Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Nov. 30, 2014 | Jan. 10, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | SOFTECH INC | |
Entity Trading Symbol | SOFT | |
Document Type | 10-Q | |
Document Period End Date | 30-Nov-14 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 354260 | |
Current Fiscal Year End Date | -26 | |
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 | Q2 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Nov. 30, 2014 | 31-May-14 |
In Thousands, unless otherwise specified | ||
ASSETS | ||
Cash | $517 | $1,209 |
Accounts receivable (less allowance for uncollectible accounts of $18 as of November 30, 2014 and May 31, 2014) | 733 | 666 |
Holdback payment and earn-out payments from CADRA sale, current portion | 304 | 547 |
Debt issuance costs, net | 26 | 139 |
Prepaid and other assets | 188 | 204 |
Total current assets | 1,768 | 2,765 |
Commitments and contingencies | ||
Redeemable common stock, $0.10 par value, 170,000 and 50,000 shares issued and outstanding at November 30, 2014 and May 31, 2014, respectively. | 1,190 | 275 |
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY | ||
Accounts payable | 283 | 483 |
Accrued expenses | 303 | 607 |
Deferred maintenance revenue | 1,172 | 1,462 |
Capital lease, current | 19 | 19 |
Current maturities of long-term debt | 851 | 973 |
Total current liabilities | 2,628 | 3,544 |
Capital lease, net of current portion | 40 | 47 |
Long-term debt, net of current maturities | 120 | 0 |
Other accrued liabilities | 15 | 0 |
Total liabilities | 2,803 | 3,591 |
Shareholders' (deficit) equity : | ||
Common stock, $0.10 par value 20,000,000 shares authorized, 723,724 and 825,135 issued and outstanding at November 30, 2014 and May 31, 2014, respectively. | 73 | 83 |
Capital in excess of par value | 27,001 | 27,338 |
Accumulated deficit | -27,033 | -26,081 |
Accumulated other comprehensive loss | -397 | -482 |
Total shareholders' (deficit) equity | -356 | 858 |
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY | $3,637 | $4,724 |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) | Nov. 30, 2014 | 31-May-14 |
PARENTHETICALS | ||
Allowance for uncollectible accounts | $18 | $18 |
Redeemable Common Stock, par value | $0.10 | $0.10 |
Redeemable Common Stock, shares issued | 170,000 | 50,000 |
Redeemable Common Stock, shares outstanding | 170,000 | 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_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 |
Revenue: | ||||
Products | $199 | $376 | $270 | $618 |
Services | 828 | 1,038 | 1,621 | 2,172 |
Total revenue | 1,027 | 1,414 | 1,891 | 2,790 |
Cost of revenue: | ||||
Products. | 33 | 28 | 86 | 62 |
Services. | 436 | 264 | 791 | 572 |
Total cost of revenue | 469 | 292 | 877 | 634 |
Gross margin | 558 | 1,122 | 1,014 | 2,156 |
Research and development expenses | 222 | 304 | 494 | 639 |
Selling, general and administrative expenses | 645 | 866 | 1,362 | 1,747 |
Gain on CADRA sale | 0 | -649 | 0 | -649 |
Change in fair value of earn-out payments and holdback payment | -21 | 0 | -60 | 0 |
Operating (loss) income | -288 | 601 | -782 | 419 |
Interest expense | 63 | 104 | 127 | 199 |
Other expense (income), net | 28 | -17 | 43 | -28 |
Net (loss) income | ($379) | $514 | ($952) | $248 |
Basic and diluted net (loss) income per share: | ($0.44) | $0.59 | ($1.08) | $0.28 |
Weighted average common and redeemable shares outstanding-basic and diluted | 866,911 | 875,135 | 881,653 | 888,140 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 |
Comprehensive income loss: | ||||
Net (loss) income | ($379) | $514 | ($952) | $248 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 28 | -25 | 85 | -45 |
Comprehensive (loss) income | ($351) | $489 | ($867) | $203 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Nov. 30, 2014 | Nov. 30, 2013 |
Cash flows from operating activities: | ||
Net (loss) income | ($952) | $248 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||
Depreciation and amortization expense | 189 | 111 |
Gain on CADRA sale | 0 | -649 |
Stock-based compensation | 59 | 4 |
Non-cash interest expense | 18 | 6 |
Change in fair value of earn-out payments and holdback payment | -60 | 0 |
Change in current assets and liabilities: | ||
Accounts receivable | -67 | -196 |
Prepaid expenses and other assets | 16 | 159 |
Restricted cash | 0 | -1,306 |
Accounts payable and accrued expenses | -489 | 402 |
Deferred maintenance revenue | -290 | -538 |
Net cash used in operating activities | -1,576 | -1,759 |
Cash flows from investing activities: | ||
Proceeds from sale of product line, net of direct expenses | 0 | 2,432 |
Capital expenditures | -2 | -37 |
Capitalized software development costs | 0 | -57 |
Capitalized patent costs | -2 | -2 |
Net cash provided by (used in) investing activities | -4 | 2,336 |
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 agreement | 750 | 0 |
Change in fair value of warrant liability | 0 | -6 |
Proceeds from holdback agreement | 320 | 0 |
Proceeds from issuance of common stock | 820 | 0 |
Repayments under debt agreements | -770 | 0 |
Repayments under capital lease | -7 | -8 |
Net cash provided by (used in) financing activities | 801 | -109 |
Effect of exchange rates on cash | 87 | -44 |
Increase (decrease) in cash and cash equivalents | -692 | 424 |
Cash and cash equivalents, beginning of period | 1,209 | 1,188 |
Cash and cash equivalents, end of period | 517 | 1,612 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 84 | 153 |
Taxes paid | 2 | 14 |
Issuance of warrants | 0 | 51 |
Accretion of redeemable common stock | $370 | $0 |
DESCRIPTION_OF_THE_BUSINESS_AN
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Nov. 30, 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 in Italy. The Company also has resellers in Asia and Europe. | |
The unaudited 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. | |
Our unaudited consolidated financial statements presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and footnote disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended May 31, 2014 included in our Annual Report on Form 10-K, which was filed with the SEC on October 7, 2014. In the opinion of management, the consolidated financial statements include all adjustments necessary for the fair presentation of the consolidated financial position, results of operations, and cash flows of the Company as of and for these interim periods. | |
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 November 30, 2014 pursuant to a distribution agreement (the “Distributorship Agreement”) with Mentor. The Company expects to renew the Distributorship Agreement for Europe (except Germany) for at least one year and is currently engaged in negotiations. 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. | |
RECLASSIFICATIONS | |
Certain accounts in the November 30, 2013 financial statements have been reclassified for comparative purposes to conform to the presentation in the November 30, 2014 financial statements. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | ||||||||
Nov. 30, 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 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 and six months ended November 30, 2013, the Company capitalized approximately $18,000 and $57,000, respectively, of software development costs. During the three and six months ended November 30, 2014, the Company did not capitalize software development costs. Amortization expense related to capitalized software development costs for the three and six months ended November 30, 2014 was approximately $28,000 and $56,000, respectively, as compared to approximately $24,000 and $49,000 for the comparable periods in the prior fiscal year. | |||||||||
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 and six months ended November 30, 2014 was approximately $71,000 and $123,000, respectively, as compared to approximately $22,000 and $43,000 for the comparable periods in the prior fiscal year. | |||||||||
The Loan Agreement has been amended several times since May 31, 2013 as described in Note D hereunder. The costs related to completing these amendments were expensed as incurred in conformity with ASC 470-50, Debt Modifications and Extinguishment. | |||||||||
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 – Revenue Recognition, 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. | |||||||||
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 November 30, 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 November 30, 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 November 30, 2014: | |||||||||
(in thousands) | |||||||||
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
Assets: | |||||||||
Earn-Out Payments | $ | 635 | $ | - | $ | - | $ | 635 | |
Total assets at fair value | $ | 635 | $ | - | $ | - | $ | 635 | |
The Holdback Payment and Earn-Out Payments are classified as current or non-current assets depending on their anticipated receipt by 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 six month period ended November 30, 2014: | |||||||||
(in thousands) | |||||||||
Fair value at May 31, 2014 | $ | 895 | |||||||
Change in fair value | 60 | ||||||||
Receipt of the Holdback Payment | -320 | ||||||||
Fair value at November 30, 2014 | $ | 635 | |||||||
The fair value of the asset at November 30, 2014 was approximately $635,000. The fair value of 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 unaudited Consolidated Statements of Operations for the three and six months ended November 30, 2014 was approximately $21,000 and $60,000, respectively. | |||||||||
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. The effects of this change have been made retrospectively to the current period consolidated financial statements in accordance with ASC 250, Accounting Changes and Error Corrections. 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, refer to the Company’s annual audited consolidated financial statements included in the Company’s Form 10-K for the fiscal year ended May 31, 2014. | |||||||||
FOREIGN CURRENCY TRANSLATION | |||||||||
The functional currency of the Company’s foreign operations 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 loss. Foreign currency gains and losses arising from transactions were included in the statements of operations. For the three and six month periods ended November 30, 2014, the Company recorded a net loss from foreign currency related transactions of approximately $28,000, and $43,000, respectively, as compared to a net gain of approximately ($14,000) and ($22,000), respectively, for the comparable periods in the prior fiscal year, to Other expense (income), net in the unaudited Consolidated Statements of Operations. | |||||||||
NET (LOSS) INCOME PER COMMON SHARE | |||||||||
For the three and six month periods ended November 30, 2014, 2,368 and 1,184, respectively, options to purchase common shares were anti-dilutive and were excluded from the basic and diluted earnings per share 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 share subject to any award under the 2011 Plan that expires, is terminated unexercised or is forfeited will be available for future 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 November 30, 2014, 144,500 stock 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 | 27,500 | 1.33 | 10 | - | |||||
Exercised | - | - | - | - | |||||
Forfeited or expired | -12,500 | 1.84 | - | - | |||||
Outstanding options at November 30, 2014 | 144,500 | $ | 1.78 | 9.02 | $ | 3,375 | |||
Exercisable at November 30, 2014 | 42,947 | $ | 1.83 | 7.9 | $ | 2,250 | |||
The Company determined the volatility for options granted using the historical volatility of the Company’s common stock. The expected life of options has been determined utilizing the “simplified” method as prescribed in ASC 718, Compensation, Stock Compensation. The expected life represents an estimate of the time options are expected to remain outstanding. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. | |||||||||
For the three and six month periods ended November 30, 2014, the Company expensed approximately $32,000 and $59,000 of stock-based compensation, respectively, as compared to approximately $2,000 and $4,000 in the comparable prior periods. | |||||||||
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 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 ending between June 1, 2014 and June 30, 2014. Each of the Investors exercised their Put Option and the Common Stock was repurchased by the Company at the agreed upon Put Option price of $5.50 per share for a total of $275,000 during the first quarter of the current fiscal year. | |||||||||
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 the Common Stock at a purchase price of $5.00 per share to Joseph P. Daly, an accredited investor and existing Company shareholder, in a private placement transaction for total proceeds of $550,000. This transaction was completed pursuant to a securities purchase agreement whereby 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. Upon completion of the transaction, the 110,000 shares of Common Stock issued pursuant to the security purchase agreement were recorded as redeemable common stock at its redemption value of $770,000 and accretion of $220,000 was recorded to additional paid in capital. | |||||||||
During the three months ended November 30, 2014, the Company issued an additional 60,000 shares of the Common Stock at a purchase price of $5.00 per share to four accredited investors (collectively, the “New Investors”) in private placement transactions for total proceeds of $300,000. These transactions were completed pursuant to a Securities Purchase Agreements (the “New Agreements”) entered into with each of the respective New Investors. In lieu of registration rights, each $50,000 investment entitles the New Investors to a fee (the “New Investors’ Fees”) of $5,000 to be paid in eight equal quarterly installments during the twenty-four month period (the “Payment Period”) following the investment. The New Agreements also provide the New Investors with the right to require the Company to redeem the Common Stock held by such New Investors for $7.00 per share in cash for a 30 day period following the Payment Period. Upon completion of these transactions, the 60,000 shares of Common Stock issued pursuant to the New Agreements were recorded as redeemable common stock at its redemption value of $420,000 and accretion of $120,000 was recorded to additional paid in capital. The $30,000 related to the total New Investors’ Fees has been included in other liabilities. | |||||||||
The Company first assessed the redeemable Common Stock to determine whether each of these instruments 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 each 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 redeemable Common Stock 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. | |||||||||
RECENT ACCOUNTING PRONOUNCEMENTS | |||||||||
Accounting Standards Update (ASU) 2014-17, “Business Combinations (Topic 805) – Pushdown Accounting” was issued by the FASB in November 2014. The primary purpose of the ASU is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-17 is effective after November 18, 2014. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
Accounting Standards Update (ASU) 2014-16, “Derivatives and Hedging (Topic 815) – Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” was issued by the FASB in November 2014. The primary purpose of the ASU is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. ASU 2014-16 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
Accounting Standards Update (ASU) 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to ‘Continue as a Going Concern” was issued by the FASB in August 2014. The primary purpose of the ASU is to provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for the annual periods and interim periods thereafter. Early adoption is permitted. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
ASU 2014-12, “Compensation-Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” was issued by the FASB in June 2014. ASU 2014-12 requires that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. ASU 2014-12 is effective for public business entities for annual periods and interim periods within the annual periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently assessing the impact of this guidance, but does not believe that it will have a material impact on its consolidated results of operations, financial position or disclosures. | |||||||||
ASU 2013-11, “Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” was issued by the FASB in July 2013. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this ASU has not had a material impact on the Company’s consolidated financial statements. | |||||||||
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. | |||||||||
ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, was issued by the FASB in April 2014. The Amendment in this update changes the criteria for reporting discontinued operations and requires additional disclosures about discontinued operations. ASU 2014-08 requires that an entity report as a discontinued operation only a disposal that represents a strategic shift in operations that has a major effect on its operations and financial results. ASU 2014-08 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held for sale) that has not been reported in financial statements previously issued or made available for issuance. The ASU must be applied prospectively. The Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position. |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 6 Months Ended | ||||
Nov. 30, 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 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: | 30-Nov-14 | 30-Nov-13 | |||
North America | $ | 859 | $ | 1,255 | |
Europe | 177 | 290 | |||
Asia | - | 330 | |||
Eliminations | -9 | -461 | |||
Consolidated Total | $ | 1,027 | $ | 1,414 | |
Six Month Periods Ended | |||||
Revenue: | 30-Nov-14 | 30-Nov-13 | |||
North America | $ | 1,541 | $ | 2,259 | |
Europe | 366 | 604 | |||
Asia | - | 493 | |||
Eliminations | -16 | -566 | |||
Consolidated Total | $ | 1,891 | $ | 2,790 | |
Long Lived Assets: | As of | As of | |||
November 30, | May 31, | ||||
2014 | 2014 | ||||
North America | $ | 1,827 | $ | 1,916 | |
Europe | 42 | 43 | |||
Consolidated Total | $ | 1,869 | $ | 1,959 | |
DEBT
DEBT | 6 Months Ended | ||
Nov. 30, 2014 | |||
DEBT | |||
DEBT | D. DEBT | ||
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 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. | |||
EssigPR is owned by Joseph P. Daly an affiliate of the Company who owns approximately 18.7% of the outstanding shares. | |||
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. | |||
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 (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. 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. The amended and restated Term Note was to mature 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. | |||
Entering into the Note with EssigPR, repurchasing the 50,000 shares of Common Stock for $275,000 from the Investors that exercised their Put Option and repurchasing the 101,411 shares of common stock from Greenleaf in exchange for approximately $38,000 were transactions that were prohibited under the Amended Loan Agreement No. 2 without the Lender’s written approval. While the Company disclosed each of these transactions to the Lender prior to completing each transaction, no written authorization was provided by the Lender. On August 8, 2014, the Company and the Lender entered into Amended Loan Agreement No. 3 in an attempt to correct for this technical violation of the borrowing arrangements. Pursuant to Amended Loan Agreement No. 3, the Lender provided consent to the completed transactions conditioned on the Company subsequently providing a security deposit of $300,000 as specified in the Amended Loan Agreement No. 3 and EssigPR entering into a subordination agreement. | |||
The Company was unable to meet all of the conditions specified under Amended Loan Agreement No. 3 and on October 29, 2014, the Company and the Lender entered into Amended Loan Agreement No. 4 wherein the parties agreed to an accelerated principal repayment schedule and modified cash collateral thresholds. Rather than repaying the remaining $1 million principal on January 1, 2015, the parties agreed to the following modified principal repayment schedule: | |||
31-Oct-14 | $ | 500,000 | |
30-Nov-14 | 250,000 | ||
31-Dec-14 | 250,000 | ||
Total | $ | 1,000,000 | |
As part of that agreement, the minimum cash balance of $1 million that was required to be included in a specified cash account at the end of each calendar month was reduced dollar for dollar by the above principal payments when made. The cash collateral minimum balances were met during the quarter ending November 30, 2014 and each of the principal repayments were made on a timely basis along with the related interest payments due. |
NOTE_RECEIVABLE
NOTE RECEIVABLE | 6 Months Ended |
Nov. 30, 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 | 6 Months Ended |
Nov. 30, 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. | |
CHANGES_IN_EQUITY
CHANGES IN EQUITY | 6 Months Ended | ||||
Nov. 30, 2014 | |||||
CHANGES IN EQUITY | |||||
CHANGES IN EQUITY | G. CHANGES IN EQUITY | ||||
The changes in redeemable common stock for the six months ended November 30, 2014 is as follows (in thousands): | |||||
Redeemable Common Stock | |||||
Shares | Amount | ||||
Balance as of May 31, 2014 | 50 | $ | 275 | ||
Issuance of redeemable common stock | 170 | 850 | |||
Accretion of redeemable common stock | - | 340 | |||
Repurchase of redeemable common stock | -50 | -275 | |||
Balance as of November 30, 2014 | 170 | $ | 1,190 | ||
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Nov. 30, 2014 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | H. SUBSEQUENT EVENTS |
The Company has evaluated all events and transactions that occurred after the balance sheet and through the date that the financial statements were available to be issued. |
ACCOUNTING_POLICIES_Policies
ACCOUNTING POLICIES (Policies) | 6 Months Ended | ||||||||
Nov. 30, 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 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 and six months ended November 30, 2013, the Company capitalized approximately $18,000 and $57,000, respectively, of software development costs. During the three and six months ended November 30, 2014, the Company did not capitalize software development costs. Amortization expense related to capitalized software development costs for the three and six months ended November 30, 2014 was approximately $28,000 and $56,000, respectively, as compared to approximately $24,000 and $49,000 for the comparable periods in the prior fiscal year. | |||||||||
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 and six months ended November 30, 2014 was approximately $71,000 and $123,000, respectively, as compared to approximately $22,000 and $43,000 for the comparable periods in the prior fiscal year. | |||||||||
The Loan Agreement has been amended several times since May 31, 2013 as described in Note D hereunder. The costs related to completing these amendments were expensed as incurred in conformity with ASC 470-50, Debt Modifications and Extinguishment. | |||||||||
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 – Revenue Recognition, 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. | |||||||||
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 November 30, 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 November 30, 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 November 30, 2014: | |||||||||
(in thousands) | |||||||||
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
Assets: | |||||||||
Earn-Out Payments | $ | 635 | $ | - | $ | - | $ | 635 | |
Total assets at fair value | $ | 635 | $ | - | $ | - | $ | 635 | |
The Holdback Payment and Earn-Out Payments are classified as current or non-current assets depending on their anticipated receipt by 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 six month period ended November 30, 2014: | |||||||||
(in thousands) | |||||||||
Fair value at May 31, 2014 | $ | 895 | |||||||
Change in fair value | 60 | ||||||||
Receipt of the Holdback Payment | -320 | ||||||||
Fair value at November 30, 2014 | $ | 635 | |||||||
The fair value of the asset at November 30, 2014 was approximately $635,000. The fair value of 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 unaudited Consolidated Statements of Operations for the three and six months ended November 30, 2014 was approximately $21,000 and $60,000, respectively. | |||||||||
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. The effects of this change have been made retrospectively to the current period consolidated financial statements in accordance with ASC 250, Accounting Changes and Error Corrections. 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, refer to the Company’s annual audited consolidated financial statements included in the Company’s Form 10-K for the fiscal year ended May 31, 2014. | |||||||||
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION | ||||||||
The functional currency of the Company’s foreign operations 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 loss. Foreign currency gains and losses arising from transactions were included in the statements of operations. For the three and six month periods ended November 30, 2014, the Company recorded a net loss from foreign currency related transactions of approximately $28,000, and $43,000, respectively, as compared to a net gain of approximately ($14,000) and ($22,000), respectively, for the comparable periods in the prior fiscal year, to Other expense (income), net in the unaudited Consolidated Statements of Operations. | |||||||||
NET INCOME (LOSS) PER COMMON SHARE POLICY | NET (LOSS) INCOME PER COMMON SHARE | ||||||||
For both the three and six month periods ended November 30, 2014, 27,500 options to purchase common shares were anti-dilutive and were excluded from the basic and diluted earnings per share calculation as compared to 10,000 options for both the three and six month periods ending November 30, 2013. | |||||||||
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 share subject to any award under the 2011 Plan that expires, is terminated unexercised or is forfeited will be available for future 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 November 30, 2014, 144,500 stock 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 | 27,500 | 1.33 | 10 | - | |||||
Exercised | - | - | - | - | |||||
Forfeited or expired | -12,500 | 1.84 | - | - | |||||
Outstanding options at November 30, 2014 | 144,500 | $ | 1.78 | 9.02 | $ | 3,375 | |||
Exercisable at November 30, 2014 | 42,947 | $ | 1.83 | 7.9 | $ | 2,250 | |||
The Company determined the volatility for options granted using the historical volatility of the Company’s common stock. The expected life of options has been determined utilizing the “simplified” method as prescribed in ASC 718, Compensation, Stock Compensation. The expected life represents an estimate of the time options are expected to remain outstanding. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. | |||||||||
For the three and six month periods ended November 30, 2014, the Company expensed approximately $32,000 and $59,000 of stock-based compensation, respectively, as compared to approximately $2,000 and $4,000 in the comparable prior periods. | |||||||||
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 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 ending between June 1, 2014 and June 30, 2014. Each of the Investors exercised their Put Option and the Common Stock was repurchased by the Company at the agreed upon Put Option price of $5.50 per share for a total of $275,000 during the first quarter of the current fiscal year. | |||||||||
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 the Common Stock at a purchase price of $5.00 per share to Joseph P. Daly, an accredited investor and existing Company shareholder, in a private placement transaction for total proceeds of $550,000. This transaction was completed pursuant to a securities purchase agreement whereby 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. Upon completion of the transaction, the 110,000 shares of Common Stock issued pursuant to the security purchase agreement were recorded as redeemable common stock at its redemption value of $770,000 and accretion of $220,000 was recorded to additional paid in capital. | |||||||||
During the three months ended November 30, 2014, the Company issued an additional 60,000 shares of the Common Stock at a purchase price of $5.00 per share to four accredited investors (collectively, the “New Investors”) in private placement transactions for total proceeds of $300,000. These transactions were completed pursuant to a Securities Purchase Agreements (the “New Agreements”) entered into with each of the respective New Investors. In lieu of registration rights, each $50,000 investment entitles the New Investors to a fee (the “New Investors’ Fees”) of $5,000 to be paid in eight equal quarterly installments during the twenty-four month period (the “Payment Period”) following the investment. The New Agreements also provide the New Investors with the right to require the Company to redeem the Common Stock held by such New Investors for $7.00 per share in cash for a 30 day period following the Payment Period. Upon completion of these transactions, the 60,000 shares of Common Stock issued pursuant to the New Agreements were recorded as redeemable common stock at its redemption value of $420,000 and accretion of $120,000 was recorded to additional paid in capital. The $30,000 related to the total New Investors’ Fees has been included in other liabilities. | |||||||||
The Company first assessed the redeemable Common Stock to determine whether each of these instruments 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 each 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 redeemable Common Stock 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. | |||||||||
RECENT ACCOUNTING PRONOUNCEMENTS, Policy | RECENT ACCOUNTING PRONOUNCEMENTS | ||||||||
Accounting Standards Update (ASU) 2014-17, “Business Combinations (Topic 805) – Pushdown Accounting” was issued by the FASB in November 2014. The primary purpose of the ASU is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-17 is effective after November 18, 2014. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
Accounting Standards Update (ASU) 2014-16, “Derivatives and Hedging (Topic 815) – Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” was issued by the FASB in November 2014. The primary purpose of the ASU is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. ASU 2014-16 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
Accounting Standards Update (ASU) 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to ‘Continue as a Going Concern” was issued by the FASB in August 2014. The primary purpose of the ASU is to provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for the annual periods and interim periods thereafter. Early adoption is permitted. The Company does not believe that this guidance will have a material impact on its consolidated results of operations or financial position or disclosures. | |||||||||
ASU 2014-12, “Compensation-Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” was issued by the FASB in June 2014. ASU 2014-12 requires that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. ASU 2014-12 is effective for public business entities for annual periods and interim periods within the annual periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently assessing the impact of this guidance, but does not believe that it will have a material impact on its consolidated results of operations, financial position or disclosures. | |||||||||
ASU 2013-11, “Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” was issued by the FASB in July 2013. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this ASU has not had a material impact on the Company’s consolidated financial statements. | |||||||||
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. | |||||||||
ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, was issued by the FASB in April 2014. The Amendment in this update changes the criteria for reporting discontinued operations and requires additional disclosures about discontinued operations. ASU 2014-08 requires that an entity report as a discontinued operation only a disposal that represents a strategic shift in operations that has a major effect on its operations and financial results. ASU 2014-08 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held for sale) that has not been reported in financial statements previously issued or made available for issuance. The ASU must be applied prospectively. The Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position. |
SCHEDULE_OF_FAIR_VALUE_OF_FINA
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended | ||||||||
Nov. 30, 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 November 30, 2014: | ||||||||
(in thousands) | |||||||||
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||
Assets: | |||||||||
Earn-Out Payments | $ | 635 | $ | - | $ | - | $ | 635 | |
Total assets at fair value | $ | 635 | $ | - | $ | - | $ | 635 | |
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 six month period ended November 30, 2014: | ||||||||
(in thousands) | |||||||||
Fair value at May 31, 2014 | $ | 895 | |||||||
Change in fair value | 60 | ||||||||
Receipt of the Holdback Payment | -320 | ||||||||
Fair value at November 30, 2014 | $ | 635 | |||||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended | ||||||||
Nov. 30, 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 | 27,500 | 1.33 | 10 | - | |||||
Exercised | - | - | - | - | |||||
Forfeited or expired | -12,500 | 1.84 | - | - | |||||
Outstanding options at November 30, 2014 | 144,500 | $ | 1.78 | 9.02 | $ | 3,375 | |||
Exercisable at November 30, 2014 | 42,947 | $ | 1.83 | 7.9 | $ | 2,250 | |||
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 6 Months Ended | ||||
Nov. 30, 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: | 30-Nov-14 | 30-Nov-13 | |||
North America | $ | 859 | $ | 1,255 | |
Europe | 177 | 290 | |||
Asia | - | 330 | |||
Eliminations | -9 | -461 | |||
Consolidated Total | $ | 1,027 | $ | 1,414 | |
Six Month Periods Ended | |||||
Revenue: | 30-Nov-14 | 30-Nov-13 | |||
North America | $ | 1,541 | $ | 2,259 | |
Europe | 366 | 604 | |||
Asia | - | 493 | |||
Eliminations | -16 | -566 | |||
Consolidated Total | $ | 1,891 | $ | 2,790 | |
Long Lived Assets: | As of | As of | |||
November 30, | May 31, | ||||
2014 | 2014 | ||||
North America | $ | 1,827 | $ | 1,916 | |
Europe | 42 | 43 | |||
Consolidated Total | $ | 1,869 | $ | 1,959 |
PRIDES_CROSSING_CAPITAL_Tables
PRIDES CROSSING CAPITAL (Tables) | 6 Months Ended | ||
Nov. 30, 2014 | |||
PRIDES CROSSING CAPITAL | |||
PRIDES CROSSING CAPITAL | Rather than repaying the remaining $1 million principal on January 1, 2015, the parties agreed to the following modified principal repayment schedule: | ||
31-Oct-14 | $ | 500,000 | |
30-Nov-14 | 250,000 | ||
31-Dec-14 | 250,000 | ||
Total | $ | 1,000,000 |
SCHEDULE_OF_CHANGES_IN_EQUITY_
SCHEDULE OF CHANGES IN EQUITY (Tables) | 6 Months Ended | ||||
Nov. 30, 2014 | |||||
SCHEDULE OF CHANGES IN EQUITY | |||||
SCHEDULE OF CHANGES IN EQUITY | The changes in redeemable common stock for the six months ended November 30, 2014 is as follows (in thousands): | ||||
Redeemable Common Stock | |||||
Shares | Amount | ||||
Balance as of May 31, 2014 | 50 | $ | 275 | ||
Issuance of redeemable common stock | 170 | 850 | |||
Accretion of redeemable common stock | - | 340 | |||
Repurchase of redeemable common stock | -50 | -275 | |||
Balance as of November 30, 2014 | 170 | $ | 1,190 | ||
DESCRIPTION_OF_THE_BUSINESS_AN1
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) (USD $) | 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 |
SOFTWARE_DEVELOPMENT_COSTS_Det
SOFTWARE DEVELOPMENT COSTS (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
SOFTWARE DEVELOPMENT COSTS DURING: | ||||
Capitalized approximately software development costs | $18,000 | $57,000 | ||
Amortization expense related to capitalized software development costs | $28,000 | $24,000 | $56,000 | $49,000 |
DEBT_ISSUANCE_COSTS_Details
DEBT ISSUANCE COSTS (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
DEBT ISSUANCE COSTS DURING THE PERIOD: | ||||
Direct costs incurred in establishing debt agreement | $255,000 | |||
Amortization expense related to debt issuance costs | $71,000 | $123,000 | $22,000 | $43,000 |
Assets_and_liabilities_measure
Assets and liabilities measured at fair value on a recurring basis (Details) (USD $) | Nov. 30, 2014 |
Total | |
Earn-Out Payments | $635 |
Total assets at fair value | 635 |
Quoted prices in active markets (Level 1) | |
Earn-Out Payments | 0 |
Total assets at fair value | 0 |
Significant other observable inputs (Level 2) | |
Earn-Out Payments | 0 |
Total assets at fair value | 0 |
Significant unobservable inputs (Level 3) | |
Earn-Out Payments | 635 |
Total assets at fair value | $635 |
Summary_of_the_changes_in_fair
Summary of the changes in fair value of the Level 3 (Details) (Contingent Consideration for the Six Months Ended November 31, 2014)In Thousands (USD $) | 6 Months Ended |
In Thousands, unless otherwise specified | Nov. 30, 2014 |
Summary of the changes in fair value | |
Fair value at May 31, 2014 | $895 |
Change in fair value | 60 |
Receipt of the Holdback Payment | -320 |
Fair value at November 30, 2014 | $635 |
FAIR_VALUE_OF_FINANCIAL_INSTRU
FAIR VALUE OF FINANCIAL INSTRUMENTS (DETAILS) (USD $) | 3 Months Ended | 6 Months Ended |
Nov. 30, 2014 | Nov. 30, 2014 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS DETAILS | ||
Fair value of the asset | $635,000 | |
Discount rate | 7.00% | |
Change in fair value of the asset | $21,000 | $60,000 |
CHANGE_IN_ACCOUNTING_POLICY_DE
CHANGE IN ACCOUNTING POLICY (DETAILS) (USD $) | 9 Months Ended |
Feb. 28, 2014 | |
CHANGE IN ACCOUNTING POLICY {1} | |
Company recorded a gain | $155,000 |
Excluded consideration of potential future Earn-Out Payments. | $686,000 |
FOREIGN_CURRENCY_TRANSLATION_D
FOREIGN CURRENCY TRANSLATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
FOREIGN CURRENCY TRANSLATION DETAILS | ||||
Net (gain) loss from foreign currency related transactions | $28,000 | $43,000 | $14,000 | $22,000 |
NET_INCOME_LOSS_PER_COMMON_SHA
NET INCOME (LOSS) PER COMMON SHARE (Details) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
NET INCOME (LOSS) PER COMMON SHARE Details | ||||
Options to purchase common shares | 27,500 | 27,500 | ||
Basic and diluted earnings per share calculation as compared to option | 10,000 | 10,000 |
Equity_Incentive_Plan_Details
Equity Incentive Plan (Details) | Nov. 30, 2014 |
Equity Incentive Plan | |
Common shares are reserved for issuance | 150,000 |
Stock options were awarded | 144,500 |
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 at May. 31, 2013 | 10,000 | 2.4 | 8.02 | |
Granted | 124,500 | 1.84 | 10 | |
Exercised | 0 | |||
Forfeited or expired | -5,000 | 1.11 | ||
Outstanding options at at May. 31, 2014 | 129,500 | 1.88 | 9.74 | 20,825 |
Granted | 27,500 | 1.33 | 10 | |
Exercised | 0 | |||
Forfeited or expired | -12,500 | 1.84 | ||
Exercisable at Nov. 30, 2014 | 42,947 | 1.83 | 7.9 | 2,250 |
Outstanding options at at Nov. 30, 2014 | 144,500 | 1.78 | 9.02 | 3,375 |
Stockbased_compensation_DETAIL
Stock-based compensation (DETAILS) (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
Stock-based compensation details | ||||
Company expenesd Stock-based compensation | $32,000 | $2,000 | $59,000 | $4,000 |
REEDEMABLE_COMMON_STOCK_Detail
REEDEMABLE COMMON STOCK (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
Nov. 30, 2014 | Aug. 31, 2014 | 31-May-13 | |
Reedemable common stock | |||
Company issued common stock shares | 60,000 | 110,000 | 50,000 |
Par value of the share | $0.10 | ||
Purchase price of the share | $5 | $5 | $5 |
Private placement transactions for total proceeds | $300,000 | $550,000 | $250,000 |
company investment | 50,000 | 25,000 | |
Investors fee | 5,000 | 6,000 | |
Redemption price of the Common Stock per share (Put option) | $5.50 | ||
Common Stock was repurchased by the Company at the agreed upon Put Option price of $5.50 per share for a total | 275,000 | ||
Mr. Daly shall have the right to require the Company to repurchase some or all of the shares and new investors price | $7 | $7 | |
Redeemable common stock at its redemption value | 60,000 | 770,000 | |
Accretion to additional paid in capital | $420,000 | $220,000 |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 |
Revenues: | ||||
North America Revenue | $859 | $1,255 | $1,541 | $2,259 |
Europe Revenue | 177 | 290 | 366 | 604 |
Asia Revenue | 330 | 493 | ||
Eliminations Revenue | -9 | -461 | -16 | -566 |
Consolidated Revenue Total | $1,027 | $1,414 | $1,891 | $2,790 |
SEGMENT_INFORMATION_LongLived_
SEGMENT INFORMATION Long-Lived Assets (DETAILS) (USD $) | Nov. 30, 2014 | 31-May-14 |
In Thousands, unless otherwise specified | ||
Long-Lived Assets: | ||
North America Assets | $1,827 | $1,916 |
Europe Assets | 42 | 43 |
Consolidated Assets Total | $1,869 | $1,959 |
ESSIGPR_promissory_note_agreem
ESSIGPR promissory note agreement (DETAILS) (USD $) | Oct. 01, 2014 | Jun. 20, 2014 |
ESSIGPR promissory note agreement | ||
Note term loan maturing on April 1, 2017 | $750,000 | |
Note term loan maturing on April 1, 2017 accrues interest rate | 9.50% | |
Short term borrowing arrangement with EssigPR whereby it was agreed that the Company would retain of the Holdback Payment due from Mentor | $300,000 | |
Short term borrowing arrangement with EssigPR interest rate | 9.50% | |
EssigPR was awarded 5,000 stock options | 5,000 | |
Purchase of common stock par value | $1 | |
EssigPR is owned by Joseph P. Daly an affiliate of the Company owns outstanding shares | 0.187 |
PRIDES_CROSSING_CAPITAL_TRANSA
PRIDES CROSSING CAPITAL TRANSACTIONS (DETAILS) (USD $) | Dec. 31, 2014 | Nov. 30, 2014 | Oct. 31, 2014 | Dec. 05, 2013 | 10-May-13 |
PRIDES CROSSING CAPITAL TRANSACTIONS | |||||
Loan Agreement with Prides Crossing Capital L.P. and Prides Crossing Capital -A, L.P. | $2,700,000 | ||||
Repurchase of shares as per the amended agreement | 170,000 | ||||
Loan matures on January 1, 2015 and bears an interest rate of | 14.00% | ||||
Company agreed to pay down the principal of the Loan | 1,000,000 | ||||
Repurchase of the shares of Common Stock as per agreement with EssigPR | 50,000 | ||||
Value of shares repurchased the common stock as per agreement | 275,000 | ||||
Repurchase of the shares of Common Stock from the Investors who exercised their Put Option | 101,411 | ||||
Value of shares repurchased the common stock from the Investors who exercised their Put Option | 38,000 | ||||
Security deposit to be provided by the Company | 300,000 | ||||
Parties agreed to the following modified principal repayment of remaining $1 million scheduled | $250,000 | $250,000 | $500,000 |
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. 08, 2014 | 31-May-13 |
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 | |
Total repurchased shares | 38,000 |
Changes_in_Redeemable_Common_S
Changes in Redeemable Common Stock (Details) (USD $) | Redeemable Common Stock Shares | Redeemable Common Stock Amount |
In Thousands | USD ($) | |
Balance as of at May. 31, 2014 | 50 | 275 |
Issuance of redeemable common stock | 170 | 850 |
Accretion of redeemable common stock | $340 | |
Repurchase of redeemable common stock | -50 | -275 |
Balance as of at Nov. 30, 2014 | 170 | 1,190 |