SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the quarterly period ended June 30, 1999



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



                         Commission file number: 0-28560


                            RESEARCH ENGINEERS, INC.
       (Exact name of small business issuer as specified in its charter)


      Delaware                                  22-2356861
   (State or other                            (IRS. Employer
   jurisdiction of                         Identification No.)
   incorporation)


                            22700 SAVI RANCH PARKWAY
                          YORBA LINDA, CALIFORNIA 92887
                    (Address of principal executive offices)

                                (714) 974-2500
             (Registrant's telephone number, including area code)


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 [ ]


The number of shares outstanding of the registrant's only class of Common Stock,
$.01 par value, was 5,764,396 on August 5, 1999.


<PAGE>

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                   RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1999
                                   (Unaudited)
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                 Assets
<S>                                                         <C>
Current assets:
  Cash and cash equivalents                                 $    1,727
  Accounts receivable (net of allowance for doubtful
    accounts of $386)                                            2,654
  Deferred income taxes                                          1,133
  Notes and related party loans receivable                          56
  Prepaid expenses and other current assets                        617
                                                            -----------
       Total current assets                                      6,187

Property, plant and equipment, net                               4,150
Goodwill and intangible assets (net of accumulated
  amortization of $980)                                          3,157
Other assets                                                       715
                                                            -----------
                                                            $   14,209
                                                            ===========

                  Liabilities and Stockholders' Equity

Current liabilities:
  Current portion of long-term bank debt                    $       71
  Current portion of capital lease obligations                     101
  Accounts payable                                                 320
  Accrued expenses                                                 777
  Income taxes payable                                             446
  Deferred maintenance revenue                                     927
                                                            -----------
       Total current liabilities                                 2,642

Long-term bank debt, net of current portion                      4,445
Capital lease obligations, net of current portion                  454
Deferred income taxes                                              304
                                                            -----------
       Total liabilities                                         7,845
                                                            -----------

Stockholders' equity:
  Preferred stock, par value $.01.  Authorized
    5,000,000 shares; issued and
    outstanding none                                                 -
  Common stock, par value $.01.  Authorized
    20,000,000 shares; issued and
    outstanding 5,738,210 shares                                    57
  Additional paid-in capital                                     6,623
  Accumulated deficit                                              (13)
  Accumulated other comprehensive loss:
    Cumulative foreign currency translation
      adjustments                                                 (303)
                                                            -----------
       Total stockholders' equity                                6,364
                                                            -----------
                                                            $   14,209
                                                            ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

                   RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                            Three         Three
                                            Months        Months
                                            Ended         Ended
                                           June 30,      June 30,
                                             1999          1998
                                         -----------   -----------
<S>                                      <C>           <C>
Net revenues:
  Product sales                          $    1,792    $    1,743
  IT services                                 1,219             -
  Maintenance and support                       448           473
                                         -----------   -----------
       Total net revenues                     3,459         2,216

Cost of revenues                              1,072           280
                                         -----------   -----------
       Gross profit                           2,387         1,936
                                         -----------   -----------

Operating expenses:
  Selling, general and administrative         1,924         1,487
  Research and development                      627           615
                                         -----------   -----------

       Total operating expenses               2,551         2,102
                                         -----------   -----------
       Operating loss                          (164)         (166)
                                         -----------   -----------

Other expense (income):
  Interest, net                                 122            16
  Other                                           3           (16)
                                         -----------   -----------
       Total other expense                      125             -
                                         -----------   -----------

Loss before income taxes                       (289)         (166)

Income tax benefit                             (100)          (43)
                                         -----------   -----------
       Net loss                          $     (189)   $     (123)
                                         ===========   ===========

Net loss per common share:

         Basic                           $    (0.03)   $    (0.02)
                                         ===========   ===========
         Diluted                         $    (0.03)   $    (0.02)
                                         ===========   ===========

Common shares used in computing net loss per common share:

         Basic                            5,738,210     5,729,710
                                         ===========   ===========
         Diluted                          5,738,210     5,729,710
                                         ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                   RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                             Three Months  Three Months
                                                Ended         Ended
                                               June 30,      June 30,
                                                 1999          1998
                                             -----------   -----------

<S>                                          <C>           <C>
Cash flows from operating activities:
  Net loss                                   $     (189)   $     (123)
  Adjustments to reconcile net loss to
    net cash provided by (used in)
    operating activities:
     Depreciation and amortization                  352           247
     Deferred income taxes                          (79)          (77)
     Gain on investments                              -           (21)
     Changes in operating assets and
      liabilities:
      Accounts receivable                           251           372
      Notes and related party loans
       receivable                                    (6)          (44)
      Prepaid expenses and other current
       assets                                       (37)          (41)
      Other assets                                    1           (51)
      Accounts payable, accrued expenses
       and other current liabilities               (169)         (121)
      Deferred maintenance revenue                 (154)         (131)
      Income taxes payable                           40           (41)
      Other long-term liabilities                     -             -
                                             -----------   -----------
           Net cash provided by (used
            in) operating activities                 10           (31)
                                             -----------   -----------

Cash flows from investing activities:
  Purchase of property, plant and
    equipment                                      (249)         (221)
  Purchase of short-term investments                  -          (365)
  Sale of short-term investments                      -           349
  Payments to acquire companies, net of
    cash acquired                                   (11)            -
                                             -----------   -----------
           Net cash provided by (used
            in) investing activities               (260)         (237)
                                             -----------   -----------

Cash flows from financing activities:
  Proceeds from bank debt                             -            58
  Repayment of bank debt                            (14)          (25)
  Repayment of capital lease obligations            (10)            -
  Common stock issuance from exercise of
    options                                           -             8
                                             -----------   -----------
           Net cash provided by (used
            in) financing activities                (24)           41
                                             -----------   -----------
  Effect of exchange rate changes on
    cash and cash equivalents                       (10)          (34)
                                             -----------   -----------
           Decrease in cash and cash
            equivalents                            (284)         (261)

Cash and cash equivalents, beginning of
  period                                          2,011         1,390
                                             -----------   -----------
Cash and cash equivalents, end of period     $    1,727    $    1,129
                                             ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                    RESEARCH ENGINEERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (Unaudited)


1. BASIS OF PRESENTATION

   The  consolidated  financial  statements  include  the  accounts  of Research
   Engineers,  Inc.  and its wholly  owned  subsidiaries  (the  "Company").  All
   significant transactions among the consolidated entities have been eliminated
   upon  consolidation.  The Company's  reported  results for the fiscal quarter
   ended June 30, 1998 have been  restated to include the results of  operations
   of PacSoft Incorporated  ("PacSoft") as a result of the Company's acquisition
   of PacSoft in March 1999.  This  acquisition has been accounted for using the
   pooling of interests method of accounting for business combinations.

   These consolidated financial statements have been prepared by the Company and
   include all  adjustments  which are, in the opinion of management,  necessary
   for a fair  presentation  of the financial  position at June 30, 1999 and the
   results of operations  and the cash flows for the three months ended June 30,
   1999 and 1998,  pursuant to the rules and  regulations  of the Securities and
   Exchange Commission.  Accordingly, they do not include all of the information
   and footnotes required by generally accepted accounting principles for annual
   consolidated financial statements. Results of operations for the three months
   ended  June 30,  1999 are not  necessarily  indicative  of the  results to be
   expected for the full year ended March 31, 2000.

2. 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 amounts reported in the consolidated financial statements and
   accompanying notes. Actual results could differ from those estimates.

3. RECLASSIFICATIONS

   Certain  prior  quarter  amounts  have been  reclassified  to  conform to the
   current quarter presentation.

4. SOFTWARE REVENUE RECOGNITION

   In October 1997, the Accounting  Standards  Executive  Committee ("AcSEC") of
   the AICPA  issued  Statement  of  Position  ("SOP")  97-2,  Software  Revenue
   Recognition,  which  superceded  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 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  results  of  operations.  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
   results of operations.


                                       5
<PAGE>

5. SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE

   In 1998,  the AICPA  issued SOP 98-1,  Accounting  for the Costs of  Computer
   Software  Developed or Obtained for Internal  Use,  which  provides  guidance
   concerning recognition and measurement of costs associated with developing or
   acquiring  software  for internal  use.  The Company  adopted SOP 98-1 in the
   first  quarter of fiscal 2000,  the  implementation  of which  resulted in no
   material impact on the Company's results of operations.

6. START-UP ACTIVITIES

   In 1998,  the AICPA also issued SOP 98-5,  Reporting on the Costs of Start-up
   Activities,   which  provides  guidance  concerning  the  costs  of  start-up
   activities.  For  accounting  purposes  start-up  activities  are  defined as
   one-time  activities  related to opening a new  facility,  introducing  a new
   product or  service,  conducting  business in a new  territory  or with a new
   class of  customers,  initiating  a new process in an existing  facility,  or
   commencing  some new  operation.  The  Company  adopted SOP 98-5 in the first
   quarter of fiscal 2000, the  implementation  of which resulted in no material
   changes to the  Company's  previous  practice  and no material  impact on the
   Company's results of operations.

7. COMPREHENSIVE INCOME (LOSS)

   As of April 1, 1998, the Company  adopted  Statement of Financial  Accounting
   Standards  ("SFAS") No. 130,  Reporting  Comprehensive  Income.  SFAS No. 130
   establishes new rules for the reporting and display of  comprehensive  income
   and its  components.  The  adoption  of this  statement  had no impact on the
   Company's  reported net (loss)/income or stockholders'  equity.  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). For the three months ended June 30, 1999
   and 1998, total comprehensive loss was $226,000 and $281,000, respectively.

8. NET LOSS PER SHARE

   In December 1997, the Financial  Accounting  Standards  Board ("FASB") issued
   SFAS No.  128,  Earnings  per  Share  ("EPS").  SFAS  No.  128  replaced  the
   calculation  of primary and fully  diluted  EPS with basic and  diluted  EPS.
   Unlike primary EPS,  basic EPS excludes any dilutive  effects of common stock
   equivalents, such as options and warrants. Diluted EPS is very similar to the
   previously reported fully diluted EPS.

   The following table illustrates the computation of basic and diluted net loss
   per share (in thousands):

<TABLE>
<CAPTION>
                                                   Three Months  Three Months
                                                      Ended         Ended
                                                     June 30,      June 30,
                                                       1999          1998
                                                   -----------   -----------
   <S>                                             <C>           <C>
   Numerator:
   Numerator for basic and diluted
     net loss per  share - net loss                $     (189)   $     (123)
                                                   ===========   ===========

   Denominator:
   Denominator for basic net loss per
     share - average number of common
     shares outstanding during the period               5,738         5,730
   Incremental common shares attributable
     to exercise of outstanding options                     -             -
                                                   -----------   -----------
   Denominator for diluted net loss per share           5,738         5,730
                                                   ===========   ===========

   Basic net loss per share                        $    (0.03)   $    (0.02)
                                                   ===========   ===========
   Diluted net loss per share                      $    (0.03)   $    (0.02)
                                                   ===========   ===========
</TABLE>

                                       6
<PAGE>

   All options, warrants and other common stock equivalents amounting to 481,000
   and 378,000  potential  common shares were excluded from the  computation  of
   diluted  EPS for the  quarters  ended June 30,  1999 and 1998,  respectively,
   because the Company reported a net loss and,  therefore,  the effect would be
   antidilutive.

9. SEGMENT AND GEOGRAPHIC DATA

   The  Company  operates  in  four  significant   segments.   The  Company  has
   historically  derived its revenues  principally from sales of its stand-alone
   and  network-based  engineering  software products and from sales of software
   maintenance  contracts  relating to these  products.  With the acquisition of
   R-Cube  in  February  1999,  the  Company   expanded  into  the  $90  billion
   information  technology  ("IT")  services  industry,  providing  expertise in
   data-mining  and  embedded  technologies  to  Internet/Intranet   design  and
   communications.  In April  1999,  the Company  launched  the first of several
   e-commerce special interest portals targeting expatriates of the Asia Pacific
   region now living throughout Europe and North America.  Finally, in June 1999
   the Company  announced  that it has signed an  agreement  to provide  digital
   media  services  for  animation   projects  including  feature  films  and  a
   television  series.  The e-commerce and digital media services  segments have
   not experienced  significant revenues or other activity to date and therefore
   are not  reportable  segments  for the  first  quarter  of fiscal  2000.  The
   following are  significant  components of worldwide  operations by reportable
   operating segment:

<TABLE>
<CAPTION>
                                                  For the quarter
                                                   ended June 30,
                                             -------------------------
                                                 1999          1998
                                             -----------   -----------
                                                   (in thousands)
          <S>                                <C>           <C>
                  Net revenue

          Software sales, maintenance
            and technical support            $    2,240    $    2,216
          IT Services                             1,219             -
                                             -----------   -----------
            Consolidated                     $    3,459    $    2,216
                                             ===========   ===========

            Operating (loss)/income

          Software sales, maintenance
            and technical support            $     (194)   $     (166)
          IT Services                               136             -
          Other                                    (106)            -
                                             -----------   -----------
            Consolidated                     $     (164)   $     (166)
                                             ===========   ===========
</TABLE>

   The  operating  loss  reported  as "Other"  represents  costs  related to the
   development of the e-commerce and digital media services businesses.


                                       7
<PAGE>

   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:

<TABLE>
<CAPTION>
                                                     For the quarter
                                                      ended June 30,
                                                -------------------------
                                                    1999          1998
                                                -----------   -----------
                                                     (in thousands)
          <S>                                   <C>           <C>
                Net revenue

          United States                         $    2,201    $    1,143
          The Americas (other than U.S.)               208           179
          Europe                                       687           697
          Asia-Pacific                                 363           197
                                                -----------   -----------
            Consolidated                        $    3,459    $    2,216
                                                ===========   ===========

               Export sales

          United States                         $      396    $      279
                                                ===========   ===========

              Long-lived Assets

          United States                         $    5,949    $    3,276
          Europe                                       596           820
          Asia-Pacific                               1,477         1,014
                                                -----------   -----------
            Consolidated                        $    8,022    $    5,110
                                                ===========   ===========
</TABLE>

                                       8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the  Securities  Act of 1933 as amended and
Section 21E of the  Securities  Exchange Act of 1934 as amended  (the  "Exchange
Act"), and the Company intends that such  forward-looking  statements be subject
to the safe harbors  created  thereby.  The Company may  experience  significant
fluctuations in future operating results due to a number of factors,  including,
among other things,  the impact of adverse  developments in overseas  economies,
the size and timing of customer orders, new or increased competition,  delays in
product  upgrades  and new  product  introductions,  the  ability to attract and
retain key technical and management  personnel,  the ability to penetrate the IT
services and other new markets the Company enters, Year 2000 compliance, changes
in  market  demand,   market  acceptance  of  new  products,   product  returns,
integration of acquisitions, the ability to identify and consummate acquisitions
and  integrate  them  successfully,  and  the  ability  to meet  future  capital
requirements.  Any of  these  factors  could  cause  operating  results  to vary
significantly  from  prior  periods.  As a result,  the  Company  believes  that
period-to-period  comparisons of its results of operations  are not  necessarily
meaningful   and  should  not  be  relied  upon  as  any  indication  of  future
performance.  Fluctuations  in the Company's  operating  results could cause the
price of the Company's Common Stock to fluctuate substantially.

The  information  contained in this report is not a complete  description of the
Company's  business or the risks  associated with an investment in the Company's
Common  Stock.  Before  deciding to buy or maintain a position in the  Company's
Common Stock, you should  carefully review and consider the various  disclosures
made by the  Company in this  report and in its other  materials  filed with the
SEC,  including its Annual Report on Form 10-KSB for the fiscal year ended March
31, 1999 (and, in particular, in the "Outlook" section therein) that discuss the
Company's  business  in greater  detail and that also  disclose  various  risks,
uncertainties and other factors that may affect the Company's business,  results
of operations or financial condition.

Assumptions  relating to the  forward-looking  statements involve judgments with
respect  to,  among  other  things,  future  economic,  competitive  and  market
conditions,  all of which are difficult or impossible to predict accurately, and
many of which are beyond the control of the Company.  In addition,  the business
and  operations of the Company are subject to  significant  risks which increase
the uncertainty  inherent in the forward-looking  statements.  In light of this,
the  inclusion  of  forward-looking  information  should  not be  regarded  as a
representation  or  guarantee  by the  Company  or any  other  person  that  the
objectives or plans of the Company will be achieved.

GENERAL

Research Engineers,  Inc. and subsidiaries (the "Company") is a leading provider
of technically-sophisticated  stand-alone and network-based engineering software
products  that  provide  fully-integrated   easy-to-use  design  automation  and
analysis  solutions  for use by  engineering  analysis and design  professionals
worldwide.  The  Company's  comprehensive  line  of  Windows-based   engineering
software products includes STAAD, the Company's  structural  analysis and design
software, as well as mechanical,  civil and process/piping engineering products.
The  Company's  software  products  assist  engineers in  performing a myriad of
mission-critical  engineering  tasks,  including  the  analysis  and  design  of
industrial,  commercial,   transportation  and  utility  structures,  pipelines,
machinery,  automotive and aerospace products,  and survey,  contour and digital
terrain modeling.

As a result  of the  acquisition  of R-Cube  Technologies,  Inc.  ("R-Cube")  in
February  1999,  the  Company  has  expanded  into the $90  billion  information
technology  ("IT")  services  industry,  providing  expertise in data-mining and
embedded  technologies  to  Internet/Intranet  design  and  communications.



                                       9
<PAGE>

The Company has expanded into two additional markets. In April 1999, the Company
announced that it has launched the first of several  e-commerce special interest
portals  targeting  the 90 million  expatriates  of the Asia Pacific  region now
living throughout Europe and North America.  In June 1999, the Company announced
that it has signed an agreement to provide  digital media services for animation
projects, including a television series and feature films.

The  following  discussion  and analysis  addresses the results of the Company's
operations  for the  three  months  ended  June 30,  1999,  as  compared  to the
Company's results of operations for the three months ended June 30, 1998.


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998

Net  revenues - Net revenues  for the quarter  ended June 30, 1999  increased by
$1,243,000 (56%) to $3,459,000,  as compared to $2,216,000 for the quarter ended
June 30, 1998.  This increase in net revenues was primarily  attributable to the
acquisition of R-Cube.  Net revenues for R-Cube totaled $1,219,000 for the first
quarter.

International  net  revenues as a percentage  of total  revenues for the quarter
ended June 30, 1999  decreased to 36%,  down from 48% for the quarter ended June
30,  1998.  The net  revenues  from  international  customers  actually  grew by
$185,000  (17%) to  $1,258,000,  as compared to $1,073,000 for the quarter ended
June 30, 1998.  The decrease in  international  net revenues as a percentage  of
total net  revenues  was  primarily  due to the  expansion  into the IT services
industry.  Currently,  all of the  Company's  IT services  revenue is  generated
within the United States,  thus this segment's  revenues increase the percentage
of consolidated  net revenues  generated  domestically.  The Company's  domestic
revenues are  denominated in U.S.  Dollars,  while revenues and expenses for the
Company's  foreign  subsidiaries  and sales offices are usually  recorded in the
applicable  foreign  currency and translated  into U.S.  Dollars.  There were no
foreign  exchange gains or losses that were material to the Company's  financial
results during the three-month periods ended June 30, 1999 and 1998.

Gross profit - Gross profit  increased by $451,000  (23%) to  $2,387,000  in the
quarter ended June 30, 1999 as compared to $1,936,000 for the quarter ended June
30, 1998.  This increase was primarily due to the  acquisition of R-Cube.  Gross
profit for R-Cube  was  $361,000  for the first  quarter of fiscal  2000.  Gross
margin  decreased to 69% of sales in the quarter ended June 30, 1999 as compared
to 87% for the quarter ended June 30, 1998.  This change is due to the growth of
the  IT  services  segment,  for  which  the  cost  of  generating  revenues  is
significantly higher than for sales of software products.

Selling,   general   and   administrative   expense  -  Selling,   general   and
administrative  ("SG&A")  expense  increased by $437,000 (29%) to $1,924,000 for
the quarter ended June 30, 1999 as compared to $1,487,000  for the quarter ended
June 30, 1998,  but decreased as a percentage of net revenues to 56% from 67% in
the  comparable  quarter of the prior  year.  The  majority  of the  increase in
expenses  is due to the  expansion  into IT  services  upon the  acquisition  of
R-Cube.  SG&A expenses for the IT services  segment totaled  $225,000,  however,
this represents  only 18% of the IT services net revenues.  The Company was able
to achieve an increase in revenues with the expansion into IT services without a
comparable  increase  in  SG&A  expenses  due to  administrative  infrastructure
already in place. The remainder of SG&A expense  represents 76% of the Company's
non-IT services revenue, an increase from the 67% experienced in the prior year.
This remaining increase was largely  experienced in India and was related to the
development of the e-commerce and digital media services businesses.

Research and development expense - Research and development expense increased by
$12,000  (2%) to  $627,000  in the  quarter  ended June 30,  1999 as compared to
$615,000 for the quarter  ended June 30, 1998,  and decreased as a percentage of
net revenues to 18% from 28% in the  comparable  quarter of the prior year.  The
decrease in research  and  development  expense as a  percentage  of revenues is
primarily  due to the addition of R-Cube.  The results for the first  quarter of
fiscal  2000  include  added net revenue for R-Cube with no addition to research
and development expense.

                                       10
<PAGE>

Other (income) expense - Net interest expense  increased by $106,000 to $122,000
for the quarter ended June 30, 1999 as compared to $16,000 for the quarter ended
June 30, 1998.  The increase is primarily due to the increase in long-term  debt
used to finance the acquisition of R-Cube.

Income  taxes - Income tax  benefit  increased  by $57,000  to  $100,000  in the
quarter  ended June 30, 1999 as  compared to $43,000 for the quarter  ended June
30, 1998. This increase in income tax benefit is primarily due to an increase in
pretax loss in the United  States and  Singapore for the three months ended June
30, 1999 and the related tax benefit.

LIQUIDITY AND CAPITAL RESOURCES

The Company currently finances its operations  (including capital  expenditures)
primarily  through  cash  flows  from  operations  as well as its  cash and cash
equivalents.

The  Company's  principal  sources of  liquidity  at June 30, 1999  consisted of
$1,727,000 of cash and cash equivalents.

The  decrease in total cash and cash  equivalents  during the three months ended
June 30,  1999 was  largely  attributable  to the  purchase  of capital  assets,
primarily in India in connection  with the  development  of the  e-commerce  and
digital media services businesses,  combined with decreases in accounts payable,
accrued expenses,  deferred  maintenance revenue and other current  liabilities,
and  increases  in prepaid  and other  current  assets,  offset by a decrease in
accounts receivable.

The Company  believes  that its current cash and cash  equivalents  balances and
cash generated from operations will provide adequate working capital to fund the
Company's  operations at currently  anticipated levels through June 30, 2000. To
the extent that such amounts are  insufficient to finance the Company's  working
capital  requirements,  the Company will be required to raise  additional  funds
through public or private equity or debt  financings.  There can be no assurance
that such additional financings will be available,  if needed, or, if available,
will be on terms satisfactory to the Company.

IMPACT OF YEAR 2000

Many existing  software programs use only two digits to identify the year in the
date field.  If such programs are not corrected,  date data  concerning the Year
2000 could  cause  many  computer  applications  to fail,  lock-up  or  generate
erroneous results.

The Company has identified its mission-critical systems related to the Year 2000
and has  committed the  resources  necessary to resolve any potential  Year 2000
issues.  This  identification  and assessment  also involved  identification  of
vendors that may have a significant impact on the Company's operations and their
expected completion of any conversions.  Although the Company is addressing such
issues in what it considers to be sufficient time prior to the century rollover,
there can be no assurance  that there will be no  interruption  of operations or
other  limitations of system  functionality,  or that the Company will not incur
substantial costs to avoid such occurrences.  The Company has determined that it
will not need to modify or replace significant  portions of its software sold to
customers,  as it does not  contain  any  date-specific  material,  and does not
believe its significant vendors will require  significant  modification of their
internal systems.

The  Company's  systems  (both IT and  non-IT),  equipment  and  processes  were
substantially  Year 2000  ready by the end of March  1999.  The  actual  cost of
remediation is approximately  $250,000,  most of which represents lease payments
for software that will be paid ratably  through  2002.  The Company is currently
working on its contingency plan for Year 2000 issues, which is expected to be in
place by the end of August 1999.


                                       11
<PAGE>

In  addition,  the Company has  initiated  communications  with its  significant
suppliers  and large  customers to determine  the extent to which the  Company's
internal  applications and other interface systems are vulnerable to those third
parties' failure to remedy their own Year 2000 issues. There can be no assurance
that other companies' systems on which the Company's systems rely will be timely
converted  and would not have an adverse  effect on the Company's  systems.  The
most  reasonably  likely  worst  case  scenario  would  be  that  the  Company's
significant  customers'  inability  to remedy  their own Year 2000 issues  would
prevent them from purchasing the Company's products.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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. In June, 1999, the Financial Accounting Standards Board issued SFAS
No. 137,  Accounting for Derivative  Instruments and Hedging Activities Deferral
of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement
No. 133. This statement  delays the required  implementation  of SFAS No. 133 by
one year. The Company is required to adopt the statement in the first quarter of
fiscal  year  2002.  The  Company  is  currently  studying  the  impact  of this
pronouncement  on  its  consolidated   financial  statements  but  has  not  yet
determined the impact on its results of operations.


                                       12
<PAGE>

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        None

ITEM 2. CHANGES IN SECURITIES

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

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

        None

ITEM 5. OTHER INFORMATION

        None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits

               27.1      Financial Data Schedule

               27.2      Restated Financial Data Schedule

        (b)    Reports on Form 8-K

               None


                                       13
<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Date:  August 13, 1999

                                    RESEARCH ENGINEERS, INC.


                                    By: /S/ WAYNE BLAIR
                                    ------------------------------
                                     Wayne Blair
                                     Chief Financial Officer, Secretary
                                     and Treasurer (principal financial
                                     and accounting officer)


                                       14
<PAGE>


                                  EXHIBIT INDEX



Exhibit 27.1    Financial Data Schedule

Exhibit 27.2    Restated Financial Data Schedule



                                       15
<PAGE>