-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZmiAJPD7uDw3J4TsACIrMNUjeKWH16nLHMC1plQlkltvytZKxGncgH8/0VY2/8i /2S6HQunh4BQqke25PTsvQ== 0000891554-98-000097.txt : 19980129 0000891554-98-000097.hdr.sgml : 19980129 ACCESSION NUMBER: 0000891554-98-000097 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971110 ITEM INFORMATION: FILED AS OF DATE: 19980128 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOFTECH INC CENTRAL INDEX KEY: 0000354260 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 042453033 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-10665 FILM NUMBER: 98515285 BUSINESS ADDRESS: STREET 1: 3260 EAGLE PARK DRIVE N E CITY: GRAND RAPIDS STATE: MI ZIP: 49505 BUSINESS PHONE: 6169572330 MAIL ADDRESS: STREET 1: 3260 EAGLE PARK DRIVE N E CITY: GRAND RAPIDS STATE: MI ZIP: 49505 8-K/A 1 AMENDED FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- Form 8-K/A-2 CURRENT REPORT Pursuant to Section 13 of the Securities and Exchange Act of 1934 Date of Report: November 10, 1997 (Date of earliest event reported) SOFTECH, INC. (Exact Name of Registrant as Specified in Charter) Massachusetts 0-10665 04-2453033 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 3260 Eagle Park Drive N.E., Grand Rapids, Michigan 49525 (Address of Principal Executive Offices) (Zip Code) (616) 957-2330 (Registrant's telephone number, including area code) Item 7 is amended in its entirety as follows: ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Item 7(a): Financial Statements of Business Acquired. The financial statements of the business acquired which are included herein are summarized as follows: - The audited balance sheets of the Advanced Manufacturing Technology Group, the business acquired, as of March 31, 1997 and March 31, 1996 and the statements of operations and divisional equity and cash flows for the two years in the period ended March 31, 1997; - The unaudited balance sheet of the Advanced Manufacturing Technology Group as of September 30, 1997 and the statements of operations and divisional equity and cash flows for the six month periods ended September 30, 1997 and 1996. REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of CIMLINC Incorporated: We have audited the accompanying balance sheets of Advanced Manufacturing Technology Group, a division of CIMLINC Incorporated, as of March 31, 1997 and 1996 and the statements of operations and divisional equity and cash flows for the years then ended. These financial statements are the responsibility of CIMLINC's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Manufacturing Technology Group, a division of CIMLINC Incorporated, as of March 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG L.L.P. Grand Rapids, Michigan January 16, 1998 CIMLINC Incorporated Advanced Manufacturing Technology Group Statements of Operations and Divisional Equity For the years ended March 31, (in thousands) 1997 1996 ---- ---- Revenue Software $ 3,366 $ 3,542 Service 3,418 3,666 ------- ------- Total Revenue 6,784 7,208 ------- ------- Cost of sales Software 211 205 Service 1,139 1,091 ------- ------- Total cost of sales 1,350 1,296 ------- ------- Gross margin 5,434 5,912 Research and development 1,180 1,068 Selling, general and administrative 3,600 4,694 ------- ------- Income from operations 654 150 Provision for income taxes 39 9 ------- ------- Net income 615 141 Transfers to parent division (467) (330) Divisional equity (deficit), beginning of year (4) 185 ------- ------- Divisional equity (deficit), end of year $ 144 $ (4) ======= ======= The accompanying notes are an integral part of the financial statements. CIMLINC Incorporated Advanced Manufacturing Technology Group Balance Sheets As of March 31, (in thousands) Assets: 1997 1996 ---- ---- Current assets: Accounts receivable (less allowance of $186 and $167 in 1997 and 1996, respectively) $ 1,779 $ 1,829 Inventory 42 21 Prepaid expenses and other current assets 60 81 ------- ------- Total current assets 1,881 1,931 ------- ------- Equipment and leasehold improvements, at cost 1,053 1,050 Less accumulated depreciation (972) (947) ------- ------- Equipment and leasehold improvements, net 81 103 Other assets 5 10 ------- ------- $ 1,967 $ 2,044 ======= ======= Liabilities and Divisional Equity (Deficit): Current liabilities: Accounts payable $ 221 $ 259 Accrued compensation 267 330 Other accrued expenses and customer deposits 105 131 Deferred revenue 1,230 1,328 ------- ------- Total current liabilities 1,823 2,048 ------- ------- Commitments (Note C) Divisional equity (deficit) 144 (4) ------- ------- $ 1,967 $ 2,044 ======= ======= The accompanying notes are an integral part of the financial statements. CIMLINC Incorporated Advanced Manufacturing Technology Group Statements of Cash Flows For the years ended March 31, (in thousands) 1997 1996 ---- ---- Cash flows from operating activities: Net income $ 615 $ 141 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49 14 Changes in operating assets and liabilities: Accounts receivable 50 477 Inventory (21) (14) Prepaid expenses and other assets 26 (32) Accounts payable (38) 80 Accrued compensation (63) (129) Accrued expenses and customer deposits (26) (66) Deferred revenue (98) (75) ----- ----- Total adjustments (121) 255 ----- ----- Net cash provided by operating activities 494 396 ----- ----- Cash flows from investing activities Purchase of equipment and leasehold improvements (27) (66) ----- ----- Net cash used by investing activities (27) (66) ----- ----- Cash flows from financing activities: Transfers to parent division (467) (330) ----- ----- Net cash used by financing activities (467) (330) ----- ----- Net change in cash $ 0 $ 0 ===== ===== The accompanying notes are an integral part of the financial statements. ADVANCED MANUFACTURING TECHNOLOGY GROUP a division OF CIMLINC INCORPORATED NOTES TO FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: DESCRIPTION OF THE BUSINESS: The Advanced Manufacturing Technology Group (the "Division" or "AMT") is a division of CIMLINC Incorporated ("CIMLINC"). AMT is a group that targets its application software products to the mold and die industry. AMT has been operated as a separate profit center of CIMLINC since 1992. AMT's software products have been primarily targeted to the tier two automotive component suppliers in the U.S. marketplace that create molds and dies from electronic models. AMT's software technology enhances the efficiency of the mold building process by reducing project development time and costs and increasing the quality of molds and dies. BASIS OF PRESENTATION: These financial statements present the Division's results of operations and its financial position as it operated as a Division of CIMLINC. The financial statements for the fiscal years ended March 31, 1997 and 1996 include an allocation of certain corporate expenses associated with CIMLINC's financing of its working capital needs and certain corporate personnel as discussed in Note F. As a result, the financial statements presented may not be indicative of the results that would have been achieved had the Division operated as a non-affiliated, independent entity. INDUSTRY SEGMENT AND SIGNIFICANT CUSTOMER: The Division operates in one industry segment and is engaged in the development, sale and post sale support of off-the-shelf software for computer applications. No single customer accounted for more than 10% of the Division's revenue. CASH: CIMLINC has funded all of the Division's operations to date through its corporate cash balances. Accordingly, no current cash balances are presented in the accompanying financial statements. INVENTORY: Inventory consists of equipment purchased for resale and is stated at the lower of cost (first-in, first-out method) or market. EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Equipment and leasehold improvements are stated at cost. The Company provides for depreciation and amortization on a straight-line basis over the estimated useful lives of one to seven years. Maintenance and repairs are charged to expense as incurred; betterments are capitalized. At the time fixed assets are retired, sold, or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts. Any resulting gain or loss on disposal is credited or charged to income. INCOME TAXES: All of the Division's operations are included in the CIMLINC federal consolidated income tax return. The income taxes for the Division reported in the accompanying financial statements have been determined on a stand alone or separate return basis as required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under SFAS No. 109 deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. REVENUE RECOGNITION: Revenue from software license fees is recognized upon shipment of the software if there are no significant post delivery obligations and collectibility is reasonably assured. The costs expected to be incurred to satisfy insignificant contractual obligations are accrued at the time of revenue recognition. When significant post delivery obligations exist, revenue recognition is deferred until such obligations are satisfied. Revenue from software maintenance agreements and service contracts are deferred and amortized into income over the maintenance support period. Other service revenue is recognized when the services are performed and the revenue is earned. SOFTWARE DEVELOPMENT COSTS: In accordance with Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," certain software development costs are capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors, including but not limited to anticipated future gross revenues, estimated economic life and changes in software and hardware technology. In fiscal 1997 and 1996, no software development costs have been capitalized as development costs incurred subsequent to technological feasibility were not material. MANAGEMENT'S USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. B. INCOME TAXES: The provision for income taxes includes the following: For the years ended March 31, (in thousands) 1997 1996 ---- ---- Current: Federal $-- $-- State and local 39 9 --- --- 39 9 Deferred -- -- $39 $ 9 === === The Division's effective tax rates were 6% in 1997 and 1996. Reconciliations of the federal statutory rates to the effective rates were as follows: For the years ended March 31, 1997 1996 ---- ---- Statutory rate 34% 34% State and local taxes 6 6 Utilization of net operating loss and tax credit carryforwards (34) (34) ------ ------ Effective tax rates 6% 6% ====== ====== Deferred tax assets were comprised of the following at March 31: (in thousands) 1997 1996 ---- ---- Deferred tax assets: Net operating loss and tax credit carryforwards $3,348 $3,570 Accounts receivable and inventory valuation allowances 81 73 Expenses not deductible within period 65 60 ------ ------ Total deferred tax assets 3,494 3,703 Valuation allowance (3,494) (3,703) ------ ------ Net deferred tax asset $ -0- $ -0- ====== ====== Due to the uncertainty surrounding the realization of certain favorable tax attributes in future tax returns, the Division has established a valuation reserve equal to the deferred tax asset of CIMLNC. Net operating loss and tax credits of CIMLINC expire at various dates through 2012. C. COMMITMENTS: The Company leases its facilities and certain equipment under operating leases through 2001. Rental expense for fiscal years 1997 and 1996 was approximately $577,000 and $532,000, respectively. At March 31, 1997, minimum annual rental commitments under non-cancelable operating leases were as follows: Fiscal Year 1998 $ 313 1999 95 2000 32 2001 19 D. STOCK OPTIONS: Members of AMT management participate in CIMLINC stock option plans. Stock options are granted at fixed amounts at an amount equal to fair value and are accounted for under APB 25. Accordingly, no compensation cost has been recognized related to stock options in the financial statements. Had compensation cost been determined based on the fair value of the stock options at the grant date under Statement 123, the effect on reported net income would not have been material. E. GEOGRAPHIC INFORMATION: Information regarding geographic areas is as follows: United States England Germany Total ------ ------- ------- ----- Year ended March 31, 1997: Sales to unaffiliated customers $5,516 $1,059 $ 209 $6,784 Income from operations 173 394 87 654 Identifiable assets 1,585 288 94 1,967 Year ended March 31, 1996: Sales to unaffiliated customers 5,446 1,468 294 7,208 Income (loss) from operations (356) 424 82 150 Identifiable assets 1,551 374 119 2,044 F. ALLOCATIONS FROM CIMLINC INCORPORATED: Since the Division's inception, administrative support services have been provided by CIMLINC (parent division). For these services, the Division was charged $786,000 and $1,369,000 for the years ended March 31, 1997 and 1996, respectively. These charges represent a proportionate allocation of CIMLINC's consolidated corporate overhead costs using formulas which management believes are reasonable based upon the Division's use of such services. All other costs incurred during fiscal 1997 and 1996, including payroll costs, are directly attributable to the Division and have been paid by CIMLINC for the Division. G. SUBSEQUENT EVENT: On November 10, 1997, CIMLINC completed the sale of certain assets and the assignment of certain liabilities of AMT to SofTech, Inc., a public company that provides CAD/CAM/CAE integration and engineering services. SofTech acquired substantially all of the assets of AMT except for accounts receivable with a net value of approximately $2.0 million as of the transaction date. In the acquisition, SofTech acquired assets with a net book value of approximately $338,000 (unaudited) and a defined list of liabilities with a net book value of approximately $2,325,000 (unaudited). The assets acquired included office furniture, computer equipment and off-the-shelf software currently marketed and supported by AMT known as PROSPECTOR(TM), EXPERTCAD(TM), EXPERTCAM(TM), TOOLDESIGNER(TM) and TOOLMAKER(TM). The purchase price for the acquired assets was $1,750,000 in cash, 200,000 shares of SofTech stock and the assumption of the above referenced liabilities. SofTech provided CIMLINC with a guarantee that the shares received in the transaction would have a value of at least $1.0 million within two years or an additional payment would be due for the difference. The guarantee is cancelled if, during the two year period, the shares are sold or if the aggregate value of the shares equals or exceeds $1.4 million for a specified period. The additional payment, if due, can be made in cash or shares or any combination thereof at the discretion of SofTech; provided, however, that in no event will the total shares issued to complete this transaction exceed 19.9% of shares outstanding before the transaction. If the additional payment is to be made in shares the average closing price for the last thirty (30) trading days of the two year period shall be used to derive the per share value. In addition, Softech will issue 157,143 shares of stock to a group of AMT employees to satisfy certain amounts due to those individuals upon the sale of AMT by CIMLINC. CIMLINC had entered into these arrangements with the key AMT employees in order to ensure their cooperation and continued employment in the event of a sale. SofTech has guaranteed the recipients of 65,714 of those 157,143 shares that the value of the shares will be at least $3.50 in two years or an additional payment will be made in cash for the difference. SofTech will also issue 357,981 shares of stock for the benefit of certain AMT employees. These individuals received a stock award that vests 50% at the first anniversary and 50% at the second anniversary of the transaction. In exchange for the share award these individuals agreed to take a salary reduction of either 10% or 20% from their current compensation plans. All of such salary reductions can be recovered by those individuals in the event that the revenue generated from the AMT business exceeds certain forecasted targets. If any of the recipients terminate their employment prior to vesting, their non-vested shares are forfeited and allocated to the recipients on a pro rata basis. If the employment of any of these individuals is terminated by the Company for any reason, other than fraud or illegal activity, during the two year vesting period the individuals are allowed to continue to purchase the non-vested shares. At the one-year anniversary any participant can elect to withdraw from the program but will only receive 40% of the stock awarded to them. CIMLINC Incorporated Advanced Manufacturing Technology Group Statements of Operations and Divisional Equity (Unaudited) For the six months ended September 30, (in thousands) 1997 1996 Revenue Software $ 1,768 $ 1,599 Service 1,641 1,739 ------- ------- Total Revenue 3,409 3,338 ------- ------- Cost of sales Software 164 60 Service 540 623 ------- ------- Total cost of sales 704 683 ------- ------- Gross margin 2,705 2,655 Research and development 543 609 Selling, general and administrative 2,061 1,689 ------- ------- Income from operations 101 357 Provision for income taxes 6 21 ------- ------- Net income 95 336 Investments by (transfers to) parent division 347 (256) Divisional equity (deficit), beginning of period 144 (4) ------- ------- Divisional equity, end of period $ 586 $ 76 ======= ======= See accompanying notes to the financial statements. CIMLINC Incorporated Advanced Manufacturing Technology Group Balance Sheet (Unaudited) As of September 30, 1997 (in thousands) Assets: Current assets: Accounts receivable (less allowance of $445) $ 2,142 Inventory 70 Prepaid expenses and other current assets 185 ------- Total current assets 2,397 ------- Equipment and leasehold improvements, at cost 1,077 Less accumulated depreciation (1,013) ------- Equipment and leasehold improvements, net 64 Other assets 9 ------- $ 2,470 ======= Liabilities and Divisional Equity: Current liabilities: Accounts payable $ 318 Accrued compensation 330 Other accrued expenses and customer deposits 152 Deferred revenue 1,084 ------- Total current liabilities 1,884 ------- Commitments Divisional equity 586 ------- $ 2,470 ======= See accompanying notes to the financial statements. CIMLINC Incorporated Advanced Manufacturing Technology Group Statements of Cash Flows (Unaudited) For the six months ended September 30, (in thousands) 1997 1996 ---- ---- Cash flows from operating activities: Net income $ 95 $ 336 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 41 29 Changes in operating assets and liabilities: Accounts receivable (363) 408 Inventory (28) (3) Prepaid expenses and other assets (129) (18) Accounts payable 97 (8) Accrued compensation 63 (91) Accrued expenses and customer deposits 47 (18) Deferred revenue (146) (362) ------- ------- Total adjustments (418) (63) ------- ------- Net cash provided by (used in) operating activities (323) 273 ------- ------- Cash flows from investing activities: Purchase of equipment and leasehold improvements (24) (17) ------- ------- Net cash used in investing activities (24) (17) ------- ------- Cash flows from financing activities: Transfers from (to) parent division 347 (256) ------- ------- Net cash provided by (used in) financing activities 347 (256) ------- ------- Net change in cash $ 0 $ 0 ======= ======= See accompanying notes to the financial statements. ADVANCED MANUFACTURING TECHNOLOGY GROUP a division OF CIMLINC INCORPORATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (A) The financial statements have been prepared from the accounts of the Advanced Manufacturing Technology Group, a division of CIMLINC Incorporated and its wholly owned subsidiaries (the "Division") without audit; however, in the opinion of management, the information presented reflects all adjustments which are of a normal recurring nature and elimination of intercompany transactions which are necessary to present fairly the Division's financial position and results of operations. (B) On November 10, 1997, CIMLINC completed the sale of certain assets and the assignment of certain liabilities of AMT to SofTech, Inc., a public company that provides CAD/CAM/CAE integration and engineering services. SofTech acquired substantially all of the assets of AMT except for accounts receivable with a net value of approximately $2.0 million as of the transaction date. In the acquisition, SofTech acquired assets with a net book value of approximately $338,000 (unaudited) and a defined list of liabilities with a net book value of approximately $2,325,000 (unaudited). The assets acquired included office furniture, computer equipment and off-the-shelf software currently marketed and supported by AMT known as PROSPECTOR(TM), EXPERTCAD(TM), EXPERTCAM(TM), TOOLDESIGNER(TM) and TOOLMAKER(TM). The purchase price for the acquired assets was $1,750,000 in cash, 200,000 shares of SofTech stock and the assumption of the above referenced liabilities. SofTech provided CIMLINC with a guarantee that the shares received in the transaction would have a value of at least $1.0 million within two years or an additional payment would be due for the difference. The guarantee is cancelled if, during the two year period, the shares are sold or if the aggregate value of the shares equals or exceeds $1.4 million for a specified period. The additional payment, if due, can be made in cash or shares or any combination thereof at the discretion of SofTech; provided, however, that in no event will the total shares issued to complete this transaction exceed 19.9% of shares outstanding before the transaction. If the additional payment is to be made in shares the average closing price for the last thirty (30) trading days of the two year period shall be used to derive the per share value. Item 7(b.) Pro Forma Financial Information. INTRODUCTION TO PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (Unaudited) The Pro Forma Combined Condensed Statements of Income for the year ended May 31, 1997 and for the six months ended November 30, 1997 present the combined results of the continuing operations of SofTech, Inc. ("the "Company") and the Advanced Manufacturing Technology Group ("AMT") assuming the acquisition had been consummated as of the beginning of the periods indicated. AMT's operations are combined using its fiscal year ended March 31, 1997 and the six months ended September 30, 1997. A pro forma combined balance sheet is not presented herein since the consolidated condensed balance sheet of the Company as of November 30, 1997, which has previously been filed in the Company's Form 10-Q for the period then ended, includes the assets and liabilities of AMT. The pro forma information does not purport to be indicative of the results of operations or the financial position which would have actually been obtained if the acquisitions had been consummated on the dates indicated. The pro forma information does not purport to be indicative of results of operations or financial positions which may result in the future. The pro forma financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company's management. Certain of these assumptions are set forth under the Notes to Pro Forma Combined Condensed Financial Statements. The pro forma financial information should be read in conjunction with the Company's historical Consolidated Financial Statements and Notes thereto contained in the 1997 Annual Report on Form 10-K. SOFTECH, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 1997
For the twelve month period ended : (in thousands, except per share data) SofTech AMT Pro Forma May 31, 1997 March 31, 1997 Pro Forma Combined (Historical - (Historical - Adjustments Condensed audited) audited) (Unaudited) (Unaudited) -------------- -------------- ----------- ----------- Revenue Product $ 9,329 $ 3,366 $ 12,695 Service 5,375 3,418 8,793 -------- -------- -------- Total Revenue 14,704 6,784 21,488 Cost of sales Product 6,133 211 625 A 6,969 Service 3,761 1,139 -- 4,900 -------- -------- --------- -------- Total cost of sales 9,894 1,350 625 11,869 -------- -------- --------- -------- Gross margin 4,810 5,434 (625) 9,619 Research and development -- 1,180 1,180 Selling, general and administrative 4,657 3,600 100 B 8,357 -------- -------- --------- -------- Income from operations 153 654 (725) 82 Interest expense -- -- 158 C 158 Gain on available-for-sale securities 2,126 -- -- 2,126 -------- -------- --------- -------- Income from operations before income taxes 2,279 654 (883) 2,050 Provision for income taxes (3) 39 (39) D (3) -------- -------- -------- -------- Net income $ 2,282 $ 615 $ (844) $ 2,053 ======== ======== ======== ======== Net income per share $ 0.50 $ 0.39 ======== ======== Weighted average shares outstanding 4,530 715 E 5,245
SOFTECH, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED INCOME STATEMENT FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
For the six month period ended : (in thousands, except per share data) Pro Forma SofTech AMT Pro Forma Combined November 30, 1997 September 30, 1997 Adjustments Condensed (Historical - unaudited) (Historical - unaudited) (Unaudited) (unaudited) ------------------------ ------------------------ ----------- ---------- Revenue Product $ 3,114 $ 1,768 $ 4,882 Service 5,980 1,641 7,621 -------- -------- -------- Total Revenue 9,094 3,409 12,503 Cost of sales Product 1,785 164 312 A 2,261 Service 3,447 40 -- 3,487 -------- -------- -------- -------- Total cost of sales 5,232 204 312 5,748 Gross margin 3,862 3,205 (312) 6,755 Research and development -- 543 543 Selling, general and administrative 3,314 2,561 50 B 5,925 -------- -------- -------- -------- Income from operations 548 101 (362) 287 Interest expense -- -- 79 C 79 Gain on available-for-sale securities 253 -- -- 253 -------- -------- -------- -------- Income from operations before income taxes 801 101 (441) 461 Provision for income taxes 100 6 (6) D 100 -------- -------- -------- -------- Net income $ 701 $ 95 $ (435) $ 361 ======== ======== ======== ======== Net income per share $ 0.13 $ 0.06 ======== ======== Weighted average shares outstanding 5,533 715 E 6,248
SOFTECH, INC. AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) The Pro Forma Combined Condensed Statement of Income for the year ended May 31, 1997, and the Pro Forma Combined Condensed Balance Sheet as of May 31, 1997 are derived from the historical audited financial statements of the Company included in the 1997 Annual Report on Form 10-K and the historical audited financial statements of AMT for the fiscal year ended March 31, 1997, contained herein. The pro forma financial information includes adjustments to reflect the purchase of AMT by SofTech on November 10, 1997 including the consideration paid and the resulting goodwill. The Pro Forma Combined Condensed Financial Statements should be read in conjunction with the Company's historical Consolidated Financial Statements and Notes thereto contained in the 1997 Annual Report on Form 10-K. The Pro Forma Combined Condensed Financial Statements do not purport to be indicative of financial position or results of operations if the acquisitions had been consummated on the dates indicated or which may be obtained in the future. Notes to pro forma financial statements: A) To record the amortization of purchased software totaling $4,000,000 over their estimated useful life of four (4) years for the CAD software and eight (8) years for the Prospector software. Amortization is recorded on a straight line basis. B) To record the incremental depreciation of the fixed assets purchased over their estimated useful life of two (2) years. C) To record the estimated cost of borrowing $1,750,000 to finance the acquisition of AMT. D) To record the estimated income tax effects of the pro forma adjustments referred to in Notes A through C above, assuming a 40% tax rate, but only to the extent that tax expense was incurred during the year. E) To reflect the increase in the number of shares outstanding resulting from the acquisition of AMT. Item 7 (c) Exhibits. 2.1 The Asset Purchase Agreement, dated November 10, 1997, by and among SofTech, Inc., Information Decisions, Inc., CIMLINC INCORPORATED, CIMLINC Ltd, and CIMLINC Gmbh was previously provided with original current report on Form 8-K, filed November 25, 1997. Schedules to the Agreement, listed in the Table of Contents of the Agreement, were not filed, but will be provided to the Commission supplementally upon request. 23.1 Consent of Ernst & Young L.L.P. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SofTech, Inc. Date: January 28, 1998 /s/ Joseph P. Mullaney By: Joseph P. Mullaney Its: Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description 23.1 Consent of Ernst & Young LLP EX-23.1 2 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 2-73261, 2-82554, 33-5782 and 33-80746)and Form S-3 (File Nos. 33-63831 and 333-30399) of SofTech, Inc. of our report dated January 16, 1998, related to our audits of the financial statements of the Advanced Manufacturing Technology Group, a division of CIMLINC INCORPORATED, as of March 31, 1997 and 1996 and the statements of operations and divisional equitiy and cash flows for the years then ended, appearing in this Form 8-K (as amended) of SofTech, Inc. /s/ Ernst & Young LLP Grand Rapids, Michigan January 27, 1998 -----END PRIVACY-ENHANCED MESSAGE-----