Document_and_Entity_Informatio
| Document and Entity Information | 3 Months Ended | |
| Aug. 31, 2014 | Oct. 10, 2014 | |
| Document and Entity Information | ' | ' |
| Entity Registrant Name | 'SOFTECH INC | ' |
| Document Type | '10-Q | ' |
| Document Period End Date | 31-Aug-14 | ' |
| Amendment Flag | 'false | ' |
| Entity Central Index Key | '0000354260 | ' |
| Current Fiscal Year End Date | '--05-31 | ' |
| Entity Common Stock, Shares Outstanding | ' | 893,724 |
| 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 | '2015 | ' |
| Document Fiscal Period Focus | 'Q1 | ' |
CONSOLIDATED_CONDENSED_BALANCE
| CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | Aug. 31, 2014 | 31-May-14 |
| In Thousands, unless otherwise specified | ||
| CURRENT ASSETS | ' | ' |
| Cash and cash equivalents | $1,230 | $1,209 |
| Accounts receivable (less allowance for uncollectible accounts of $18 as of August 31, 2014 and May 31, 2014) | 568 | 666 |
| Holdback Payment and Earn-Out Payments from CADRA Sale | 600 | 547 |
| Debt issuance costs, net | 87 | 139 |
| Prepaid and other assets | 272 | 204 |
| Total current assets | 2,757 | 2,765 |
| Property and equipment, net | 84 | 95 |
| Goodwill | 948 | 948 |
| Capitalized software development costs, net | 291 | 319 |
| Capitalized patent costs | 108 | 106 |
| Earn-Out Payments from CADRA Sale, net of current portion | 334 | 348 |
| Other assets | 143 | 143 |
| TOTAL ASSETS | 4,665 | 4,724 |
| LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | ' | ' |
| Accounts payable | 196 | 483 |
| Accrued expenses | 492 | 503 |
| Other current liabilities | 104 | 104 |
| Deferred maintenance revenue | 1,196 | 1,462 |
| Capital lease, current | 19 | 19 |
| Debt | 1,529 | 973 |
| Total current liabilities | 3,536 | 3,544 |
| Capital lease | 44 | 47 |
| Long-term debt | 203 | 0 |
| Total liabilities | 3,783 | 3,591 |
| Redeemable common stock, $0.10 par value, 110,000 and 50,000 shares issued and outstanding at August 31, 2014 and May 31, 2014, respectively. | 770 | 275 |
| Shareholders' equity : | ' | ' |
| Common stock, $0.10 par value 20,000,000 shares authorized, 723,724 and 825,135 issued and outstanding at August 31, 2014 and May 31, 2014, respectively. | 73 | 83 |
| Capital in excess of par value | 27,117 | 27,338 |
| Accumulated deficit | -26,653 | -26,081 |
| Accumulated other comprehensive loss | -425 | -482 |
| Total shareholders' equity | 112 | 858 |
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | $4,665 | $4,724 |
CONSOLIDATED_CONDENSED_BALANCE1
| CONSOLIDATED CONDENSED BALANCE SHEETS PARENTHETICALS (USD $) | Aug. 31, 2014 | 31-May-14 |
| In Thousands, except Per Share data, unless otherwise specified | ||
| Parentheticals | ' | ' |
| Allowance for uncollectible accounts | $18 | $18 |
| Redeemable Common Stock, par value | $0.10 | $0.10 |
| Redeemable Common Stock, shares issued | 110,000 | 50,000 |
| Redeemable Common Stock, shares outstanding | 110,000 | 50,000 |
| Common Stock, par value | $0.10 | $0.10 |
| Common Stock, shares authorized | 20,000,000 | 20,000,000 |
| Common Stock, shares issued | 723,724 | 825,135 |
| Common Stock, shares outstanding | 723,724 | 825,135 |
CONSOLIDATED_CONDENSED_STATEME
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
| In Thousands, except Per Share data, unless otherwise specified | Aug. 31, 2014 | Aug. 31, 2013 |
| Revenue: | ' | ' |
| Products | $71 | $241 |
| Services | 793 | 1,134 |
| Total revenue | 864 | 1,375 |
| Cost of revenue: | ' | ' |
| Products | 53 | 33 |
| Services | 355 | 307 |
| Total cost of revenue | 408 | 340 |
| Gross margin | 456 | 1,035 |
| Research and development expenses | 272 | 335 |
| Selling, general and administrative expenses | 717 | 881 |
| Gain on change in fair value of Earn-Out Payments and Holdback Payment | -39 | 0 |
| Operating loss | -494 | -181 |
| Interest expense | 63 | 102 |
| Gain on change in fair value of warrant | 0 | -9 |
| Other (income) expense, net | 15 | -8 |
| Net loss | ($572) | ($266) |
| Basic and diluted net loss per share: | ($0.64) | ($0.30) |
| Weighted average common and redeemable shares outstanding-basic and diluted | 896,234 | 901,005 |
CONSOLIDATED_CONDENSED_STATEME1
| CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | |
| In Thousands, unless otherwise specified | Aug. 31, 2014 | Aug. 31, 2013 |
| Comprehensive income loss: | ' | ' |
| Net loss | ($572) | ($266) |
| Foreign currency translation adjustment | 57 | -20 |
| Total other comprehensive income (loss) | 57 | -20 |
| Comprehensive loss | ($515) | ($286) |
CONSOLIDATED_CONDENSED_STATEME2
| CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
| In Thousands, unless otherwise specified | Aug. 31, 2014 | Aug. 31, 2013 |
| Cash flows from operating activities: | ' | ' |
| Net loss | ($572) | ($266) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
| Depreciation and amortization expense | 90 | 55 |
| Stock-based compensation | 27 | 2 |
| Non-cash interest expense | 9 | 2 |
| Change in fair value of Earn-Out Payments and Holdback Payment | -39 | 0 |
| Change in fair value of warrant liability | 0 | -9 |
| Change in current assets and liabilities: | ' | ' |
| Accounts receivable | 98 | 190 |
| Prepaid expenses and other assets | -68 | 24 |
| Restricted cash | 0 | 24 |
| Accounts payable, accrued expenses and other liabilities | -298 | 82 |
| Deferred maintenance revenue | -266 | -35 |
| Change in assets and liabilities held for sale | 0 | -318 |
| Net cash used in operating activities | -1,019 | -249 |
| Cash flows from investing activities: | ' | ' |
| Capital expenditures | 0 | -29 |
| Capitalized software development costs | 0 | -39 |
| Capitalized patent costs | -2 | -2 |
| Net cash used in investing activities | -2 | -70 |
| Cash flows from financing activities: | ' | ' |
| Cost of repurchase of common stock | -37 | -63 |
| Cost of repurchase of redeemable common stock | -275 | 0 |
| Capitalized debt issuance costs | 0 | -32 |
| Borrowing under debt agreements | 750 | 0 |
| Proceeds from issuance of common stock | 550 | 0 |
| Repayments under capital lease | -3 | -4 |
| Net cash provided by (used in) financing activities | 985 | -99 |
| Effect of exchange rates on cash | 57 | -18 |
| Increase (decrease) in cash and cash equivalents | 21 | -436 |
| Cash and cash equivalents, beginning of period | 1,209 | 1,188 |
| Cash and cash equivalents, end of period | 1,230 | 752 |
| Supplemental disclosures of cash flow information: | ' | ' |
| Interest paid | 36 | 56 |
| Taxes paid | 2 | 14 |
| Noncash investing and financing activities: | ' | ' |
| Issuance of warrants | 0 | 51 |
| Accretion of redeemable common stock | $220 | $0 |
DESCRIPTION_OF_THE_BUSINESS_AN
| DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
| Aug. 31, 2014 | |
| 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. 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. | |
| 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. | |
| CADRA Sale | |
| On October 18, 2013, the Company sold substantially all of the assets of its CADRA product line, including all intellectual property related to that technology but specifically excluding cash, billed accounts receivable and liabilities other than the deferred maintenance liability associated with CADRA customer maintenance contracts for support services (the “CADRA Sale”), to Mentor Graphics Corporation (“Mentor”), pursuant to an Asset Purchase Agreement dated August 30, 2013 (the “Asset Purchase Agreement”). The aggregate consideration for the CADRA Sale is up to $3.95 million, which is comprised of (i) $2.88 million of which was paid on the closing date; (ii) $320,000 payable on the one year anniversary (the “Holdback Payment”) of the closing date (subject to any indemnification claims); and (iii) up to an aggregate $750,000 over the three-year period subsequent to the closing date, based on 10% of the net revenue generated by the CADRA business (the “Earn-Out Payments”), subject to the terms of the Earn-Out Agreement dated August 30, 2013 (the “Earn-Out Agreement”). | |
| The Company continued to offer the CADRA technology as a reseller throughout Europe (except Germany) on an exclusive basis until October 16, 2014 pursuant to a distribution agreement with Mentor (“Distributorship Agreement”) at which time the Distributorship Agreement will be subject to renewal by mutual agreement of the parties. The Company expects to renew the Distributorship Agreement for Europe (except Germany) for at least one year and is currently engaged in negotiations. In addition, for a one year period from the closing of the transaction the Company retained the right to market the CADRA technology to Sikorsky Aircraft, the largest CADRA user in the United States. This marketing right expired as expected on October 16, 2014. Due to the significant continued involvement in the sale and support of the CADRA product line, the transaction does not qualify for presentation as discontinued operations. | |
| Term Loan, Stock Purchase Agreement and Partnership Agreement | |
| On June 20, 2014, the Company entered into a securities purchase agreement (the “Share Purchase Agreement”) with Mr. Joseph P. Daly, an existing SofTech shareholder and a promissory note agreement (the “Note”) with EssigPR, Inc. (“EssigPR”), a Puerto Rico corporation. EssigPR is owned by the aforementioned Mr. Daly. Each of the agreements between the parties is briefly described below. | |
| Under the Share Purchase Agreement dated June 20, 2014, Mr. Daly, Essig’s CEO and owner, purchased 110,000 shares of SofTech common stock, par value $0.10 per share for $550,000, in a direct private placement. Mr. Daly shall have the right to require the Company to repurchase some or all of the shares at $7.00 per share during the ninety (90) day period immediately following the three-year anniversary of the purchase date. | |
| The Note is a three (3) year borrowing arrangement with EssigPR as the lender. The Note is a $750,000 term loan maturing on April 1, 2017, that accrues interest at a 9.5% interest rate, paid quarterly in arrears. The principal on the Note will be paid from the deferred payments (Holdback Payment and Earn-Out Payments) due over the next three years from Mentor in connection with their purchase of the CADRA product line as described herein. The Company is responsible for ensuring that the Mentor deferred payments are sufficient for paying down the Note or, on April 1, 2017, making up for any shortfall. Mentor deferred payments in excess of amounts due under the Note revert to the Company. | |
| On October 1, 2014, the Company entered into an additional short term borrowing arrangement with EssigPR (“Short Term Note”) whereby it was agreed that the Company would retain $300,000 of the Holdback Payment due from Mentor in October 2014 rather than utilize those monies to pay down the above described Note. The interest rate on the Short Term Note is 9.5%, payable quarterly in arrears. The Short Term Note can be repaid at any time without penalty and is due in full on April 10, 2015. EssigPR was awarded 5,000 stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on October 1, 2024 if not exercised. |
SIGNIFICANT_ACCOUNTING_POLICIE
| SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||||
| Aug. 31, 2014 | |||||||||
| 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, the fair value estimate of the Holdback Payment and Earn-Out Payments due from Mentor related to the sale of the CADRA business and the valuation of long term assets including goodwill, capitalized patent costs, capitalized software development costs and deferred tax assets. Actual results could differ from those estimates. | |||||||||
| SOFTWARE DEVELOPMENT COSTS | |||||||||
| The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985, 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, the Company capitalized approximately $39,000 of software development costs. During the three months ended August 31, 2014, the Company did not capitalize software development costs. Amortization expense related to capitalized software development costs for the three months ended August 31, 2014 and 2013 was approximately $28,000 and $24,000, 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. In May 2013, the Company entered into the Loan Agreement as detailed in Note D. Total direct costs incurred in establishing this debt agreement were approximately $255,000 which are being amortized over the term of the arrangement in accordance with ASC 470-50. Amortization expense related to debt issuance costs for the three months ended August 31, 2014 and 2013 were approximately $52,000 and $22,000, respectively. | |||||||||
| Amended Loan Agreement No. 2 described in Note D hereunder was a modification per ASC 470-50, Debt Modifications and Extinguishment, therefore the direct costs totaling approximately $120,000 incurred in completing the modification were expensed. | |||||||||
| 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. | |||||||||
| REVENUE RECOGNITION | |||||||||
| The Company follows the provisions of ASC 985-605, 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 985-605. 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 its 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 the Company licenses 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. | |||||||||
| ACCOUNTING FOR GOODWILL | |||||||||
| The Company accounts for goodwill pursuant to 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. | |||||||||
| During fiscal year 2014, the Company completed the CADRA Sale as described above. The Company attributed a portion of its total goodwill to the CADRA product line and expensed it in the derivation of the gain on the sale. The portion of the total goodwill apportioned to the CADRA product line was equal to the estimated market value of the CADRA product line as compared to the total market value of the Company. | |||||||||
| As of May 31, 2014, 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, 2014 to warrant an interim impairment test. | |||||||||
| 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 for both the three month periods ended August 31, 2014 and 2013, respectively. | |||||||||
| 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, 2014, the Company does not have any long-lived assets it considers to be impaired. | |||||||||
| FINANCIAL INSTRUMENTS | |||||||||
| The Company’s financial instruments consist of cash, accounts receivable, Holdback Payment, Earn-Out Payments, notes receivable, accounts payable and notes payable. The Company’s estimate of the fair value of these financial instruments approximates their carrying value at August 31, 2014. | |||||||||
| FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
| Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company is required to classify certain assets based on the fair value hierarchy, which groups fair value-measured assets based upon the following levels of inputs: | |||||||||
| · | |||||||||
| Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |||||||||
| · | |||||||||
| Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; | |||||||||
| · | |||||||||
| Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). | |||||||||
| The assets maintained by the Company that are required to be measured at fair value on a recurring basis include the Holdback Payment and Earn-Out Payments associated with the Company’s sale of the CADRA product line. | |||||||||
| The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
| Assets: | |||||||||
| Holdback Payment and Earn-Out Payments | $ | 934 | $ | - | $ | - | $ | 934 | |
| Total assets at fair value | $ | 934 | $ | - | $ | - | $ | 934 | |
| The Holdback Payment and Earn-Out Payments are classified as current or non-current assets depending on their anticipated distributions to the Company. | |||||||||
| The table below provides a summary of the changes in fair value of the Level 3 classified Holdback Payment and Earn-Out Payments asset for the three months ended August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Contingent Consideration for the Three Months Ended August31, 2014 | |||||||||
| Fair value at May 31, 2014 | $ | 895 | |||||||
| Change in fair value | 39 | ||||||||
| Fair value at August 31, 2014 | $ | 934 | |||||||
| The fair value of the asset at August 31, 2014 was approximately $934,000. The fair value of the Holdback Payment and the Earn-Out Payments expected to be collected within one year have been classified as current assets. The fair value of the payments expected to be received beyond one year are included in long term assets in the accompanying consolidated balance sheet. The Company has estimated the fair value of the Holdback Payment and Earn-Out Payments using a discounted cash flow approach. This valuation is based upon several factors including; i) management’s estimate of the amount and timing of future CADRA revenues, ii) the timing of receipt of payments from Mentor, and iii) a discount rate of 7%. | |||||||||
| A change in any of these unobservable inputs can significantly change the fair value of the asset. The change in fair value of the asset recognized in the Consolidated Statements of Operations for the three months ended August 31, 2014 was approximately $39,000. | |||||||||
| CHANGE IN ACCOUNTING POLICY | |||||||||
| In our quarterly reports for the fiscal quarters ended November 30, 2013 and February 28, 2014, we accounted for the Holdback Payment and the Earn-Out Payments pursuant to ASC 450, Contingencies whereby the Company recorded a gain of approximately $155,000 through the nine months ended February 28, 2014 which included consideration of the Holdback Payment and reported Earn-Out Payments, but excluded consideration of up to $686,000 of potential future Earn-Out Payments. | |||||||||
| During the fourth quarter of fiscal 2014, we changed our accounting policy with regard to these payments to account for the proceeds at the fair value of the consideration received in accordance with ASC 810-10-40-5. Pursuant to the new policy, the Company estimated the fair value of Holdback Payment and the Earn-Out Payments on the date of the transaction and recognized the fair value as a component of the gain on sale as of the transaction date. The Holdback Payment and Earn-Out Payments will be adjusted to fair value at each reporting period with changes in the fair value of the asset reported as a component of operations in the Consolidated Condensed Statement of Operations. For more information, see the Company’s Form 10-K for the fiscal year ended May 31, 2014, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates – Changes in Accounting Policy.” | |||||||||
| 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, 2014 and 2013, the Company recorded a net (gain) loss from foreign currency related transactions of approximately $15,000, and $(8,000), respectively, to Other (income) expense, net in the Consolidated Condensed Statements of Operations. | |||||||||
| NET INCOME (LOSS) PER COMMON SHARE | |||||||||
| Basic 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 anti-dilutive.The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net loss for each period: | |||||||||
| (Amounts in thousands, except share amounts) | |||||||||
| For the Three Months Ended | |||||||||
| August 31, | August 31, | ||||||||
| 2014 | 2013 | ||||||||
| Net loss available to common shareholders | $ | -572 | $ | -266 | |||||
| Weighted average number of common shares outstanding used in calculating basic earnings per share | 896,234 | 901,005 | |||||||
| Weighted average number of common and redeemable shares outstanding used in calculating diluted earnings per share | 896,234 | 901,005 | |||||||
| For the three month period ended August 31, 2014 and 2013, 129,500 and 10,000, respectively, options to purchase common shares were anti-dilutive and were excluded from the above calculation. | |||||||||
| 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. | |||||||||
| 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. Any 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, 2014, 129,500 options were awarded. | |||||||||
| The following table summarizes option activity under the 2011 Stock Option Plan: | |||||||||
| Number of Options | Weighted Average Exercise Price Per Share | Weighted-Average Remaining Life (in years) | Aggregate Intrinsic Value | ||||||
| Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | |||||
| Granted | 124,500 | 1.84 | 10 | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | -5,000 | 1.11 | - | - | |||||
| Outstanding options at May 31, 2014 | 129,500 | 1.88 | 9.74 | 20,825 | |||||
| Granted | - | - | - | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | - | - | - | - | |||||
| Outstanding options at August 31, 2014 | 129,500 | $ | 1.88 | 9.49 | $ | 19,600 | |||
| Exercisable at August 31, 2014 | 26,112 | $ | 1.98 | 9.04 | $ | 3,267 | |||
| The Company determined the volatility for options granted during the fiscal year ended May 31, 2014 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, 2014 and 2013, the Company expensed approximately $27,000 and $2,000 of stock-based compensation, respectively. | |||||||||
| REDEEMABLE COMMON STOCK | |||||||||
| During the year ended May 31, 2013, the Company issued 50,000 shares of common stock, $0.10 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 entitled 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 provided 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, Distinguishing Liabilities from Equity. 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 related to the total Fee due to each of the Investors, 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. | |||||||||
| During the three months ended August 31, 2014, each of the Investors exercised their Put Option and the Shares were repurchased by the Company at the agreed upon Put Option price of $5.50 per share for a total of $275,000. | |||||||||
| During the three months ended August 31, 2014, in a transaction structured in a similar fashion to the above described Agreement, the Company issued 110,000 shares of common stock, $0.10 par value (the “New Common Stock”) at a purchase price of $5.00 per share to Joseph P. Daly in a private placement transaction for total proceeds of $550,000. This transaction was completed pursuant to a Securities Purchase Agreement (the “New Agreement”). Under the New Agreement Mr. Daly shall have the right to require the Company to repurchase some or all of the shares at $7.00 per share during the ninety (90) day period immediately following the three-year anniversary of the transaction. The Company analyzed the stock issuances pursuant to ASC 480 and ASC 815 and concluded that the New Common Stock is not mandatorily redeemable and the put option does meet the definition of a derivative. Therefore the shares have been classified as temporary equity pursuant to ASC 480-10-S99-3A. | |||||||||
| The Company elected to record the New Common Stock issued pursuant to the New Agreement at their redemption value of $770,000 and accordingly recorded accretion of $220,000 to additional paid in capital. | |||||||||
| RECENT ACCOUNTING PRONOUNCEMENTS | |||||||||
| In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, (Topic 606). The ASU is the result of a joint project by the FASB and the International Accounting Standards Board (“IASB”) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”) that would: remove inconsistencies and weaknesses, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets, improve disclosure requirements and resulting financial statements, and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted. The Company is currently assessing the impact of this guidance. | |||||||||
SEGMENT_INFORMATION
| SEGMENT INFORMATION | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| 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-14 | 31-Aug-13 | |||
| North America | $ | 682 | $ | 1,003 | |
| Europe | 189 | 314 | |||
| Asia | - | 163 | |||
| Eliminations | -7 | -105 | |||
| Consolidated Total | $ | 864 | $ | 1,375 | |
| Long Lived Assets: | As of | As of | |||
| August 31, | May 31, | ||||
| 2014 | 2014 | ||||
| North America | $ | 1,866 | $ | 1,916 | |
| Europe | 42 | 43 | |||
| Consolidated Total | $ | 1,908 | $ | 1,959 | |
DEBT
| DEBT | 3 Months Ended |
| Aug. 31, 2014 | |
| DEBT | ' |
| DEBT | ' |
| D. DEBT | |
| 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 provided for a $2.7 million, three-year term loan (the “Loan”) with interest only payments until October 1, 2014. | |
| On July 9, 2013, the Loan Agreement was amended (the “Amended Loan Agreement No. 1”) to allow the Company to repurchase 170,000 of its shares from Greenleaf Capital (“Greenleaf”) (as described in Note F) 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 Amended Loan Agreement No. 1, 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 were to vest monthly over three years, with accelerated vesting under certain circumstances including if the Loan was repaid prior to maturity, and terminate if not exercised on or before July 9, 2020. | |
| Upon issuance, the warrants 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 warrants. Therefore these warrants were 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 “Other income, net.” | |
| The Company determined the fair value of the warrants using the Black-Scholes valuation model. The grant date fair value of the warrants of approximately $51,000 was recorded as a liability, with a corresponding discount recorded on the debt. The debt discount is being accreted through the remaining term of the Loan Agreement using the effective interest rate method. | |
| On December 5, 2013, the Company entered into the Amended Loan Agreement No. 2 between the Company, as borrower and Prides Crossing Capital Funding, L.P., as the Lender whereby the parties agreed to amend and restate the Company’s existing $2.7 million Loan Agreement following the CADRA Sale. The Lender was the successor to Prides Crossing Capital, L.P. and Prides Crossing Capital-A, L.P., the Lenders under the Loan Agreement. Under the terms of the Amended Loan Agreement No. 2, the Company agreed to pay down the principal of the Loan from $2.7 million to $1.0 million using a portion of the proceeds from the CADRA Sale. In addition, the Company paid a pre-payment penalty of $81,000 and agreed to repurchase the outstanding warrants to purchase 25,000 shares of common stock at an exercise price of $1.00 per share in exchange for $19,000. | |
| The amended and restated Term Note matures on January 1, 2015 and bears an interest rate of 14% payable in arrears on a monthly basis throughout the life of the loan commencing on January 1, 2014. The Term Note may be repaid in full at any time but partial voluntary pre-payments are not allowed. | |
| The Company agreed to secure all of its obligations under the Term Note by granting the Lender 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 Lender in the Company’s intellectual property, the Company has entered into an intellectual property security agreement with the Lender and entered into a source code escrow agreement with the Lender and an independent third party. In addition, the Company’s Chief Executive Officer has provided the Lender with a personal guaranty of up to $500,000 secured by his equity interests in the Company. | |
| The Term Note 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 Term Note contains financial covenants by the Company that establish (i) a month-end minimum consolidated cash balance of $1.0 million of which no less than $750,000 must be held in the Company’s main operating account that is subject to a deposit account control agreement; (ii) a minimum of $750,000 of consolidated cash at all times; (iii) a quick ratio covenant, which provides that on the last day of each fiscal quarter the ratio of the Company’s cash plus accounts receivable divided by accounts payable plus accrued expenses shall not be less than 2.7:1; and (iv) a covenant that provides that the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for Q3 and Q4 of fiscal 2014 shall not exceed a loss of $200,000 for each of those fiscal quarters and shall be greater than positive EBITDA of $100,000 for each subsequent fiscal quarter. The Term Note also imposes limits on capital expenditures for each fiscal year during the term of the Term Note. The Company, the Lender and First Republic Bank entered into a deposit account control agreement pursuant to which the Lender will perfect its security interest in the assets held in the Company’s main operating account at First Republic Bank. | |
| The Term Note 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 Term Note will become immediately due and payable and the Lender commitment will be automatically terminated. Upon the occurrence and continuation of any other event of default, the Lender may accelerate payment of all obligations and terminate the Lender’s commitments under the Term Note. | |
| ESSIGPR | |
| On June 20, 2014, the Company entered into a promissory note agreement (the “Note”) with EssigPR, Inc. (“EssigPR”), a Puerto Rico corporation. The Note is a three (3) year borrowing arrangement with EssigPR as the lender. The promissory note is a $750,000 term loan maturing on April 1, 2017, that accrues interest at a 9.5% interest rate, paid quarterly in arrears. The principal on the Note will be paid from the deferred payments (Holdback Payment and Earn-Out Payments) due over the next three years from Mentor in connection with their purchase of the CADRA product line as described herein. The Company is responsible for ensuring that the Mentor deferred payments are sufficient for paying down the Note or, on April 1, 2017, making up for any shortfall. Mentor deferred payments in excess of amounts due under the Note revert to the Company. | |
| On October 1, 2014, the Company entered into an additional short term borrowing arrangement with EssigPR (“Short Term Note”) whereby it was agreed that the Company would retain $300,000 of the Holdback Payment due from Mentor in October 2014 rather than utilize those monies to pay down the above described Note. The interest rate on the Short Term Note is 9.5%, payable quarterly in arrears. The Short Term Note can be repaid at any time without penalty and is due in full on April 10, 2015. EssigPR was awarded 5,000 stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on October 1, 2024 if not exercised. |
NOTE_RECEIVABLE
| NOTE RECEIVABLE | 3 Months Ended |
| Aug. 31, 2014 | |
| NOTE RECEIVABLE | ' |
| NOTE RECEIVABLE | ' |
| E. 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. |
STOCK_PURCHASE_AGREEMENT
| STOCK PURCHASE AGREEMENT | 3 Months Ended |
| Aug. 31, 2014 | |
| STOCK PURCHASE AGREEMENT | ' |
| STOCK PURCHASE AGREEMENT | ' |
| F. 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 K to the consolidated financial statements as of May 31, 2013. On August 8, 2014 the Company repurchased Greenleaf’s remaining 101,411 shares at $0.37 per share for a total of approximately $38,000. |
CADRA_SALE
| CADRA SALE | 3 Months Ended |
| Aug. 31, 2014 | |
| CADRA SALE | ' |
| CADRA SALE | ' |
| G. CADRA SALE | |
| In October 2014, the Company sold substantially all of the assets of its CADRA product line, including all intellectual property related to that technology but specifically excluded cash, billed accounts receivable and liabilities other than the deferred maintenance liability associated with CADRA customer maintenance contracts for support services, to Mentor, pursuant to an Asset Purchase Agreement dated August 30, 2013. The aggregate consideration for the CADRA Sale is up to $3.95 million, which is comprised of (i) $2.88 million of which was paid on the closing date; (ii) $320,000 (representing a 10% holdback) of which will be paid on the one year anniversary of the closing date (subject to any indemnification claims), and (ii) Earn-Out Payments of up to an aggregate $750,000 over the three-year period subsequent to the closing date, based on 10% of the net revenue generated by the CADRA business , subject to the terms of the Earn-Out Agreement dated August 30, 2013. | |
| The Company continued to offer the CADRA technology as a reseller throughout Europe (except Germany) on an exclusive basis until October 16, 2014 pursuant to a distribution agreement with Mentor (“Distributorship Agreement”) at which time the Distributorship Agreement will be subject to renewal by mutual agreement of the parties. The Company expects to renew the Distributorship Agreement for Europe (except Germany) for at least one year and is currently engaged in negotiations with Mentor. In addition, for a one year period from the closing of the transaction the Company retained the right to market the CADRA technology to Sikorsky Aircraft, the largest CADRA user in the United States. This marketing right expired as expected on October 16, 2014. |
CHANGES_IN_EQUITY
| CHANGES IN EQUITY | 3 Months Ended | ||||||||||||
| Aug. 31, 2014 | |||||||||||||
| CHANGES IN EQUITY | ' | ||||||||||||
| CHANGES IN EQUITY | ' | ||||||||||||
| H. CHANGES IN EQUITY | |||||||||||||
| The changes in Redeemable Common Stock for the three months ended August 31, 2014 is as follows (in thousands): | |||||||||||||
| Redeemable Common Stock | |||||||||||||
| Shares | Amount | ||||||||||||
| Balance as of May 31, 2014 | 50 | $ | 275 | ||||||||||
| Issuance of redeemable common stock | 110 | 550 | |||||||||||
| Accretion of redeemable common stock | - | 220 | |||||||||||
| Repurchase of redeemable common stock | -50 | -275 | |||||||||||
| Balance as of August 31, 2014 | 110 | $ | 770 | ||||||||||
| The changes in Shareholders’ Equity for the three months ended August 31, 2014 is as follows (in thousands): | |||||||||||||
| Common Stock | Capital in excess of | Accumulated | Accumulated other comprehensive | Total shareholders’ | |||||||||
| Shares | Amount | par value | deficit | loss | equity | ||||||||
| Balance as of May 31, 2014 | 825 | $ | 83 | $ | 27,338 | $ | -26,081 | $ | -482 | $ | 858 | ||
| Accretion of redeemable common stock | - | - | -220 | - | - | -220 | |||||||
| Net loss | - | - | - | -572 | - | -572 | |||||||
| Foreign currency translation adjustments | - | - | - | - | 57 | 57 | |||||||
| Repurchase of common stock | -101 | -10 | -28 | - | - | -38 | |||||||
| Stock-based compensation expense | - | - | 27 | - | - | 27 | |||||||
| Balance as of August 31, 2014 | 724 | $ | 73 | $ | 27,117 | $ | -26,653 | $ | -425 | $ | 112 | ||
SUBSEQUENT_EVENTS
| SUBSEQUENT EVENTS | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| SUBSEQUENT EVENTS | ' | ||||
| SUBSEQUENT EVENTS | ' | ||||
| I. 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. | |||||
| In four transactions in September and October 2014, the Company raised proceeds of $300,000 from the issuance of an aggregate of 60,000 shares of the Company’s common stock, par value $0.10 per share, at $5.00 per share to accredited investors in separate private placement transactions. | |||||
| These transactions were completed pursuant to Securities Purchase Agreements which the Company entered into with each of the investors as described in the table below. | |||||
| The material terms of the Securities Purchase Agreements are summarized below. | |||||
| · | |||||
| Number of Shares Sold: An aggregate of 60,000 shares of the Company’s common stock, par value $0.10 per share; | |||||
| · | |||||
| Purchase Price Per Share: The shares were sold to investors at a purchase price of $5.00 per share in lots of 10,000 shares; | |||||
| · | |||||
| Type of Offering: Direct private placement to accredited investors; no registration rights; no third party placement fees; | |||||
| · | |||||
| Fees: In lieu of registration rights and Company costs savings related to direct negotiation with accredited investors, each $50,000 investment entitles the investor to a fee of $5,000 to be paid in eight equal quarterly installments during the twenty-four month period following the investment; and | |||||
| · | |||||
| Purchase Put Right: Each share purchased shall also give the investors the right to require the Company to repurchase the shares at $7.00 per share for the 30 day period following the twenty-four month anniversary of the investment. | |||||
| The Company does not believe that the issuance of such shares will restrict the Company’s ability to utilize its net operating losses. Accordingly, the Board of Directors of the Company approved in advance the purchase of the shares in these transactions as “Exempt Transactions” as defined in Section 1(o) of the Company’s Rights Agreement, dated February 3, 2012, between the Company and the Registrar and Transfer Company | |||||
| Name of Accredited Investor | Date of Securities Purchase Agreement | Amount of Investment in Transaction ($/# of Shares Purchased) | |||
| Robert Anthonyson | 18-Sep-14 | $100,000 / 20,000 shares | |||
| Glenn W. Dillon | 22-Sep-14 | $100,000 / 20,000 shares | |||
| Thomas Doherty | 22-Sep-14 | $50,000 / 10,000 shares | |||
| Leonard Schrank | 9-Oct-14 | $50,000 / 10,000 shares | |||
| Mr. Anthonyson is the Company’s Vice President and is a member of its Board of Directors. He owned 129,838 shares of the Company’s common stock prior to the above described transaction. | |||||
| The offer and sale of securities in the private placements described above were made to “accredited investors” (as defined in Rule 501(a) under the Securities Act) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder. | |||||
| On October 1, 2014, the Company entered into a Short Term Note (as defined above) with EssigPR whereby it was agreed that the Company would retain $300,000 of the Holdback Payment due from Mentor in October 2014 rather than utilize those monies to pay down the above described Note. The interest rate on the Short Term Note is 9.5%, payable quarterly in arrears. The Short Term Note can be repaid at any time without penalty and is due in full on April 10, 2015. EssigPR was awarded 5,000 stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on October 1, 2024 if not exercised. | |||||
ACCOUNTING_POLICIES_Policies
| ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||||
| Aug. 31, 2014 | |||||||||
| 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, the fair value estimate of the Holdback Payment and Earn-Out Payments due from Mentor related to the sale of the CADRA business and the valuation of long term assets including goodwill, capitalized patent costs, capitalized software development costs and deferred tax assets. Actual results could differ from those estimates. | |||||||||
| SOFTWARE DEVELOPMENT COSTS | ' | ||||||||
| SOFTWARE DEVELOPMENT COSTS | |||||||||
| The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985, 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, the Company capitalized approximately $39,000 of software development costs. During the three months ended August 31, 2014, the Company did not capitalize software development costs. Amortization expense related to capitalized software development costs for the three months ended August 31, 2014 and 2013 was approximately $28,000 and $24,000, 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. In May 2013, the Company entered into the Loan Agreement as detailed in Note D. Total direct costs incurred in establishing this debt agreement were approximately $255,000 which are being amortized over the term of the arrangement in accordance with ASC 470-50. Amortization expense related to debt issuance costs for the three months ended August 31, 2014 and 2013 were approximately $52,000 and $22,000, respectively. | |||||||||
| Amended Loan Agreement No. 2 described in Note D hereunder was a modification per ASC 470-50, Debt Modifications and Extinguishment, therefore the direct costs totaling approximately $120,000 incurred in completing the modification were expensed. | |||||||||
| INCOME TAXES | ' | ||||||||
| 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. | |||||||||
| REVENUE RECOGNITION | ' | ||||||||
| REVENUE RECOGNITION | |||||||||
| The Company follows the provisions of ASC 985-605, 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 985-605. 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 its 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 the Company licenses 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. | |||||||||
| ACCOUNTING FOR GOODWILL | ' | ||||||||
| ACCOUNTING FOR GOODWILL | |||||||||
| The Company accounts for goodwill pursuant to 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. | |||||||||
| During fiscal year 2014, the Company completed the CADRA Sale as described above. The Company attributed a portion of its total goodwill to the CADRA product line and expensed it in the derivation of the gain on the sale. The portion of the total goodwill apportioned to the CADRA product line was equal to the estimated market value of the CADRA product line as compared to the total market value of the Company. | |||||||||
| As of May 31, 2014, 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, 2014 to warrant an interim impairment test. | |||||||||
| 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 for both the three month periods ended August 31, 2014 and 2013, respectively. | |||||||||
| 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, 2014, the Company does not have any long-lived assets it considers to be impaired. | |||||||||
| FINANCIAL INSTRUMENTS | ' | ||||||||
| FINANCIAL INSTRUMENTS | |||||||||
| The Company’s financial instruments consist of cash, accounts receivable, Holdback Payment, Earn-Out Payments, notes receivable, accounts payable and notes payable. The Company’s estimate of the fair value of these financial instruments approximates their carrying value at August 31, 2014. | |||||||||
| FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||
| FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
| Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company is required to classify certain assets based on the fair value hierarchy, which groups fair value-measured assets based upon the following levels of inputs: | |||||||||
| · | |||||||||
| Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |||||||||
| · | |||||||||
| Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; | |||||||||
| · | |||||||||
| Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). | |||||||||
| The assets maintained by the Company that are required to be measured at fair value on a recurring basis include the Holdback Payment and Earn-Out Payments associated with the Company’s sale of the CADRA product line. | |||||||||
| The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
| Assets: | |||||||||
| Holdback Payment and Earn-Out Payments | $ | 934 | $ | - | $ | - | $ | 934 | |
| Total assets at fair value | $ | 934 | $ | - | $ | - | $ | 934 | |
| The Holdback Payment and Earn-Out Payments are classified as current or non-current assets depending on their anticipated distributions to the Company. | |||||||||
| The table below provides a summary of the changes in fair value of the Level 3 classified Holdback Payment and Earn-Out Payments asset for the three months ended August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Contingent Consideration for the Three Months Ended August31, 2014 | |||||||||
| Fair value at May 31, 2014 | $ | 895 | |||||||
| Change in fair value | 39 | ||||||||
| Fair value at August 31, 2014 | $ | 934 | |||||||
| The fair value of the asset at August 31, 2014 was approximately $934,000. The fair value of the Holdback Payment and the Earn-Out Payments expected to be collected within one year have been classified as current assets. The fair value of the payments expected to be received beyond one year are included in long term assets in the accompanying consolidated balance sheet. The Company has estimated the fair value of the Holdback Payment and Earn-Out Payments using a discounted cash flow approach. This valuation is based upon several factors including; i) management’s estimate of the amount and timing of future CADRA revenues, ii) the timing of receipt of payments from Mentor, and iii) a discount rate of 7%. | |||||||||
| A change in any of these unobservable inputs can significantly change the fair value of the asset. The change in fair value of the asset recognized in the Consolidated Statements of Operations for the three months ended August 31, 2014 was approximately $39,000. | |||||||||
| CHANGE IN ACCOUNTING POLICY | ' | ||||||||
| CHANGE IN ACCOUNTING POLICY | |||||||||
| In our quarterly reports for the fiscal quarters ended November 30, 2013 and February 28, 2014, we accounted for the Holdback Payment and the Earn-Out Payments pursuant to ASC 450, Contingencies whereby the Company recorded a gain of approximately $155,000 through the nine months ended February 28, 2014 which included consideration of the Holdback Payment and reported Earn-Out Payments, but excluded consideration of up to $686,000 of potential future Earn-Out Payments. | |||||||||
| During the fourth quarter of fiscal 2014, we changed our accounting policy with regard to these payments to account for the proceeds at the fair value of the consideration received in accordance with ASC 810-10-40-5. Pursuant to the new policy, the Company estimated the fair value of Holdback Payment and the Earn-Out Payments on the date of the transaction and recognized the fair value as a component of the gain on sale as of the transaction date. The Holdback Payment and Earn-Out Payments will be adjusted to fair value at each reporting period with changes in the fair value of the asset reported as a component of operations in the Consolidated Condensed Statement of Operations. For more information, see the Company’s Form 10-K for the fiscal year ended May 31, 2014, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates – Changes in Accounting Policy.” | |||||||||
| 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, 2014 and 2013, the Company recorded a net (gain) loss from foreign currency related transactions of approximately $15,000, and $(8,000), respectively, to Other (income) expense, net in the Consolidated Condensed Statements of Operations. | |||||||||
| NET INCOME (LOSS) PER COMMON SHARE POLICY | ' | ||||||||
| NET INCOME (LOSS) PER COMMON SHARE | |||||||||
| Basic 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 anti-dilutive.The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net loss for each period: | |||||||||
| (Amounts in thousands, except share amounts) | |||||||||
| For the Three Months Ended | |||||||||
| August 31, | August 31, | ||||||||
| 2014 | 2013 | ||||||||
| Net loss available to common shareholders | $ | -572 | $ | -266 | |||||
| Weighted average number of common shares outstanding used in calculating basic earnings per share | 896,234 | 901,005 | |||||||
| Weighted average number of common and redeemable shares outstanding used in calculating diluted earnings per share | 896,234 | 901,005 | |||||||
| For the three month period ended August 31, 2014 and 2013, 129,500 and 10,000, respectively, options to purchase common shares were anti-dilutive and were excluded from the above calculation. | |||||||||
| 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. | |||||||||
| 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. Any 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, 2014, 129,500 options were awarded. | |||||||||
| The following table summarizes option activity under the 2011 Stock Option Plan: | |||||||||
| Number of Options | Weighted Average Exercise Price Per Share | Weighted-Average Remaining Life (in years) | Aggregate Intrinsic Value | ||||||
| Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | |||||
| Granted | 124,500 | 1.84 | 10 | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | -5,000 | 1.11 | - | - | |||||
| Outstanding options at May 31, 2014 | 129,500 | 1.88 | 9.74 | 20,825 | |||||
| Granted | - | - | - | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | - | - | - | - | |||||
| Outstanding options at August 31, 2014 | 129,500 | $ | 1.88 | 9.49 | $ | 19,600 | |||
| Exercisable at August 31, 2014 | 26,112 | $ | 1.98 | 9.04 | $ | 3,267 | |||
| The Company determined the volatility for options granted during the fiscal year ended May 31, 2014 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, 2014 and 2013, the Company expensed approximately $27,000 and $2,000 of stock-based compensation, respectively. | |||||||||
| REEDEMABLE COMMON STOCK | ' | ||||||||
| REDEEMABLE COMMON STOCK | |||||||||
| During the year ended May 31, 2013, the Company issued 50,000 shares of common stock, $0.10 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 entitled 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 provided 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, Distinguishing Liabilities from Equity. 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 related to the total Fee due to each of the Investors, 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. | |||||||||
| During the three months ended August 31, 2014, each of the Investors exercised their Put Option and the Shares were repurchased by the Company at the agreed upon Put Option price of $5.50 per share for a total of $275,000. | |||||||||
| During the three months ended August 31, 2014, in a transaction structured in a similar fashion to the above described Agreement, the Company issued 110,000 shares of common stock, $0.10 par value (the “New Common Stock”) at a purchase price of $5.00 per share to Joseph P. Daly in a private placement transaction for total proceeds of $550,000. This transaction was completed pursuant to a Securities Purchase Agreement (the “New Agreement”). Under the New Agreement Mr. Daly shall have the right to require the Company to repurchase some or all of the shares at $7.00 per share during the ninety (90) day period immediately following the three-year anniversary of the transaction. The Company analyzed the stock issuances pursuant to ASC 480 and ASC 815 and concluded that the New Common Stock is not mandatorily redeemable and the put option does meet the definition of a derivative. Therefore the shares have been classified as temporary equity pursuant to ASC 480-10-S99-3A. | |||||||||
| The Company elected to record the New Common Stock issued pursuant to the New Agreement at their redemption value of $770,000 and accordingly recorded accretion of $220,000 to additional paid in capital. | |||||||||
| RECENT ACCOUNTING PRONOUNCEMENTS, Policy | ' | ||||||||
| RECENT ACCOUNTING PRONOUNCEMENTS | |||||||||
| In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, (Topic 606). The ASU is the result of a joint project by the FASB and the International Accounting Standards Board (“IASB”) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”) that would: remove inconsistencies and weaknesses, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets, improve disclosure requirements and resulting financial statements, and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted. The Company is currently assessing the impact of this guidance. | |||||||||
SCHEDULE_OF_FAIR_VALUE_OF_FINA
| SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended | ||||||||
| Aug. 31, 2014 | |||||||||
| SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS Table Text Block: | ' | ||||||||
| Schedule Of Fair Value, Assets Measured on Recurring Basis | ' | ||||||||
| The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
| Assets: | |||||||||
| Holdback Payment and Earn-Out Payments | $ | 934 | $ | - | $ | - | $ | 934 | |
| Total assets at fair value | $ | 934 | $ | - | $ | - | $ | 934 | |
| Summary of the changes in fair value of the Level 3 classified Holdback Payment and Earn-Out Payments | ' | ||||||||
| The table below provides a summary of the changes in fair value of the Level 3 classified Holdback Payment and Earn-Out Payments asset for the three months ended August 31, 2014: | |||||||||
| (in thousands) | |||||||||
| Contingent Consideration for the Three Months Ended August31, 2014 | |||||||||
| Fair value at May 31, 2014 | $ | 895 | |||||||
| Change in fair value | 39 | ||||||||
| Fair value at August 31, 2014 | $ | 934 | |||||||
SCHEDULE_OF_NET_INCOME_LOSS_PE
| SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE (Tables) | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE | ' | ||||
| SCHEDULE OF NET INCOME (LOSS) PER COMMON SHARE | ' | ||||
| The following table details the derivation of weighted average shares outstanding used in the calculation of basic and diluted net loss for each period: | |||||
| (Amounts in thousands, except share amounts) | |||||
| For the Three Months Ended | |||||
| August 31, | August 31, | ||||
| 2014 | 2013 | ||||
| Net loss available to common shareholders | $ | -572 | $ | -266 | |
| Weighted average number of common shares outstanding used in calculating basic earnings per share | 896,234 | 901,005 | |||
| Weighted average number of common and redeemable shares outstanding used in calculating diluted earnings per share | 896,234 | 901,005 | |||
STOCKBASED_COMPENSATION_Tables
| STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||
| Aug. 31, 2014 | |||||||||
| Summarizes option activity | ' | ||||||||
| Summarizes option activity | ' | ||||||||
| The following table summarizes option activity under the 2011 Stock Option Plan: | |||||||||
| Number of Options | Weighted Average Exercise Price Per Share | Weighted-Average Remaining Life (in years) | Aggregate Intrinsic Value | ||||||
| Outstanding options at May 31, 2013 | 10,000 | 2.4 | 8.02 | - | |||||
| Granted | 124,500 | 1.84 | 10 | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | -5,000 | 1.11 | - | - | |||||
| Outstanding options at May 31, 2014 | 129,500 | 1.88 | 9.74 | 20,825 | |||||
| Granted | - | - | - | - | |||||
| Exercised | - | - | - | - | |||||
| Forfeited or expired | - | - | - | - | |||||
| Outstanding options at August 31, 2014 | 129,500 | $ | 1.88 | 9.49 | $ | 19,600 | |||
| Exercisable at August 31, 2014 | 26,112 | $ | 1.98 | 9.04 | $ | 3,267 | |||
SEGMENT_INFORMATION_Tables
| SEGMENT INFORMATION (Tables) | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| SEGMENT INFORMATION {2} | ' | ||||
| SEGMENT INFORMATION | ' | ||||
| 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-14 | 31-Aug-13 | |||
| North America | $ | 682 | $ | 1,003 | |
| Europe | 189 | 314 | |||
| Asia | - | 163 | |||
| Eliminations | -7 | -105 | |||
| Consolidated Total | $ | 864 | $ | 1,375 | |
| Long Lived Assets: | As of | As of | |||
| August 31, | May 31, | ||||
| 2014 | 2014 | ||||
| North America | $ | 1,866 | $ | 1,916 | |
| Europe | 42 | 43 | |||
| Consolidated Total | $ | 1,908 | $ | 1,959 | |
Schedule_of_Redeemable_Common_
| Schedule of Redeemable Common Stock (Tables) | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| Schedule of Redeemable Common Stock | ' | ||||
| Schedule of Redeemable Common Stock | ' | ||||
| The changes in Redeemable Common Stock for the three months ended August 31, 2014 is as follows (in thousands): | |||||
| Redeemable Common Stock | |||||
| Shares | Amount | ||||
| Balance as of May 31, 2014 | 50 | $ | 275 | ||
| Issuance of redeemable common stock | 110 | 550 | |||
| Accretion of redeemable common stock | - | 220 | |||
| Repurchase of redeemable common stock | -50 | -275 | |||
| Balance as of August 31, 2014 | 110 | $ | 770 | ||
SCHEDULE_OF_CHANGES_IN_EQUITY_
| SCHEDULE OF CHANGES IN EQUITY (Tables) | 3 Months Ended | ||||||||||||
| Aug. 31, 2014 | |||||||||||||
| SCHEDULE OF CHANGES IN EQUITY | ' | ||||||||||||
| SCHEDULE OF CHANGES IN EQUITY | ' | ||||||||||||
| The changes in Shareholders’ Equity for the three months ended August 31, 2014 is as follows (in thousands): | |||||||||||||
| Common Stock | Capital in excess of | Accumulated | Accumulated other comprehensive | Total shareholders’ | |||||||||
| Shares | Amount | par value | deficit | loss | equity | ||||||||
| Balance as of May 31, 2014 | 825 | $ | 83 | $ | 27,338 | $ | -26,081 | $ | -482 | $ | 858 | ||
| Accretion of redeemable common stock | - | - | -220 | - | - | -220 | |||||||
| Net loss | - | - | - | -572 | - | -572 | |||||||
| Foreign currency translation adjustments | - | - | - | - | 57 | 57 | |||||||
| Repurchase of common stock | -101 | -10 | -28 | - | - | -38 | |||||||
| Stock-based compensation expense | - | - | 27 | - | - | 27 | |||||||
| Balance as of August 31, 2014 | 724 | $ | 73 | $ | 27,117 | $ | -26,653 | $ | -425 | $ | 112 | ||
SCHEDULE_OF_SUBSEQUENT_EVENTS_
| SCHEDULE OF SUBSEQUENT EVENTS (Tables) | 3 Months Ended | ||||
| Aug. 31, 2014 | |||||
| Schedule of Purchase Put Right | ' | ||||
| Schedule of Purchase Put Right | ' | ||||
| Name of Accredited Investor | Date of Securities Purchase Agreement | Amount of Investment in Transaction ($/# of Shares Purchased) | |||
| Robert Anthonyson | 18-Sep-14 | $100,000 / 20,000 shares | |||
| Glenn W. Dillon | 22-Sep-14 | $100,000 / 20,000 shares | |||
| Thomas Doherty | 22-Sep-14 | $50,000 / 10,000 shares | |||
| Leonard Schrank | 9-Oct-14 | $50,000 / 10,000 shares | |||
DESCRIPTION_OF_THE_BUSINESS_AN1
| DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) (USD $) | Jun. 20, 2014 | Aug. 30, 2013 |
| CADRA Sale | ' | ' |
| The aggregate consideration for the CADRA Sale is up to | ' | $3,950,000 |
| The aggregate consideration for the CADRA sale comprised and paid on the closing date | ' | 2,880,000 |
| Amount paid on the one year anniversary | ' | 320,000 |
| On closing date(subject to any indemnification claims);over the three-year period subsequent to the | ' | 750,000 |
| Mr. Daly, Essig's CEO and owner, purchased shares of SofTech common stock | 110,000 | ' |
| Common stock, par value per share | $0.10 | ' |
| Common stock in a direct private placement | 550,000 | ' |
| Repurchase some or all of the shares at per share | $7 | ' |
| Term loan maturing on April 1, 2017 | 750,000 | ' |
| Short term borrowing arrangement with EssigPR whereby it was agreed that the Company would retain of the Holdback Payment due from Mentor | $300,000 | ' |
SOFTWARE_DEVELOPMENT_COSTS_Det
| SOFTWARE DEVELOPMENT COSTS (Details) (USD $) | 3 Months Ended | |
| Aug. 31, 2014 | Aug. 31, 2013 | |
| SOFTWARE DEVELOPMENT COSTS DURING: | ' | ' |
| Capitalized approximately software development costs | $0 | $39,000 |
| Amortization expense related to capitalized software development costs | $28,000 | $24,000 |
DEBT_ISSUANCE_COSTS_Details
| DEBT ISSUANCE COSTS (Details) (USD $) | 3 Months Ended | |
| Aug. 31, 2014 | Aug. 31, 2013 | |
| DEBT ISSUANCE COSTS DURING THE PERIOD: | ' | ' |
| Direct costs incurred in establishing debt agreement | $255,000 | ' |
| Amortization expense related to debt issuance costs | 52,000 | 22,000 |
| Direct costs totaling approximately | $120,000 | ' |
CAPITALIZED_PATENT_COSTS_Detai
| CAPITALIZED PATENT COSTS (Details) (USD $) | 3 Months Ended | |
| Aug. 31, 2014 | Aug. 31, 2013 | |
| CAPITALIZED PATENT COSTS AS FOLLOWS: | ' | ' |
| Capitalized patent costs totaled | $2,000 | $2,000 |
Assets_and_liabilities_measure
| Assets and liabilities measured at fair value on a recurring basis (Details) (USD $) | Aug. 31, 2014 |
| In Thousands, unless otherwise specified | |
| Holdback Payment and Earn-Out Payments | $934 |
| Total assets at fair value | 934 |
| Quoted prices in active markets (Level 1) | ' |
| Holdback Payment and Earn-Out Payments | 0 |
| Total assets at fair value | 0 |
| Significant other observable inputs (Level 2) | ' |
| Holdback Payment and Earn-Out Payments | 0 |
| Total assets at fair value | 0 |
| Significant unobservable inputs (Level 3) | ' |
| Holdback Payment and Earn-Out Payments | 934 |
| Total assets at fair value | $934 |
Summary_of_the_changes_in_fair
| Summary of the changes in fair value of the Level 3 (Details) (Contingent Consideration for the Three Months Ended August31, 2014, USD $) | Contingent Consideration for the Three Months Ended August31, 2014 |
| In Thousands | USD ($) |
| Fair value at May. 31, 2014 | $895 |
| Change in fair value | 39 |
| Fair value at Aug. 31, 2014 | $934 |
FOREIGN_CURRENCY_TRANSLATION_D
| FOREIGN CURRENCY TRANSLATION (Details) (USD $) | 3 Months Ended | |
| Aug. 31, 2014 | Aug. 31, 2013 | |
| FOREIGN CURRENCY TRANSLATION DETAILS | ' | ' |
| Net (gain) loss from foreign currency related transactions | $15,000 | ($8,000) |
NET_INCOME_LOSS_PER_COMMON_SHA
| NET INCOME (LOSS) PER COMMON SHARE (Details) (USD $) | 3 Months Ended | |
| In Thousands, unless otherwise specified | Aug. 31, 2014 | Aug. 31, 2013 |
| NET INCOME (LOSS) PER COMMON SHARE Details | ' | ' |
| Net loss available to common shareholders | ($572) | ($266) |
| Weighted average number of common shares outstanding used in calculating basic earnings per share | 896,234 | 901,005 |
| Weighted average number of common and redeemable shares outstanding used in calculating diluted earnings per share | 896,234 | 901,005 |
Summarizes_option_activity_und
| Summarizes option activity under 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, 2013 | 10,000 | 2.4 | 8.02 | 0 |
| Granted | 124,500 | 1.84 | 10 | 0 |
| Exercised | 0 | 0 | 0 | 0 |
| Forfeited or expired | -5,000 | 1.11 | 0 | 0 |
| Outstanding options at May. 31, 2014 | 129,500 | 1.88 | 9.74 | 20,825 |
| Granted | 0 | 0 | 0 | 0 |
| Exercised | 0 | 0 | 0 | 0 |
| Forfeited or expired | 0 | 0 | 0 | 0 |
| Exercisable at Aug. 31, 2014 | 26,112 | 1.98 | 9.04 | 3,267 |
| Outstanding options at Aug. 31, 2014 | 129,500 | 1.88 | 9.49 | 19,600 |
REEDEMABLE_COMMON_STOCK_Detail
| REEDEMABLE COMMON STOCK (Details) (USD $) | Aug. 31, 2014 |
| Reedemable common stock | ' |
| Company issued common stock shares | 50,000 |
| Par value of the share | $0.10 |
| Purchase price of the share | $5 |
| Private placement transactions for total proceeds | $250,000 |
| company investment | 25,000 |
| Investors fee | 6,000 |
| Redemption price of the Common Stock per share (Put option) | $5.50 |
| Redeemable common Stock initial carrying value | 163,000 |
| Amount equal to gross proceeds | 250,000 |
| Issuance cost related legal fee | 27,000 |
| Fee included in other liabilities | 60,000 |
| Common Stock recorded at its redemption value | 275,000 |
| Recorded accretion to additional paid in capital | $112,000 |
SEGMENT_INFORMATION_Details
| SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | |
| In Thousands, unless otherwise specified | Aug. 31, 2014 | Aug. 31, 2013 |
| Revenues: | ' | ' |
| North America Revenue | $682 | $1,003 |
| Europe Revenue | 189 | 314 |
| Asia Revenue | 0 | 163 |
| Eliminations Revenue | -7 | -105 |
| Consolidated Revenue Total | 864 | 1,375 |
| Long-Lived Assets: | ' | ' |
| North America Assets | 1,866 | 1,916 |
| Europe Assets | 42 | 43 |
| Consolidated Assets Total | $1,908 | $1,959 |
PRIDES_CROSSING_CAPITAL_DETAIL
| PRIDES CROSSING CAPITAL (DETAILS) (USD $) | Aug. 31, 2014 | Jul. 09, 2013 | 10-May-13 |
| PRIDES CROSSING CAPITAL | ' | ' | ' |
| Loan Agreement with Prides Crossing Capital L.P. and Prides Crossing Capital -A, L.P. | ' | ' | $2,700,000 |
| Loan matures on January 1, 2015 and bears an interest rate of | ' | 14.00% | ' |
| 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 | ' |
| Repurchase of shares as per the amended agreement | ' | 170,000 | ' |
| Warrants issued to the lender | ' | 25,000 | ' |
| Exercise price per share | $1 | $1 | ' |
| Warrants vesting period | ' | 3 | ' |
| Grant date fair value of the warrant of approximately | ' | 51,000 | ' |
| Warrant was adjusted to its fair value | 19,000 | ' | ' |
| Company agreed to pay down the principal of the Loan | 1,000,000 | ' | ' |
| Paid a pre-payment penalty | $81,000 | ' | ' |
| Agreed to repurchase the outstanding warrant to purchase shares of common stock | 25,000 | ' | ' |
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 |
Stock_Purchase_Agreement_Detai
| Stock Purchase Agreement (Details) (USD $) | Aug. 31, 2014 |
| 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 |
Changes_in_Redeemable_Common_S
| Changes in Redeemable Common Stock (Details) (USD $) | Redeemable Common Stock Shares | Redeemable Common Stock Amount |
| In Thousands | USD ($) | |
| Balance at May. 31, 2014 | 50 | 275 |
| Issuance of redeemable common stock (Shares) | 110 | ' |
| Issuance of redeemable common stock (Amount) | ' | $550 |
| Accretion of redeemable common stock | ' | $220 |
| Repurchase of redeemable common stock | -50 | -275 |
| Balance at Aug. 31, 2014 | 110 | 770 |
Changes_in_Shareholders_Equity
| Changes in Shareholders' Equity (Details) (USD $) | Common Stock Shares | Common Stock Amount | Capital in excess of par value | Accumulated deficit | Accumulated other comprehensive loss | Total shareholders' equity |
| In Thousands | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | |
| Balance: at May. 31, 2014 | 825 | 83 | 27,338 | -26,081 | -482 | 858 |
| Accretion of redeemable common stock | ' | $0 | ($220) | $0 | $0 | ($220) |
| Net loss | ' | 0 | 0 | -572 | 0 | -572 |
| Foreign currency translation adjustments | ' | 0 | 0 | 0 | 57 | 57 |
| Repurchase of common stock | -101 | -10 | -28 | 0 | 0 | -38 |
| Stock-based compensation expense | ' | $0 | $27 | $0 | $0 | $27 |
| Balance: at Aug. 31, 2014 | 724 | 73 | 27,117 | -26,653 | -425 | 112 |
Material_terms_of_the_Securiti
| Material terms of the Securities Purchase Agreements are summarized below (Details) (USD $) | Aug. 31, 2014 |
| Material terms of the Securities Purchase Agreements are summarized below | ' |
| Number of Shares Sold under Securities Purchase Agreements | 60,000 |
| Per share value of Shares Sold under Securities Purchase Agreements | $0.10 |
| Purchase Price Per Share in lots of 10,000 shares | $5 |
| Each $50,000 investment entitles the investor to a fee | $5,000 |
| Purchase Put Right per share value | $7 |