Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Aug. 31, 2013 | Oct. 10, 2013 | |
Document and Entity Information | ||
Entity Registrant Name | SOFTECH INC | |
Document Type | 10-Q | |
Document Period End Date | 31-Aug-13 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 354260 | |
Current Fiscal Year End Date | -26 | |
Entity Common Stock, Shares Outstanding | 875,135 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED_CONDENSED_BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) (USD $) | Aug. 31, 2013 | 31-May-13 |
CURRENT ASSETS | ||
Cash and cash equivalents | $752 | $1,188 |
Restricted cash | 76 | 100 |
Accounts receivable (less allowance for uncollectible accounts of $29 as of August 31, 2013 and May 31, 2013) | 705 | 895 |
Prepaid and other assets | 283 | 299 |
Total current assets | 1,816 | 2,482 |
Property and equipment, net | 72 | 53 |
Goodwill | 500 | 498 |
Capitalized software development costs, net | 391 | 376 |
Capitalized patent costs | 103 | 101 |
Debt issuance costs, net | 260 | 250 |
Notes receivable and other assets | 187 | 195 |
Assets held for sale | 3,759 | 3,759 |
TOTAL ASSETS | 7,088 | 7,714 |
LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | ||
Accounts payable | 167 | 137 |
Accrued expenses | 675 | 602 |
Other current liabilities | 68 | 89 |
Deferred maintenance revenue | 1,281 | 1,495 |
Current portion of capital lease | 13 | 13 |
Current liabilities held for sale | 513 | 652 |
Total current liabilities | 2,717 | 2,988 |
Capital lease, net of current portion | 35 | 39 |
Long-term debt, net of current portion | 2,651 | 2,700 |
Warrant liability | 42 | 0 |
Total liabilities | 5,445 | 5,727 |
Redeemable common stock, $0.10 par value, 50,000 shares issued and outstanding at August 31, 2013 and May 31, 2013 | 275 | 275 |
Shareholders' equity : | ||
Common stock, $0.10 par value 20,000,000 shares authorized, 875,135 and 1,045,135 issued and outstanding at August 31, 2013 and May 31, 2013, respectively | 100 | 100 |
Treasury stock, $0.10 par value, 170,000 shares at cost | -63 | 0 |
Capital in excess of par value | 27,374 | 27,369 |
Accumulated deficit | -25,599 | -25,333 |
Accumulated other comprehensive loss | -444 | -424 |
Total shareholders' equity | 1,368 | 1,712 |
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | $7,088 | $7,714 |
CONSOLIDATED_CONDENSED_BALANCE1
CONSOLIDATED CONDENSED BALANCE SHEETS PARENTHETICALS (USD $) | Aug. 31, 2013 | 31-May-13 |
Parentheticals | ||
Allowance for uncollectible accounts | $29 | $29 |
Redeemable common stock, par value | $0.10 | $0.10 |
Redeemable common Stock, shares issued | 50,000 | 50,000 |
Redeemable common Stock, shares outstanding | 50,000 | 50,000 |
Common Stock, par value | $0.10 | $0.10 |
Common Stock, shares authorized | 20,000,000 | 20,000,000 |
Common Stock, shares issued | 875,135 | 1,045,135 |
Common Stock, shares outstanding | 875,135 | 1,045,135 |
Treasury stock, par value | $0.10 | $0.10 |
Treasury stock, shares | 170,000 | 170,000 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for share and per share data) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Revenue: | ||
Products | $241 | $215 |
Services | 1,134 | 1,165 |
Royalties on sale of patents | 0 | 190 |
Total revenue | 1,375 | 1,570 |
Cost of revenue: | ||
Products. | 33 | 25 |
Services. | 307 | 308 |
Total cost of revenue | 340 | 333 |
Gross margin | 1,035 | 1,237 |
Research and development expenses | 335 | 244 |
Selling, general and administrative expenses | 881 | 758 |
Operating income(loss) | -181 | 235 |
Interest expense | 102 | 65 |
Change in fair value of warrant liability | -9 | 0 |
Other income | -8 | -3 |
Net income(loss) | ($266) | $173 |
Basic and diluted net income(loss) per share: | ($0.30) | $0.17 |
Weighted average common shares outstanding-basic | 901,005 | 995,135 |
Weighted average common shares outstanding-diluted | 901,005 | 1,001,234 |
CONSOLIDATED_CONDENSED_STATEME
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME(LOSS) (in thousands) (UNAUDITED) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
STATEMENTS OF COMPREHENSIVE INCOME(LOSS) | ||
Net income (loss) | ($266) | $173 |
Other comprehensive income: | ||
Foreign currency translation adjustment | -20 | -6 |
Total other comprehensive loss | -20 | -6 |
Comprehensive income (loss) | ($286) | $167 |
CONSOLIDATED_CONDENSED_STATEME1
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Cash flows from operating activities: | ||
Net income(loss) | ($266) | $173 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 55 | 48 |
Stock-based compensation | 2 | 2 |
Non-cash interest expense | 2 | 0 |
Change in fair value of warrant liability. | -9 | 0 |
Change in current assets and liabilities: | ||
Accounts receivable | 190 | 102 |
Prepaid expenses and other assets | 24 | 24 |
Restricted cash | 24 | 0 |
Accounts payable, accrued expenses and other liabilities | 82 | -40 |
Deferred maintenance revenue | -35 | -500 |
Change in assets and liabilities held for sale | -318 | 0 |
Net cash used in operating activities | -249 | -191 |
Cash flows from investing activities: | ||
Collection of note receivable from sale of product line | 0 | -5 |
Capital expenditures | -29 | 0 |
Capitalized software development costs | -39 | -111 |
Capitalized patent costs | -2 | -6 |
Net cash used in investing activities | -70 | -122 |
Cash flows from financing activities: | ||
Cost of treasury shares | -63 | 0 |
Capitalized debt issuance costs | -32 | 0 |
Repayment under debt agreements | 0 | -180 |
Repayments under capital lease | -4 | -1 |
Net cash used in financing activities | -99 | -181 |
Effect of exchange rates on cash | -18 | -1 |
Decrease in cash and cash equivalents | -436 | -495 |
Cash and cash equivalents, beginning of period | 1,188 | 595 |
Cash and cash equivalents, end of period | 752 | 100 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 56 | 42 |
Taxes paid | 14 | 2 |
Noncash investing and financing activities: | ||
Issuance of warrants | $51 | $0 |
DESCRIPTION_OF_THE_BUSINESS_AN
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Aug. 31, 2013 | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | A. Description of the Business and Basis of Presentation |
SofTech, Inc. (the “Company”) was formed in Massachusetts on June 10, 1969. The Company is engaged in the development, marketing, distribution and support of computer software solutions that serve the Product Lifecycle Management (“PLM”) industry. These solutions include software technology offerings for computer aided design as well as product data/lifecycle management and collaboration technologies, all of which fit under the broadly defined PLM industry. The Company’s operations are organized geographically with offices in the U.S. and European sales and customer support offices in Germany and Italy. The Company also has resellers in Asia and Europe. | |
Since the Recapitalization Transaction described hereunder, the Company has also been actively engaged in acquiring and filing four new U.S. patents, evaluating alternatives for monetizing its existing patents and investigating the acquisition of specific patents already awarded that might enhance our value. It is expected that this kind of activity will become an increasing area of focus and investment over the coming years. | |
The consolidated financial statements of the Company include the accounts of SofTech, Inc. and its wholly-owned subsidiaries, Information Decisions, Inc., Workgroup Technology Corporation, SofTech, GmbH and SofTech, Srl. All significant intercompany accounts and transactions have been eliminated in consolidation. | |
The consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission 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 Company’s financial position and results of operations. It is recommended that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s fiscal 2013 results included in the previously filed Form 10-K (“2013 Form 10-K”). | |
Recapitalization Transaction | |
In March 2011, the current management team (CEO and VP of Business Development) completed a transaction (the “Recapitalization Transaction”) in which a group of eight investors purchased 39% of the Company’s common stock, arranged for debt facilities of $3.2 million and negotiated for a $7.6 million debt reduction from Greenleaf Capital, Inc. (“Greenleaf”), the Company’s sole lender at that time and largest shareholder. As part of that Recapitalization Transaction, Greenleaf accepted a payment of $2.7 million in cash and note for $250,000 in full satisfaction of the $10.6 million of indebtedness. The former CEO resigned after a short transition period, a new four person Board of Directors was appointed and the existing Board members resigned. In addition, Greenleaf gave the Company’s new Board of Directors voting control over its shares for a three year period immediately following the Recapitalization Transaction. | |
Refinancing of Debt | |
In May 2013, the Company entered into a new three year, $2.7 million loan agreement as detailed in Note F that replaced the Company’s prior debt facilities that were to expire in February 2014. The loan agreement requires quarterly principal payments of $135,000 beginning on October 1, 2014 and carries a 14% interest rate due in arrears each calendar quarter beginning July 1, 2013. The funds were used to retire existing debt and provide additional working capital. | |
Stock Purchase Agreement with Greenleaf Capital and affiliates | |
In June 2013, the Company purchased 170,000 shares of common stock from Greenleaf, The Ronda E. Stryker and William D. Johnston Foundation, and The L. Lee Stryker 1974 Irrevocable Trust fbo Ronda E. Stryker, for a purchase price of $62,900 or $0.37 per share as detailed in Note K to the consolidated financial statements as of May 31, 2013. The agreement provides an option for the Company to either make an offer to purchase the remaining 101,411 shares held by Greenleaf at $0.37 per share or to provide Greenleaf with registration rights with respect to the remaining shares as set forth in the Registration Rights Agreement dated March 8, 2011. Greenleaf is under no obligation to accept the Company’s offer to purchase the remaining shares on the terms set forth above, however, if the offer is made by the Company and rejected, the Company will no longer be obligated to provide Greenleaf with registration rights with respect to the remaining shares. As part of the agreement, Greenleaf agreed not to sell or transfer the shares for a one year period. | |
Assets and liabilities held for Sale | |
On August 30, 2013, SofTech agreed to sell its CADRA product line to Mentor Graphics Corporation (“Mentor”) for a purchase price of $3.2 million(subject to any indemnification claims), plus potential earn-out payments of up to an additional $750,000 based on 10% of CADRA revenue generated by Mentor in the three year period following the closing. The closing of this asset sale, which is subject to stockholder approval and other customary closing conditions and terms (including a holdback of a portion of the purchase price to secure any indemnification claims arising under the asset purchase agreement), is expected to occur in October 2013. The transaction is not subject to any financing condition. | |
The assets to be acquired by Mentor relate to the CADRA product line and include (i) rights to, and interest in, all computer software; (ii) specified physical assets; (iii) all customer information; and (iv) purchase orders in backlog and customer support agreements. The liabilities to be assumed by Mentor are limited to customer support obligations. Specifically excluded from the sale and retained by SofTech are all remaining assets and liabilities not specifically identified and all billed accounts receivable of the CADRA product line through the closing date which is expected to take place subsequent to the approval of the SofTech shareholders. |
Significant_Accounting_Policie
Significant Accounting Policies | 3 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Significant Accounting Policies | |||||||||||||
Significant Accounting Policies | B. | ||||||||||||
Significant Accounting Policies | |||||||||||||
USE OF ESTIMATES | |||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. The most significant estimates included in the financial statements pertain to revenue recognition, the allowance for doubtful accounts receivable, and the valuation of long term assets including goodwill, intangibles, capitalized software development costs and deferred tax assets. Actual results could differ from those estimates. | |||||||||||||
REVENUE RECOGNITION | |||||||||||||
The Company follows the provisions of the Accounting Standards Codification (“ASC”) 985, Software for transactions involving the licensing of software and software support services. Revenue from software license sales is recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectability has been determined. The Company does not provide for a right of return. For multiple element arrangements, total fees are allocated to each of the undelivered elements based upon vendor specific objective evidence (“VSOE”) of their fair values, with the residual amount recognized as revenue for the delivered elements, using the residual method set forth in ASC 985. Revenue from customer maintenance support agreements is deferred and recognized ratably over the term of the agreements, typically one year. Revenue from engineering, consulting and training services is recognized as those services are rendered using a proportional performance model. | |||||||||||||
The Company follows the provisions of ASC 605, Revenue Recognition for transactions that do not involve the licensing of software or software support services as in the case of the recent sale of our patents. Revenue from the sale of patents is recorded when persuasive evidence of an arrangement exists, delivery has taken place and a fixed fee and collectability has been determined. These conditions are no different from those when we license software. For multiple element arrangements, however, under ASC 605, total fees are allocated to each of the elements based upon the relative selling price method. Under that method the allocation of fees to the undelivered elements is based on VSOE, or if it doesn’t exist, then based on third party evidence of selling price. If neither exists, then the allocation is based on management’s best estimate of the selling price. | |||||||||||||
SOFTWARE DEVELOPMENT COSTS | |||||||||||||
The Company accounts for its software development costs in accordance with 985-20, Costs of Computer Software to Be Sold, Leased or Marketed. Costs that are incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software development costs are capitalized until the product is available for general release to customers. Such costs are amortized using the straight-line method over the estimated economic life of the product, generally three years. The Company evaluates the realizability of the assets and the related periods of amortization on a regular basis. Judgment is required in determining when technological feasibility of a product is established as well as its economic life. | |||||||||||||
During the three months ended August 31, 2013 and 2012, the Company capitalized approximately $39,000 and $111,000, respectively, of software development costs related to new products. Amortization expense related to capitalized software development for the three months ending August 31, 2013 and 2012 was approximately $24,000 and $12,000, respectively. | |||||||||||||
DEBT ISSUANCE COSTS | |||||||||||||
The Company capitalizes the direct costs associated with entering into debt agreements and amortizes those costs over the life of the debt agreement. On May 10, 2013, the Company refinanced its then existing debt agreements and entered into a new debt agreement as described in Note F. Total direct costs incurred in establishing this debt agreement were approximately $291,000. These costs have been capitalized and are being amortized over the three year life of the loan. Unamortized debt issuance costs related to the Company’s previous debt agreement as of May 10, 2013 totaled approximately $108,000 and were expensed during fiscal 2013. Amortization expense related to debt issuance costs for the three months ending August 31, 2013 and 2012 were approximately $22,000 and $29,000, respectively. | |||||||||||||
ACCOUNTING FOR GOODWILL | |||||||||||||
The Company accounts for goodwill pursuant to the provisions of the ASC 350, Intangibles – Goodwill and Other. This requires that goodwill be reviewed annually, or more frequently as a result of an event or change in circumstances, for possible impairment with impaired assets written down to fair value. Additionally, existing goodwill and intangible assets must be assessed and classified within the statement’s criteria. | |||||||||||||
The Company operates in a single reporting unit. Goodwill has been allocated to the CADRA product line based upon the estimated fair value of the CADRA product line based on the transaction with Mentor as compared to the estimated fair value of the Company as a whole. As of May 31, 2013, the Company conducted its annual impairment test of goodwill by comparing the fair value of the reporting unit to the carrying amount of the underlying assets and liabilities of its single reporting unit. The Company determined that the fair value of the reporting unit exceeded the carrying amount of the assets and liabilities, therefore no impairment existed as of the testing date. The Company concluded that no facts or circumstances arose during the three months ended August 31, 2013 to warrant an interim impairment test. Goodwill allocated to the CADRA product line and being held for sale on August 31, 2013 and May 31, 2013 was approximately $3.8 million. | |||||||||||||
CAPITALIZED PATENT COSTS | |||||||||||||
Costs related to patent applications are capitalized as incurred and are amortized once the patent application is accepted or are expensed if the application is finally rejected. Patent costs are amortized over their estimated economic lives under the straight-line method, and are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable through the estimated undiscounted future cash flows from the use of the associated patent. Capitalized patent costs totaled approximately $2,000 and $6,000 for the three month period ended August 31, 2013 and 2012. | |||||||||||||
LONG-LIVED ASSETS | |||||||||||||
The Company periodically reviews the carrying value of all intangible and other long-lived assets. If indicators of impairment exist, the Company compares the undiscounted cash flows estimated to be generated by those assets over their estimated economic life to the related carrying value of those assets to determine if the assets are impaired. If the carrying value of the asset is greater than the estimated undiscounted cash flows, the carrying value of the assets would be decreased to their fair value through a charge to operations. As of August 31, 2013, the Company does not have any long-lived assets it considers to be impaired. | |||||||||||||
STOCK BASED COMPENSATION | |||||||||||||
Stock-based compensation expense for all stock-based payment awards made to employees and directors is measured based on the grant-date fair value of the award. The Company estimated the fair value of each share-based award using the Black-Scholes option valuation model. The Black-Scholes option valuation model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award. | |||||||||||||
The Company’s 1994 Stock Option Plan provided for the granting of stock options at an exercise price not less than fair market value of the stock on the date of the grant and with vesting schedules as determined by the Board of Directors. No new options could be granted under the Plan after fiscal year 2004 and all stock options had vested prior to May 31, 2009. During fiscal 2012, all options awarded under the 1994 Stock Option Plan had expired. In May 2011, the 2011 Equity Incentive Plan (the “2011 Plan”) was approved by the Company’s shareholders, pursuant to which 150,000 shares of our common shares are reserved for issuance. Additionally, any future shares subject to any award under the 2011 Plan that expires, is terminated unexercised or is forfeited will be available for awards under the 2011 Plan. The Company may grant stock options, restricted stock, restricted stock units, stock equivalents and awards of shares of common stock that are not subject to restrictions or forfeiture under the 2011 Plan. As of August 31, 2013, 10,000 options were awarded and outstanding under the 2011 Plan. | |||||||||||||
The following table summarizes option activity under the 1994 Stock Option Plan and 2011 Plan: | |||||||||||||
Weighted | Weighted- | ||||||||||||
Average | Average | ||||||||||||
Number of | Exercise Price | Remaining | Aggregate | ||||||||||
Options | Per Share | Life (in years) | Intrinsic Value | ||||||||||
Outstanding options at May 31, 2012 | 10,000 | $ | 2.4 | 9.02 | $ | - | |||||||
Granted | - | - | - | - | |||||||||
Exercised | - | - | - | - | |||||||||
Forfeited or expired | - | - | - | - | |||||||||
Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | |||||||||
Granted | - | - | - | - | |||||||||
Exercised | - | - | - | - | |||||||||
Forfeited or expired | - | - | - | - | |||||||||
Outstanding options at August 31, 2013 | 10,000 | $ | 2.4 | 7.77 | $ | - | |||||||
Exercisable at August 31, 2013 | 7,222 | $ | 2.4 | 7.77 | $ | - | |||||||
The Company determined the volatility for options granted using the historical volatility of the Company’s common stock. The expected life of options has been determined utilizing the “simplified” method as prescribed in ASC 718 Compensation, Stock Compensation. The expected life represents an estimate of the time options are expected to remain outstanding. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. | |||||||||||||
For the three month periods ended August 31, 2013 and 2012, the Company expensed approximately $2,000 of stock-based compensation. | |||||||||||||
REDEEMABLE COMMON STOCK | |||||||||||||
During the year ending May 31, 2013, the Company issued 50,000 shares of common stock, $.10 par value (the “Common Stock”) at a purchase price of $5.00 per share to accredited investors (collectively, the “Investors”) in separate private placement transactions for total proceeds of $250,000. These transactions were completed pursuant to a Securities Purchase Agreement (the “Agreement”) which the Company entered into with each of the respective Investors. In lieu of registration rights, each $25,000 investment entitles the Investors to a fee of $6,000 (the “Fee”) to be paid in six equal quarterly installments during the eighteen month period (the “Payment Period”) following the investment. The Agreement also provides the Investors with the right to require the Company to redeem the Common Stock held by such Investors (the “Put Option”) for $5.50 per share in cash for a 30 day period following the Payment Period. | |||||||||||||
The Company first assessed the redeemable Common Stock to determine if the instrument should be accounted for as a liability in accordance with ASC 480. In that the Put Option is optionally redeemable by the holder, the Common Stock was not required to be accounted for as a liability. Next, the Company assessed the Put Option within the redeemable Common Stock as a potential embedded derivative pursuant to the provisions of ASC 815, Derivatives and Hedging, and concluded that the Put Option did not meet the net settlement criteria within the definition of a derivative. Therefore, the Company has accounted for the Common Stock issued pursuant to the Agreement in accordance with ASC 480-10-S99-3A, Classification and Measurement of Redeemable Securities, which provides that securities that are optionally redeemable by the holder for cash or other assets are classified outside of permanent equity in temporary equity. The 50,000 shares of Common Stock issued pursuant to the Agreement were recorded as redeemable common stock at an initial carrying value of $163,000. This amount is equal to the gross proceeds of $250,000, less $27,000 in issuance costs related to legal fees and the $60,000 Fee, which has been included in other liabilities. The Company elected to record the Common Stock at its redemption value of $275,000 immediately and accordingly recorded accretion of $112,000 to additional paid in capital during fiscal year 2013. | |||||||||||||
FOREIGN CURRENCY TRANSLATION | |||||||||||||
The functional currency of the Company’s foreign operations (Germany and Italy) is the Euro. As a result, assets and liabilities are translated at period-end exchange rates and revenues and expenses are translated at the average exchange rates. Adjustments resulting from translation of such financial statements are classified in accumulated other comprehensive income (loss). Foreign currency gains and losses arising from transactions were included in the statements of operations. For the three month periods ended August 31, 2013 and 2012, the Company recorded a net gain from foreign currency related transactions of approximately $8,000, and $3,000, respectively, to Other income in the Consolidated Condensed Statements of Operations. | |||||||||||||
INCOME TAXES | |||||||||||||
The provision for income taxes is based on the earnings or losses reported in the consolidated financial statements. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company provides a valuation allowance against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||||||||
BALANCE SHEET COMPONENTS | |||||||||||||
Details of certain balance sheet captions are as follows: | |||||||||||||
August 31, | May 31, | ||||||||||||
2013 | 2013 | ||||||||||||
(Amounts in thousands) | |||||||||||||
Property and equipment | $ | 1,909 | $ | 1,869 | |||||||||
Accumulated depreciation and amortization | -1,837 | -1,816 | |||||||||||
Property and equipment, net | $ | 72 | $ | 53 | |||||||||
NET INCOME (LOSS) PER COMMON SHARE | |||||||||||||
Basic and diluted net income (loss) per share are computed by dividing the net income (loss) by the weighted-average number of common shares outstanding. Diluted net income per share is computed by dividing net income by the weighted-average number of common and equivalent dilutive common shares outstanding. For periods in which losses are reported potentially dilutive common stock equivalents are excluded from the calculation of diluted loss per share because the effect is antidilutive. | |||||||||||||
The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net income (loss) for each period: | |||||||||||||
For the Three Months Ended | |||||||||||||
August 31, | August 31, | ||||||||||||
2013 | 2012 | ||||||||||||
(amounts in thousands) | |||||||||||||
Net income (loss) available to common shareholders | $ | -266 | $ | 173 | |||||||||
Weighted average number of common shares outstanding | |||||||||||||
used in calculation of basic earnings per share | 901,005 | 995,135 | |||||||||||
Incremental shares from the assumed exercise of | |||||||||||||
dilutive stock options | - | 6,099 | |||||||||||
Weighted average number of common shares | |||||||||||||
outstanding used in calculating diluted earnings | |||||||||||||
per share | 901,005 | 1,001,234 | |||||||||||
For the three month period ended August 31, 2013, 10,000 options to purchase common shares were anti-dilutive and were excluded from the above calculation. For the three month period ended August 31, 2012, all options were included in the above calculation. | |||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||||||
The Company’s financial instruments consist of cash equivalents, accounts receivable, warrants to purchase shares of common stock, accounts payable and notes payable. The estimated fair values have been determined through information obtained from market sources and management estimates. The estimated fair value of certain financial instruments including cash equivalents, accounts receivable and account payable, approximate the carrying value due to their short-term maturity. The Company’s warrant liability is recorded at fair value. | |||||||||||||
Fair Value Measurements | |||||||||||||
The fair value of the Company’s financial assets and liabilities are measured using inputs from the three levels of fair value hierarchy which are as follows: | |||||||||||||
Level 1 | — | Quoted prices in active markets for identical assets or liabilities. | |||||||||||
Level 2 | — | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||||||
Level 3 | — | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | |||||||||||
The following summarizes the Company’s assets and liabilities measured at fair value as of August 31, 2013: | |||||||||||||
Fair Value Measurements at Reporting Date Using: | |||||||||||||
Quoted | |||||||||||||
Prices | |||||||||||||
in Active | Significant | ||||||||||||
Markets for | Other | Significant | |||||||||||
Balance as of | Identical | Observable | Unobservable | ||||||||||
August 31, | Assets | Inputs | Inputs | ||||||||||
Description (000’s) | 2013 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities | |||||||||||||
Warrant liability | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Total Liabilities | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Activity for liabilities classified as Level 3: | |||||||||||||
SubordinatedConvertibleNote | |||||||||||||
Balance at May 31, 2013 | $ | - | |||||||||||
Issuance of warrant liability | 51 | ||||||||||||
Fair value adjustment | -9 | ||||||||||||
Fair value at August 31, 2013 | $ | 42 | |||||||||||
Fair values for the Company’s warrant liability are determined by utilizing widely accepted valuation techniques including the Black-Scholes Pricing Model. The methods and significant inputs and assumptions utilized in estimating the fair value of the Warrant Liabilities as of the August 31, 2013 balance sheet date are discussed below. The warrants are categorized as Level 3 within the fair value hierarchy. | |||||||||||||
The Company estimated the fair value of each share-based award using the Black-Scholes option valuation model. The Black-Scholes Pricing Model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. | |||||||||||||
Input | July 9, | August 31, | |||||||||||
2013 | 2013 | ||||||||||||
Stock Price | $ | 2.11 | $ | 1.77 | |||||||||
Exercise Price | 1 | 1 | |||||||||||
Expected Life (in years) | 7 | 6.86 | |||||||||||
Stock Volatility | 138% | 138% | |||||||||||
Risk-Free Interest Rate | 2.28% | 2.24% | |||||||||||
Dividend Rate | 0% | 0% | |||||||||||
The following are significant assumptions utilized in developing the inputs: | |||||||||||||
The Company’s common stock shares are traded on the OTC Bulletin Board and, accordingly, the stock price input is based upon bid prices as of the valuation dates due to the extremely thin trading volume, broker-driven market (vs. exchange market) and the wide bid/ask spread as of the valuation date; | |||||||||||||
Stock volatility was estimated by considering (i) the annualized monthly volatility of the Company’s stock price during the historical period preceding the respective valuation dates and measured over a period corresponding to the remaining life of the instruments (monthly data set is more relevant given the extremely thin trading volume of the Company’s common stock). Historical prices of the Company’s common stock were used to estimate volatility as the Company did not have traded options as of the valuation dates; | |||||||||||||
Based upon the Company’s historical operations and management’s expectations for the foreseeable future, the Company’s stock was assumed to be a non-dividend-paying; and | |||||||||||||
The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the valuation date for the expected term. |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
SEGMENT INFORMATION | |||||
SEGMENT INFORMATION | C. Segment Information | ||||
The Company operates in one reportable segment and is engaged in the development, marketing, distribution and support of computer aided design and product data management and collaboration computer solutions. The Company’s operations are organized geographically with offices in the U.S. and foreign offices in Germany and Italy. Components of revenue and long-lived assets (consisting primarily of intangible assets, capitalized software and property, plant and equipment) by geographic location, are as follows (in thousands): | |||||
Three Month Periods Ended | |||||
Revenue: | 31-Aug-13 | 31-Aug-12 | |||
North America | $ | 1,003 | $ | 1,198 | |
Europe | 314 | 333 | |||
Asia | 163 | 166 | |||
Eliminations | -105 | -127 | |||
Consolidated Total | $ | 1,375 | $ | 1,570 | |
Long Lived Assets: | As of August 31, | As of May 31, | |||
2013 | 2013 | ||||
North America | $ | 5,158 | $ | 5,119 | |
Europe | 114 | 113 | |||
Consolidated Total | $ | 5,272 | $ | 5,232 | |
NOTE_RECEIVABLE
NOTE RECEIVABLE | 3 Months Ended |
Aug. 31, 2013 | |
NOTE RECEIVABLE | |
NOTE RECEIVABLE | D. Note Receivable |
Joseph Mullaney, the Company’s CEO, was extended a non-interest bearing note in the amount of $134,000 related to a stock transaction in May, 1998. The note is partially secured by the Company stock acquired in that transaction. The Company has accounted for the note as a fixed arrangement. |
SALE_OF_PATENTS
SALE OF PATENTS | 3 Months Ended |
Aug. 31, 2013 | |
SALE OF PATENTS | |
SALE OF PATENTS | E. Sale of Patents |
In June 2012, the Company sold to an unrelated third party (the “Buyer”) its rights, title and interests in three of its U.S. patents (the “Patents”) all entitled Method and System for Design and Drafting in exchange for a non-refundable, initial royalty payment of $200,000 (the “Initial Payment”). These Patents were derived from the Company’s development work related to the Company’s CADRA product line and the inventions are a key, time saving feature within that technology offering. The Company received a limited, non-exclusive, royalty-free license under the Patents to make, use, offer to sell, or sell the Company’s products or services. | |
In September 2012, the Patent agreement was amended to include two other U.S. patents (“Additional Patents”) both entitled Product Development System and Method Using Integrated Process and Data Management. These Additional Patents were derived from the development work related to the Company’s ProductCenter product line and are a core and essential capability within that product offering. The Company received a limited, non-exclusive, royalty-free license under the Additional Patents to make, use, offer to sell or sell the Company’s products or services. As a result of the amendment, the Initial Payment was increased by $100,000. | |
The agreement gives the Buyer complete control over what, if any, actions shall be taken in the future to monetize the Patents through licensing, sale, enforcement or other means. In the event whereby monies are derived from the Patents, the Company is due 30% of the net proceeds (the “Net Proceeds”), as defined in the agreement. The Initial Payment shall be reimbursable from Net Proceeds to the extent any are due. There can be no assurance that the Company will derive any additional monies from the Patents, however. | |
The sale of the Patents is a multiple element arrangement as defined under ASC 605 and, as such, the Company allocated the Initial Payment between the sale of the Patents that were delivered during the fiscal quarter and support services that were undelivered. Support services include being available to the Buyer to assist them should they require such assistance in licensing or pursuing other means of monetizing the Patents to third parties. The allocation of the Initial Payment to the patent and support services elements was based on management’s best estimate of the selling price of each element. The Initial Payment was allocated as follows: Patents - $290,000; and Support Services - $10,000. Additional monies due the Company in the form of royalties from its 30% share of Net Proceeds will be recorded in the quarterly period in which the Buyer notifies the Company such payments are due. Such notification and payment, if any, are due thirty calendar days after the end of each calendar quarter. The revenue allocated to support services has been deferred and will be recognized as revenue when the services are performed. There can be no assurance that the Company will derive any other monies from the Additional Patents, however. | |
The Company retained its three U.S. patent applications that it acquired or filed since the Recapitalization Transaction in March 2011. These patent applications were not included in the above described agreement. The Company expects to be actively engaged with the U.S. Patent and Trademark Office for the foreseeable future with regard to those filings. |
DEBT
DEBT | 3 Months Ended |
Aug. 31, 2013 | |
DEBT | |
DEBT | F. Debt |
The following provides a description of the current terms of the Company’s loan agreement with Prides Crossing Capital. As further described in Note H hereto, the Company has reached an agreement in principal with Prides Crossing Capital in connection with the closing of the CADRA sale, which provides, among other things, for the amendment of the Loan Agreement within 30 days of the date of the completion of the CADRA sale. | |
PRIDES CROSSING CAPITAL | |
On May 10, 2013, the Company entered into a loan agreement (the “Loan Agreement”) with Prides Crossing Capital L.P. and Prides Crossing Capital -A, L.P., (“Lenders”). The Loan Agreement provides for a $2.7 million, three-year term loan (the “Loan”) with interest only until October 1, 2014. | |
Approximately $1.8 million of the proceeds from the Loan were used to pay-off the Company’s prior credit facilities. | |
The Loan matures on May 1, 2016 and bears an interest rate of 14% paid in arrears on a calendar quarter basis commencing on July 1, 2013 and continuing throughout the life of the loan. Commencing on October 1, 2014, and continuing on the last day of each calendar quarter thereafter through May 1, 2016, the Company will make quarterly principal payments of $135,000. Remaining principal balances will be due and payable on May 1, 2016. | |
The Company agreed to secure all of its obligations under the Loan by granting the Lenders a first priority security interest in all of the Company’s assets, including the Company’s intellectual property and pledges of (i) one hundred percent (100%) of the Company’s equity interests in its domestic subsidiaries and (ii) sixty-five percent (65%) of the Company’s equity interests in its foreign subsidiaries. In connection with the grant of the security interest in favor of the Lenders in the Company’s intellectual property, the Company has entered into an intellectual property security agreement with the Lenders and a source code escrow agreement with the Lenders and an independent third party. In addition, the Company’s CEO has provided the Lenders with a personal guaranty of up to $500,000 secured by his equity interests in the Company. The Company agreed to pay the CEO $80,000 in consideration for extending that personal guaranty. This payment has been included as a part of capitalized debt issuance costs and was included in accrued expenses on each of the balance sheet dates presented. | |
The Loan Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes in its business. In addition, the Loan Agreement contains financial covenants by the Company that establish (i) a maximum ratio of indebtedness to recurring revenue; (ii) a maximum ratio of indebtedness to EBITDA; and (iii) a minimum liquidity test (defined as the Company’s cash plus amounts available under a line of credit of up to $250,000). The Loan Agreement also imposes limits on capital expenditures for each calendar year during the term of the Loan Agreement. | |
The Loan Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy. Upon an event of default relating to insolvency, bankruptcy or receivership, the amounts outstanding under the Loan will become immediately due and payable and the Lenders commitments will be automatically terminated. Upon the occurrence and continuation of any other event of default, the Lenders may accelerate payment of all obligations and terminate the Lenders’ commitments under the Loan Agreement. | |
On July 9, 2013, the Loan Agreement was amended (the “Amendment”) to allow the Company to repurchase 170,000 of its shares from Greenleaf and to increase the maximum ratio of indebtedness to EBITDA from 2.25:1 to 2.60:1 for the quarters ended May 31, 2013, August 31, 2013 and November 30, 2013. In consideration for entering into the Amendment, the Company issued the Lenders warrants to purchase 25,000 shares of common stock at an exercise price of $1.00 per share. The warrants vest monthly over three years, with accelerated vesting under certain circumstances including if the Loan is repaid prior to maturity, and terminate if not exercised on or before July 9, 2020. | |
Upon issuance, the Warrant did not meet the requirements for equity classification, because such warrants provide a cash-out election allowing the holder to a one time right to require the Company to repurchase all or a portion of the Warrant. Therefore these Warrants are required to be accounted for as a liability. Changes in fair value are recognized as either a gain or loss in the consolidated statement of operations under the caption “Change in fair value of warrant liabilities.” | |
The Company determined the fair value of the warrants using the Black-Scholes valuation model. The grant date fair value of the warrant of approximately $51,000 was recorded a liability, with a corresponding discount recorded on the debt. The debt discount will be accreted through the remaining term of the Loan Agreement using the effective interest rate method. Accretion during recorded as interest expense during the three months ended August 31, 2013 was approximately $2,000. As of August 31, 2013 the warrant was adjusted to its fair value of $42,000 resulting in $9,000 of other income recorded during the three months ended August 31, 2013. |
Stock_Purchase_Agreement
Stock Purchase Agreement | 3 Months Ended |
Aug. 31, 2013 | |
Stock Purchase Agreement | |
Stock Purchase Agreement Text Block | G. Stock Purchase Agreement |
In June 2013, the Company purchased 170,000 shares of common stock from Greenleaf, The Ronda E. Stryker and William D. Johnston Foundation, and The L. Lee Stryker 1974 Irrevocable Trust fbo Ronda E. Stryker, for a purchase price of $62,900 or $0.37 per share as detailed in Note G to the consolidated financial statements as of May 31, 2013. The agreement provides an option for the Company to either make an offer to purchase the remaining 101,411 shares held by Greenleaf at $0.37 per share or to provide Greenleaf with registration rights with respect to the remaining shares as set forth in the Registration Rights Agreement dated March 8, 2011. Greenleaf is under no obligation to accept the Company’s offer to purchase the remaining shares on the terms set forth above, however, if the offer is made by the Company and rejected, the Company will no longer be obligated to provide Greenleaf with registration rights with respect to the remaining shares. As part of the agreement, Greenleaf agreed not to sell or transfer the shares for a one year period. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Aug. 31, 2013 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | H. |
Subsequent Events | |
The Company has evaluated all events and transactions that occurred after the balance sheet and through the date that the financial statements were available to be issued. The sale of the CADRA product line is subject to stockholder approval by two-thirds of SofTech's shareholders. On September 30, 2013, SofTech filed a proxy statement with respect to a special meeting of the shareholders to seek that approval. The special meeting of stockholders was held on October 9, 2013. Approximately 674,000 shares were voted at the special meeting and approximately 671,000 or 77% shares of common stock voted to approve the sale of the CADRA product line to Mentor. | |
In connection with the CADRA sale, the Company has reached an agreement in principal with the Lenders to deposit $1,350,000 of the proceeds from the CADRA sale in a restricted account for the benefit of the Lenders, pending the agreement by the Company and the Lenders to an amendment to the Loan Agreement within 30 days from the date of the closing of the CADRA sale. The Loan Agreement amendment may provide for the repayment of indebtedness and/or other terms that are less favorable to the Company than those contained in the existing Loan Agreement. Furthermore, if the Company and the Lenders are unable to agree to the amended terms of the Loan Agreement during the 30 day period following the closing of the CADRA sale, all of the indebtedness currently outstanding under the Loan Agreement ($2.7 million as of August 31, 2013) will become immediately due and payable. | |
ACCOUNTING_POLICIES_POLICIES
ACCOUNTING POLICIES (POLICIES) | 3 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
ACCOUNTING POLICIES | |||||||||||||
USE OF ESTIMATES | USE OF ESTIMATES | ||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. The most significant estimates included in the financial statements pertain to revenue recognition, the allowance for doubtful accounts receivable, and the valuation of long term assets including goodwill, intangibles, capitalized software development costs and deferred tax assets. Actual results could differ from those estimates. | |||||||||||||
REVENUE RECOGNITION | REVENUE RECOGNITION | ||||||||||||
The Company follows the provisions of the Accounting Standards Codification (“ASC”) 985, Software for transactions involving the licensing of software and software support services. Revenue from software license sales is recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectability has been determined. The Company does not provide for a right of return. For multiple element arrangements, total fees are allocated to each of the undelivered elements based upon vendor specific objective evidence (“VSOE”) of their fair values, with the residual amount recognized as revenue for the delivered elements, using the residual method set forth in ASC 985. Revenue from customer maintenance support agreements is deferred and recognized ratably over the term of the agreements, typically one year. Revenue from engineering, consulting and training services is recognized as those services are rendered using a proportional performance model. | |||||||||||||
SOFTWARE DEVELOPMENT COSTS | SOFTWARE DEVELOPMENT COSTS | ||||||||||||
The Company accounts for its software development costs in accordance with 985-20, Costs of Computer Software to Be Sold, Leased or Marketed. Costs that are incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software development costs are capitalized until the product is available for general release to customers. Such costs are amortized using the straight-line method over the estimated economic life of the product, generally three years. The Company evaluates the realizability of the assets and the related periods of amortization on a regular basis. Judgment is required in determining when technological feasibility of a product is established as well as its economic life. | |||||||||||||
During the three months ended August 31, 2013 and 2012, the Company capitalized approximately $39,000 and $111,000, respectively, of software development costs related to new products. Amortization expense related to capitalized software development for the three months ending August 31, 2013 and 2012 was approximately $24,000 and $12,000, respectively. | |||||||||||||
DEBT ISSUANCE COSTS | DEBT ISSUANCE COSTS | ||||||||||||
The Company capitalizes the direct costs associated with entering into debt agreements and amortizes those costs over the life of the debt agreement. On May 10, 2013, the Company refinanced its then existing debt agreements and entered into a new debt agreement as described in Note F. Total direct costs incurred in establishing this debt agreement were approximately $291,000. These costs have been capitalized and are being amortized over the three year life of the loan. Unamortized debt issuance costs related to the Company’s previous debt agreement as of May 10, 2013 totaled approximately $108,000 and were expensed during fiscal 2013. Amortization expense related to debt issuance costs for the three months ending August 31, 2013 and 2012 were approximately $22,000 and $29,000, respectively. | |||||||||||||
ACCOUNTING FOR GOODWILL | ACCOUNTING FOR GOODWILL | ||||||||||||
The Company accounts for goodwill pursuant to the provisions of the ASC 350, Intangibles – Goodwill and Other. This requires that goodwill be reviewed annually, or more frequently as a result of an event or change in circumstances, for possible impairment with impaired assets written down to fair value. Additionally, existing goodwill and intangible assets must be assessed and classified within the statement’s criteria. | |||||||||||||
The Company operates in a single reporting unit. Goodwill has been allocated to the CADRA product line based upon the estimated fair value of the CADRA product line based on the transaction with Mentor as compared to the estimated fair value of the Company as a whole. As of May 31, 2013, the Company conducted its annual impairment test of goodwill by comparing the fair value of the reporting unit to the carrying amount of the underlying assets and liabilities of its single reporting unit. The Company determined that the fair value of the reporting unit exceeded the carrying amount of the assets and liabilities, therefore no impairment existed as of the testing date. The Company concluded that no facts or circumstances arose during the three months ended August 31, 2013 to warrant an interim impairment test. Goodwill allocated to the CADRA product line and being held for sale on August 31, 2013 and May 31, 2013 was approximately $3.8 million. | |||||||||||||
CAPITALIZED PATENT COSTS | CAPITALIZED PATENT COSTS | ||||||||||||
Costs related to patent applications are capitalized as incurred and are amortized once the patent application is accepted or are expensed if the application is finally rejected. Patent costs are amortized over their estimated economic lives under the straight-line method, and are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable through the estimated undiscounted future cash flows from the use of the associated patent. Capitalized patent costs totaled approximately $2,000 and $6,000 for the three month period ended August 31, 2013 and 2012. | |||||||||||||
LONG-LIVED ASSETS | LONG-LIVED ASSETS | ||||||||||||
The Company periodically reviews the carrying value of all intangible and other long-lived assets. If indicators of impairment exist, the Company compares the undiscounted cash flows estimated to be generated by those assets over their estimated economic life to the related carrying value of those assets to determine if the assets are impaired. If the carrying value of the asset is greater than the estimated undiscounted cash flows, the carrying value of the assets would be decreased to their fair value through a charge to operations. As of August 31, 2013, the Company does not have any long-lived assets it considers to be impaired. | |||||||||||||
STOCK-BASED COMPENSATION | STOCK BASED COMPENSATION | ||||||||||||
Stock-based compensation expense for all stock-based payment awards made to employees and directors is measured based on the grant-date fair value of the award. The Company estimated the fair value of each share-based award using the Black-Scholes option valuation model. The Black-Scholes option valuation model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award. | |||||||||||||
The Company’s 1994 Stock Option Plan provided for the granting of stock options at an exercise price not less than fair market value of the stock on the date of the grant and with vesting schedules as determined by the Board of Directors. No new options could be granted under the Plan after fiscal year 2004 and all stock options had vested prior to May 31, 2009. During fiscal 2012, all options awarded under the 1994 Stock Option Plan had expired. In May 2011, the 2011 Equity Incentive Plan (the “2011 Plan”) was approved by the Company’s shareholders, pursuant to which 150,000 shares of our common shares are reserved for issuance. Additionally, any future shares subject to any award under the 2011 Plan that expires, is terminated unexercised or is forfeited will be available for awards under the 2011 Plan. The Company may grant stock options, restricted stock, restricted stock units, stock equivalents and awards of shares of common stock that are not subject to restrictions or forfeiture under the 2011 Plan. As of August 31, 2013, 10,000 options were awarded and outstanding under the 2011 Plan. | |||||||||||||
The following table summarizes option activity under the 1994 Stock Option Plan and 2011 Plan: | |||||||||||||
Weighted | Weighted- | ||||||||||||
Average | Average | ||||||||||||
Number of | Exercise Price | Remaining | Aggregate | ||||||||||
Options | Per Share | Life (in years) | Intrinsic Value | ||||||||||
Outstanding options at May 31, 2012 | 10,000 | $ | 2.4 | 9.02 | $ | - | |||||||
Granted | - | - | - | - | |||||||||
Exercised | - | - | - | - | |||||||||
Forfeited or expired | - | - | - | - | |||||||||
Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | |||||||||
Granted | - | - | - | - | |||||||||
Exercised | - | - | - | - | |||||||||
Forfeited or expired | - | - | - | - | |||||||||
Outstanding options at August 31, 2013 | 10,000 | $ | 2.4 | 7.77 | $ | - | |||||||
Exercisable at August 31, 2013 | 7,222 | $ | 2.4 | 7.77 | $ | - | |||||||
The Company determined the volatility for options granted using the historical volatility of the Company’s common stock. The expected life of options has been determined utilizing the “simplified” method as prescribed in ASC 718 Compensation, Stock Compensation. The expected life represents an estimate of the time options are expected to remain outstanding. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. | |||||||||||||
For the three month periods ended August 31, 2013 and 2012, the Company expensed approximately $2,000 of stock-based compensation. | |||||||||||||
REEDEMABLE COMMON STOCK | REDEEMABLE COMMON STOCK | ||||||||||||
During the year ending May 31, 2013, the Company issued 50,000 shares of common stock, $.10 par value (the “Common Stock”) at a purchase price of $5.00 per share to accredited investors (collectively, the “Investors”) in separate private placement transactions for total proceeds of $250,000. These transactions were completed pursuant to a Securities Purchase Agreement (the “Agreement”) which the Company entered into with each of the respective Investors. In lieu of registration rights, each $25,000 investment entitles the Investors to a fee of $6,000 (the “Fee”) to be paid in six equal quarterly installments during the eighteen month period (the “Payment Period”) following the investment. The Agreement also provides the Investors with the right to require the Company to redeem the Common Stock held by such Investors (the “Put Option”) for $5.50 per share in cash for a 30 day period following the Payment Period. | |||||||||||||
The Company first assessed the redeemable Common Stock to determine if the instrument should be accounted for as a liability in accordance with ASC 480. In that the Put Option is optionally redeemable by the holder, the Common Stock was not required to be accounted for as a liability. Next, the Company assessed the Put Option within the redeemable Common Stock as a potential embedded derivative pursuant to the provisions of ASC 815, Derivatives and Hedging, and concluded that the Put Option did not meet the net settlement criteria within the definition of a derivative. Therefore, the Company has accounted for the Common Stock issued pursuant to the Agreement in accordance with ASC 480-10-S99-3A, Classification and Measurement of Redeemable Securities, which provides that securities that are optionally redeemable by the holder for cash or other assets are classified outside of permanent equity in temporary equity. The 50,000 shares of Common Stock issued pursuant to the Agreement were recorded as redeemable common stock at an initial carrying value of $163,000. This amount is equal to the gross proceeds of $250,000, less $27,000 in issuance costs related to legal fees and the $60,000 Fee, which has been included in other liabilities. The Company elected to record the Common Stock at its redemption value of $275,000 immediately and accordingly recorded accretion of $112,000 to additional paid in capital during fiscal year 2013. | |||||||||||||
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION | ||||||||||||
The functional currency of the Company’s foreign operations (Germany and Italy) is the Euro. As a result, assets and liabilities are translated at period-end exchange rates and revenues and expenses are translated at the average exchange rates. Adjustments resulting from translation of such financial statements are classified in accumulated other comprehensive income (loss). Foreign currency gains and losses arising from transactions were included in the statements of operations. For the three month periods ended August 31, 2013 and 2012, the Company recorded a net gain from foreign currency related transactions of approximately $8,000, and $3,000, respectively, to Other income in the Consolidated Condensed Statements of Operations. | |||||||||||||
INCOME TAXES Policy | INCOME TAXES | ||||||||||||
The provision for income taxes is based on the earnings or losses reported in the consolidated financial statements. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company provides a valuation allowance against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||||||||
BALANCE SHEET COMPONENTS | BALANCE SHEET COMPONENTS | ||||||||||||
Details of certain balance sheet captions are as follows: | |||||||||||||
August 31, | May 31, | ||||||||||||
2013 | 2013 | ||||||||||||
(Amounts in thousands) | |||||||||||||
Property and equipment | $ | 1,909 | $ | 1,869 | |||||||||
Accumulated depreciation and amortization | -1,837 | -1,816 | |||||||||||
Property and equipment, net | $ | 72 | $ | 53 | |||||||||
NET INCOME (LOSS) PER COMMON SHARE POLICY | INCOME (LOSS) PER COMMON SHARE | ||||||||||||
Basic and diluted net income (loss) per share are computed by dividing the net income (loss) by the weighted-average number of common shares outstanding. Diluted net income per share is computed by dividing net income by the weighted-average number of common and equivalent dilutive common shares outstanding. For periods in which losses are reported potentially dilutive common stock equivalents are excluded from the calculation of diluted loss per share because the effect is antidilutive. | |||||||||||||
The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net income (loss) for each period: | |||||||||||||
For the Three Months Ended | |||||||||||||
August 31, | August 31, | ||||||||||||
2013 | 2012 | ||||||||||||
(amounts in thousands) | |||||||||||||
Net income (loss) available to common shareholders | $ | -266 | $ | 173 | |||||||||
Weighted average number of common shares outstanding | |||||||||||||
used in calculation of basic earnings per share | 901,005 | 995,135 | |||||||||||
Incremental shares from the assumed exercise of | |||||||||||||
dilutive stock options | - | 6,099 | |||||||||||
Weighted average number of common shares | |||||||||||||
outstanding used in calculating diluted earnings | |||||||||||||
per share | 901,005 | 1,001,234 | |||||||||||
For the three month period ended August 31, 2013, 10,000 options to purchase common shares were anti-dilutive and were excluded from the above calculation. For the three month period ended August 31, 2012, all options were included in the above calculation. | |||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS | ||||||||||||
The Company’s financial instruments consist of cash equivalents, accounts receivable, warrants to purchase shares of common stock, accounts payable and notes payable. The estimated fair values have been determined through information obtained from market sources and management estimates. The estimated fair value of certain financial instruments including cash equivalents, accounts receivable and account payable, approximate the carrying value due to their short-term maturity. The Company’s warrant liability is recorded at fair value. | |||||||||||||
Fair Value Measurements | |||||||||||||
The fair value of the Company’s financial assets and liabilities are measured using inputs from the three levels of fair value hierarchy which are as follows: | |||||||||||||
Level 1 | — | Quoted prices in active markets for identical assets or liabilities. | |||||||||||
Level 2 | — | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||||||
Level 3 | — | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | |||||||||||
The following summarizes the Company’s assets and liabilities measured at fair value as of August 31, 2013: | |||||||||||||
Fair Value Measurements at Reporting Date Using: | |||||||||||||
Quoted | |||||||||||||
Prices | |||||||||||||
in Active | Significant | ||||||||||||
Markets for | Other | Significant | |||||||||||
Balance as of | Identical | Observable | Unobservable | ||||||||||
August 31, | Assets | Inputs | Inputs | ||||||||||
Description (000’s) | 2013 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities | |||||||||||||
Warrant liability | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Total Liabilities | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Activity for liabilities classified as Level 3: | |||||||||||||
SubordinatedConvertibleNote | |||||||||||||
Balance at May 31, 2013 | $ | - | |||||||||||
Issuance of warrant liability | 51 | ||||||||||||
Fair value adjustment | -9 | ||||||||||||
Fair value at August 31, 2013 | $ | 42 | |||||||||||
Fair values for the Company’s warrant liability are determined by utilizing widely accepted valuation techniques including the Black-Scholes Pricing Model. The methods and significant inputs and assumptions utilized in estimating the fair value of the Warrant Liabilities as of the August 31, 2013 balance sheet date are discussed below. The warrants are categorized as Level 3 within the fair value hierarchy. | |||||||||||||
The Company estimated the fair value of each share-based award using the Black-Scholes option valuation model. The Black-Scholes Pricing Model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. | |||||||||||||
Input | July 9, | August 31, | |||||||||||
2013 | 2013 | ||||||||||||
Stock Price | $ | 2.11 | $ | 1.77 | |||||||||
Exercise Price | 1 | 1 | |||||||||||
Expected Life (in years) | 7 | 6.86 | |||||||||||
Stock Volatility | 138% | 138% | |||||||||||
Risk-Free Interest Rate | 2.28% | 2.24% | |||||||||||
Dividend Rate | 0% | 0% | |||||||||||
The following are significant assumptions utilized in developing the inputs: | |||||||||||||
The Company’s common stock shares are traded on the OTC Bulletin Board and, accordingly, the stock price input is based upon bid prices as of the valuation dates due to the extremely thin trading volume, broker-driven market (vs. exchange market) and the wide bid/ask spread as of the valuation date; | |||||||||||||
Stock volatility was estimated by considering (i) the annualized monthly volatility of the Company’s stock price during the historical period preceding the respective valuation dates and measured over a period corresponding to the remaining life of the instruments (monthly data set is more relevant given the extremely thin trading volume of the Company’s common stock). Historical prices of the Company’s common stock were used to estimate volatility as the Company did not have traded options as of the valuation dates; | |||||||||||||
Based upon the Company’s historical operations and management’s expectations for the foreseeable future, the Company’s stock was assumed to be a non-dividend-paying; and | |||||||||||||
The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the valuation date for the expected term. |
Summarizes_option_activity_Tab
Summarizes option activity (Tables) | 3 Months Ended | |||||||
Aug. 31, 2013 | ||||||||
Summarizes option activity | ||||||||
Summarizes option activity | The following table summarizes option activity under the 1994 Stock Option Plan and 2011 Plan: | |||||||
Weighted | Weighted- | |||||||
Average | Average | |||||||
Number of | Exercise Price | Remaining | Aggregate | |||||
Options | Per Share | Life (in years) | Intrinsic Value | |||||
Outstanding options at May 31, 2012 | 10,000 | $ | 2.4 | 9.02 | $ | - | ||
Granted | - | - | - | - | ||||
Exercised | - | - | - | - | ||||
Forfeited or expired | - | - | - | - | ||||
Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | ||||
Granted | - | - | - | - | ||||
Exercised | - | - | - | - | ||||
Forfeited or expired | - | - | - | - | ||||
Outstanding options at August 31, 2013 | 10,000 | $ | 2.4 | 7.77 | $ | - | ||
Exercisable at August 31, 2013 | 7,222 | $ | 2.4 | 7.77 | $ | - | ||
Details_of_certain_balance_she
Details of certain balance sheet captions (Tables) | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
Details of certain balance sheet captions | |||||
Details of certain balance sheet captions | Details of certain balance sheet captions are as follows: | ||||
August 31, | May 31, | ||||
2013 | 2013 | ||||
(Amounts in thousands) | |||||
Property and equipment | $ | 1,909 | $ | 1,869 | |
Accumulated depreciation and amortization | -1,837 | -1,816 | |||
Property and equipment, net | $ | 72 | $ | 53 |
Calculation_of_basic_and_dilut
Calculation of basic and diluted net income for each period (Tables) | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
Calculation of basic and diluted net income for each period (Tables): | |||||
Calculation of basic and diluted net income for each period | The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net income (loss) for each period: | ||||
For the Three Months Ended | |||||
August 31, | August 31, | ||||
2013 | 2012 | ||||
(amounts in thousands) | |||||
Net income (loss) available to common shareholders | $ | -266 | $ | 173 | |
Weighted average number of common shares outstanding | |||||
used in calculation of basic earnings per share | 901,005 | 995,135 | |||
Incremental shares from the assumed exercise of | |||||
dilutive stock options | - | 6,099 | |||
Weighted average number of common shares | |||||
outstanding used in calculating diluted earnings | |||||
per share | 901,005 | 1,001,234 |
Fair_Value_Of_Financial_Instru
Fair Value Of Financial Instruments As Follows (Tables) | 3 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Fair Value Of Financial Instruments As Follows | |||||||||||||
Fair Value Assets and Liabilities Measured | The following summarizes the Company’s assets and liabilities measured at fair value as of August 31, 2013: | ||||||||||||
Fair Value Measurements at Reporting Date Using: | |||||||||||||
Quoted | |||||||||||||
Prices | |||||||||||||
in Active | Significant | ||||||||||||
Markets for | Other | Significant | |||||||||||
Balance as of | Identical | Observable | Unobservable | ||||||||||
August 31, | Assets | Inputs | Inputs | ||||||||||
Description (000’s) | 2013 | (Level 1) | (Level 2) | (Level 3) | |||||||||
Liabilities | |||||||||||||
Warrant liability | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Total Liabilities | $ | 42 | $ | — | $ | — | $ | 42 | |||||
Activity for liabilities classified as level 3 | Activity for liabilities classified as Level 3: | ||||||||||||
SubordinatedConvertibleNote | |||||||||||||
Balance at May 31, 2013 | $ | - | |||||||||||
Issuance of warrant liability | 51 | ||||||||||||
Fair value adjustment | -9 | ||||||||||||
Fair value at August 31, 2013 | $ | 42 | |||||||||||
Estimated the fair value of each share-based award using the Black-Scholes option | The Company estimated the fair value of each share-based award using the Black-Scholes option valuation model. The Black-Scholes Pricing Model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield | ||||||||||||
Input | July 9, | August 31, | |||||||||||
2013 | 2013 | ||||||||||||
Stock Price | $ | 2.11 | $ | 1.77 | |||||||||
Exercise Price | 1 | 1 | |||||||||||
Expected Life (in years) | 7 | 6.86 | |||||||||||
Stock Volatility | 138% | 138% | |||||||||||
Risk-Free Interest Rate | 2.28% | 2.24% | |||||||||||
Dividend Rate | 0% | 0% |
Segment_Reporting_Information_
Segment Reporting Information (Tables) | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
Segment Reporting Information | |||||
Segment Reporting Information | The Company’s operations are organized geographically with offices in the U.S. and foreign offices in Germany and Italy. Components of revenue and long-lived assets (consisting primarily of intangible assets, capitalized software and property, plant and equipment) by geographic location, are as follows (in thousands): | ||||
Three Month Periods Ended | |||||
Revenue: | 31-Aug-13 | 31-Aug-12 | |||
North America | $ | 1,003 | $ | 1,198 | |
Europe | 314 | 333 | |||
Asia | 163 | 166 | |||
Eliminations | -105 | -127 | |||
Consolidated Total | $ | 1,375 | $ | 1,570 | |
Long Lived Assets: | As of August 31, | As of May 31, | |||
2013 | 2013 | ||||
North America | $ | 5,158 | $ | 5,119 | |
Europe | 114 | 113 | |||
Consolidated Total | $ | 5,272 | $ | 5,232 | |
SOFTWARE_DEVELOPMENT_COSTS_Det
SOFTWARE DEVELOPMENT COSTS (Details) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
SOFTWARE DEVELOPMENT COSTS DURING: | ||
Capitalized approximately | $39,000 | $111,000 |
Amortization expense related to capitalized software development costs | $24,000 | $12,000 |
DEBT_ISSUANCE_COSTS_Details
DEBT ISSUANCE COSTS (Details) (USD $) | 3 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | 10-May-13 | |
DEBT ISSUANCE COSTS DURING THE PERIOD: | |||
Direct costs incurred in establishing debt agreement | $291,000 | ||
Unamortized debt issuance costs | 108,000 | ||
Amortization expense related to debt issuance costs | $225,000 | $114,000 |
CAPITALIZED_PATENT_COSTS_AS_FO
CAPITALIZED PATENT COSTS AS FOLLOWS (Details) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
CAPITALIZED PATENT COSTS AS FOLLOWS: | ||
Capitalized patent costs totaled | $2,000 | $6,000 |
Stock_based_compensation_Issua
Stock based compensation Issuance (details) (USD $) | 3 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | 31-May-11 | |
Stock based compensation Issuance | |||
As per equity incentive plan company reserved common shares for issuance | 150,000 | ||
Options were awarded and outstanding under the 2011 Plan. | 10,000 | ||
Expensed approximately of stock-based compensation | $2,000 | $2,000 |
Summarizes_option_activity_und
Summarizes option activity under the 1994 and the 2011 Stock Option Plan (Details) | Number of Options | Weighted Average Exercise Price Per Share | Weighted-Average Remaining Life (in years) | Aggregate Intrinsic Value |
Outstanding options at May. 31, 2012 | 10,000 | 2.4 | 9.02 | 0 |
Granted | 0 | 0 | 0 | 0 |
Exercised | 0 | 0 | 0 | 0 |
Forfeited or expired | 0 | 0 | 0 | 0 |
Outstanding options at May. 31, 2013 | 10,000 | 2.4 | 8.02 | 0 |
Granted | 0 | 0 | 0 | 0 |
Exercised | 0 | 0 | 0 | 0 |
Forfeited or expired | 0 | 0 | 0 | 0 |
Exercisable at Aug. 31, 2013 | 6,389 | 2.4 | 7.77 | 0 |
Outstanding options at Aug. 31, 2013 | 10,000 | 2.4 | 7.77 | 0 |
FOREIGN_CURRENCY_TRANSLATION_T
FOREIGN CURRENCY TRANSLATION TRANSACTIONS (Details) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
FOREIGN CURRENCY TRANSLATION TRANSACTIONS: | ||
Net gain from foreign currency related transactions | $8,000 | $3,000 |
Certain_balance_sheet_captions
Certain balance sheet captions are as follows (Details) (USD $) | Aug. 31, 2013 | 31-May-13 |
Certain balance sheet captions are as follows: | ||
Property and equipment | $1,909 | $1,869 |
Accumulated depreciation and amortization | -1,837 | -1,816 |
Property and equipment, net. | $72 | $53 |
NET_INCOME_PER_COMMON_SHARE_De
NET INCOME PER COMMON SHARE (Details) (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Calculation of basic and diluted net income: | ||
Net income (loss) available to common shareholders | ($266) | $173 |
Weighted average number of common shares outstanding used in calculating basic earnings per share | 901,005 | 995,135 |
Incremental shares from the assumed exercise of dilutive stock options | $6.10 | |
Weighted average number of common shares outstanding used in calculating diluted earnings per share | 901,005 | 1,001,234 |
Summarizes_assets_and_liabilit
Summarizes assets and liabilities measured at fair value (Details) (USD $) | Aug. 31, 2013 |
Liabilities: | |
Warrant liability: | $42 |
Total Liabilities: | 42 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |
Warrant liability (Quoted Prices) | 0 |
Total Liabilities (Quoted Prices) | 0 |
Significant Other Observable Inputs (Level 2) | |
Warrant liability (Other Observable Inputs) | 0 |
Total Liabilities (Other Observable Inputs) | 0 |
Significant Unobservable Inputs (Level 3) | |
Warrant liability (Unobservable Inputs) | 42 |
Total Liabilities (Unobservable Inputs) | $42 |
Activity_for_liabilities_class
Activity for liabilities classified as level 3 (Details) (Subordinated Convertible Note, USD $) | Subordinated Convertible Note |
USD ($) | |
Balance. at May. 31, 2013 | 0 |
Issuance of warrant liability | $51 |
Fair value adjustment | -9 |
Fair value: at Aug. 31, 2013 | $42 |
BlackScholes_option_valuation_
Black-Scholes option valuation model (Details) (USD $) | Aug. 31, 2013 | Jul. 09, 2013 |
Black-Scholes option valuation model: | ||
Stock Price | $1.77 | $2.11 |
Exercise Price | $1 | $1 |
Expected Life (in years) | 6.86 | 7 |
Stock Volatility | 138.00% | 138.00% |
Risk-Free Interest Rate | 2.24% | 2.28% |
Dividend Rate | 0.00% | 0.00% |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | 31-May-13 | |
Revenues: | |||
North America Revenue | $1,003 | $1,198 | |
Europe Revenue | 314 | 333 | |
Asia Revenue | 163 | 166 | |
Eliminations Revenue | -105 | -127 | |
Consolidated Revenue Total | 1,375 | 1,570 | |
Long-Lived Assets: | |||
North America Assets | 5,158 | 5,119 | |
Europe Assets | 114 | 113 | |
Consolidated Assets Total | $5,272 | $5,232 |
Notes_Receivables_details
Notes Receivables (details) (USD $) | 31-May-98 |
Notes Receivables details | |
Non interest bearing note extended by CEO related to a stock transaction | $134,000 |
Patents_Sales_Transactions_DET
Patents Sales Transactions (DETAILS) (USD $) | Aug. 31, 2013 | Sep. 30, 2012 |
Patents Sales Transactions | ||
Non-refundable initial royalty payment made | $200,000 | |
Patents purchased | 290,000 | |
Support services payment | 10,000 | |
Share of royalties payable | 30.00% | |
Increase in the limit of initial payment | $100,000 |
PRIDES_CROSSING_CAPITAL_DETAIL
PRIDES CROSSING CAPITAL (DETAILS) (USD $) | Aug. 31, 2013 |
PRIDES CROSSING CAPITAL | |
Loan Agreement with Prides Crossing Capital L.P. and Prides Crossing Capital -A, L.P. | $2,700,000 |
Amount used to pay-off the prior credit facilities | 1,800,000 |
Loan matures on May1, 2016 and bears an interest rate of | 14.00% |
Quarterly principal payments | 135,000 |
Security offered in company's equity interests in its domestic subsidiaries | 100.00% |
Security offered in company's equity interests in its foreign subsidiaries | 65.00% |
Personal guarantee offered by CEO upto | 500,000 |
Consideration for extending personal guaranty | 80,000 |
Repurchase of shares as per the amended agreement | 170,000 |
Warrants issued to the lender | 25,000 |
Exercise price per share | $1 |
Warrants vesting period | 3 |
Grant date fair value of the warrant of approximately | 51,000 |
Accretion during recorded as interest expense | 2,000 |
Warrant was adjusted to its fair value | 42,000 |
Other income recorded during the period | $9,000 |
Stock_Purchase_Agreement_DETAI
Stock Purchase Agreement (DETAILS) (USD $) | Aug. 31, 2013 |
Stock Purchase Agreement: | |
Company purchased common stock from Greenleaf Capital Inc, | 170,000 |
Purchase price (total) | $62,900 |
Purchase price per share | $0.37 |
Option to purchase remainig shares as per stock purchase agreement | 101,411 |
Price per share within one year of the date of agreement | $0.37 |
Subsequent_Events_DETAILS
Subsequent Events (DETAILS) (USD $) | Sep. 30, 2013 |
Subsequent Events As Follows | |
Shares were voted at the special meeting | 674,000 |
Shares of common stock voted to approve the sale of the CADRA product line to Mentor | 671,000 |
Percentage of Shares of common stock voted to approve the sale of the CADRA product line to Mentor | 77.00% |
Deposits of the proceeds from the CADRA sale in a restricted account for the benefit of the Lenders | $1,350,000 |
All of the indebtedness currently outstanding under the Loan Agreement in millions as on August 31,2013 | 2.7 |