-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JcCMH3s+1XWcrMxwnoZUTwRrcSUYnlqoBOgTi8sFPDHxMgy0YJNXiC1jELmMq7JF yJDuVngdcjvCRDOMLCspxw== 0000910647-95-000007.txt : 19950615 0000910647-95-000007.hdr.sgml : 19950615 ACCESSION NUMBER: 0000910647-95-000007 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19950320 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOFTECH INC CENTRAL INDEX KEY: 0000354260 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 042453033 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-10665 FILM NUMBER: 95521934 BUSINESS ADDRESS: STREET 1: 460 TOTTEN POND RD CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178906900 MAIL ADDRESS: STREET 1: 460 POND ROAD CITY: WALTHAM STATE: MA ZIP: 02154 8-K/A 1 BODY OF AMENDMENT #1 ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8 AMENDMENT TO APPLICATION OR REPORT Filed pursuant to Section 12, 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 SofTech, Inc. (Exact name of registrant as specified in charter) AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Form 8-K Report filed on January 20, 1995 as set forth in the pages attached hereto: Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a.) Financial Statements of Acquired Business Audited financial statements as required to be filed pursuant to Item 7(a.) of Form 8-K filed on January 20, 1995. (b.) Pro Forma Financial Information Pro forma financial information, required to be filed pursuant to Item 7(b.) of Form 8-K filed on January 20, 1995 reflecting the acquisition of Micro Control, Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized SofTech, Inc. (Registrant) By: \s\Joseph P. Mullaney Joseph P. Mullaney Vice President and Chief Financial Officer Date: March 20, 1995 Item 7(a.) Financial Statements of Acquired Business Audited financial statements of Micro Control, Inc. including the Balance Sheet as of December 31, 1994; the Statements of Operations and Retained Earnings and Cash Flows for the year ended December 31, 1994; and manually signed Report of Independent Accountants. Item 7(b.) Pro Forma Financial Information SofTech, Inc. and Subsidiaries INTRODUCTION TO PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (Unaudited) The Pro Forma Combined Condensed Statement of Income for the year ended May 31,1994 and the six months ended November 30, 1994 present the combined results of the continuing operations of SofTech, Inc. (the "Company") and Micro Control, Inc. ("MCI") assuming the acquisitions had been consummated as of the beginning of the periods indicated. The Pro Forma Combined Condensed Balance Sheet as of November 30, 1994 presents the financial position of the Company and MCI assuming the acquisition had been consummated as of the balance sheet date. The statements include all material adjustments necessary to present the combined historical results under these assumptions. 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 acquisition had been consummated on the date indicated. The pro forma information does not purport to be indicative of results of operations or financial positions which may be obtained in the future. The pro forma financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company. 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 1994 Annual Report on Form 10-K and Form 10-Q for the second quarter of 1995. SOFTECH, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF NOVEMBER 30, 1994
SofTech, Inc. and Micro Subsidiaries Control, Inc. As Of As Of Pro Forma Pro Forma 30-Nov-94 30-Nov-94 Adjustments Combined (Historical-Unaudited) (Historical-Unaudited) (Unaudited) Condensed Assets Current Assets: Cash and cash equivalents $ 1,333,468 $182,562 $ (182,562) E $ 1,333,468 Marketable securities, at cost which approximates market 3,046,616 (1,031,000) E 2,015,616 Accounts receivable 10,531,512 238,027 10,769,539 Inventory 3,172,901 137,835 3,310,736 Prepaid expenses and other assets 1,631,134 97,104 (69,493) E 1,658,745 Deferred income taxes 592,114 592,114 Net assets of discontinued operations 750,620 750,620 ----------- -------- ----------- Total current assets 21,058,365 655,528 20,430,838 ----------- -------- ----------- Property and equipment, at cost 4,741,516 297,315 (72,505) E 4,966,326 Less accumulated depreciation and amortization 2,593,695 211,356 (24,686) E 2,780,365 ----------- -------- ----------- 2,147,821 85,959 2,185,961 Goodwill 2,762,094 2,382,227 E 5,144,321 Other assets 464,656 58,900 523,556 Deferred income tax 272,000 272,000 ----------- -------- ----------- $26,704,936 $800,387 $28,556,676 =========== ======== =========== Liabilities and Stockholders' Equity: Current Liabilities: Current portion of long-term debt $ --- $ 15,000 (12,041) E $ 2,959 Accounts payable 2,493,322 100,906 2,594,228 Accrued expenses 1,068,370 68,419 (1,736) E 1,135,053 Deferred maintenance revenue 890,680 890,680 Federal and state income taxes 280,548 280,548 ----------- -------- ----------- Total current liabilities 4,732,920 184,325 4,903,468 ----------- -------- ----------- Long term debt, net of current portion 19,522 (16,938) E 2,584 Commitments and contingencies Stockholders' equity Common stock 416,757 1,000 26,977 D,F 444,734 Capital in excess of par value 14,641,948 30,000 1,620,631 D,F 16,292,579 Retained earnings 8,394,826 565,540 (565,540) F 8,394,826 Less treasury stock (1,481,515) (1,481,515) ----------- -------- ----------- Total stockholders' equity 21,972,016 596,540 23,650,624 ----------- -------- ----------- $26,704,936 $800,387 $28,556,676 =========== ======== ===========
See accompanying notes to pro forma financial information. SOFTECH, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED INCOME STATEMENT FOR THE SIX MONTHS ENDED NOVEMBER 30, 1994
SofTech, Inc. and Micro Subsidiaries for Control, Inc. The Six Months For the Six Months Pro Forma Pro Forma Ended Ended 30-Nov-94 30-Nov-94 Adjustments Combined (Historical-Unaudited) (Historical-Unaudited) (Unaudited) Condensed Revenue $23,138,265 $1,155,460 $ $24,293,725 Cost of sales 17,153,587 623,569 17,777,156 Selling, general and administrative 5,069,985 508,622 237,500 B 5,816,107 ----------- ---------- --------- ----------- Income from operations 914,693 23,269 (237,500) 700,462 Interest income 77,929 0 (20,620) A 57,309 Other income/(expense), net 0 (3,974) (3,974) ----------- ---------- --------- ----------- Income from continuing operations before income taxes 992,622 19,295 (258,120) 753,797 Provision for federal and state income taxes 297,786 7,718 (103,248) C 202,256 ----------- ---------- --------- ----------- Net income $ 694,836 $ 11,577 (154,872) $ 551,541 =========== ========== ========= =========== Net income from continuing operations per common share $ 0.18 $ 0.13 =========== =========== Weighted average common shares outstanding 3,889,827 279,768 D 4,169,595
See accompanying Notes to Pro Forma Financial Information. SOFTECH, INC. AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 1994
SofTech, Inc. and Micro Subsidiaries for Control, Inc. The Year Ended For the Year Ended Pro Forma Pro Forma 31-May-94 31-May-94 Adjustments Combined (Historical) (Historical-Unaudited) (Unaudited) Condensed Revenue $24,178,325 $4,055,653 $ $28,233,978 Cost of sales 17,627,804 2,402,569 20,030,373 Selling, general and administrative 5,469,179 889,979 475,000 B 6,834,158 ----------- ---------- --------- ----------- Income from operations 1,081,342 763,105 (475,000) 1,369,447 Interest income 293,901 0 (41,240) A 252,661 Other income/(expense), net 0 (8,735) (8,735) ----------- ---------- --------- ----------- Income from continuing operations before income taxes 1,375,243 754,370 (516,240) 1,613,373 Provision for federal and state income taxes 255,877 301,748 (206,496) C 351,129 ----------- ---------- --------- ----------- Net income $ 1,119,366 $ 452,622 (309,744) $ 1,262,244 =========== ========== ========= =========== Net income from continuing operations per common share $ 0.29 $ 0.31 =========== =========== Weighted average common shares outstanding 3,810,331 279,768 D 4,090,099
See accompanying Notes to Pro Forma Financial Information. SofTech, Inc. and Subsidiaries NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) The Pro Forma Combined Condensed Statements of Income for the year ended May 31, 1994 and the six months ended November 30, 1994, and the Pro Forma Combined Condensed Balance Sheet as of November 30, 1994 are derived from the historical financial statements of the Company incorporated in the 1994 Annual Report on Form 10-K, the historical financial statements (unaudited) of the Company incorporated in the Form 10-Q for the second quarter of fiscal 1995 and the historical financial statements (unaudited) of MCI. The pro forma financial information includes adjustments to reflect the purchase of MCI 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 1994 Annual Report on Form 10-K and the Form 10-Q for the second quarter of fiscal 1995. The Pro Forma Combined Condensed Financial Statements do not purport to be indicative of financial position or results of operations if the acquisition had been consummated on the date indicated or which may be obtained in the future. Notes to pro forma financial statements: A. To record the reduction of interest income as a result of lower invested balances for the cash component of the purchase price, assuming a 4% return on invested cash. B. To record the amortization of goodwill ($475,000) resulting from purchase accounting adjustments relating to the acquisition of Micro Control, Inc. on a straight line basis over five years. See Note F below. C. To record the estimated income tax effects of the pro forma adjustments referred to in Notes A and B above, assuming a 40% tax rate. D. To reflect the increase in the number of common shares outstanding (279,768) for the equity component of the purchase price of MCI. E. To record the cash payments by the Company for the acquisition of certain defined assets of Micro Control, Inc. The purchase price of MCI totaled $2,709,600 and consisted of $1,031,000 in cash and 279,768 shares of SofTech common stock valued at $1,678,600. The net assets acquired totaled approximately $400,000, resulting in goodwill of approximately $2.3 million which will be amortized over a period of five years on a straight line basis. F. To eliminate the stockholders' equity of the acquired companies. MICRO CONTROL, INC. ------------------- FINANCIAL STATEMENTS for the year ended December 31, 1994 MICRO CONTROL, INC. ------------------- INDEX Page(s) Report of Independent Accountants 2 Financial Statements: Balance Sheet as of December 31, 1994 3 Statement of Operations and Retained Earnings for the year ended December 31, 1994 4 Statement of Cash Flows for the year ended December 31, 1994 5 Notes to the Financial Statements 6-9 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Micro Control, Inc.: We have audited the accompanying balance sheet of Micro Control, Inc. as of December 31, 1994, the related statements of operations and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in material respects, the financial position of Micro Control, Inc. as of December 31, 1994 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Coopers and Lybrand L.L.P. Boston, Massachusetts March 3, 1995 MICRO CONTROL, INC. BALANCE SHEET December 31, 1994 ------------------- ASSETS Current assets: Cash $ 211,144 Accounts receivable (net of allowance for doubtful accounts of $7,000) 393,190 Inventories 115,194 Prepaid expenses and other assets 59,088 ---------- Total current assets 778,616 Property and equipment, net 128,686 Other Assets: Shareholder loan 71,020 Deposits 8,900 Asset held for sale 50,000 ---------- Total other assets 129,920 ---------- Total assets $1,037,222 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long term debt $ 14,550 Accounts payable 285,623 Accrued expenses 118,599 ---------- Total current liabilities 418,772 Long term debt, less current portion 20,638 Commitments and contingencies (Note 7) --- Stockholders' Equity Common stock, no par value, 10,000 shares authorized, 1,000 shares issued and outstanding --- Additional paid in capital 31,000 Retained earnings 566,812 ---------- Total stockholders' equity 597,812 ---------- Total liabilities and stockholders' equity $1,037,222 ==========
The accompanying notes are an integral part of the financial statements MICRO CONTROL, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS for the year ended December 31, 1994 ------------------- Revenue $3,147,240 Cost of revenue 1,837,577 ---------- Gross margin 1,309,663 Selling, general and administrative expenses 870,393 ---------- Operating income 439,270 Other expense, net: Other expense 87,466 Interest expense, net 12,860 ---------- Total other expense 100,326 ---------- Net income 338,944 Retained earnings, beginning of year 227,868 ---------- Retained earnings, end of year $ 566,812 ==========
The accompanying notes are an integral part of the financial statements MICRO CONTROL, INC. STATEMENT OF CASH FLOWS for the year ended December 31, 1994 ------------------- Cash flows from operating activities: Net income $338,944 -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,736 Write down of asset held for sale 46,000 Provision for doubtful accounts 7,000 Change in current assets and liabilities: Accounts receivable 992,363 Inventories (90,095) Prepaid expenses and other assets 69,556 Accounts payable (759,985) Accrued expenses 86,339 -------- Total adjustments 376,914 -------- Net cash provided by operating activities 715,858 -------- Cash flows from investing activities: Capital expenditures (47,069) Leasehold improvements (63,000) -------- Net cash used by investing activities (110,069) -------- Cash flows from financing activities: Decrease in shareholder loan 21,317 Borrowings on line of credit 179,000 Repayments on line of credit (479,000) Repayments on short term loan (100,000) Principal payments on long-term debt (30,595) -------- Net cash used by financing activities (409,278) -------- Net increase in cash 196,511 Cash, beginning of year 14,633 -------- Cash, end of year $211,144 ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest paid $ 16,881 Income taxes paid $ 2,149
The accompanying notes are an integral part of the financial statements MICRO CONTROL, INC. NOTES TO THE FINANCIAL STATEMENTS ------------------- 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Business Description Micro Control, Inc., (the "Company"), a Pennsylvania Corporation, is engaged in the sale of hardware and computer aided design ("CAD") systems and service. Sales are made principally in Pennsylvania and New Jersey to manufacturers, engineers and local government agencies. In January 1995, certain assets and liabilities of the Company were acquired SofTech, Inc. for cash and stock. Revenue Recognition Revenue from computer systems sales is recognized upon shipment, or upon completion of installation, when required. Nonrefundable license fees are recorded as revenue upon execution of the license agreement and the delivery of the software, if collectibility is probable and no significant obligations exist. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consists primarily of cash and trade receivables. The Company maintains cash in the bank from which it has its borrowing. Trade receivables are concentrated within two customers. At December 31, 1994, the accounts receivable from one customer comprised 27% of the balance, while a second customer accounted for 13%. To reduce credit risk, the Company performs ongoing credit evaluations of its customers' financial condition. Inventories Inventories consist principally of computer hardware held for resale and are stated at the lower of cost (first-in, first-out method) or market. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are provided using the straight line method over the estimated useful lives of the respective assets which range as follows:
Description Years Equipment 5 Furniture and fixtures 5 Vehicles 5 Leasehold improvements Term of lease or life of asset
Maintenance and repairs are charged to expense as incurred. When assets are sold or retired, the related cost and accumulated depreciation are removed from the respective accounts and any resulting gain or loss is credited or charged to income. Income Taxes Effective January 1, 1993, the Company elected to be taxed as an "S" Corporation. The Company remains subject to Pennsylvania capital stock taxes and New Jersey corporate income taxes and the amounts are not material. 2. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1994 is comprised of the following: Equipment $125,766 Vehicles 85,991 Furniture and fixtures 67,080 Leasehold improvements 63,000 -------- 341,837 Less accumulated depreciation and amortization (213,151) -------- Net property and equipment $128,686 ========
3. ASSET HELD FOR SALE The asset held for sale represents an automobile. During 1994, the automobile was written down from $96,000 to $50,000 to reflect its estimated fair value. This write down is included in other expenses. 4. LONG TERM DEBT: Long term debt outstanding at December 31, 1994 is comprised of the following:
Current Long-term Bank term loan payable in monthly installments of $460 including interest at 7.5% through August 1997, with a balloon payment of $10,750 due September 1, 1997. $ 4,001 $18,080 Auto loan payable in monthly installments of $248 including interest at 9.25%, through November 1996, collateralized by the automobile. 2,396 2,558 Bank term loan payable in monthly installments of $2,075, including interest at 11.2% through May 1995. 8,153 --- ------- ------- Total $14,550 $20,638 ======= =======
The outstanding term loans are collateralized by security agreements covering substantially all assets of the Company and personal guarantees of the Company's stockholders. During 1994, the Company had a $300,000 bank line of credit. Advances under the line of credit bear interest at the Bank's prime rate plus .75%. The average borrowing rates during the year were between 6.75% and 8.0%. During 1994, the line of credit was repaid and not renewed. The Company had an outstanding short term loan with a bank at December 31, 1993 of $100,000. This short term borrowing was secured by a mortgage lien on personal property owned by the shareholders of the Company. During 1994, this borrowing was repaid Interest expense under these loans was approximately $16,880 during 1994. The following table presents the approximate annual maturities of long-term debt: 1995 $14,550 1996 6,870 1997 13,768 ------- Total $35,188 =======
5. ACCRUED EXPENSES: Accrued expenses consist of the following at December 31, 1994: Accrued legal settlement $ 41,466 Sales tax 38,249 Accrued commissions 21,550 Other 17,334 -------- Total accrued expenses $118,599 ========
6. MAJOR CUSTOMERS: Approximately 41% of the Company's total 1994 sales were concentrated in two customers. In 1994 the revenue derived from a single customer was approximately $930,000 (29% of revenue) and revenue derived from a second customer was approximately $374,000 (12% of total revenue). 7. COMMITMENTS/RELATED PARTY TRANSACTIONS: The Company holds a note from a shareholder with a principal amount of $67,000. This note has a 6% annual simple interest rate and interest and principal are payable on December 31, 2001. Interest income on the note receivable amounted to approximately $4,020 for the year ended December 31, 1994. The outstanding note plus accrued interest is included in the shareholder loan. The Company leases its operating facilities from a trust, of which a shareholder of the Company is trustee. The agreement is a noncancellable lease which is subject to escalation for increases in real estate taxes through 2000 with an option to extend through 2002. Prepaid expenses and other assets include $7,350 of prepaid rent to the trust. Rent expense for the year ended December 31, 1994 was approximately $88,200. In relation to the operating lease for facilities, the Company paid $63,000 for leasehold improvements to the trust. The Company also leases operating equipment from unrelated parties. At December 31, 1994, minimum annual rental commitments under the noncancellable leases were as follows: 1995 $119,100 1996 120,800 1997 128,110 1998 123,560 1999 and thereafter 230,560 -------- Total $722,130 ========
8. LITIGATION: On February 15, 1995, the Company agreed to settle a lawsuit initiated by Douglas Marks Association for the amount of $37,500 in full satisfaction of all claims and demands arising out of a joint venture between the two parties from October 1992 through September 1993. This settlement amount and related legal fees of $3,966 have been recorded in other expense in the 1994 statement of operations and retained earnings. -----END PRIVACY-ENHANCED MESSAGE-----