<PAGE>

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


                                   FORM 10-QSB

(Mark One)
[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM __________ to __________

                         Commission file number: 0-28560

                                  NETGURU, INC.
        (Exact name of small business issuer as specified 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)


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

                                 NOT APPLICABLE
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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 [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the registrant's only class of common stock,
$.01 par value, was 19,235,041 on August 5, 2006.

Transitional Small Business Disclosure Format (Check one) Yes [ ] No [X]


<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

                                                                            PAGE
                                                                            ----

Item 1.    Financial Statements..............................................  3

           Condensed Consolidated Statements of Operations for the three
           months ended June 30, 2006 and 2005 (unaudited)...................  3

           Condensed Consolidated Balance Sheets as of
           June 30, 2006 (unaudited) and March 31, 2006......................  4

           Condensed Consolidated Statements of Cash Flows for the
           three months ended June 30, 2006 and 2005 (unaudited).............  5

           Notes to Condensed Consolidated Financial Statements (unaudited)..  7

Item 2.    Management's Discussion and Analysis or Plan of Operation......... 18

Item 3.    Controls and Procedures........................................... 30

                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings................................................... 32

Item 2.  Unregistered Sales of Equity Securities and Use of  Proceeds........ 32

Item 3.  Defaults Upon Senior Securities..................................... 32

Item 4.  Submission of Matters to a Vote of Security Holders................. 33

Item 5.  Other Information................................................... 33

Item 6.  Exhibits ........................................................... 33

Signatures................................................................... 34

Exhibits Attached to this Report on Form 10-QSB.............................. 35


                                       2

<PAGE>
<TABLE>
<S>     <C>

                                        PART I -- FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                                        NETGURU, INC. AND SUBSIDIARIES
                                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (Unaudited)
                              ($ in thousands except share and per share amounts)

                                                                            THREE MONTHS ENDED
                                                                                 JUNE 30,
                                                                      -------------------------------
                                                                          2006               2005
                                                                      ------------       ------------
Net revenues:
    Collaborative software products and services                      $        450       $        242
    IT services                                                                420                554
                                                                      ------------       ------------
           Total net revenues                                                  870                796
                                                                      ------------       ------------

Cost of revenues:
    Collaborative software products and services                                54                  1
    IT services                                                                307                388
                                                                      ------------       ------------
           Total cost of revenues                                              361                389
                                                                      ------------       ------------
           Gross profit                                                        509                407
                                                                      ------------       ------------

Operating expenses:
    Selling, general and administrative                                        738                482
    Research and development                                                   108                150
    Depreciation                                                                34                 56
                                                                      ------------       ------------
           Total operating expenses                                            880                688
                                                                      ------------       ------------

           Operating loss                                                     (371)              (281)
                                                                      ------------       ------------

Other (income) expense                                                          (1)               123
                                                                      ------------       ------------

Loss from continuing operations before income taxes                           (370)              (404)
Income tax expense                                                              --                 10
                                                                      ------------       ------------
    Loss from continuing operations                                           (370)              (414)
                                                                      ------------       ------------

(Loss) income from discontinued operations (Note 13)                           (82)                80
                                                                      ------------       ------------

                    Net loss                                          $       (452)      $       (334)
                                                                      ============       ============

Basic and diluted net loss per common share:
    Net loss per common share from continuing operations              $      (0.02)      $      (0.02)
    Net income per common share from discontinued operations          $         --       $         --
                                                                      ------------       ------------
   Basic and diluted loss per common share                                   (0.02)             (0.02)
                                                                      ============       ============

Common equivalent shares used in computing basic and diluted net
loss per common share                                                   19,235,041         19,117,154
                                                                      ============       ============


                     See accompanying notes to condensed consolidated financial statements.

                                                      3

<PAGE>

                                        NETGURU, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands, except share and per share amounts)

                                                                                 JUNE 30,
                                                                                   2006         MARCH 31,
                                                                                (UNAUDITED)       2006
                                                                                 --------       --------
                                                    ASSETS
Current assets:
    Cash and cash equivalents                                                    $  2,197       $  2,497
    Restricted cash                                                                    --          1,070
    Accounts receivable (net of allowance for doubtful accounts of $20 of
      June 30, 2006 and March 31, 2006)                                               368            606
    Note receivable                                                                    38            103
    Prepaid expenses and other current assets                                         134            239
    Assets held for sale (Note 13)                                                  1,995          2,133
                                                                                 --------       --------
           Total current assets                                                     4,732          6,648

Property and equipment, net                                                           151            179
Other assets                                                                          105            109
                                                                                 --------       --------
                                                                                 $  4,988       $  6,936
                                                                                 ========       ========

                                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of capital lease obligations                                      118            117
    Accounts payable                                                                  158            205
    Accrued expenses                                                                  244            451
    Income taxes payable                                                               32             52
    Deferred revenues                                                                  87            199
    Accrued settlement for REI sale (Note 13)                                          --            760
    Other liabilities                                                                  34             53
    Current liabilities held for sale (Note 13)                                       451            717
                                                                                 --------       --------
           Total current liabilities                                                1,124          2,554

Capital lease obligations, net of current portion                                     106            136
Deferred gain on sale-leaseback (Note 13)                                             591            608
                                                                                 --------       --------

            Total liabilities                                                       1,821          3,298
                                                                                 --------       --------

Stockholders' equity:
    Preferred stock, par value $.01 (Authorized 5,000,000 shares; no shares
      issued and outstanding)                                                          --             --
    Common stock, par value $.01; authorized 150,000,000 shares; 19,235,041
      shares outstanding as of June 30, 2006 and March 31, 2006                       192            192
    Additional paid-in capital                                                     20,685         20,685
    Accumulated deficit                                                           (17,014)       (16,563)
    Accumulated other comprehensive loss:
       Cumulative foreign currency translation adjustments                           (696)          (676)
                                                                                 --------       --------

           Total stockholders' equity                                               3,167          3,638
                                                                                 --------       --------
                                                                                 $  4,988       $  6,936
                                                                                 ========       ========

                        See accompanying notes to condensed consolidated financial statements.

                                                      4

<PAGE>

                                        NETGURU, INC. AND SUBSIDIARIES
                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (Unaudited)
                                                (In thousands)

                                                                            THREE MONTHS          THREE MONTHS
                                                                               ENDED                 ENDED
                                                                           JUNE 30, 2006         JUNE 30, 2005
                                                                           -------------         -------------
Cash flows from operating activities:
    Net loss                                                                  $  (452)              $  (334)
     Less: (Loss) income from discontinued operations                             (82)                   80
                                                                              -------               -------
    Loss from continuing operations                                              (370)                 (414)
    Adjustments to reconcile loss from continuing operations to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                                              34                    56
        Amortization of debt discount                                              --                    53
        Changes in operating assets and liabilities:
          Accounts receivable                                                     117                   439
          Notes and related party loans receivable                                 70                     1
          Prepaid expenses and other current assets                               104                    55
          Other assets                                                              4                     3
          Accounts payable                                                        (48)                   23
          Accrued expenses                                                       (209)                 (215)
          Income taxes payable                                                    (21)                   --
          Other current liabilities                                               (21)                  (24)
          Deferred revenues                                                        11                  (104)
          Deferred gain on sale-leaseback                                         (17)                  (17)
                                                                              -------               -------

                  Net cash used in operating activities                          (346)                 (144)
                                                                              -------               -------

Cash flows from investing activities:
    Purchase of property, plant and equipment                                      (3)                   (2)
    Decrease in restricted cash                                                 1,070                    --
                                                                              -------               -------

                  Net cash provided by (used in) investing activities           1,067                    (2)
                                                                              -------               -------

Cash flows from financing activities:
    Proceeds from issuance of long-term debt                                       --                    48
    Repayment of long-term debt                                                    --                  (100)
    Repayment of capital lease obligations                                        (29)                  (32)
                                                                              -------               -------

                  Net cash used in financing activities                           (29)                  (84)
                                                                              -------               -------

    Effect of exchange rate changes on cash and cash equivalents                    4                   (39)
                                                                              -------               -------

                  Net cash provided by (used in) continuing operations            696                  (269)
                                                                              -------               -------

   Cash flows from discontinued operations
          Cash (used in) provided by operating activities                      (1,031)                  680
          Cash provided by (used in) investing activities                          62                  (121)
          Cash used in financing activities                                       (27)                   (4)
                                                                              -------               -------
                  Net cash (used in) provided by discontinued operations         (996)                  555

Cash and cash equivalents, beginning of period                                  2,497                 3,227
                                                                              -------               -------
Cash and cash equivalents, end of period                                      $ 2,197               $ 3,513
                                                                              =======               =======

                                           (continued on the following page)

                                                      5

<PAGE>

                                          NETGURU, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                  (Unaudited)
                                                (In thousands)

                                                                              THREE MONTHS         THREE MONTHS
                                                                                  ENDED                ENDED
                                                                              JUNE 30, 2006        JUNE 30, 2005
                                                                              -------------        -------------
Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest                                                                 $        12          $        91
                                                                               ===========          ===========
      Income taxes                                                             $         -          $         8
                                                                               ===========          ===========

Supplemental disclosure of non-cash investing and financing activities:
    Acquisition of equipment under capital leases                              $         -          $        29








                        See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                                      6

<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006
                                   (Unaudited)

1.       BASIS OF PRESENTATION

         The condensed consolidated financial statements include the accounts of
netGuru, Inc. and its subsidiaries (the "Company"). All significant transactions
among the consolidated entities have been eliminated upon consolidation.

         These condensed consolidated financial statements have been prepared by
the Company and include all normal and recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position at June 30, 2006 and the results of operations and the cash flows for
the three months ended June 30, 2006 and 2005, 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 accounting principles
generally accepted in the United States of America, ("GAAP") for annual
consolidated financial statements. Results of operations for the three months
ended June 30, 2006 are not necessarily indicative of the results to be expected
for the full year ending March 31, 2007 or any other period. It is suggested
that the accompanying condensed consolidated financial statements be read in
conjunction with the Company's audited consolidated financial statements
included in the Company's annual report on Form 10-KSB for the fiscal year ended
March 31, 2006.

         The preparation of financial statements in conformity with GAAP
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.

         On November 18, 2005, the Company completed its sale of the assets of
its Research Engineers International ("REI") business and STAAD product lines to
privately-held Bentley Systems, Incorporated ("Bentley") for $23.5 million. On
January 5, 2006, the Company sold its France subsidiary to Mr. Badreddine Ziane
for approximately $100,000. As such, unless otherwise noted, all amounts
presented, including all note disclosures, contain only information related to
the Company's continuing operations. In accordance with GAAP, the balance sheet
at March 31, 2006 has been reclassified to reflect the assets and liabilities of
the India subsidiary and operations as held for sale. Additionally, the
statements of operations and cash flows have been reclassified to reflect the
results of the REI business and STAAD product lines, the France subsidiary, and
the India subsidiary as discontinued for the periods presented.

         The special committee appointed by netGuru's board of directors has
been evaluating strategic alternatives and options for the Company and its
information technology, Web 4, and engineering business process outsourcing
businesses since November 2005. Discussions with a number of public and private
entities continue to be held involving potential asset purchases, common stock
purchases, and reverse mergers. The Board of Directors has determined that there
is a reasonable probability that the entire India operations of the Company will
be sold and therefore this asset of the Company is classified as an asset held
for sale.

                                       7

<PAGE>

         Certain reclassifications have been made to the fiscal 2006 condensed
consolidated financial statements to conform to the fiscal 2007 presentation.
The primary reclassifications relate to the separate reporting for the
discontinued operations of the REI business and STAAD product lines, the France
subsidiary, and the India subsidiary (note 13).

2.       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. At June 30, 2006, the Company's
management believed the carrying amounts of cash and cash equivalents,
receivable and payable amounts, and accrued expenses approximated fair value
because of the short maturity of these financial instruments. The Company's
management also believed that the carrying amounts of its capital lease
obligations approximated their fair values, as the interest rates approximated a
rate that the Company could have obtained under similar terms at the balance
sheet date.

3.       REVENUE RECOGNITION

         The Company recognizes revenue when the following criteria are met: (1)
persuasive evidence of an arrangement, such as agreements, purchase orders or
written or online requests, exists; (2) delivery has been completed and no
significant obligations remain; (3) the Company's price to the buyer is fixed or
determinable; and (4) collection is reasonably assured. The Company's revenues
arise from the following segments: collaborative software products and services
and IT services.

         Revenue from software sales is recognized upon shipment if no
significant post-contract support obligations remain outstanding and collection
of the resulting receivable is reasonably assured. Customers may choose to
purchase maintenance contracts that include telephone, e-mail and other methods
of support, and the right to unspecified upgrades on a when-and-if available
basis. Revenue from these maintenance contracts is deferred and recognized
ratably over the life of the contract, usually twelve months.

         In October 1997, the Accounting Standards Executive Committee ("AcSEC")
of the AICPA issued Statement of Position ("SOP") 97-2, "Software Revenue
Recognition." 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
determines the fair value of each element in multi-element transactions based on
vendor-specific objective evidence ("VSOE"). VSOE for each element is based on
the price charged when the same element is sold separately.

         In 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions," which modified SOP
97-2 to allow for use of the residual method of revenue recognition if certain
criteria have been met. If evidence of fair value of all undelivered elements
exists but evidence does not exist for one or more delivered elements, then
revenue is recognized using the residual method. Under the residual method, the
fair value of the undelivered elements is deferred and the remaining portion of
the transaction fee is recognized as revenue.

         The Company sells its collaborative software along with a maintenance
package. This constitutes a multi-element arrangement. The price charged for the
maintenance portion is the same as when the maintenance is sold separately. The
fair values of the maintenance contracts sold in all multi-element arrangements
are recognized over the terms of the maintenance contracts. The collaborative
software portion is recognized when persuasive evidence of an arrangement exits,
price is fixed and determinable, when delivery is complete, collection of the
resulting receivable is reasonably assured and no significant obligations
remain.

                                       8

<PAGE>

         Revenues from providing IT services are recognized primarily on a time
and materials basis, with time at a marked-up rate and materials and other
reasonable expenses at cost, once the services are completed and no significant
obligations remain. Certain IT services contracts are fixed price contracts
where progress toward completion is measured by mutually agreed upon
pre-determined milestones for which the Company recognizes revenue upon
achieving such milestones. Fixed price IT contracts are typically for a short
duration of one to nine months. The Company did not have any fixed price
contracts at June 30, 2006. Other products and services sold via Internet
portals, where the Company is an agent, are recognized net of purchase costs
when the products and services are delivered and collection is reasonably
assured.

4.       CONCENTRATION OF SALES AND CREDIT RISK

         The Company is subject to credit risk primarily through its accounts
receivable balances. The Company does not require collateral for its accounts
receivable balances. Four of the Company's customers each accounted for more
than 10% of the Company's consolidated net sales during the three months ended
June 30, 2006. Deutsche Rentenversicherung Bund, Post Industrial Technologies,
Inc, Course Technology, Inc., and BBK Healthcare, Inc. accounted for
approximately 26.1%, 11.6%, 13.9%, and 10.7%, respectively, of the Company's
consolidated net sales for the three months ended June 30, 2006. During the
three months ended June 30, 2005, Sharp Laboratories of America, Course
Technology, and Deutsche Bank accounted for approximately 12.3%, 17.7%, and
15.9%, respectively, of the Company's consolidated net sales. No other customers
accounted for more than 10% of the Company's consolidated net sales during those
periods.

5.       DEFERRED REVENUES

         The Company defers revenues for its maintenance contracts and for its
collaborative software sales that are not considered earned. The Company defers
its maintenance revenues when the maintenance contracts are sold, and then
recognizes the maintenance revenues over the term of the maintenance contracts.
The Company defers its collaborative software sales revenues if it invoices or
receives payment prior to the completion of a project, and then recognizes these
revenues upon completion of the project when no significant obligations remain.

6.       LONG-TERM DEBT

         On November 18, 2005, the Company used part of the sale proceeds it
received from Bentley pursuant to the Asset Purchase Agreement described in note
13 to pay the remaining total outstanding debt and accrued interest in the
amount of approximately $2.25 million owed to Laurus Master Fund, Ltd., then a
secured creditor and beneficial owner of more than 5% of the Company's
outstanding common stock ("Laurus"). Upon receiving payment in full for all of
the Company's obligations under the convertible promissory notes held, Laurus
released all UCC filings against assets of the Company. In addition, the
revolving credit facility described below was terminated.

         REVOLVING CREDIT FACILITY

         On July 31, 2003, the Company obtained a three-year, renewable,
$4,000,000 revolving accounts receivable credit facility from Laurus
("Facility"). The amount available under this Facility was reduced by the
balance outstanding on the Amended and Restated 2003 Note (defined below).

         On November 18, 2005, this Facility was terminated after the entire
outstanding debt balance for the Amended and Restated 2003 Note and 2004 Note
were paid off. As of that date the Company had no borrowings under the Facility.

                                       9

<PAGE>

         2003 NOTE

         On April 27, 2004, the Company amended and restated the 2003 Note to
reflect an additional $1,000,000 that it borrowed on April 27, 2004, so that the
principal amount of the 2003 Note was increased to $2,400,000 from $1,400,000
(the "Amended and Restated 2003 Note").

         As of November 18, 2005, there was an outstanding principal balance of
$1,310,000 and accrued interest of approximately $5,000 for the 2003 Note. On
November 18, 2005, the Company paid the entire amount of outstanding debt and
accrued interest for the 2003 Note.

         2004 NOTE

         On December 23, 2004 ("Closing Date"), the Company entered into a
Securities Purchase Agreement ("2004 Agreement") with Laurus. Pursuant to the
2004 Agreement, the Company sold to Laurus a secured convertible note in the
original principal amount of $1,000,000 ("2004 Note") that was scheduled to
mature on December 23, 2007 ("Maturity Date").

         As of November 18, 2005, there was an outstanding principal balance of
$850,000 and accrued interest of approximately $3,000 on the 2004 Note. On
November 18, 2005, the Company paid the entire amount of outstanding debt and
accrued interest on the 2004 Note.

7.       STOCK-BASED COMPENSATION

         The Company's 1996, 1997, 1998, 2000, and 2003 Stock Option Plans,
which are shareholder-approved, permit the grant of stock options as either
incentive or non-qualified to eligible directors, officers, employees and, in
certain cases, consultants, of the Company and its subsidiaries. Option awards
are generally granted with an exercise price equal to or greater than the market
price of the Company's stock at the date of grant. Options under all plans
generally vest over three years, though the vesting periods may vary from option
to option, and are exercisable subject to continued service and other
conditions.

         Effective the beginning of the first quarter of fiscal year 2007, the
Company adopted the provisions of SFAS No. 123(R), "Share-Based Payment", using
the modified-prospective transition method. Under this method, prior period
financial statements will not be restated but disclosure of the pro forma net
loss calculation will be included in the footnotes to the financial statements
for periods prior to fiscal 2007 and the adoption of SFAS 123(R). The provisions
of SFAS 123(R) apply to new stock options issued on or after the adoption date
and stock options outstanding, but not yet vested, on the adoption date. SFAS
123 (R) requires the Company to estimate future forfeitures of stock based
compensation, while the pro forma disclosure for the three months ended June 30,
2005 includes only those options that had been forfeited during that period. As
of March 31, 2006, there were no options outstanding and unexercisable under any
of the employee stock option plans. There were no stock option grants during the
three months ended June 30, 2006; accordingly, there was no determination of
fair value or stock-based compensation expense recorded during this period.

         Prior to April 1, 2006, the Company measured stock compensation expense
using the intrinsic value method of accounting in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations (APB No. 25). Stock-based compensation was
previously recognized on stock options issued to employees only if the option
exercise price was less than the market price of the underlying stock on the
date of grant. During the three months ended June 30, 2005, no stock-based
compensation was recorded under the intrinsic value method. Results for prior
periods have not been restated.

                                       10

<PAGE>

         The following represents pro forma information as if the Company
applied the fair value method of accounting for stock-based compensation in
accordance with SFAS No. 123 during the first quarter of fiscal 2006 (in
thousands, except amounts per share):

                                                              THREE MONTHS ENDED
                                                                JUNE 30, 2005
                                                                --------------

       Net loss - as reported                                   $        (334)

       Deduct:  Stock-based compensation expense determined
           under the fair value based method for all awards,
            net of tax                                                     36
                                                                --------------
       Net loss - pro forma                                     $        (370)
                                                                ==============
       Basic and diluted net loss per share -
           as reported                                          $       (0.02)
                                                                ==============
            pro forma                                           $       (0.02)
                                                                ==============
       Weighted average fair value of options granted           $           -
                                                                ==============


         The fair value of stock options granted during the periods indicated
has been determined using the Black-Scholes option pricing model. The
weighted-average assumptions used in estimating the fair value of stock options
granted during the period, along with the weighted-average grant date fair
values, were as follows:

                                                             THREE MONTHS ENDED
                                                                JUNE 30, 2005
                                                             -------------------
       Black-Scholes option pricing model assumptions:
                Dividend yield                                        --
                Expected volatility                                81.0%
                Risk-free interest rate                             4.26
                Expected option lives (in years)                    7.01
                Expected forfeiture rate                              --

         No dividend yield is expected since the Company has never paid cash
dividends and has no present intention to pay cash dividends. The expected
volatility is based on the historical volatility of our common stock over the
period commensurate with the expected life of the options. The risk-free
interest rate is based on the implied yield currently available on U.S Treasury
securities with an equivalent remaining term. The expected life represents the
period the Company's stock-based award are expected to be outstanding, giving
consideration to the contractual terms of the stock-based awards and vesting
schedules. The forfeiture rate is an estimate of the percentage of granted stock
options that will be cancelled prior to becoming vested. The Company has
estimated this to be 0% because of the historically small amount of forfeitures
in the prior periods.

8.       FOREIGN CURRENCY TRANSLATION

         The financial condition 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 United States dollars (the reporting currency) at the exchange rate in
effect at the end of the interim period. Statements of operations accounts are


                                       11

<PAGE>

translated at the average rate of exchange prevailing during the respective
interim periods. Translation adjustments arising from the use of differing
exchange rates from period to period are included in accumulated other
comprehensive income (loss) in the consolidated balance sheet. Gains and losses
resulting from foreign currency transactions are included in operations and were
not material to the first quarters of fiscal 2007 and 2006.

9.       COMPREHENSIVE INCOME (LOSS)

         The Company applies the provisions of SFAS No. 130, "Reporting
Comprehensive Income," which prescribes rules for the reporting and display of
comprehensive income (loss) and its components. SFAS No. 130 requires foreign
currency translation adjustments, which are reported separately in stockholders'
equity, to be included in other comprehensive income (loss). Total comprehensive
loss was $472,000 and $373,000 for the quarters ended June 30, 2006 and 2005,
respectively.

10.      NET LOSS PER SHARE

         Basic earnings (loss) 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.

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

<TABLE>
                                                                                 THREE MONTHS ENDED
                                                                                      JUNE 30,
                                                                         --------------------------------
                                                                               2006              2005
                                                                         --------------    --------------
<S>                                                                      <C>               <C>
         Numerator:
         Net loss and numerator for basic and diluted loss per
         share                                                           $        (452)    $        (334)
                                                                         ==============    ==============

         Denominator:
         Denominator for basic net loss per share - average
            number of common shares outstanding during the period               19,235            19,117
         Incremental common shares attributable to exercise of
            outstanding options, warrants and other common stock
            equivalents                                                              -                 -
         Denominator for diluted net loss per share                             19,235            19,117
                                                                         ==============    ==============

         Basic and diluted net loss per share                            $       (0.02)    $       (0.02)
                                                                         ==============    ==============
</TABLE>

         Options, warrants and other common stock equivalents amounting to
35,976 and 1,977,000 potential common shares were excluded from the computations
of diluted EPS for the quarters ended June 30, 2006 and 2005, respectively,
because the Company reported net losses and, therefore, the effect would have
been anti-dilutive. Potential common shares amounting to 1,975,000 from the
possible conversion of the convertible notes issued to Laurus were excluded from
the computation of diluted loss per share for the quarter ended June 30, 2005,
as their effect would have been anti-dilutive.

                                       12

<PAGE>

11.      SEGMENT AND GEOGRAPHIC DATA

         The Company is an integrated Internet and information technology ("IT")
and services company. The Company's operating segments are:

         o        Collaborative software products and services; and
         o        IT services.

         The Company applies the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 requires
segments to be determined and reported based on how management measures
performance and makes decisions about allocating resources. The Company's
management monitors unallocable expenses related to the Company's corporate
activities in a separate "Center," which is reflected in the tables below.

         The significant components of worldwide operations by reportable
operating segment are:

<TABLE>
                                                             THREE MONTHS ENDED JUNE 30,
                                                         ----------------------------------
                                                               2006             2005
                                                         ---------------- -----------------
                                                                  (IN THOUSANDS)
<S>                                                      <C>               <C>
          NET REVENUE
              Collaborative software products and
                services                                 $           450   $           242
              IT services                                            420               554
                                                         ---------------- -----------------
                   Consolidated                          $           870   $           796
                                                         ================ =================

          GROSS PROFIT
              Collaborative software products and
                services                                 $           396   $           241
              IT services                                            113               166
                                                         ---------------- -----------------
                   Consolidated                          $           509   $           407
                                                         ================ =================

          OPERATING LOSS
              Collaborative software products and
                services                                 $           159   $            17
              IT services                                             11                63
              Center                                                (541)             (361)
                                                         ---------------- -----------------
                   Consolidated                          $          (371)  $          (281)
                                                         ================ =================


         The Company's operations are based in the United States and Germany. The
following are significant components of revenue by geographic location:

                                                                THREE MONTHS ENDED
                                                                     JUNE 30,
                                                         -------------------------------
                                                               2006           2005
                                                         --------------- ---------------
                                                                 (IN THOUSANDS)
                NET REVENUE
                United States                            $           544 $           676
                Europe                                               308              65
                Asia-Pacific                                          18              55
                                                         --------------- ---------------

                         Consolidated                    $           870 $           796
                                                         =============== ===============

                EXPORT SALES
                United States                            $            19 $            86
                                                         =============== ===============

                                       13

<PAGE>

                                                                      AS OF
                                                         -------------------------------
                                                             JUNE 30,       MARCH 31,
                                                               2006           2006
                                                         --------------- ---------------
                                                                 (IN THOUSANDS)
                LONG-LIVED ASSETS
                United States                            $           226 $           257
                Europe                                                30              31
                                                         --------------- ---------------

                         Consolidated                    $           256 $           288
                                                         =============== ===============
</TABLE>

12.      CONTINGENCIES

         RESEARCH ENGINEERS LTD. (FORMERLY RESEARCH ENGINEERS PRIVATE LTD.) V.
         VITAL COMMUNICATIONS, AND VITAL COMMUNICATIONS V. RESEARCH ENGINEERS
         LTD.

         The Company's majority-owned India-based subsidiary, Research Engineers
Ltd. (formerly Research Engineers Private Limited ("REPL"), is a plaintiff in a
civil action commenced by REPL and is a defendant in a counter suit by Vital
Communications stemming from actions in 2001 in Tiz Hazari Court, India and
Delhi High Court, India, SUIT NO. 256 OF 2001 LYING PENDING AT THE HIGH COURT OF
DELHI, INDIA.

         In the actions, REPL alleges causes of action for breach of contract
and seeks alleged damages of approximately $450,000. Vital Communications denies
any breach of contract or other wrongdoing and/or contends and alleges that REPL
is in breach of contract and is demanding $1,350,000 in damages. The Company
further denies that Vital Communications is entitled to the claimed damages.

         Both REPL and Vital Communications are engaged in settlement
discussions. No reserves regarding this dispute have been recorded under accrued
expenses in the June 30, 2006 consolidated balance sheet.

         AUTODESK, INC. V. NETGURU SYSTEMS LIMITED AND REPL
         (NETGURU SYSTEMS LIMITED WAS AMALGAMATED INTO REPL)

         REPL was a defendant in a civil action commenced against it by
plaintiff Autodesk, Inc. ("Autodesk") on May 4, 2006, SUIT NO. 752 OF 2006, IN
THE HIGH COURT OF DELHI, INDIA. In the action, plaintiff alleged infringement of
copyright on account of unlicensed use of software programs being utilized by
defendant.

         On June 29, 2006, REPL entered into a deed of settlement agreement with
Autodesk, Inc whereby REPL would purchase all software programs allegedly being
used and would agree to periodic audits by plaintiff over a period of 12 months.
The agreement called for a payment of 5 million rupees for the purchase of the
software and 1 million rupees towards legal fees, for a total of 6 million
rupees, which is $131,600. As of March 31, 2006, the Company accrued $120,000
for the settlement of this lawsuit. The entire payment of $131,600 was paid in
July 2006 and the remaining expense of approximately $12,000 was recorded during
the three months ended June 30, 2006.

                                       14

<PAGE>

         OTHER LITIGATION

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

13.      DISCONTINUED OPERATIONS

         On November 18, 2005, the Company completed the sale of assets of its
REI business and STAAD product lines to Bentley for $23.5 million in cash. In
November 2005, the Company set aside a cash reserve of $1.07 million in
accordance with the asset sale agreement with Bentley. As of May 17, 2006 the
sum of the prepaid assets assigned to Bentley at closing and the assigned
accounts receivable for which payments have been received by Bentley was less
than the aggregate amount of the assumed current liabilities, which resulted in
a shortfall of approximately $760,000. Per the asset sale agreement, the Company
was obligated to pay the amount of the shortfall to Bentley. The entire amount
of the shortfall was recorded under accrued settlement for REI sale on the
balance sheet as of March 31, 2006 and was subsequently paid out in May 2006.

         The special committee appointed by netGuru's board of directors has
been evaluating strategic alternatives and options for the Company and its
information technology, Web 4, and engineering business process outsourcing
businesses since November 2005. Discussions with a number of public and private
entities continue to be held involving potential asset purchases, common stock
purchases, and reverse mergers. The Board of Directors has determined that there
is a reasonable probability that the entire India operations of the Company will
be sold and therefore this asset of the Company is classified as an asset held
for sale.

         On January 5, 2006, the Company sold its France subsidiary to Mr.
Badreddine Ziane for approximately $100,000. The France subsidiary was in the
business of selling the Company's STAAD structural analysis and design product
lines and provided technical support and maintenance for their customers. Mr.
Ziane agreed to purchase all the outstanding shares of the subsidiary and has
indicated that he intends to sell the REI products and offer related consulting
services as an independent contractor to Bentley. Per the agreement, $65,000 was
due upon signing of the agreement and $35,000 is due over the next 6 months. As
of June 30, 2006, the Company had received $65,000 and had a remaining balance
of $35,000 recorded under note receivable on the balance sheet as of June 30,
2006. In July 2006, the Company received another payment of approximately
$12,000, leaving a balance of approximately $23,000 still due.

         The Company's condensed consolidated financial statements have been
reclassified for all periods presented to reflect the India subsidiary, REI
business, and France subsidiary as discontinued operations. The Company first
reflected the REI business and France subsidiary operations as discontinued in
the second quarter of fiscal 2006 and the India subsidiary and operations as
discontinued in the first quarter of fiscal 2007 when the Company decided to
sell those respective operations. In accordance with GAAP, the revenues, costs,
and expenses directly associated with those businesses have been reclassified as
discontinued operations on the condensed consolidated statements of operations
for all periods presented. Corporate expenses such as general corporate overhead
and interest have not been allocated to discontinued operations. Additionally,
assets and liabilities of the India subsidiary have been reclassified as held
for sale on the Company's condensed consolidated balance sheets for all periods
presented, and the Company's condensed consolidated statements of cash flows
have been reclassified to reflect the operations of the India subsidiary, REI
business, and France subsidiary as discontinued operations for all periods
presented. There were no assets or liabilities held for sale for the REI
business or France subsidiary for the periods presented due to the fact that
these businesses were sold prior to the Company's prior year end of March 31,
2006.

                                       15

<PAGE>

         The carrying value of the assets and liabilities held for sale of the
discontinued India subsidiary included in the consolidated balance sheets are as
follows:


                                                         JUNE 30,     MARCH 31,
                                                           2006         2006
                                                       -----------  -----------

    Cash and cash equivalents                          $       290  $       251
    Restricted cash                                             51          147
    Accounts receivable, net                                   228          276
    Deposits                                                    46           69
    Prepaid expenses and other current assets                  538          515
                                                       -----------  -----------
           Total current assets                              1,153        1,258

Property and equipment, net                                    842          875
                                                       -----------  -----------
                                                       $     1,995  $     2,133
                                                       ===========  ===========

    Current portion of capital lease obligations       $        18  $        18
    Current portion of long term debt, net of discount          52           57
    Accounts payable                                            57          109
    Accrued expenses                                           272          458
    Income taxes payable                                         8            8
    Deferred revenues                                            8            9
                                                       -----------  -----------
           Total current liabilities                           415          659

Capital lease obligations, net of current portion               36           41
Long term debt, net of current portion and discount              -           17
                                                       -----------  -----------
           Total liabilities                           $       451  $       717
                                                       ===========  ===========

                                       16

<PAGE>

        The net revenues, net income (loss), gain on sale, and income tax
expense of the Company's discontinued operations, were as follows:

                                                      THREE MONTHS ENDED
                                                           JUNE 30,
                                              ----------------------------------
                                                   2006                 2005
                                              --------------      --------------

Net revenues:
    India subsidiary                                    195                 197
    REI business                                          -               2,607
    France subsidiary                                     -                 167
                                              --------------      --------------
                                              $         195       $       2,971

Net (loss) income from operations of:
    India subsidiary                                   (110)               (271)
    REI business                                         28                 340
    France subsidiary                                     -                  11
                                              --------------      --------------
                                              $         (82)      $          80


                                       17

<PAGE>

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

     FORWARD-LOOKING STATEMENTS

         This report contains 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. We intend that the forward-looking
statements be subject to the safe harbors created by those sections. The
forward-looking statements generally include the plans and objectives of
management for future operations, including plans and objectives relating to our
future economic performance, and can generally be identified by the use of the
words "believe," "intend," "plan," "expect," "forecast," "project," "may,"
"should," "could," "seek," "pro forma," "goal," "estimates," "continues,"
"anticipate" and similar words. 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 continue as a going concern;
         o        Our ability to obtain additional debt or equity financing to
                  the extent needed for our continued operations or for planned
                  expansion, particularly if we are unable to attain and
                  maintain profitable operations in the future;
         o        Our ability to successfully implement our business plans,
                  including the possible divestiture of some or all remaining
                  operations, and the possibility of a corporate merger or
                  strategic acquisition;
         o        Our ability to attract and retain strategic partners and
                  alliances;
         o        Our ability to hire and retain qualified personnel;
         o        The risks of uncertainty of protection of our intellectual
                  property;
         o        Risks associated with existing and future governmental
                  regulation to which we are subject; and
         o        Uncertainties relating to economic conditions in the markets
                  in which we currently operate and in which we intend to
                  operate in the future.

         These forward-looking statements necessarily depend upon assumptions
and estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the
forward-looking statements. We do not undertake to update, revise or correct any
forward-looking statements.

         Any of the factors described above or in the "Risk Factors" section of
our latest annual report on Form 10-KSB or our other filings could cause our
financial results, including our net income (loss) or growth in net income
(loss) to differ materially from prior results, which in turn could, among other
things, cause the price of our common stock to fluctuate substantially.

     OVERVIEW

         We operate in the following two business segments:

         o        Document-centric collaborative software products and services
                  for businesses worldwide; and
         o        Information technology ("IT") services.

                                       18

<PAGE>

         Our net revenues from continuing operations during the three months
ended June 30, 2006 were $870,000, an increase of $74,000 (9.3%) over the
corresponding prior year period, of which collaborative software products and
services net revenues increased $208,000 (86.0%), and IT services net revenues
declined $134,000 (24.2%).

         COLLABORATIVE SOFTWARE

         Once installed at a host location, our eReview collaborative software
enables a host and other participants to engage in real-time Web-based
conferencing and document sharing anywhere and anytime in over 150 widely used
document formats. eReview allows our customers to bridge physical distances in
their global business environments by enabling decision makers to communicate
without costly and time consuming travel to geographically dispersed locations.
Complementing eReview, our WebWorks software provides comprehensive
project-based document and team management functions. Our collaborative products
can be implemented as stand-alone enterprise solutions or as an integrated
system working in concert with other products.

         We have also developed workflow management solutions by embedding our
collaborative software in the software of our major original equipment
manufacturer, or OEM, partners, who then market the combined solution to their
customers. Some of our OEM partners are Fuji Xerox, CMStat and, Service Point.
We are also working closely with both FileNet and Oracle to develop integrations
with their document collaboration tools.

         We generate revenues from software licensing fees and annual support
fees established at the time of the initial contract. Most of our customers who
purchase eReview buy a site license to cover the entire company's requirements.
Our primary sales strategy for our collaborative software is to develop close
relationships with our OEM partners and create recurring revenues through
royalties and maintenance.

         IT SERVICES

         We offer our IT services through our service office located in Boston,
Massachusetts. We provide IT 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. When we provide on-site consulting
services, we bill our clients on a time and materials basis. Our goal is to
migrate our staffing model to a project-based on-site/off-site model where most
of the work is done by our lower cost off-site centers in India or by our
outside contractors in Russia.

         We were chosen as the global technology partner by BBK Healthcare to
create their latest version of TrialCentralNet portal application for clinical
study team collaboration. This project was done by our netGuru IT services group
using the above-mentioned on-site/off-site model.

         As a result of the steep decline in the IT services net revenues, we
scaled back our domestic IT services operations in fiscal 2004. For the past
several years, the IT services industry has been adversely affected by a slow
economy and many of our customers reduced, and continue to reduce, spending on
technology consulting and systems integration services. We anticipate that
revenue from IT services will now stabilize and remain at approximately current
levels.

     PENDING SALE OF INDIA SUBSIDIARY

         The special committee appointed by our board of directors has been
evaluating strategic alternatives and options for our information technology,
Web 4, and engineering business process outsourcing businesses since November
2005. Discussions with a number of public and private entities continue to be


                                       19

<PAGE>

held involving potential asset purchases, common stock purchases, and reverse
mergers. Our Board of Directors has determined that there is a reasonable
probability that our entire India operations will be sold and therefore this
asset is classified as an asset held for sale.

         During the three months ended June 30, 2006, we incurred certain
professional fees related to these strategic alternatives, which are included in
general and administrative expenses, aggregating approximately $144,000.

         Accordingly, the results of operations relating to our India subsidiary
are discussed below as discontinued operations.

     SALE OF REI BUSINESS AND STAAD PRODUCT LINES AND FRANCE SUBSIDIARY

         On November 18, 2005, we completed our sale of assets of our REI
business and STAAD product lines to Bentley for $23.5 million and recorded a net
gain of $21.6 million in the third quarter of fiscal 2006. On January 5, 2006,
we entered into an agreement with Mr. Badreddine Ziane to sell our France
subsidiary for approximately $100,000 and recorded a net loss of approximately
$120,000 during the three months ended March 31, 2006. Accordingly, the results
of operations relating to our REI business and STAAD product lines and France
subsidiary are discussed below as discontinued operations.

     CRITICAL ACCOUNTING POLICIES

         We have identified the following as accounting policies that are the
most critical to aid in understanding and evaluating our financial results:

         o        revenue recognition; and
         o        allowance for doubtful accounts receivable;

     REVENUE RECOGNITION

         We derive revenues from:

         o        Collaborative software products and services; and
         o        IT services.

         We recognize revenues when the following criteria are met:

         o        Persuasive evidence of an arrangement, such as agreements,
                  purchase orders or written or online requests, exists;
         o        Delivery has been completed and no significant obligations
                  remain;
         o        Our price to the buyer is fixed or determinable; and
         o        Collection is reasonably assured.

         We recognize revenues from software that we customize to fit a
customer's requirements based on satisfactory completion of pre-determined
milestones (evidenced by written acceptance from the customer) and delivery of
the product to the customer, provided no significant obligations remain and
collection of the resulting receivable is reasonably assured. Customers may
choose to purchase ongoing maintenance contracts that include telephone, e-mail


                                       20

<PAGE>

and other methods of support, and unspecified upgrades on a when-and-if
available basis. Revenue from the maintenance contracts is deferred and
recognized ratably over the life of the contract, usually twelve months.

         In 1997, the Accounting Standards Executive Committee ("AcSec") of the
American Institute of Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 97-2, "Software Revenue Recognition." SOP 97-2 distinguishes
between significant and insignificant vendor obligations as a basis for
recording revenue and requires that each element of a software licensing
arrangement be separately identified and accounted for based on relative fair
values of each element. We determine the fair value of each element in
multi-element transactions based on vendor-specific objective evidence ("VSOE").
VSOE for each element is based on the price charged when the same element is
sold separately.

         In 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2, "Software
Revenue Recognition, With Respect to Certain Transactions," which modified SOP
97-2 to allow for use of the residual method of revenue recognition if certain
criteria are met. If evidence of fair value of all undelivered elements exists
but evidence does not exist for one or more delivered elements, then we
recognize revenue using the residual method. Under the residual method, the fair
value of the undelivered elements is deferred, and the remaining portion of the
transaction fee is recognized as revenue.

         We recognize revenues from our IT services primarily on a time and
materials basis, with time at a marked-up rate and materials and other
reasonable expenses at cost, as we perform IT services. Certain IT services
contracts are fixed price contracts where we measure progress toward completion
by mutually agreed upon pre-determined milestones and recognize revenue upon
reaching those milestones. Our fixed price IT contracts typically are for a
short duration of one to nine months. We did not have any uncompleted fixed
price IT contracts at June 30, 2006.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

         We sell to our customers on credit and grant credit to those we deem
credit worthy based on our analysis of their credit history. We periodically
review our accounts receivable balances and the collectibility of those
balances. Based on our analysis of the length of time that the balances have
been outstanding, the pattern of customer payments, our understanding of the
general business conditions of our customers and our communications with our
customers, we estimate the recoverability of these balances. When recoverability
is uncertain, we record bad debt expense and increase the allowance for accounts
receivable by an amount equal to the amount estimated to be unrecoverable. If
the historical data we use to calculate the allowance provided for doubtful
accounts does not reflect our future ability to collect outstanding receivables,
additional provisions for doubtful accounts may be needed and our future results
of operations could be materially affected.

                                       21

<PAGE>

CONSOLIDATED RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2006 VERSUS
THREE MONTHS ENDED JUNE 30, 2005

     CONTINUING OPERATIONS

         NET REVENUES

         The following table presents our net revenues by segment (dollars in
thousands):

                                                        THREE MONTHS ENDED
                                                            JUNE 30,
                                               ---------------------------------
         NET REVENUE                                2006              2005
                                               ---------------   ---------------
             Collaborative software products
               and services                    $           450   $           242
             % of total net revenues                     51.7%             30.4%

             IT services                       $           420   $           554
             % of total net revenues                     48.3%             69.6%
                                               ---------------   ---------------

              Total net revenues               $           870   $           796
                                               ===============   ===============


         Net revenues for the three months ended June 30, 2006 increased by
$74,000 (9.3%), compared to the three months ended June 30, 2005. Our revenues
consisted of revenues from (1) collaborative software products and services, and
(2) IT services.

         COLLABORATIVE SOFTWARE PRODUCTS AND SERVICES

         Net revenues from collaborative software products and services for the
three months ended June 30, 2006 increased by $208,000 (86.0%) compared to the
three months ended June 30, 2005 primarily due to the completion and recognition
of one large collaborative software project in our Germany office during the
quarter representing approximately $227,000. Following the sale of our REI
business in November 2005, more focus has been concentrated on collaborative
software revenues in our Germany office, whereas prior to that, the majority of
our focus was on our REI revenues. The majority of our collaborative software
revenue is generated from service-oriented projects where the revenue is
recognized only upon completion of the entire project. The timing of completion
and recognition of revenue from our large projects creates variability in our
collaborative software net revenues between quarters.

         IT SERVICES

         The trend of decreasing IT services net revenues continued for the
three months ended June 30, 2006, compared to the same period in the prior
fiscal year. IT services net revenues decreased $134,000 (24.2%) for the three
months ended June 30, 2006, compared to the three months ended June 30, 2005.
Net revenues from IT services have decreased due to the scaling back of one of
our domestic IT services offices, a decrease in the number of customers, and a
decrease in the number of qualified employees available to staff various jobs.
For the past several years, the IT services industry has been adversely affected
by a slow economy and many of our customers reduced, and continue to reduce,
spending on technology consulting and systems integration services.

                                       22

<PAGE>

GROSS PROFIT AND GROSS MARGIN

         The following table presents our gross profit by segment and gross
profit as a percentage of each segment's net revenue, or gross margin (dollars
in thousands):

                                                         THREE MONTHS ENDED
                                                             JUNE 30,
                                                --------------------------------
                                                     2006             2005
                                                ---------------  ---------------
        GROSS PROFIT
            Collaborative software products
              and services                      $          396   $          241
            IT services                                    113              166
                                                ---------------  ---------------
                 Total gross profit             $          509   $          407
                                                ===============  ===============
        GROSS MARGIN
            Collaborative software products
              and services                               88.0%            99.6%
            IT services                                  26.9%            30.0%

                 Total gross margin                      58.5%            51.1%


         Consolidated gross margin increased to 58.5% for the three months ended
June 30, 2006 from 51.55% for the three months ended June 30, 2005 due to the
higher concentration of the higher gross margin from collaborative software
products and services compared to IT services.

         COLLABORATIVE SOFTWARE PRODUCTS AND SERVICES

         Our collaborative software products and services segment generally
produces a higher gross margin than our IT services segment due to the
relatively lower costs associated with each sale. Additionally, research and
development costs are typically written off when developing software and only
certain amounts are capitalized and subsequently amortized. The cost of net
revenues for the collaborative software products and services segment includes
royalty fees, salaries of the engineers working on specific service
customization jobs, and software amortization expense.

         Gross margin in the collaborative software products and services
segment decreased by 11.6 percentage points for the three months ended June 30,
2006 compared to the three months ended June 30, 2005. During the three months
ended June 30, 2006, cost of sales for the collaborative software products and
services segment included an increase of $39,000 for salaries of a few engineers
who worked on service- oriented collaborative software jobs that were not
underway in the prior year and an increase of $14,000 for royalties and
purchases made.

         IT SERVICES

         Gross margin in the IT services segment decreased by 3.1 percentage
points for the three months ended June 30, 2006 compared to the three months
ended June 30, 2005. IT services segment gross margin decreased due to an
increase in the number of employees that were idle and due to the fact that in
the prior period certain expenses such as insurance expense for the consultants
were not realized under cost of sales, whereas in the current period they were.
Historically, gross margin from the IT services segment has been lower than
gross margin from the collaborative software products and services segment due
to the higher cost of labor associated with IT services. The cost of net
revenues for IT services includes the salaries, bonuses, and benefits for the
consulting employees. Our IT services consultants generally receive higher
salaries than our technical support employees.

                                       23

<PAGE>

OPERATING EXPENSES

         The following table presents our operating expenses in dollars and as a
percentage of total net revenues (dollars in thousands):

                                                  THREE MONTHS ENDED
                                                      JUNE 30,
                                         -------------------------------------
                                               2006                2005
                                         -----------------   -----------------
        OPERATING EXPENSES
            Selling, general and
              administrative expenses    $             738   $             482
            % of total net revenues                  84.8%               60.6%

            Research and development     $             108   $             150
            % of total net revenues                  12.4%               18.8%

            Depreciation                 $              34   $              56
             % of total net revenues                  3.9%                7.0%

            Total operating expenses     $             880   $             688
            % of total net revenues                 101.1%               86.4%


         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative ("SG&A") expenses increased by
$256,000 (53.1%) for the three months ended June 30, 2006, compared to the three
months ended June 30, 2005 primarily due to the following:

         o        A $53,000 increase in employee salaries and taxes due to
                  additional sales employees hired, raises given, and a $32,000
                  bonus payment made to our Chief Financial Officer per his
                  employment agreement;
         o        A $75,000 increase in board compensation expenses due to an
                  additional $25,000 cash compensation paid to each of the three
                  members of the special committee in recognition of additional
                  efforts expensed by each member;
         o        A $68,000 increase in consulting and sales commission fees due
                  to commissions paid to an outside consultant for the
                  additional collaborative software revenue brought in to our
                  Germany office;
         o        A $47,000 increase in legal fees for additional work done
                  related to potential strategic transactions; and
         o        A $22,000 increase in traveling expenses due to increased
                  traveling by our sales departments and upper management to
                  promote sales growth and visit our India office.

                                       24

<PAGE>

         We anticipate our legal and professional fees will increase in the
second and third quarters of fiscal 2007 due to our efforts in connection with
potential strategic transactions. However, we are continuing to control and cut
costs where feasible and anticipate that our overall corporate overhead costs
may decrease during the fourth quarter of fiscal 2007.

         RESEARCH AND DEVELOPMENT EXPENSES

         Research and development ("R&D") expenses consist primarily of software
developers' wages. R&D expenses decreased by $42,000 (28.0%) to $108,000 for the
three months ended June 30, 2006 from $150,000 for the three months ended June
30, 2005. As a percentage of collaborative software net revenues, to which they
mostly relate, R&D expenses decreased to 24.0% for the three months ended June
30, 2006 from 62.0% for the same period in the prior year. The decrease in R&D
expenses is primarily due to many of our R&D developers working on actual
service projects for our customers, and, as a result, their costs were
re-classified to cost of sales. Total costs re-classified from research and
development expense to cost of sales were $39,000.

         DEPRECIATION

         Depreciation expenses (excluding amounts charged to cost of revenues)
decreased by $22,000 (39.3%) for the three months ended June 30, 2006, compared
to the three months ended June 30, 2005 due to the increased amount of fixed
assets becoming fully depreciated. We anticipate that depreciation expenses will
remain at this level through the end of fiscal 2007.

SEGMENT PROFITABILITY AND OPERATING INCOME (LOSS)

         During the three months ended June 30, 2006, consolidated operating
loss was $371,000 compared to a consolidated operating loss of $281,000 during
the three months ended June 30, 2005. Consolidated operating loss during the
three months ended June 30, 2006 consisted of operating income from the
collaborative software products and services segment and IT services segment,
offset by an operating loss from the corporate center. Operating income in the
collaborative software products and services segment was $159,000 during the
three months ended June 30, 2006 compared to operating income of $17,000 during
the three months ended June 30, 2005. Operating income in the IT services
segment during the three months ended June 30, 2006 was $11,000 compared to
operating income of $63,000 during the three months ended June 30, 2005.
Operating income in the collaborative software products and services segment
increased due to an increase in revenues from larger value projects being
completed. Operating income in the IT services segment decreased due to a
decrease in gross profit resulting from a decrease in the number of customers
and projects that caused a reduction in sales.

OTHER EXPENSE (INCOME)

         Other expense (income) decreased by $124,000 (100.8%) for the three
months ended June 30, 2006 compared to the three months ended June 30, 2005.
This decrease was due to our debt to Laurus Master Fund, Ltd. ("Laurus") and our
debt in our Indian subsidiary being paid off in November 2005. When the Laurus
debt was paid off, we expensed the remaining unamortized discount related to the
debt, and therefore there was no additional interest expense relating to Laurus
after November 2005. Total interest expense related to the Laurus debt was
approximately $111,000 for the three months ended June 30, 2005. Due to the
Laurus debt payoff, we anticipate our interest expense in fiscal 2007 will
decrease significantly from fiscal 2006 unless we engage in a transaction that
requires us to obtain additional debt financing.

                                       25

<PAGE>

         INCOME TAXES

         We recorded no income tax during the three months ended June 30, 2006
compared to an income tax expense of $10,000 for the three months ended June 30,
2005. Tax expense for the three months ended June 30, 2005 resulted from
provisions for domestic income taxes.

DISCONTINUED OPERATIONS

         On November 18, 2005, we completed the sale of our REI business and
STAAD product lines to Bentley for $23.5 million in cash. The asset sale
included the worldwide operations associated with REI, including the STAAD
structural analysis and design product line, software and product development,
customer support and relationships, and offices associated with the worldwide
business.

         The special committee appointed by our board of directors has been
evaluating strategic alternatives and options for our information technology,
Web 4, and engineering business process outsourcing businesses since November
2005. Discussions with a number of public and private entities continue to be
held involving potential asset purchases, common stock purchases, and reverse
mergers. Our Board of Directors has determined that there is a reasonable
probability that our entire India operations will be sold and therefore this
asset is classified as an asset held for sale.

         On January 5, 2006, we entered into a separate agreement with Mr.
Badreddine Ziane to sell the Company's France subsidiary for approximately
$100,000 and recorded a net loss of approximately $120,000. Our France
subsidiary was in the business of selling our STAAD structural analysis and
design product lines and provided technical support and maintenance for its
customers. Mr. Ziane agreed to purchase all the outstanding shares of the
subsidiary and he intends to sell the REI products and offer related consulting
services as an independent contractor to Bentley.

         In accordance with accounting principles generally accepted in the
United States, the revenues, costs, and expenses directly associated with the
India subsidiary, REI business, and France subsidiary have been reclassified as
discontinued operations on the condensed consolidated statements of operations
for all periods presented. Corporate expenses such as general corporate overhead
and interest have not been allocated to discontinued operations.

         Net loss from discontinued operations for the three months ended June
30, 2006 was $82,000 compared to a net income of $80,000 for the same period in
the prior year, a decrease of $162,000. Net loss for the three months ended June
30, 2006 comprised a net loss from our India subsidiary of $110,000, offset by a
net income from our REI business of $28,000. Net income in the prior year period
comprised net income of $351,000 from our REI business and France subsidiary,
offset by a net loss of $271,000 from our India subsidiary. The increase in the
net loss from discontinued operations was due primarily to the fact that there
were no REI operations during the three months ended June 30, 2006, other than
accounts receivable payments that came in relating to accounts that were
previously written off to bad debt expense, since the business was sold in
November 2005, compared to three months of income in the same period of the
prior year. This increase in net loss from discontinued operations was offset by
a decrease in net loss from our India subsidiary. Net loss from our India
subsidiary decreased $161,000 primarily due to a decrease of $206,000 in bad
debt expense.

                                       26

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Historically, we have relied upon cash from financing activities to
fund the majority of the cash requirements of our operating and investing
activities. We have not been able to generate sufficient cash from our operating
activities in the past, and there is no assurance we will be able to do so in
the future. Until the close of the sale of our REI business during the quarter
ended December 31, 2005, we financed our operations (including capital
expenditures) primarily through existing cash and cash equivalent balances and
issuance of convertible notes. As a result of the sale, we allocated a portion
of the $23.5 million sale proceeds to transaction costs, applicable taxes and
the retirement of approximately $3.3 million of outstanding debt. On December
29, 2005, we announced that our board of directors had approved a cash
distribution in the amount of $0.85 per share payable on January 27, 2006 to
stockholders of record as of January 17, 2006. The total amount that was
distributed on January 27, 2006 was approximately $16,250,000.

         Our principal sources of liquidity at June, 2006 consisted of
approximately $2.2 million of cash and cash equivalents. Cash and cash
equivalents decreased by approximately $300,000 during fiscal 2007. Total cash
provided by our continuing operations was $696,000 for the three months ended
June 30, 2006, compared to total cash used of $269,000 for the three months
ended June 30, 2005. Total cash used in our discontinued operations was $996,000
for the three months ended June 30, 2006, compared to total cash provided of
$555,000 for the three months ended June 30, 2005.

         Net cash used in continuing operations was $346,000 for the three
months ended June 30, 2006 compared to $144,000 for the three months ended June
30, 2005, an increase of $202,000. The primary reason for cash used in
operations during the current quarter was a net loss from continuing operations
of $370,000. In addition, the following contributed to cash usage for the three
months ended June 30, 2006:

         o        A $209,000 decrease in accrued expenses primarily due to
                  payment of year-end audit and tax fees and payment of lawsuit
                  settlements; and
         o        A $48,000 decrease in accounts payable due to a severance
                  payment being made.

          The above cash usages were primarily offset by the following
contributors to cash during the three months ended June 30, 2006:

         o        A $117,000 decrease in accounts receivable due to a large
                  payment received for a collaborative software contract, an
                  increased amount of payments received for our IT customers,
                  and a decrease in the overall level of sales in our IT
                  division;
         o        A $104,000 decrease in prepaid expenses and other current
                  assets due to the collection of other receivable balances that
                  were transferred back to us from Bentley resulting from our
                  shortfall payment to them; and
         o        A $70,000 increase in note receivables primarily due to a
                  payment made to us for the sale of the France subsidiary.

          The primary reason for cash used in operations during the three months
ended June 30, 2005 was net loss from continuing operations of $414,000 offset
by depreciation expense of $56,000 and amortization of discount on loan of
$53,000. In addition, the following contributed to the cash usage for the three
months ended June 30, 2005:

         o        A $215,000 decrease in accrued expenses due to payments made
                  for year-end audit and tax fees and legal fees; and
         o        A $104,000 decrease in deferred revenues due to the
                  recognition of a large collaborative software project that was
                  deferred at March 31, 2005.

                                       27

<PAGE>

         The above cash usages were primarily offset by the following
contributors to cash during the three months ended June 30, 2005:

         o        A $439,000 decrease in accounts receivable due to payments
                  received for three large collaborative software projects that
                  were billed at the end of the previous quarter.; and
         o        A $55,000 decrease in prepaid and other current assets due
                  primarily to a decrease in prepaid insurance payments and due
                  to payments received for the sale of our telecom division.

         Although we anticipate our cash needs will increase in the upcoming
quarters as a result of increases in expenses related to our efforts in
connection with potential strategic transactions, we believe that the proceeds
that remain from our sale of our REI business, together with our operating
revenues and the proceeds from the sale of our France subsidiary will be
adequate to cover these additional expenses at least through October 2006. We
believe we have adequate cash to operate and retire all outstanding obligations
through October 2006; however we will be able to operate much longer if lease
and other obligations are not retired at that time.

         Net cash provided by investing activities for the three months ended
June 30, 2006 was approximately $1.1 million compared to cash used in investing
activities of $2,000 for the three months ended June 30, 2005. Net cash provided
by investing activities primarily consisted of a decrease in restricted cash of
approximately $1.1 million due to the release of the cash reserve set aside for
the Bentley asset sale agreement after the shortfall settlement payment was made
in May 2006. As of May 17, 2006, the sum of the prepaid assets assigned to
Bentley at closing and assigned accounts receivable for which payments had been
received by Bentley was less than the aggregate amount of the assumed current
liabilities, which resulted in a shortfall of approximately $760,000. Per the
asset sale agreement, we were obligated to pay the amount of the shortfall to
Bentley in May 2006. The $760,000 payment is categorized under cash flows from
discontinued operations. Net cash used in investing activities for the three
months ended June 30, 2005 consisted of purchases for property, plant and
equipment.

         Net cash used in financing activities during the three months ended
June 30, 2006 was $29,000. Net cash used in financing activities primarily
resulted from payments of capital lease obligations. Cash used in financing
activities for the three months ended June 30, 2005 was due to $100,000 in
repayments of long-term debt and $32,000 in payments of capital lease
obligations, offset by borrowings of $48,000.

         On August 31, 2005, our board of directors formed a special committee
consisting of three independent board members. This special committee has been
evaluating the possible divestiture of some of or all of our remaining assets
and operations, as well as possible mergers and/or strategic acquisitions for
our company and our information technology, collaborative software, and EBPO
businesses. Discussions ensued with public and private entities involving
potential asset purchases, common stock purchases, and reverse mergers. Our
future capital requirements will depend upon many factors. These factors include
but are not limited to sales and marketing efforts, the development of new
products and services, possible future corporate mergers or strategic
acquisitions or divestitures, the progress of research and development efforts,
and the status of competitive products and services.

         To the extent we need any additional financing, we cannot assure you
that any such additional financing will be available to us on acceptable terms,
or will be available at all. In addition, any future financing may cause
significant dilution to existing stockholders. Because of this uncertainty,
our recurring losses from operations, excluding gains on the sale of
significant portions of our operating assets, our limited cash resources, our


                                       28

<PAGE>

accumulated deficit and the contemplated sale of additional operating assets,
among other factors, raised doubt about our ability to continue as a going
concern and led our independent registered public accounting firm to include an
explanatory paragraph related to our ability to continue as a going concern in
their report for the year ended March 31, 2006. Reports of independent auditors
questioning a company's ability to continue as a going concern generally are
viewed unfavorably by analysts and investors. This report may make it difficult
for us to raise additional debt or equity financing to the extent needed for our
continued operations or for planned expansion, particularly if we are unable to
attain and maintain profitable operations in the future. Consequently, future
losses may adversely affect our business, prospects, financial condition,
results of operations and cash flows. We urge potential investors to review the
report of our independent registered public accounting firm in our Annual 10-KSB
for the year ended March 31, 2006 and our consolidated financial statements
before making a decision to invest in netGuru.

         The following table summarizes our contractual obligations and
commercial commitments at June 30, 2006 (in thousands):

<TABLE>
                                                                         PAYMENTS DUE BY PERIOD
                                               ---------------------------------------------------------------------------
                                                            LESS THAN 1                                         AFTER 5
         CONTRACTUAL OBLIGATIONS                TOTAL           YEAR          2-3 YEARS        4-5 YEARS          YEARS
                                               --------     -------------    -------------   --------------     ----------
<S>                                            <C>          <C>              <C>             <C>                <C>
Capital Lease Obligations*                          273             150             123                -                -
Operating Leases                                     36              36               -                -                -
                                               --------     -------------    -------------   --------------     ----------
Total Contractual Cash Obligations             $    309     $       186      $      123      $         -        $       -
                                               ========     =============    =============   ==============     ==========
</TABLE>

* Represents future minimum lease payments excluding deductions for imputed
interest of $49.

                                       29

<PAGE>

ITEM 3.       CONTROLS AND PROCEDURES.

         We conducted an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer (our principal executive officer
and principal financial officer, respectively), of the design and operation of
our "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), as of June 30,
2006, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's ("SEC's") rules and forms, including to ensure that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that as of June 30, 2006, our disclosure
controls and procedures were not effective at the reasonable assurance level due
to the material weakness described below.

         A material weakness is a control deficiency (within the meaning of the
Public Company Accounting Oversight Board (United States) Auditing Standard No.
2) or combination of control deficiencies that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Management has identified as a
material weakness our need for additional staff with expertise in preparing
accounting estimates and performing reconciliation procedures relating to
inclusion of financial information in our consolidated financial statements.

                                       30

<PAGE>

         Our need for such additional staff resulted from the major sale of
assets we completed during the quarter ended December 31, 2005, which resulted
in our loss of accounting staff in our India and United States operations. We
have worked to remediate this weakness by using our remaining accounting staff,
temporary help and outside consulting services to perform additional manual
controls, procedures and analysis and other pre- and post-closing procedures
designed to ensure that our consolidated financial statements were prepared in
accordance with generally accepted accounting principles. Accordingly, we
believe that the consolidated financial statements included in this report
fairly present, in all material respects, our financial condition, results of
operations and cash flows for the periods presented. Management is unable,
however, to estimate our capital or other expenditures associated with
allocation of time of certain company personnel to assist us in performing the
additional controls and procedures or other expenditures relating to higher fees
paid to our independent auditors in connection with their review of this
remediation.

         The changes noted above, specifically, the changes relating to our use
of temporary help and outside consulting services to assist us in preparing our
consolidated financial statements and relating to our performance of additional
controls and procedures, are the only changes during the quarter ended June 30,
2006 in our "internal controls over financial reporting" (as defined in Rule
13a-15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.

                                       31

<PAGE>

                          PART II -- OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

         Legal proceedings, Ash Brahma, et al. v. netGuru, Inc and EOP Central
Park Plaza v. R-Cube Technologies, Inc. were both resolved and settled during
the three months ended June 30, 2006 as described in Part I, Item 3 of the Form
10-KSB for March 31, 2006 filed on June 29, 2006. The description in the Form
10-KSB is incorporated by reference.

RESEARCH ENGINEERS LTD. (FORMERLY RESEARCH ENGINEERS PRIVATE LTD.) V. VITAL
COMMUNICATIONS, AND VITAL COMMUNICATIONS V. RESEARCH ENGINEERS LTD.

         Our majority-owned India-based subsidiary, Research Engineers Ltd.
(formerly Research Engineers Private Limited, "REPL") is a plaintiff in a civil
action commenced by REPL and is a named defendant in a counter suit by Vital
Communications stemming from actions in 2001 in Tiz Hazari Court, India and
Delhi High Court, India, SUIT NO. 256 OF 2001 LYING PENDING AT THE HIGH COURT OF
DELHI, INDIA.

         In the actions, REPL alleges causes of action for breach of contract
and seeks alleged damages of approximately $450,000. Vital Communications denies
any breach of contract or other wrongdoing and/or contends and alleges that REPL
is in breach of contract and is demanding $1,350,000 in damages. We further deny
that Vital Communications is entitled to the claimed damages.

         Both REPL and Vital Communications are engaged in settlement
discussions. No reserves regarding this dispute have been recorded under accrued
expenses in the June 30, 2006 consolidated balance sheet.

AUTODESK, INC. V. NETGURU SYSTEMS LIMITED AND REPL.
(NETGURU SYSTEMS LIMITED WAS AMALGAMATED INTO REPL)

         REPL was a defendant in a civil action commenced against it by
plaintiff Autodesk, Inc. ("Autodesk") on May 4, 2006, SUIT NO. 752 OF 2006, IN
THE HIGH COURT OF DELHI, INDIA.In the action, plaintiffs alleged infringement of
copyright on account of unlicensed use of software programs being utilized by
the defendants.

         On June 29, 2006, REPL entered into a deed of settlement agreement with
Autodesk, Inc whereby they would purchase all software programs allegedly being
used and would agree to periodic audits by plaintiff over a period of 12 months.
The agreement called for a payment of $5 million rupees for the purchase of the
software and $1 million rupees towards legal fees, for a total of $6 million
rupees, which is $131,600. As of March 31, 2006, we accrued an estimated
$120,000 for the settlement of this lawsuit. The entire payment of $131,600 was
paid in July 2006 and the remaining expense of approximately $12,000 was
recorded during the three months ended June 30, 2006.

ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

         None.

                                       32

<PAGE>

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

         During the quarter ended June 30, 2006, no matters were submitted to a
vote of our common stockholders.

ITEM 5.       OTHER INFORMATION

         None.

ITEM 6.       EXHIBITS

Exhibit
Number   Description
------   -----------

   31.1       Certification of Chief Executive Officer required by Rule
              13a-14(a) of the Securities Exchange Act of 1934, as amended, as
              adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
              (1)

   31.2       Certification of Chief Financial Officer required by Rule
              13a-14(a) of the Securities Exchange Act of 1934, as amended, as
              adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
              (1)

   32         Certification of Chief Executive Officer and Chief Financial
              Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002 (1)

________________
(1) Attached as an exhibit to this Form 10-QSB








                                       33

<PAGE>


                                   SIGNATURES
                                   ----------

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

Date:  August 14, 2006                   NETGURU, INC.


                                         By:  /s/ BRUCE K. NELSON
                                              ----------------------------------
                                              Bruce K. Nelson
                                              Chief Financial Officer (principal
                                              financial officer and duly
                                              authorized officer)









                                       34

<PAGE>


            EXHIBITS ATTACHED TO THIS QUARTERLY REPORT ON FORM 10-QSB


Exh. No.                              Description
--------                              -----------

31.1     Certification of Chief Executive Officer required by Rule 13a-14(a) of
         the Securities Exchange Act of 1934, as amended, as adopted pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Certification of Chief Financial Officer required by Rule 13a-14(a) of
         the Securities Exchange Act of 1934, as amended, as adopted pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002

32       Certification of Chief Executive Officer and Chief Financial Officer
         pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
         of the Sarbanes-Oxley Act of 2002










                                       35