect to all shares of common stock shown as beneficially owned by
       them. Shares of common stock subject to options currently exercisable, or
       exercisable within 60 days after May 26, 2000, are deemed to be
       outstanding in calculating the percentage ownership of a person or group
       but are not deemed to be outstanding as to any other person or group.
(2)    Named executive officer of our company. The address of each executive
       officer is c/o netGuru, Inc., 22700 Savi Ranch Parkway, Yorba Linda, CA.
(3)    Director of our company. The address of each director is c/o netGuru,
       Inc., 22700 Savi Ranch Parkway, Yorba Linda, CA.
(4)    Includes 1,279,759 shares of Common Stock held by the A. and P. Das
       Living Trust and 90,000 shares of common stock underlying options which
       are exercisable as of May 26, 2000 or within 60 days after such date.
       Does not include 923,216 shares of common stock held by Mr. Das'
       daughter, Sormistha Das, or 1,706,706 shares of common stock beneficially
       held by Mr. Das' son, Santanu Das. Mr. Das disclaims beneficial ownership
       of the shares of common stock held by Sormistha Das and Santanu Das.
       Includes 50,000 shares of common stock held by the Purabi Das Foundation,
       Inc., of which Mr. Das is the Trustee. Mr. Das disclaims beneficial
       ownership of these shares.

                                       43
<PAGE>

(5)    Includes 159,333 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date.
(6)    Consists solely of 66,333 shares of common stock underlying options which
       are exercisable as of May 26, 2000 or within 60 days after such date.
(7)    Includes 60,333 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date.
(8)    Includes 53,333 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date.
(9)    Includes 130,000 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date. Mr. Das
       is the son of Amrit Das, our Chief Executive Officer.
(10)   Includes 20,000 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date.
(11)   Consists solely of 20,000 shares of common stock underlying options which
       are exercisable as of May 26, 2000 or within 60 days after such date.
(12)   Includes 599,332 shares of common stock underlying options which are
       exercisable as of May 26, 2000 or within 60 days after such date.

                                       44
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       We provide digital media production services to Ruby Pictures, Inc.
("Ruby"). Ruby is a movie production house owned and operated by the Purabi Das
Foundation, Inc., a charitable organization founded by Amrit Das, our Chairman
and CEO. We have recognized $324,000 in revenue for the fiscal year ended March
31, 2000 related to these services and have a receivable balance due from Ruby
of $284,000 at March 31, 2000.

       In March 2000, our Indian subsidiary provided an interest-free loan in
the amount of $229,000 to Anup Das, a director of such subsidiary and brother of
Amrit Das, our Chairman and Chief Executive Officer. This loan was originated to
facilitate our investment in Interra Global Limited, an Indian company which has
obtained the rights to operate as an Internet service provider within India.
The loan is secured by the capital stock of Interra Global Limited.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits


  2.1          Amended and Restated Stock Purchase Agreement, without exhibits
               and schedules, dated as of September 14, 1999, among the
               registrant, NetGuru Systems, Inc., NetGuru Consulting, Inc. and
               Bharat Manglani.*****

  2.2          Earn-Out Agreement dated as of September 14, 1999, between the
               registrant and Bharat Manglani.*****

  2.3          Registration Rights Agreement dated as of September 14, 1999,
               between the registrant and Bharat Manglani.*****

  2.4          Securities Purchase Agreement, without exhibits and schedules,
               dated as of September 14, 1999, between the registrant and The
               Shaar Fund Ltd.*****

  2.5          Registration Rights Agreement, dated as of September 14, 1999,
               beween the registrant and The Shaar Fund Ltd.*****

  2.6          Securities Purchase Agreement, without exhibits and schedules,
               dated as of September 14, 1999, between the registrant and Triton
               Private Equities Fund, L.P.*****

  2.7          Registration Rights Agreement dated as of September 14, 1999,
               between the registrant and Triton Private Equities Fund,
               L.P.*****

  2.8          Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Krishna P. Reedy.****

  2.9          Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Prakash Rao Pokala.****

  2.10         Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Srinivasa Reddy
               Malireddy.****

  2.11         Securities Purchase Agreement dated March 8, 2000 between the
               registrant, Elliott Associates, L.P. and Westgate International,
               L.P.

  2.12         Exchange Agreement dated March 30, 2000 between the registrant,
               Elliott Associates, L.P. and Westgate International, L.P.

  2.13         Stock Purchase Agreement dated March 27, 2000 between the
               registrant, Allegria Software, Inc. and GRAL, Inc.

  2.14         Stock Purchase Agreement dated January 31, 2000 between the
               registrant, e-Destinations, Inc., Vinod Bhindi, Dhanesh Bhindi,
               Rekesh Kapoor and Jayent Bhindi.

                                       45
<PAGE>


  2.15         Agreement for Sale of Shares dated May 29, 2000 between Anup Das
               and NetGuru India Pvt. Ltd.

  2.16         Agreement Cum Guarantee dated May 29, 2000 between the registrant
               and NetGuru India Pvt. Ltd.

  2.17         Shareholders Agreement dated May 22, 2000 between Research
               Engineers Pvt. Ltd. and Anup Das.

  2.18         Shareholders Agreement dated May 25, 2000 between the registrant
               and Anup Das, individually and on behalf of the Indian
               Shareholders (defined therein).

  3.1          Certificate of Incorporation of the registrant.*

  3.2          Certificate of Ownership and Merger merging netGuru, Inc. into
               netguru.com, inc.

  3.3          Certificate of Ownership and Merger merging netguru.com, Inc.
               into Research Engineers, Inc.

  3.5          Bylaws of the registrant.*

  4.1          Certificate of Designations of Series B Cumulative Convertible
               Preferred Stock dated March 30, 2000.

  4.2          Common Stock Purchase Warrant dated as of September 14, 1999,
               issued by the registrant to the Shaar Fund Ltd.*****

  4.3          Common Stock Purchase Warrant dated as of September 14, 1999,
               issued by the registrant 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
               registrant.+++

  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 registrant.+++

  4.6          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Elliott Associates, L.P.

  4.7          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Westgate International, L.P.

  4.8          Registration Rights Agreement dated March 8, 2000 between the
               registrant, Elliott Associates, L.P. and Westgate International,
               L.P.

  4.9          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Shoreline Institutional Finance.

  4.10         Warrant Agreement dated February 7, 2000 between the registrant
               and Cruttenden Roth Incorporated.

  10.1         Research Engineers, Inc. 1996 Stock Option Plan.*

  10.2         Form of Nonqualified Stock Option Agreement pertaining to the
               1996 Stock Option Plan (schedule of options issued pursuant to
               this Plan is attached thereto).*

  10.3         Employment Agreement dated May 1, 1996, by and between the
               registrant and Amrit K. Das.*

  10.4         Employment Agreement dated May 1, 1996, by and between the
               registrant and Jyoti Chatterjee.*

  10.5         Employment Agreement dated May 1, 1996, by and between the
               registrant and Clara Y. M. Young.*

  10.6         Research Engineers, Inc. 1997 Stock Option Plan.**

                                       46
<PAGE>


  10.7         Agreement Not To Compete dated October 1, 1998 between the
               registrant and Techna Consultancy Private Limited.***

  10.8         Research Engineers, Inc. 1998 Stock Option Plan. +

  10.9         Credit Agreement dated February 26, 1999 by and between the
               registrant and Imperial Bank.****

  10.10        Agreement and Plan of Reorganization among the registrant,
               PacSoft, Incorporated and Karen Hunter, William Schmidt and Mae
               Webb dated March 31, 1999.++

  21.1         Subsidiaries of the registrant.

  23.1         Consent of KPMG LLP.

  27.1         Financial Data Schedule.


(b)      Reports on Form 8-K

                      None.

-------------------------------------

*        Filed as an exhibit to the Company's Registration Statement on Form
         SB-2 dated May 21, 1996 or amendment thereto dated June 14, 1996
         (Registration No. 333-4844-LA) and incorporated herein by reference.
**       Filed as an exhibit to the Company's Form 10-KSB for the fiscal year
         ended March 31, 1997 and filed with Securities and Exchange Commission
         on June 30, 1997, or amendment thereto filed on August 19, 1997 and
         incorporated herein by reference.
***      Filed as an exhibit to the Company's Form 10-QSB for the quarterly
         period ended December 31, 1998 and filed with the Securities and
         Exchange Commission on February 11, 1999 and incorporated herein by
         reference.
****     Filed as an exhibit to the Company's Form 8-K dated February 26, 1999
         and filed with the Securities and Exchange Commission on March 5, 1999
         and incorporated herein by reference.
+        Filed as an exhibit to the Company's Proxy Statement filed pursuant to
         Section 14(a) of the Securities Act on November 12, 1998 and
         incorporated herein by reference.
++       Filed as an exhibit to the Company's Form 10-KSB dated March 31, 1999
         and filed with the Securities and Exchange Commission on June 30, 1999
         and incorporated herein by reference.
+++      Filed as an exhibit to our Form 8-K/A - Amendment No. 2 dated September
         14, 1999 and filed with the Securities Exchange Commission on November
         12, 1999.


                                       47
<PAGE>

SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                  NETGURU, Inc


Dated: June 23, 2000                       By: /s/ AMRIT K. DAS
                                           -------------------------------------
                                           Amrit K. Das, Chief Executive Officer


         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
                   Name                                           Title                              Date
--------------------------------------------      --------------------------------------      -------------------

<S>                                               <C>                                         <C>
/s/ AMRIT K. DAS                                  Chairman of the Board, Chief                June 23, 2000
--------------------------------------------      Executive Officer and Director
Amrit K. Das                                      (principal executive officer)



/s/ JYOTI CHATTERJEE                              President, Chief Operating Officer          June 23, 2000
--------------------------------------------      and Director
Jyoti Chatterjee



/s/ WAYNE BLAIR                                   Senior Vice President, Finance,             June 23, 2000
--------------------------------------------      Chief Financial Officer (principal
Wayne Blair                                       financial and accounting officer)



/s/ SANTANU DAS                                   Director                                    June 23, 2000
--------------------------------------------
Santanu Das



/s/ BRUCE CUMMINGS                                Director                                    June 23, 2000
--------------------------------------------
Bruce Cummings
</TABLE>

                                       48
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Independent Auditors' Report                                           F-2

2.   Consolidated Financial Statements

         Consolidated Balance Sheet as of March 31, 2000                    F-3

         Consolidated Statements of Operations for the years ended
         March 31, 2000 and 1999                                            F-4

         Consolidated Statements of Stockholders' Equity and
         Comprehensive Loss for the years ended
         March 31, 2000 and 1999                                            F-5

         Consolidated Statements of Cash Flows for the years ended
         March 31, 2000 and 1999                                            F-6

         Notes to Consolidated Financial Statements                         F-8

                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
netGuru, Inc.:


We have audited the consolidated financial statements of netGuru, Inc. and
subsidiaries as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of netGuru, Inc. and
subsidiaries as of March 31, 2000, and the results of their operations and their
cash flows for the years ended March 31, 2000 and 1999, in conformity with
generally accepted accounting principles.


                                  /s/ KPMG LLP


Orange County, California
May 25, 2000, except as to the third and fourth paragraphs of Note 12,
  which are as of May 29, 2000 and June 22, 2000, respectively

                                      F-2
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                 March 31, 2000

               (In thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                     ASSETS

<S>                                                                             <C>
Current assets:
    Cash and cash equivalents                                                   $      13,265
    Accounts receivable (net of allowance for doubtful accounts of $413)                4,225
    Deferred income taxes                                                                 272
    Notes and related party loans receivable                                              224
    Deposits                                                                            2,381
    Prepaid expenses and other current assets                                             874
                                                                                --------------

           Total current assets                                                        21,241

Property, plant and equipment, net                                                      2,571
Goodwill and intangible assets (net of accumulated amortization of $1,602)              9,615
Deferred income taxes, non-current                                                      1,387
Other assets                                                                              580
                                                                                --------------

                                                                                $      35,394
                                                                                ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Current portion of long-term debt                                           $         972
    Current portion of capital lease obligations                                          121
    Accounts payable                                                                      891
    Accrued expenses                                                                    1,932
    Income taxes payable                                                                  222
    Deferred maintenance revenue                                                        1,250
    Deferred income taxes                                                                  60
                                                                                --------------

           Total current liabilities                                                    5,448

Long-term debt, net of current portion                                                  1,328
Capital lease obligations, net of current portion                                         360
Deferred income taxes, non-current                                                        167
Deferred gain on sale-leaseback                                                         1,026
                                                                                --------------

           Total liabilities                                                            8,329
                                                                                --------------

Commitments and contingencies (Note 8)

Stockholders' equity:
    Preferred stock, par value $.01 (Authorized 5,000,000 shares;  issued and
      outstanding, 12,000 shares)                                                           -
    Common stock, par value $.01 (Authorized 20,000,000 shares; issued and
      outstanding 13,264,035 shares)                                                      133
    Additional paid-in capital                                                         28,500
    Accumulated deficit                                                                (1,224)
    Accumulated other comprehensive loss:
      Cumulative foreign currency translation adjustments                                (344)
                                                                                --------------

           Total stockholders' equity                                                  27,065
                                                                                --------------

                                                                                $      35,394
                                                                                ==============
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                       Years ended March 31, 2000 and 1999

               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                                     2000            1999
                                                                                --------------  --------------

<S>                                                                             <C>             <C>
Net revenues:
    IT services                                                                 $      10,512   $         435
    Software sales, maintenance and services                                            8,953          10,310
    Internet, e-commerce, digital media products and services                             471               -
                                                                                --------------  --------------

           Total net revenues                                                          19,936          10,745

Cost of revenues:
    IT services                                                                         7,322             252
    Software sales, maintenance and services                                            1,010             898
    Internet, e-commerce, digital media products and services                             383               -
                                                                                --------------  --------------

           Total cost of  revenues                                                      8,715           1,150

           Gross profit                                                                11,221           9,595
                                                                                --------------  --------------

Operating expenses:
    Selling, general and administrative                                                10,322           7,630
    Research and development                                                            2,452           2,415
                                                                                --------------  --------------

           Total operating expenses                                                    12,774          10,045
                                                                                --------------  --------------

           Operating loss                                                              (1,553)           (450)
                                                                                --------------  --------------

Other expense (income):
    Interest, net                                                                         408             191
    Other                                                                                 (26)            (50)
                                                                                --------------  --------------

           Total other expense                                                            382             141
                                                                                --------------  --------------

Loss before income taxes                                                               (1,935)           (591)

Income tax benefit                                                                       (587)            (71)
Minority interest in earnings of consolidated subsidiaries                                  7               -
                                                                                --------------  --------------

           Net loss                                                             $      (1,355)  $        (520)
                                                                                ==============  ==============

Net loss per common share:
     Basic                                                                      $       (0.12)  $       (0.05)
                                                                                ==============  ==============
     Diluted                                                                    $       (0.12)  $       (0.05)
                                                                                ==============  ==============
Common shares used in computing net loss per common share:
     Basic                                                                         11,979,577      11,462,170
                                                                                ==============  ==============
     Diluted                                                                       11,979,577      11,462,170
                                                                                ==============  ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

     Consolidated Statements of Stockholders' Equity and Comprehensive Loss

                       Years ended March 31, 2000 and 1999

                      (In thousands, except share amounts)


<TABLE>
<CAPTION>
                                              COMMON STOCK                     RETAINED     ACCUMULATED                    TOTAL
                                          --------------------   ADDITIONAL    EARNINGS        OTHER         TOTAL       COMPREHEN-
                               PREFERRED    NUMBER OF    PAR      PAID-IN    (ACCUMULATED  COMPREHENSIVE  STOCKHOLDERS'  SIVE INCOME
                                 STOCK       SHARES     VALUE     CAPITAL      DEFICIT)    INCOME (LOSS)     EQUITY        (LOSS)
                               ---------  ------------  ------  -----------  ------------  -------------  -------------  -----------

<S>                            <C>         <C>          <C>     <C>          <C>           <C>            <C>            <C>
Balance, March 31, 1998        $     --    11,455,420   $ 115   $    6,536   $       696           (151)  $      7,196

Net loss                             --            --      --           --          (520)            --           (520)  $     (520)

Foreign currency translation         --            --      --           --            --           (117)          (117)        (117)

Unrealized gain on
    investments                      --            --      --           --            --              2              2
                               ---------  ------------  ------  -----------  ------------  -------------  -------------  -----------

Comprehensive loss for the
    year ended March 31,
    1999                             --            --      --           --          (520)          (115)            --   $     (635)
                                                                                                                         ===========

Exercise of stock options            --        21,000      --           29            --             --             29
                               ---------  ------------  ------  -----------  ------------  -------------  -------------

Balance, March 31, 1999              --    11,476,420   $ 115   $    6,565   $       176   $       (266)  $      6,590
                               ---------  ------------  ------  -----------  ------------  -------------  -------------

Net loss                             --            --      --           --        (1,355)            --         (1,355)  $   (1,355)

Foreign currency translation         --            --      --           --            --            (78)           (78)         (78)
                               ---------  ------------  ------  -----------  ------------  -------------  -------------  -----------

Comprehensive loss for the
    year ended March 31,
    2000                             --            --      --           --        (1,355)           (78)            --   $   (1,433)
                                                                                                                         ===========

Issuance of preferred stock           4            --      --       13,976            --             --         13,980

Preferred stock conversion           (4)      578,372       6           (2)           --             --             --

Issuance of common stock, stock
    options and stock warrants
    in connection with
    acquisitions                     --       405,270       4        2,970            --             --          2,974

Exercise of stock warrants           --       575,000       6        4,527            --             --          4,533

Exercise of stock options            --       227,441       2          361            --             --            363

Compensation expense for
    stock options issued to
    employees below fair
    value                            --            --      --           61            --             --             61

Preferred stock dividends            --         1,532      --           42           (45)            --             (3)
                               ---------  ------------  ------  -----------  ------------  -------------  -------------

Balance, March 31, 2000        $     --    13,264,035   $ 133   $   28,500   $    (1,224)  $       (344)  $     27,065
                               =========  ============  ======  ===========  ============  =============  =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                       Years ended March 31, 2000 and 1999

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                     2000            1999
                                                                                --------------  --------------

<S>                                                                             <C>             <C>
Cash flows from operating activities:
    Net loss                                                                    $      (1,355)  $        (520)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation and amortization                                                   1,666           1,126
        Deferred income taxes                                                            (633)           (285)
        Compensation expense recognized on issuance of stock options                       61               -
        Gain on investments                                                                 -             (20)
        Changes in operating assets and liabilities (net of acquisitions):
          Accounts receivable                                                            (245)           (166)
          Notes and related party loans receivable                                         76             103
          Deposits                                                                     (2,381)              -
          Prepaid expenses and other current assets                                      (334)           (168)
          Other assets                                                                    (43)           (242)
          Accounts payable                                                                 49             (47)
          Accrued expenses                                                                713              94
          Income taxes payable                                                           (183)            (51)
          Deferred maintenance revenue                                                    166              75
          Deferred gain on sale-leaseback                                                 (21)              -
                                                                                --------------  --------------

                  Net cash used in operating activities                                (2,464)           (101)
                                                                                --------------  --------------

Cash flows from investing activities:
    Purchase of property, plant and equipment                                            (906)           (805)
    Proceeds from sale-leaseback                                                        2,446               -
    Purchase of short-term investments                                                      -            (491)
    Sale/maturity of short-term investments                                                 -           2,139
    Collection of note receivable                                                         250               -
    Payments to acquire companies, net of cash acquired                                (3,701)         (2,644)
                                                                                --------------  --------------

                  Net cash used in investing activities                                (1,911)         (1,801)
                                                                                --------------  --------------

Cash flows from financing activities:
    Proceeds from issuance of bank debt                                                 1,544           2,875
    Repayment of bank debt                                                             (4,670)           (270)
    Payment of capital lease obligations                                                  (90)            (69)
    Preferred stock issuance                                                           13,980               -
    Common stock issuance                                                               4,896              29
    Preferred stock dividends                                                              (3)              -
                                                                                --------------  --------------

                  Net cash provided by financing activities                            15,657           2,565
                                                                                --------------  --------------

    Effect of exchange rate changes on cash and cash equivalents                          (28)            (42)
                                                                                --------------  --------------

                  Increase in cash and cash equivalents                                11,254             621

Cash and cash equivalents, beginning of year                                            2,011           1,390
                                                                                --------------  --------------

Cash and cash equivalents, end of year                                          $      13,265   $       2,011
                                                                                ==============  ==============
</TABLE>

                                   (Continued)

                                      F-6
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued


<TABLE>
<CAPTION>
                                                                                     2000            1999
                                                                                --------------  --------------

<S>                                                                             <C>             <C>
Supplemental  cash flow information:
    Amounts paid for:
      Interest                                                                  $         663   $         273
      Income taxes                                                                        272             276

Supplemental disclosure of non-cash investing and financing activities:
    Acquisition of equipment under capital lease obligations                    $           4   $         635
    Note receivable from sale of property                                                 250               -
    Issuance of common stock, warrants and options in connection with
      acquisitions                                                                      2,974               -
    Note payable issued in connection with acquisition                                    600               -
    Conversion of preferred stock                                                           4               -
    Common shares issued as preferred stock dividend                                       42               -
    Unrealized gain on investments                                                          -               2

Acquisitions:
    Fair value of assets acquired, net of cash                                  $       8,333   $       3,108
    Liabilities assumed                                                                (1,058)           (464)
                                                                                --------------  --------------

    Net assets acquired                                                                 7,275           2,644
    Less: non-cash consideration given                                                 (3,574)              -
                                                                                --------------  --------------

    Payments to acquire companies, net of cash acquired                         $       3,701   $       2,644
                                                                                ==============  ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       ORGANIZATION

       The company was incorporated in 1981 in the state of New Jersey and
       reincorporated in the state of Delaware in 1996 under the name Research
       Engineers, Inc. Effective February 25, 2000 the name of the company was
       changed to netGuru, Inc. (the "Company" or "netGuru"). The Company is an
       integrated Internet technology and services company providing
       Internet-based information technology ("IT") services, Internet and
       PC-based engineering software products, and internet content and commerce
       through special interest portals.

       PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of netGuru,
       Inc. and its wholly-owned subsidiaries. All significant transactions
       among the consolidated entities have been eliminated upon consolidation.

       USE OF ESTIMATES

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities at
       the date of the financial statements and the reported amounts of revenues
       and expenses during the reporting periods. Actual results could differ
       from those estimates.

       FAIR VALUE OF FINANCIAL INSTRUMENTS

       Statement of Financial Accounting Standards ("SFAS") No. 107, DISCLOSURES
       ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires management to
       disclose the estimated fair value of certain assets and liabilities
       defined by SFAS No. 107 as financial instruments. Financial instruments
       are generally defined by SFAS No. 107 as cash or a contractual obligation
       that both conveys to one entity a right to receive cash or other
       financial instruments from another entity, and imposes on the other
       entity the obligation to deliver cash or other financial instruments to
       the first entity. At March 31, 2000, management believes that the
       carrying amounts of cash and cash equivalents, receivable and payable
       amounts, and accrued expenses approximate fair value because of the short
       maturity of these financial instruments. The Company believes that the
       carrying value of its long-term debt and capital lease obligations
       approximate their fair value as the interest rates approximate a rate
       that the Company could obtain under similar terms at the balance sheet
       date.

       FOREIGN CURRENCY TRANSLATION

       The financial position and results of operations of the Company's foreign
       subsidiaries are accounted for using the local currency as the functional
       currency. Assets and liabilities of the subsidiaries are translated into
       U.S. dollars (the reporting currency) at the exchange rate in effect at
       each year-end. Statement of operations accounts are translated at the
       average rate of exchange prevailing during the year. Translation
       adjustments arising from the use of differing exchange rates from period
       to period are included in accumulated other comprehensive income (loss)
       in stockholders' equity. Gains and losses resulting from foreign currency
       transactions are included in operations and are not material for fiscal
       2000 and 1999.

                                      F-8
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       CASH AND CASH EQUIVALENTS

       The Company considers all highly liquid investments with maturities of
       three months or less at the date of purchase to be cash equivalents.

       SHORT-TERM INVESTMENTS

       The Company's short-term investments have historically consisted of
       United States government agency securities, classified as
       held-to-maturity, and common stock marketable equity securities,
       certificates of deposit and mutual funds, classified as
       available-for-sale. In accordance with SFAS No. 115, ACCOUNTING FOR
       CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, investments classified
       as available-for-sale have been recorded at fair value and investments
       classified as held-to-maturity are reported at amortized cost. The
       Company had no short term investment balances at March 31, 2000. As such,
       there are no unrealized gains or losses on investments classified as
       available-for-sale recorded in accumulated other comprehensive income
       (loss) as of March 31, 2000. All realized gains and losses are computed
       on the specific identification basis.

       DEPOSITS

       Deposits at March 31, 2000 comprise amounts forwarded by the Company and
       its subsidiary in India towards the acquisition of Interra Global Limited
       and towards the licensing and infrastructure necessary to commence
       business within India as an Internet service provider. This acquisition
       was completed in May 2000 (see Note 12).

       PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment are stated at cost. Depreciation is
       calculated using the straight-line method over the following useful
       lives:

                 Building                                    39 years
                 Computer equipment                          5 years
                 Computer software                           3 years
                 Office equipment and furniture              3-7 years

       Assets held subject to capital lease agreements and leasehold
       improvements are amortized over the lesser of the life of the asset or
       the term of the lease but not in excess of 5 years.

       GOODWILL

       The Company amortizes costs in excess of the fair value of net assets of
       businesses acquired ("Goodwill") using the straight-line method over the
       estimated useful lives of the businesses acquired, usually a period of
       5-15 years. Goodwill amortization was $795,000 and $362,000 for the years
       ended March 31, 2000 and 1999, respectively.

       IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

       The Company applies the provisions of SFAS No. 121, ACCOUNTING FOR THE
       IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
       OF. This statement requires that long-lived assets and certain
       identifiable intangibles (including Goodwill) be reviewed for impairment
       whenever events or changes in circumstances indicate that the carrying
       amount of an asset may not be recoverable. Recoverability of assets to be
       held and used is measured by a comparison of the carrying amount of an

                                      F-9
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       asset to future net undiscounted cashflows expected to be generated by
       the asset. If such asset is considered to be impaired, the impairment to
       be recognized is measured as the amount by which the carrying amount of
       the asset exceeds the fair value of the asset. Assets to be disposed of
       are reported at the lower of the carrying amount of fair value less costs
       to sell.

       SOFTWARE DEVELOPMENT COSTS AND PURCHASED TECHNOLOGY

       The Company capitalizes costs related to the development of certain
       software products. Capitalization of costs begins when technological
       feasibility has been established and ends when the product is available
       for general release to customers. As of March 31, 2000, capitalized costs
       of approximately $399,000, net of accumulated amortization, were included
       in other assets. Approximately $130,000 of this amount represents the
       cost of software developed by third parties on behalf of the Company. The
       remaining $269,000 represents purchased technology. Additions to
       capitalized software were $60,000 and $116,000 during fiscal 2000 and
       1999, respectively.

       Capitalized software development costs and purchased technology are
       amortized using the straight-line method over three to five years, or the
       ratio of actual sales to anticipated sales, whichever is greater.
       Amortization of software development costs and purchased technology
       charged to operations was approximately $337,000 and $329,000 for the
       years ended March 31, 2000 and 1999, respectively. Accumulated
       amortization on capitalized software was $934,000 and $601,000 as of
       March 31, 2000 and 1999, respectively.

       REVENUE RECOGNITION

       The Company recognizes revenue when it is realized or realizable and
       earned. The Company's revenues arise from the following segments:
       Information Technology ("IT") services; software sales, maintenance and
       services; and Internet, e-commerce, digital media products and services.

       Revenue from providing IT services is primarily recognized on a time and
       material basis as services are performed. Certain IT services contracts
       are fixed cost type contracts for which revenue is recognized upon
       achieving certain milestones.

       Revenue from software sales is recognized upon shipment, provided that no
       significant post-contract support obligations remain outstanding and
       collection of the resulting receivable is deemed probable. The Company's
       sales do not provide a specific right of return. At the time of sale, the
       Company typically provides 120-day initial maintenance and support to the
       customer. Costs relating to this initial 120-day support period, which
       include primarily telephone support, are not considered material. After
       the initial support period, customers may choose to purchase ongoing
       maintenance contracts that include telephone, e-mail and other methods of
       support, and the right to purchase upgrades at a discounted price.
       Revenue from these maintenance contracts is deferred and recognized
       ratably over the life of the contract, usually twelve months.

       Revenues from products and services sold via Internet portals and travel
       services are recognized net of purchase costs when the products and
       services are delivered and collectibility is certain.

       In October 1997, the Accounting Standards Executive Committee ("AcSEC")
       of the AICPA issued Statement of Position ("SOP") 97-2, SOFTWARE REVENUE
       RECOGNITION, which superseded SOP 91-1. SOP 97-2 distinguishes between
       significant and insignificant vendor obligations as a basis for recording
       revenue with a requirement that each element of a software licensing
       arrangement be separately identified and accounted for based on relative

                                      F-10
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       fair values of each element. The Company adopted SOP 97-2 in the first
       quarter of fiscal 1999, the implementation of which resulted in no
       material changes to the Company's previous practice. In 1998 the AICPA
       issued SOP 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE RECOGNITION,
       WITH RESPECT TO CERTAIN Transactions, which modifies SOP 97-2 to allow
       for use of the residual method of revenue recognition provided that
       certain criteria have been met. The Company adopted SOP 98-9 in the first
       quarter of fiscal 2000, the implementation of which resulted in no
       material changes to the Company's previous practice.

       RESEARCH AND DEVELOPMENT

       Research and development costs are charged to operations as incurred.

       INCOME TAXES

       The Company accounts for income taxes using the asset and liability
       method. Deferred tax assets and liabilities are recognized for the future
       tax consequences attributable to differences between the financial
       statement carrying amounts of existing assets and liabilities and their
       respective tax bases. Deferred tax assets and liabilities are measured
       using enacted tax rates expected to apply to taxable income in the years
       in which those temporary differences are expected to be recovered or
       settled.

       NET LOSS PER SHARE

       Basic Earnings Per Share ("EPS") is calculated by dividing net income
       (loss) by the weighted-average common shares outstanding during the
       period. Diluted EPS reflects the potential dilution to basic EPS that
       could occur upon conversion or exercise of securities, options, or other
       such items, to common shares using the treasury stock method based upon
       the weighted-average fair value of the Company's common shares during the
       period. See Note 11 "Loss Per Share" for computation of EPS. On February
       7, 2000, the Company effected a 2-for-1 split of its common stock. All
       share and per share amounts have been adjusted to reflect this split.

       COMPREHENSIVE INCOME (LOSS)

       As of April 1, 1998, the Company adopted SFAS No. 130, REPORTING
       COMPREHENSIVE INCOME. SFAS No. 130 establishes rules for the reporting
       and display of comprehensive income (loss) and its components. SFAS No.
       130 requires changes in unrealized gains or losses on the Company's
       available-for-sale investments and foreign currency translation
       adjustments, which are reported separately in stockholders' equity, to be
       included in other comprehensive income (loss).

       STOCK-BASED COMPENSATION

       The Company has implemented SFAS No. 123, ACCOUNTING FOR STOCK-BASED
       COMPENSATION. As permitted by SFAS No. 123, the Company continues to
       follow the guidance of Accounting Principles Board ("APB") Opinion No.
       25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Consequently, compensation
       related to stock options is the difference between the grant price and
       the fair market value of the underlying common shares at the grant date.
       Generally, the Company issues stock options to employees with a grant
       price equal to the market value of common stock on the grant date. The
       Company has issued certain stock options with a grant price below the
       market value at the grant date. The Company recognizes compensation
       expense on these grants over the vesting period, generally three to four
       years. As required by SFAS No. 123, the Company discloses in Note 5
       "Stockholders' Equity" the pro forma effect on operations, as if
       compensation costs were recorded at the estimated fair value of the stock
       options granted.

                                      F-11
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       SEGMENT REPORTING

       The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
       ENTERPRISE AND RELATED INFORMATION". SFAS 131 requires segments to be
       determined and reported based on how management measures performance and
       makes decisions about allocating resources. See Note 10 "Segment and
       Geographic Data" for description of and disclosures regarding the
       Company's significant reportable segments.

       RECENT ACCOUNTING DEVELOPMENTS

       In June 1998, the Financial Accounting Standards Board issued SFAS No.
       133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The
       provisions of the statement require the recognition of all derivatives as
       either assets or liabilities in the consolidated balance sheet and the
       measurement of those instruments at fair value. The accounting for the
       changes in fair value of a derivative depends on the intended use of the
       derivative and the resulting designation. The Company is required to
       adopt the statement, as amended by SFAS 137, ACCOUNTING FOR DERIVATIVE
       INSTRUMENTS AND HEDGING ACTIVITIES, in the first quarter of fiscal year
       2002. The Company is currently studying the impact of this pronouncement
       on its consolidated financial statements and results of operations. At
       this time, the Company is unable to assess the impact of adopting SFAS
       133.

       In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
       ("SAB 101"), "Revenue Recognition in Financial Statements" and in March
       2000, the SEC staff issued Staff Accounting Bulleting No. 101 A
       "Implementation Issues Related to SAB 101." These bulletins summarize
       certain of the staff's views about applying generally accepted accounting
       principles to revenue recognition in financial statements. The provisions
       of these pronouncements are effective for the Company commencing with the
       first quarter of fiscal 2001. Management is in the process of analyzing
       the implications of these bulletins and does not believe the adoption
       will have a material impact on the Company's consolidated financial
       position or results of operations.

       RECLASSIFICATIONS

       Certain reclassifications have been made to the 1999 consolidated
       financial statements to conform to the 2000 presentation.

(2)    ACQUISITIONS

       The Company has consummated a number of acquisitions during the fiscal
       years ended March 31, 2000 and 1999. Except for the PacSoft acquisition
       discussed below, all acquisitions were accounted for using the purchase
       method of accounting and, accordingly, the results of operations of the
       acquired assets and assumed liabilities have been included in the
       consolidated financial statements subsequent to effective dates of the
       respective acquisitions. All assets acquired and liabilities assumed,
       except for those of PacSoft, were recorded at their estimated fair market
       values at the date of acquisition in the consolidated balance sheet. Any
       options and warrants issued in these transactions were valued using the
       Black-Scholes model.

                                      F-12
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       NET GURU SYSTEMS, INC. AND NET GURU CONSULTING, INC.

       Effective September 14, 1999, the Company acquired 80% of the outstanding
       capital stock of NetGuru Systems, Inc. and NetGuru Consulting, Inc.
       (collectively, "NetGuru Systems"). Pursuant to the terms of the
       agreement, the Company purchased the remaining 20% interest on December
       15, 1999. NetGuru Systems is a provider of IT services headquartered in
       Waltham, Massachusetts. The aggregate purchase, including acquisition
       costs, was approximately $6,255,000 which was paid in a combination of
       cash, a promissory note, 341,270 shares of the Company's common stock and
       warrants to purchase 70,000 shares of the Company's common stock at $4.71
       per share.

       The promissory note, amounting to $600,000, is payable one year from the
       closing date and bears interest at 8.5%. The cash portion of the purchase
       price was obtained through the issuance of 371,429 shares of the
       Company's newly created Series B 5% Convertible Preferred Stock and
       warrants to purchase 100,000 shares of the Company's common stock to two
       investors in a private transaction not involving a public offering. The
       preferred stock accrued dividends on a cumulative basis and was
       convertible to shares of common stock at the option of the holder. Prior
       to March 31, 2000, all of the preferred shares were converted into
       578,372 shares of common stock. Preferred dividends accrued through the
       conversion date were paid in a combination of 1,532 common shares and
       approximately $1,800 cash.

       In determining the purchase price for NetGuru Systems, the Company took
       into account the value of companies of similar industry and size,
       comparable transactions and the market for such companies. The
       acquisition was accounted for using the purchase method of accounting
       and, as such, all assets acquired and liabilities assumed were recorded
       at their estimated fair market values at the date of acquisition. The
       purchase price allocation (including acquisition costs of $677,000) is
       summarized as follows (in thousands):

                Current assets, including cash of $300        $         1,307
                Property and equipment                                     75
                Goodwill                                                5,908
                Current liabilities                                    (1,033)
                Capital lease obligations                                  (2)
                                                              ================
                                                              $         6,255
                                                              ================

       Goodwill recorded as a result of this acquisition is being amortized over
       fifteen years.

       R-CUBE TECHNOLOGIES, INC.

       On February 26, 1999, the Company acquired all of the outstanding common
       stock of R-Cube Technologies, Inc. (R-Cube), an established provider of
       IT services, for $2,320,000 in cash. The funds used for the acquisition
       were provided by a new bank credit agreement (see Note 4). The Company
       incurred approximately $283,000 in related acquisition costs.

                                      F-13
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       The purchase price allocation for the acquisition of R-Cube is summarized
       as follows (in thousands):

                Current assets, including cash of $263        $           809
                Property and equipment                                     21
                Other non-current assets                                    2
                Goodwill                                                2,279
                Current liabilities                                      (464)
                                                              ----------------
                                                              $         2,647
                                                              ================

       Goodwill recorded as a result of this acquisition is being amortized over
       fifteen years.

       E-DESTINATIONS, INC.

       On January 31, 2000, the Company, acquired all of the outstanding stock
       of e-Destinations, Inc. ("e-Destinations"), an online travel agency
       targeting Asia/Pacific countries, for 60,000 shares of the Company's
       common stock and options to purchase an additional 100,000 shares of
       common stock at $10.46 per share. The purchase price allocation
       (including acquisition costs of $21,000) is summarized as follows (in
       thousands):

                Current assets, including cash of $16         $           105
                Other assets                                               34
                Goodwill                                                1,048
                Current liabilities                                       (22)
                                                              ----------------
                                                              $         1,165
                                                              ================

       Goodwill recorded as a result of this acquisition is being amortized over
       five years.

       PACSOFT INCORPORATED

       On March 31, 1999, the Company acquired all of the outstanding stock of
       PacSoft Incorporated ("PacSoft"), a developer of engineering software
       products and integration tools for the engineering industry, in exchange
       for 100,000 shares of the Company's common stock. This acquisition has
       been accounted for using the pooling of interests method of accounting
       for business combinations. As the acquisition was immaterial, the Company
       has not presented the separate historical results of PacSoft.
       Accordingly, the Company's consolidated financial statements for the year
       ended March 31, 1999 were restated to include the historical results of
       operations of PacSoft for that period.

       TECHNA CONSULTANCY PRIVATE LIMITED

       On October 1, 1998, the Company, through its subsidiary in India,
       acquired Techna Consultancy Private Limited ("Techna"), a software
       developer and consultant. The purchase price of $254,000 in cash
       primarily related to an agreement not to compete and the assumption of an
       employee base. The purchase price was allocated to intangible assets,
       which is being amortized on a straight-line basis over five years.

                                      F-14
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       PRO FORMA DISCLOSURES

       The Company's fiscal 2000 consolidated financial statements include 6.5
       months of operations of Net Guru Systems. The Company's fiscal 1999
       consolidated financial statements include one month of operations of
       R-Cube. The following selected unaudited pro forma information is being
       provided to present a summary of the combined results of the Company,
       R-Cube and NetGuru Systems as if the acquisitions had occurred as of
       April 1, 1999 and 1998, respectively, giving effect to purchase
       accounting adjustments.

                                          FOR THE PRO FORMA YEAR ENDED MARCH 31,
                                          --------------------------------------
                                                 2000                 1999
                                          ------------------   -----------------
                                                        (unaudited)

              Net revenues                $          23,859    $         20,649
              Net loss                    $          (1,127)   $           (658)
              Basic loss per share        $           (0.11)   $          (0.07)
              Diluted loss per share      $           (0.11)   $          (0.07)

       The pro forma amounts reflect the results of operations for the Company
       including NetGuru Systems, R-Cube and the following purchase accounting
       adjustments for the periods presented:

              o    Amortization of goodwill, straight-line, over a useful life
                   of 15 years;
              o    The addition of interest expense on debt incurred to finance
                   the acquisitions (8.5% on the promissory note related to
                   NetGuru Systems and 10.75% on credit line borrowings related
                   to R-Cube);
              o    Estimated income tax effect on the pro forma adjustments;
              o    Estimated income tax effect on NetGuru Systems historical
                   financial results (prior to the acquisition NetGuru Systems
                   was an "S" Corporation and as such had not reported income
                   tax expense in their financial statements); and
              o    The 20% minority interest in the earnings of NetGuru Systems
                   through the date of the second acquisition closing.

       The pro forma loss per share data is based on the Company's weighted
       average number of common shares during fiscal 2000 and 1999 and the
       addition of the 341,270 common shares issued as part of the acquisition.
       The loss per share calculation was adjusted to include the effect of
       cumulative dividends on 371,429 shares of Series B 5% Convertible
       Preferred Stock issued as part of financing the acquisition. The
       unaudited pro forma data is for informational purposes only and may not
       necessarily reflect the results of operations of the Company had R-Cube
       and Net Guru Systems operated as part of the Company for the fiscal years
       ended March 31, 2000 and 1999, nor are they indicative of future
       operating results.

       The historical results of PacSoft have been merged into the historical
       results of the Company in accordance with its treatment as a pooling of
       interests and thus these results have been included in the above pro
       forma numbers. Pro forma disclosures have not been provided for the
       e-Destinations and Techna acquisitions as they would not have
       significantly changed the above noted proforma disclosures for fiscal
       years ended March 31, 2000 and 1999.

                                      F-15
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(3)    PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment, at cost, as of March 31, 2000 consists of
       the following (in thousands):

                Land                                         $              25
                Building                                                   301
                Office and computer equipment, software
                    and furniture                                        3,291
                Assets under capital lease                                 648
                                                             ------------------

                                                                         4,265

                Accumulated depreciation                                (1,694)
                                                             ------------------
                Net property, plant and equipment            $           2,571
                                                             ==================

       On December 15, 1999 the Company consummated a sale and leaseback
       transaction involving its Yorba Linda, California facility. The gross
       selling price of the property was $3,200,000, $1,689,000 of which was
       utilized to pay off the balance of the mortgage on the property. The
       Company received approximately $1,017,000 in cash proceeds, net of
       transaction costs, and a $250,000 short term note receivable for the sale
       of the property (payment on note was received prior to March 31, 2000).
       The proceeds were used to purchase the remaining 20% of NetGuru Systems
       in December and for operating purposes. Concurrent with the sale, the
       Company entered into a fifteen year operating lease on the facility (see
       Note 8). The net book value of the land and building and the related
       mortgage have been removed from the Company's consolidated balance sheet
       and the lease payments are being charged to expense as incurred. The gain
       on the sale transaction of $1,047,000 has been deferred and is being
       recognized over the period of the lease as a reduction in lease expense.


(4)    LINE OF CREDIT AND LONG-TERM DEBT

       Long-term debt consists of the following at March 31, 2000 (in
       thousands):

       Term loan from a bank in India, bearing interest at
          3.5% over the bank's medium term prime rate
          (for an effective rate of 17.0% at March 31,
          2000) payable monthly, principal due in
          quarterly installments beginning June 2000 and
          ending March 2005, secured by substantially all
          of the Company's assets located in India and
          guaranteed by a major shareholder                  $           1,605

       Capital lease obligations maturing at dates ranging
          from October, 2001 to November, 2003, secured
          by the leased assets                                             481

       Note payable, bearing interest at 8.5%,
          principal and interest due at maturity of
          September 14, 2000                                               600

       Other                                                                95
                                                             ------------------
               Total                                                     2,781
               Less current portion                                      1,093
                                                             ------------------

                                                             $           1,688
                                                             ==================

                                      F-16
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       In February 1999, the Company obtained a $2,320,000 revolving line of
       credit (LOC), bearing interest at 3.0% over the bank's prime rate and
       maturing September 2000, primarily to finance the acquisition of R-Cube.
       As of March 31, 1999, the Company had fully utilized available borrowings
       under the LOC. During fiscal year 2000, the Company repaid the entire
       balance. The Company has available borrowings under this LOC of
       $2,320,000 at March 31, 2000. Any outstanding borrowings under the LOC
       would be secured by substantially all of the assets of the Company.

       The LOC and the term loan contain certain restrictive covenants, all of
       which have either been complied with or a waiver has been obtained at
       March 31, 2000, except that the waiver for the term loan contains a
       restriction on the Company's use of cash in the amount of approximately
       $1,300,000. This restriction is applicable until the Company registers
       its additional equity investment in its India subsidiary with the Indian
       government.

       The long-term debt matures in each of the following years ending March 31
       (in thousands):

                 2001                  $          1,093
                 2002                               491
                 2003                               453
                 2004                               423
                 2005                               321
                                       -----------------

                                       $          2,781
                                       =================


 (5)   STOCKHOLDERS' EQUITY

       PRIVATE PLACEMENTS OF PREFERRED STOCK

       In September 1999, the Company issued 371,429 shares of the Company's
       newly created Series B 5% Convertible Preferred Stock and warrants to
       purchase 100,000 shares of the Company's common stock to two investors in
       a private transaction not involving a public offering. This was used to
       complete the cash portion of the purchase price of NetGuru Systems. The
       preferred stock accrued dividends on a cumulative basis and was
       convertible to shares of common stock at the option of the holder. Prior
       to March 31, 2000, all of the preferred shares were converted into
       578,372 shares of common stock. Preferred dividends accrued through the
       conversion date were paid in a combination of 1,532 common shares and
       approximately $1,800 cash.

       In March 2000, the Company issued 12,000 shares of Series B 5% Cumulative
       Convertible Preferred Stock and warrants to purchase 102,000 shares of
       the Company's common stock for approximately $11,380,000, net of offering
       costs, in a private transaction not involving a public offering. The
       preferred stock accrues dividends on a cumulative basis and is
       convertible to shares of common stock at the option of the holder, at a
       conversion rate based on a defined calculation of average market price
       for the Company's common stock surrounding the date of conversion, not to
       exceed $28.50 per share. Each warrant is convertible into one share of
       common stock at an exercise price of $28.50 per share. Of the total
       warrants issued, 90,000 warrants expire March 2005 and 12,000 warrants
       expire March 2003.

       In connection with the acquisition of NetGuru Systems discussed above,
       the Company issued warrants to purchase 170,000 shares of the Company's

                                      F-17
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       common stock. Each warrant is convertible into one share of common stock.
       Of the total warrants issued, 100,000 warrants are convertible at an
       exercise price of $4.85 per share and 70,000 warrants are convertible at
       $4.71 per share. Through March 31, 2000, 55,000 of these warrants had
       been converted into common stock. In April 2000, 80,000 warrants were
       converted to common stock. The remaining 35,000 warrants expire between
       September 2002 and September 2004.

       WARRANTS

       In December 1999, warrants to purchase 260,000 shares of common stock,
       originally issued in 1996 at an exercise price of $3.00 per share, were
       exercised for $780,000. In consideration for the holder's decision to
       exercise these warrants for cash rather than via a cashless exercise,
       warrants to purchase an additional 260,000 shares of common stock were
       issued at an exercise price of $13.44 per share. In February 2000, these
       additional shares were exercised for approximately $3,494,000. In
       consideration for the holder's decision to exercise these warrants for
       cash rather than via a cashless exercise, warrants to purchase an
       additional 200,000 shares of common stock were issued at an exercise
       price of $38.00 per share. These warrants expire February 2005.

       The following table summarizes the warrant activity (in thousands, except
       dollar amounts):

                                                                  Weighted
                                               Number of           average
                                               warrants         exercise price
                                           ------------------  -----------------
       Outstanding at April 1, 1998               260          $     3.00
                                           ------------------

       Issued                                      -                  -
                                           ------------------

       Outstanding at March 31, 1999              260          $     3.00
       Issued                                     732          $    20.24
       Exercised                                 (575)         $     7.90
                                           ------------------

       Outstanding at March 31,  2000             417          $    26.53
                                           ==================


       STOCK OPTION PLANS

       The Company has adopted the following employee stock option plans:

<TABLE>
<CAPTION>
                                                                                                 SHARES
                                                        ADOPTED            TERMINATES          AUTHORIZED
                                                   ------------------   -----------------   ----------------
           <S>                                       <C>                  <C>                  <C>
           Research Engineers, Inc. 1998 Stock
               Option Plan (the "1998 Plan")         December 1998        November 2008        1,000,000
           Research Engineers, Inc. 1997 Stock
               Option Plan (the "1997 Plan")         February 1997        February 2007          600,000
           Research Engineers, Inc. 1996 Stock
               Option Plan (the "1996 Plan")           April 1996           April 2006           588,000
</TABLE>


       Each plan provides for the granting of shares as either Incentive Stock
       Options (ISOs) or Non-Qualified Stock Options (NQOs). Options under all
       plans generally vest over 3 years, though the vesting periods may vary
       from person to person, and are exercisable subject to continued
       employment and other conditions. As of March 31, 2000, there were 2,000
       options available for grant and 217,000 options exercisable under the
       1998 Plan, 26,000 options available for grant and 287,000 options
       exercisable under the 1997 Plan, and 19,000 options available for grant
       and 376,000 options exercisable under the 1996 Plan.

                                      F-18
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       During fiscal 2000, the Company granted 100,000 stock options outside of
       the above described plans, pursuant to the e-Destination acquisition
       (see Note 2). These options vest over a period of ten years, with an
       exercise price of $10.46.

                                      F-19
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       The following is a summary of activity related to all outstanding stock
       options (number of shares in thousands):

                                                                    WEIGHTED
                                                                     AVERAGE
                                                                    EXERCISE
                                                     NUMBER OF      PRICE PER
                                                      SHARES         OPTION
                                                   ------------  --------------
                Outstanding at April 1, 1998            976          $1.41
                Granted                                 758           1.54
                Exercised                               (21)          1.40
                Forfeited                               (30)          1.42
                                                   ------------
                Outstanding at March 31, 1999         1,683           1.43
                Granted                                 613           5.54
                Exercised                              (227)          1.57
                Forfeited                               (83)          1.45
                                                   ------------
                Outstanding at March 31, 2000         1,986          $2.30
                                                   ============


       As discussed in Note 1, the Company accounts for its stock options issued
       to employees based on the intrinsic value of a grant as of the date of
       the grant in accordance with APB No. 25. Generally, the Company issues
       stock options to employees with a grant price equal to the market value
       of common stock on the grant date. The Company has issued certain stock
       options with a grant price below the market value at the grant date.
       Compensation expense on these grants is recognized over the vesting
       period, generally three to four years. Compensation expense recognized in
       the Company's consolidated financial statements for these grants for
       fiscal 2000 was $61,000 as compared to none in fiscal 1999.

       As required by SFAS No. 123, the Company discloses below the pro forma
       and assumption information for stock options using the fair value method
       (dollars in thousands, except amounts per share):

<TABLE>
<CAPTION>
              For the fiscal years ended March 31,                 2000                 1999
                                                             ------------------   -----------------

              <S>                                            <C>                  <C>
              Net loss - as reported                         $          (1,355)   $           (520)
              Net loss - pro forma                                      (2,046)               (852)
                                                             ==================   =================
              Basic net loss per share -
                  as reported                                $           (0.12)   $          (0.05)
                   pro forma                                             (0.17)              (0.07)
              Diluted net loss per share -
                   as reported                                           (0.12)              (0.05)
                   pro forma                                             (0.17)              (0.07)
                                                             ==================   =================
              Weighted average fair value of options
                  granted                                    $            4.14    $           1.51
                                                             ==================   =================
              Black-Scholes option pricing model assumptions:
                       Dividend yield                                       --                  --
                       Expected volatility                                 93%                 63%
                       Risk-free interest rate                            6.72%               4.53%
                       Expected option lives (in years)                    5                    5
</TABLE>

                                      F-20
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       At March 31, 2000, the range of exercise prices and the weighted average
       remaining contractual life of outstanding options were $1.32 - $21.68 and
       8.2 years, respectively.


(6)    RELATED PARTY TRANSACTIONS

       In September 1999, the Company issued a $600,000 promissory note payable
       to the previous owner of NetGuru Systems to satisfy a portion of the
       purchase price of NetGuru Systems. As of March 31, 2000, this individual
       was still employed by the Company, however, as of the date of this report
       he was not. The note is included in current portion of long-term debt on
       the consolidated balance sheet (see Note 4). The Company has a note
       receivable from the same individual in the amount of $164,000. This note
       relates to payments made by the Company to third parties on behalf of the
       individual as part of the acquisition. The note is included in notes and
       related party loans receivable on the consolidated balance sheet. In June
       2000, both of these notes were settled.

       The Company provides digital media production services to Ruby Pictures,
       Inc. ("Ruby"). Ruby is a movie production house owned and operated by the
       Purabi Das Foundation, Inc., a charitable organization founded by Amrit
       Das, Chairman and CEO of the Company. The Company has recognized $324,000
       in revenue for the fiscal year ended March 31, 2000 related to these
       services and has a receivable balance due from Ruby of $284,000 at March
       31, 2000.

       In March 2000, the Company's Indian subsidiary provided an interest-free
       loan in the amount of $229,000 to Anup Das, a director of such subsidiary
       and brother of Amrit Das, the Company's Chairman and Chief Executive
       Officer. This loan was originated to facilitate the Company's investment
       in Interra Global Limited, an Indian company which has obtained the
       rights to operate as an Internet service provider within India, and was
       scheduled to be repaid upon consummation of such investment. The loan is
       included in notes and related party loans receivable on the consolidated
       balance sheet.


 (7)   RETIREMENT PLAN

       The Company and certain of its subsidiaries have adopted qualified cash
       or deferred 401(k) retirement savings plans. These plans cover all
       employees of such entities who have attained age 21. The respective
       entities make matching contributions to these plans of 25% to 100% of the
       employees' elective contributions up to a maximum of 6% to 10% of
       compensation. For the years ended March 31, 2000 and 1999, Company
       contributions to these retirement plans were $144,000 and $105,000,
       respectively. Certain of the Company's subsidiaries have similar plans,
       however, the Company does not match contributions to these plans.


(8)    COMMITMENTS AND CONTINGENCIES

       The Company leases certain facilities and equipment under noncancelable
       operating leases. The facility leases include options to extend the lease
       terms and provisions for payment of property taxes, insurance and
       maintenance expenses.

                                      F-21
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       At March 31, 2000, future minimum annual rental commitments under these
       lease obligations were as follows (in thousands):

                     Year ending March 31:
                         2001                               $            717
                         2002                                            664
                         2003                                            588
                         2004                                            508
                         2005                                            357
                         Thereafter                                    3,081
                                                            -----------------

                                                            $          5,915
                                                            =================


       Rent expense was $459,000 and $325,000 for the years ended March 31, 2000
       and 1999, respectively.

       On March 24, 2000, Video Pioneers Corporation ("VPC") initiated an action
       against the Company alleging breach of contract, conversion, and
       interference with economic advantage, constructive and actual fraud,
       trade secret misappropriation and breach of promise. VPC alleges that the
       Company failed to pay amounts due for its services, obtained materials
       and information by fraud and conversion, interfered with its prospective
       business relationships and used its confidential information and vendors
       for improper purposes. VPC claims damages in excess of $1,000,000. The
       Company has filed its answer to this complaint denying all charges and
       has filed a cross-complaint. Management does not believe the resolution
       of this matter will have a material effect on the Company's results of
       operations or financial condition.

       The Company is a party to various other litigation arising in the normal
       course of business. Management believes the disposition of these matters
       will not have a material adverse effect on the Company's results of
       operations or financial condition.


(9)    INCOME TAXES

       The components of income (loss) before income taxes are as follows for
       the year ended March 31, (in thousands):

                                                       2000             1999
                                                  -------------    -------------

                        United States             $     (1,897)    $       (981)
                        Foreign                            (38)             390
                                                  -------------    =============
                          Total                         (1,935)            (591)
                                                  =============    =============


       The provision (benefit) for income taxes is comprised of the following
       for the year ended March 31, (in thousands):

                                                       2000            1999
                                                  -------------    -------------
                    Current:
                        Federal                   $          -     $          -
                        State                                -                2
                        Foreign                             46              212
                                                  -------------    -------------
                                                            46              214
                    Deferred:
                        Federal                           (445)            (295)
                        State                             (183)              14
                        Foreign                             (5)              (4)
                                                  -------------    -------------
                                                          (633)            (285)
                                                  -------------    -------------
                          Total                   $       (587)    $        (71)
                                                  =============    =============

                                      F-22
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       The reported provision (benefit) for income taxes differs from the amount
       computed by applying the statutory federal income tax rate of 34% to
       income (loss) before income taxes as follows for the year ended March 31,
       (in thousands):

                                                      2000             1999
                                                  -------------    -------------

            Income tax benefit at statutory rate  $       (658)    $       (201)
            State taxes, net of federal benefits          (121)               7
            Foreign income tax rate differential            59               90
            Return to provision adjustments                 59              (15)
            Change in valuation allowance                   11               60
            Research and development credits               (25)             (17)
            Nondeductible amortization                      72               --
            Other                                           16                5
                                                  -------------    -------------
                  Total                           $       (587)    $        (71)
                                                  =============    =============

                                      F-23
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       The Company provides deferred income taxes for temporary differences
       between assets and liabilities recognized for financial reporting and
       income tax purposes. The tax effects of temporary differences at March
       31, 2000 are as follows (in thousands):


              Deferred tax assets:
                  Accrued vacation                             $            114
                  Allowance for doubtful accounts                            84
                  Amortization of intangibles                               272
                  Maintenance revenue                                        72
                   Net operating loss carryforwards                         571
                   Foreign tax credit carryforwards                         102
                   Research and development credit
                      carryforwards                                         104
                   Gain on sale of property                                 409
                   Other                                                      2
                                                               -----------------

                         Total deferred tax assets                        1,730

                         Less: valuation allowance                          (71)
                                                               -----------------

                         Net deferred tax assets                          1,659
                                                               -----------------

              Deferred tax liabilities:
                  Depreciation                                             (107)
                  Cash to accrual adjustment                               (120)
                                                               -----------------

                         Total deferred tax liabilities                    (227)
                                                               -----------------

                         Net deferred tax assets               $          1,432
                                                               =================


       During fiscal 2000, the Company added approximately $48,000 of deferred
       tax assets as part of the acquisition of NetGuru Systems (see Note 2).

       At March 31, 2000 the Company had tax net operating loss carryforwards of
       $1,546,000 for federal and $773,000 for state income tax purposes, which
       expire at varying dates beginning in 2019 and 2004, respectively. In
       addition, the Company has, for federal income tax purposes, $65,000 of
       research and development credit carryforwards and $102,000 of foreign tax
       credit carryforwards, which expire at varying dates beginning in 2013 and
       2003, respectively. Additionally, the Company has, for state income tax
       purposes, $39,000 of research and development credit, which carries
       forward indefinitely.

       In assessing the realizability of the net deferred tax assets, management
       considers whether it is more likely than not that some or all of the
       deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent upon either the generation of future
       taxable income during the periods in which those temporary differences
       become deductible or the carryback of losses to recover income taxes
       previously paid during the carryback period. As of March 31, 2000, the
       Company had provided a valuation allowance of $71,000 to reduce the net
       deferred tax assets due to the potential expiration of certain foreign
       tax credit carryforwards prior to their utilization.

                                      F-24
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Undistributed earnings of certain of the Company's foreign subsidiaries
       in the cumulative amount of $1,027,000 are considered to be indefinitely
       reinvested and, accordingly, no provision for United States federal and
       state income taxes has been provided thereon. Upon distribution of those
       earnings in the form of dividends or otherwise, the Company would be
       subject to both federal income taxes (subject to an adjustment for
       foreign tax credits) and withholding taxes payable to the various foreign
       countries.


(10)   SEGMENT AND GEOGRAPHIC DATA

       The Company is an integrated Internet technology and services company
       operating in three primary business segments; 1) IT services; 2)
       engineering software products, maintenance and services; and 3) Internet
       content, e-commerce, digital media products and services. The Company has
       provided computer-aided engineering software solutions to customers for
       over 18 years. During the past 15 years, the Company has supported the
       engineering software business with India-based software programming and
       IT resources. With the acquisitions of R-Cube in February 1999 and
       NetGuru Systems in September 1999, the Company further expanded its IT
       resources and capabilities and its presence in the IT services industry,
       providing expertise in data-mining and embedded technologies to
       Internet/Intranet design and communications. With the Company's
       experience in India and understanding of the global Indian community, it
       began offering online Internet portal services in 1999. The Company
       continues to provide digital media services, including computer
       animation, and has used this expertise to enhance content provided in its
       Internet portal offerings. The following are significant components of
       worldwide operations by reportable operating segment:


                                                    FOR THE YEAR ENDED MARCH 31
                                                  ------------------------------
                                                       2000            1999
                                                  -------------    -------------
                                                          (IN THOUSANDS)
                           NET REVENUE
                IT services                       $     10,512     $        435
                Software sales, maintenance and
                  services                               8,953           10,310
                Internet, e-commerce and digital
                     media products and services           471                -
                                                  -------------    -------------

                         Consolidated             $     19,936     $     10,745
                                                  =============    =============

                     OPERATING (LOSS)/INCOME
                IT services                       $      1,102     $         86
                Software sales, maintenance and
                  services                              (1,609)            (536)
                Internet, e-commerce and digital
                    media products and services         (1,046)               -
                                                  -------------    -------------

                         Consolidated             $     (1,553)    $       (450)
                                                  =============    =============

                                      F-25
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The Company's operations are based worldwide through foreign and domestic
     subsidiaries and branch offices in the United States, Germany, India, the
     United Kingdom, and Asia-Pacific. The following are significant components
     of worldwide operations by geographic location:

                                                    FOR THE YEAR ENDED MARCH 31
                                                  ------------------------------
                                                       2000            1999
                                                  -------------    -------------
                                                          (IN THOUSANDS)

                           NET REVENUE
                United States                     $     14,169     $      4,805
                The Americas (other than U.S.)             628              994
                Europe                                   3,255            3,161
                Asia-Pacific                             1,884            1,785
                                                  -------------    -------------

                         Consolidated             $     19,936     $     10,745
                                                  =============    =============

                          EXPORT SALES
                United States                     $      1,590     $      2,085
                                                  =============    =============


                       LONG-LIVED ASSETS
                United States                     $     10,629     $      6,106
                Europe                                     473              662
                Asia-Pacific                             1,675            1,380
                                                  =============    =============

                         Consolidated             $     12,777     $      8,148
                                                  =============    =============


(11)   LOSS PER SHARE

       The following table illustrates the computation of basic and diluted net
       loss per share for the years ended March 31, (in thousands):


                                                       2000            1999
                                                  -------------    -------------
            Numerator:
            Net loss                              $     (1,355)    $       (520)
            Cumulative preferred stock dividends           (39)               -
                                                  -------------    -------------

            Numerator for basic and diluted net
               loss per share                           (1,394)            (520)
                                                  =============    =============

            Denominator:
            Denominator for basic net loss per
               share - average number of common
               shares outstanding during the year       11,980           11,462
            Incremental common shares attributable
               to exercise of outstanding options
               and warrants                                  -                -
                                                  -------------    -------------

            Denominator for diluted net loss
               per share                                11,980           11,462
                                                  =============    =============

            Basic net loss per share              $      (0.12)    $      (0.05)
                                                  =============    =============

            Diluted net loss per share            $      (0.12)    $      (0.05)
                                                  =============    =============

                                      F-26
<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Options, warrants and other common stock equivalents amounting to
       1,789,000 and 519,000 potential common shares were excluded from the
       computation of diluted EPS for fiscal 2000 and 1999, respectively,
       because the Company reported a net loss and, therefore, the effect would
       be antidilutive. Warrants to purchase an additional 260,000 shares of
       common stock were also not included in the computation of diluted EPS for
       1999 because their exercise price was greater than the average market
       price of the common shares and therefore would be antidilutive.


(12)   SUBSEQUENT EVENTS

       In April 2000, the Company acquired all of the outstanding stock of
       Allegria Software, Inc. ("Allegria") for approximately $1,500,000 in cash
       and 13,000 shares of the Company's common stock. Allegria is a developer
       of internet-based document management and collaborative tools for
       engineering and manufacturing companies. The technology acquired will be
       used in the development of the Company's special interest portal
       targeting the engineering, architectural and manufacturing communities.
       The acquisition will be accounted for as a purchase.

       In April 2000, the Company signed a letter of intent to acquire a 30%
       share in Vital Communications Ltd. for approximately $2,100,000. Vital
       Communications provides and markets ISP services and e-commerce solutions
       within India. Vital Communications'services and customer base will be
       utilized in the development of the Company's ISP business. The investment
       will be accounted for using the equity method.

       In May 2000, the Company acquired a 49% interest in India-based Interra
       Global Limited, an Internet service provider, for approximately $242,000.
       The remaining 51% interest in Interra Global Limited was owned by NetGuru
       India Private Limited, a private company co-owned by Anup Das (brother of
       Amrit Das, CEO of the Company) and his wife. In May 2000, the Company's
       wholly-owned subsidiary in India acquired a 49% interest in NetGuru India
       Private Limited for approximately $225,000. Effective May 29, 2000, as a
       result of these two acquisitions, the Company now owns a total of 74%
       interest in Interra Global Limited. The acquisition will be accounted for
       as a purchase.

       On June 22, 2000, the Company closed a private equity financing to issue
       to two investors, in a private transaction not involving a public
       offering, 200,000 shares of the Company's common stock for approximately
       $3,000,000, net of certain commissions and offering costs. In connection
       with this private placement, the Company issued warrants to purchase an
       aggregate of 60,000 shares of the Company's common stock to the two
       investors. The warrants are convertible into common stock at an exercise
       price of $19.00 per share and expire in June 2005. In addition, the
       Company issued a warrant to purchase 3,300 shares of the Company's common
       stock to a third party in connection with this transaction. This warrant
       is convertible into common stock at an exercise price equal to 125% of an
       average of the lowest 5 closing bid prices of the common stock recorded
       on the Nasdaq National market during the relevant trading period pursuant
       to the warrant agreement and expires in June 2003.

                                      F-27
<PAGE>


                                  EXHIBIT INDEX
                                  -------------

EXHIBIT NO.                               DESCRIPTION
-----------                               -----------

  2.1          Amended and Restated Stock Purchase Agreement, without exhibits
               and schedules, dated as of September 14, 1999, among the
               registrant, NetGuru Systems, Inc., NetGuru Consulting, Inc. and
               Bharat Manglani.*****

  2.2          Earn-Out Agreement dated as of September 14, 1999, between the
               registrant and Bharat Manglani.*****

  2.3          Registration Rights Agreement dated as of September 14, 1999,
               between the registrant and Bharat Manglani.*****

  2.4          Securities Purchase Agreement, without exhibits and schedules,
               dated as of September 14, 1999, between the registrant and The
               Shaar Fund Ltd.*****

  2.5          Registration Rights Agreement, dated as of September 14, 1999,
               beween the registrant and The Shaar Fund Ltd.*****

  2.6          Securities Purchase Agreement, without exhibits and schedules,
               dated as of September 14, 1999, between the registrant and Triton
               Private Equities Fund, L.P.*****

  2.7          Registration Rights Agreement dated as of September 14, 1999,
               between the registrant and Triton Private Equities Fund,
               L.P.*****

  2.8          Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Krishna P. Reedy.****

  2.9          Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Prakash Rao Pokala.****

  2.10         Stock Purchase Agreement dated as of January 18, 1999, among the
               registrant, R-Cube Technologies, Inc. and Srinivasa Reddy
               Malireddy.****

  2.11         Securities Purchase Agreement dated March 8, 2000 between the
               registrant, Elliott Associates, L.P. and Westgate International,
               L.P.

  2.12         Exchange Agreement dated March 30, 2000 between the registrant,
               Elliott Associates, L.P. and Westgate International, L.P.

  2.13         Stock Purchase Agreement dated March 27, 2000 between the
               registrant, Allegria Software, Inc. and GRAL, Inc.

  2.14         Stock Purchase Agreement dated January 31, 2000 between the
               registrant, e-Destinations, Inc., Vinod Bhindi, Dhanesh Bhindi,
               Rekesh Kapoor and Jayent Bhindi.

  2.15         Agreement for Sale of Shares dated May 29, 2000 between Anup Das
               and NetGuru India Pvt. Ltd.

  2.16         Agreement Cum Guarantee dated May 29, 2000 between the registrant
               and NetGuru India Pvt. Ltd.

  2.17         Shareholders Agreement dated May 22, 2000 between Research
               Engineers Pvt. Ltd. and Anup Das.

  2.18         Shareholders Agreement dated May 25, 2000 between the registrant
               and Anup Das, individually and on behalf of the Indian
               Shareholders (defined therein).

  3.1          Certificate of Incorporation of the registrant.*

  3.2          Certificate of Ownership and Merger merging netGuru, Inc. into
               netguru.com, inc.

  3.3          Certificate of Ownership and Merger merging netguru.com, Inc.
               into Research Engineers, Inc.

  3.5          Bylaws of the registrant.*

  4.1          Certificate of Designations of Series B Cumulative Convertible
               Preferred Stock dated March 30, 2000.

  4.2          Common Stock Purchase Warrant dated as of September 14, 1999,
               issued by the registrant to the Shaar Fund Ltd.*****

  4.3          Common Stock Purchase Warrant dated as of September 14, 1999,
               issued by the registrant to Triton Private Equities Fund,
               L.P.*****


<PAGE>

  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
               registrant.+++

  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 registrant.+++

  4.6          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Elliott Associates, L.P.

  4.7          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Westgate International, L.P.

  4.8          Registration Rights Agreement dated March 8, 2000 between the
               registrant, Elliott Associates, L.P. and Westgate International,
               L.P.

  4.9          Common Stock Purchase Warrant dated March 8, 2000, issued by the
               registrant to Shoreline Institutional Finance.

  4.10         Warrant Agreement dated February 7, 2000 between the registrant
               and Cruttenden Roth Incorporated.

  10.1         Research Engineers, Inc. 1996 Stock Option Plan.*

  10.2         Form of Nonqualified Stock Option Agreement pertaining to the
               1996 Stock Option Plan (schedule of options issued pursuant to
               this Plan is attached thereto).*

  10.3         Employment Agreement dated May 1, 1996, by and between the
               registrant and Amrit K. Das.*

  10.4         Employment Agreement dated May 1, 1996, by and between the
               registrant and Jyoti Chatterjee.*

  10.5         Employment Agreement dated May 1, 1996, by and between the
               registrant and Clara Y. M. Young.*

  10.6         Research Engineers, Inc. 1997 Stock Option Plan.**

  10.7         Agreement Not To Compete dated October 1, 1998 between the
               registrant and Techna Consultancy Private Limited.***

  10.8         Research Engineers, Inc. 1998 Stock Option Plan. +

  10.9         Credit Agreement dated February 26, 1999 by and between the
               registrant and Imperial Bank.****

  10.10        Agreement and Plan of Reorganization among the registrant,
               PacSoft, Incorporated and Karen Hunter, William Schmidt and Mae
               Webb dated March 31, 1999.++

  21.1         Subsidiaries of the registrant.

  23.1         Consent of KPMG LLP.

  27.1         Financial Data Schedule.

--------------------------------------------

*        Filed as an exhibit to our Registration Statement on Form SB-2 dated
         May 21, 1996 or amendment thereto dated June 14, 1996 (Registration No.
         333-4844-LA) and incorporated herein by reference.
**       Filed as an exhibit to our Form 10-KSB for the fiscal year ended March
         31, 1997 and filed with Securities and Exchange Commission on June 30,
         1997, or amendment thereto filed on August 19, 1997 and incorporated
         herein by reference.
***      Filed as an exhibit to our Form 10-QSB for the quarterly period ended
         December 31, 1998 and filed with the Securities and Exchange Commission
         on February 11, 1999 and incorporated herein by reference.
****     Filed as an exhibit to our Form 8-K dated February 26, 1999 and filed
         with the Securities and Exchange Commission on March 5, 1999 and
         incorporated herein by reference.
*****    Filed as an exhibit to our Form 8-K dated September 14, 1999 and filed
         with the Securities Exchange Commission on September 29, 1999.
+        Filed as an exhibit to our Proxy Statement filed pursuant to Section
         14(a) of the Securities Act on November 12, 1998 and incorporated
         herein by reference.
++       Filed as an exhibit to our Form 10-K dated March 31, 2000 and filed
         with the Securities and Exchange Commission on June 30, 1999 and
         incorporated herein by reference.
+++      Filed as an exhibit to our Form 8-K/A - Amendment No. 2 dated September
         14, 1999 and filed with the Securities Exchange Commission on November
         12, 1999.