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)
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
SOFTECH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
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)
-------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
SOFTECH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
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)
------------------------ ------------------------ ----------- ----------
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
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.
<PAGE>
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
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EXHIBIT INDEX
Exhibit
Number Description
23.1 Consent of Ernst & Young LLP
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
