Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2016 | Aug. 24, 2016 | Nov. 30, 2015 | |
Document and Entity Information | |||
Entity Registrant Name | SOFTECH INC | ||
Entity Trading Symbol | soft | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2016 | ||
Amendment Flag | false | ||
Entity Central Index Key | 354,260 | ||
Current Fiscal Year End Date | --05-31 | ||
Entity Common Stock, Shares Outstanding | 903,724 | ||
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 | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 565,452 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May 31, 2016 | May 31, 2015 |
ASSETS | ||
Cash and cash equivalents | $ 175 | $ 310 |
Accounts receivable (less allowance for uncollectible accounts of $18 as of May 31, 2016 and 2015) | 477 | 587 |
Earn-Out Payments from CADRA Sale, current portion | 130 | 243 |
Prepaid and other assets | 207 | 315 |
Total current assets | 989 | 1,455 |
Property and equipment, net | 71 | 57 |
Goodwill | 948 | 948 |
Capitalized software development costs, net | 825 | 422 |
Capitalized patent costs | 113 | 109 |
Earn-Out Payments from CADRA Sale, net of current portion | 0 | 133 |
Related party note receivable | 134 | 134 |
Other assets | 35 | 35 |
TOTAL ASSETS | 3,115 | 3,293 |
LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' DEFICIT | ||
Accounts payable | 178 | 137 |
Accrued expenses | 323 | 283 |
Deferred maintenance and subscription revenue | 1,531 | 1,732 |
Current portion of capital lease | 24 | 19 |
Current portion of long-term debt - related party | 900 | 446 |
Total current liabilities | 2,956 | 2,617 |
Capital lease, net of current portion | 39 | 30 |
Other liabilities | 0 | 10 |
Total liabilities | 2,995 | 2,657 |
Commitments and contingencies | ||
Redeemable Common Stock and Shareholders' Deficit: | ||
Redeemable common stock, $0.10 par value, 180,000 and 170,000 shares issued and outstanding at May 31, 2016 and 2015, respectively. | 1,260 | 1,190 |
Shareholders' deficit: | ||
Common stock, $0.10 par value 20,000,000 shares authorized, 723,724 issued and outstanding at May 31, 2016 and 2015, respectively. | 73 | 73 |
Additional paid in capital | 27,138 | 27,056 |
Accumulated deficit | (28,073) | (27,400) |
Accumulated other comprehensive loss | (278) | (283) |
Total shareholders' deficit | (1,140) | (554) |
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' DEFICIT | $ 3,115 | $ 3,293 |
CONSOLIDATED BALANCE SHEETS PAR
CONSOLIDATED BALANCE SHEETS PARENTHETICALS - USD ($) | May 31, 2016 | May 31, 2015 |
PARENTHETICALS | ||
Allowance for uncollectible accounts | $ 18 | $ 18 |
Redeemable common stock, par value | $ 0.10 | $ 0.10 |
Redeemable common Stock, shares issued | 180,000 | 170,000 |
Redeemable common Stock, shares outstanding | 180,000 | 170,000 |
Common Stock, par value | $ 0.10 | $ 0.10 |
Common Stock, shares authorized | 20,000,000 | 20,000,000 |
Common Stock, shares issued | 723,724 | 723,724 |
Common Stock, shares outstanding | 723,724 | 723,724 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Revenues: | ||
Products | $ 515 | $ 535 |
Services | 3,661 | 3,407 |
Total revenues | 4,176 | 3,942 |
Cost of revenues: | ||
Products | 67 | 151 |
Services | 1,455 | 1,539 |
Total cost of revenues | 1,522 | 1,690 |
Gross margin | 2,654 | 2,252 |
Research and development expenses | 633 | 894 |
Selling, general and administrative expenses | 2,555 | 2,481 |
Change in fair value of earn-out and holdback payments | 46 | (85) |
Operating loss | (580) | (1,038) |
Interest expense | 96 | 165 |
Other (income) expense | (5) | (114) |
Loss before income taxes | (671) | (1,317) |
Provision for income taxes | 2 | 2 |
Net loss | $ (673) | $ (1,319) |
Basic and diluted net loss per share | $ (0.75) | $ (1.48) |
Weighted average common shares outstanding-basic and diluted | 902,529 | 890,120 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Comprehensive income loss: | ||
Net loss | $ (673) | $ (1,319) |
Other comprehensive income: | ||
Foreign currency translation adjustment | 5 | 199 |
Comprehensive loss | $ (668) | $ (1,120) |
REDEEMABLE COMMON STOCK AND SHA
REDEEMABLE COMMON STOCK AND SHARES - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Redeemable common stock: | ||
Redeemable common stock balance at beginning of year | $ 1,190 | $ 275 |
Issuance of redeemable common stock | 50 | 850 |
Repurchase of redeemable common stock | 0 | (275) |
Accretion of redeemable common stock to redemption value | 20 | 340 |
Redeemable common stock at end of year | 1,260 | 1,190 |
Common stock: | ||
Common stock balance at beginning of year | 73 | 83 |
Repurchase of common stock | 0 | (10) |
Common stock balance at end of year | 73 | 73 |
Additional paid in capital: | ||
Additional paid in capital balance at beginning of year | 27,056 | 27,338 |
Repurchase of common stock | 0 | (27) |
Accretion of redeemable common stock to redemption value | (20) | (340) |
Fee to be paid to redeemable common stock investors | (6) | (30) |
Stock based compensation | 108 | 115 |
Additional paid in capital balance at end of year | 27,138 | 27,056 |
Accumulated deficit: | ||
Accumulated deficit balance at beginning of year | (27,400) | (26,081) |
Net loss | (673) | (1,319) |
Accumulated deficit balance at end of year | (28,073) | (27,400) |
Accumulated other comprehensive loss: | ||
Accumulated other comprehensive loss balance at beginning of year | (283) | (482) |
Foreign currency translation adjustments | 5 | 199 |
Accumulated other comprehensive loss balance at end of year | (278) | (283) |
Total shareholders' deficit at end of year | $ (1,140) | $ (554) |
Outstanding shares: | ||
Balance of redeemable common stock at beginning of year | 170,000 | 50,000 |
Repurchase of redeemable common stock | 0 | (50,000) |
Issuance of redeemable common stock | 10,000 | 170,000 |
Balance of redeemable common stock at end of year | 180,000 | 170,000 |
Balance of common stock at beginning of year | 723,724 | 825,135 |
Repurchase of common stock | 0 | (101,411) |
Balance of common stock at end of year | 723,724 | 723,724 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (673) | $ (1,319) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 74 | 279 |
Change in fair value of earn-out and holdback payments | 46 | (85) |
Non-cash loss on foreign currency transactions | 4 | 114 |
Stock-based compensation | 108 | 115 |
Non-cash interest expense | 0 | 27 |
Changes in current assets and liabilities: | ||
Accounts receivable | 110 | 86 |
Prepaid expenses and other current assets | 108 | (111) |
Accounts payable, accrued expenses and other liabilities | 65 | (663) |
Deferred maintenance revenue | (201) | 270 |
Net cash used in operating activities | (359) | (1,287) |
Cash flows from investing activities: | ||
Proceeds from earn-out and holdback payments | 200 | 604 |
Capital expenditures | (22) | (3) |
Capitalized software development costs | (438) | (202) |
Capitalized identifiable intangible assets | 0 | (33) |
Capitalized patent costs | (4) | (3) |
Net cash provided by (used in) investing activities | (264) | 363 |
Cash flows from financing activities: | ||
Proceeds from issuance of redeemable common stock, net of issuance costs | 50 | 820 |
Cost of repurchasing common stock | 0 | (37) |
Borrowings under debt agreement | 647 | 750 |
Cost of repurchasing redeemable common stock | 0 | (275) |
Repayment under debt agreements | (193) | (1,304) |
Repayments under capital lease | (18) | (14) |
Net cash provided by (used in) financing activities | 486 | (60) |
Effect of exchange rates on cash | 2 | 85 |
Decrease in cash and cash equivalents | (135) | (899) |
Cash and cash equivalents, beginning of year | 310 | 1,209 |
Cash and cash equivalents, end of year | 175 | 310 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 88 | 122 |
Income taxes paid | 2 | 2 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Purchase of property and equipment under capital lease | 32 | 0 |
Accretion of redeemable common stock | $ 20 | $ 340 |
DESCRIPTION OF THE BUSINESS AND
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
May 31, 2016 | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | A A.DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION SofTech, Inc. (the “Company”) was formed in Massachusetts on June 10, 1969. The Company is primarily 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. In addition to the products offered to the PLM industry, in 2012, the Company filed a patent application describing an information management system for the residential property market. The Company established a wholly-owned subsidiary, HomeView, Inc. on April 7, 2015 in Massachusetts. HomeView™, a technology being developed by HomeView, Inc., is a secure, intelligent home asset management and maintenance system. HomeView allows homeowners to create a virtual home manual that logs, manages and tracks personal assets and attributes about the property. Home ownership is made easier by managing user manuals, warranty periods, service records, maintenance reminders and other projects with HomeView. Our plans are to offer this technology as a hosted solution wherein the software would reside on our servers. During fiscal years 2015 and 2016, the Company invested a substantial amount of time in, among other things, researching this market, reviewing various business models, creating specifications for the technology and developing the technology. In January 2016, the product was introduced to the market and a free version of the app was made available on iTunes. The Company has been actively engaged in acquiring and filing new U.S. patents, evaluating alternatives for monetizing its existing patents and investigating the acquisition of specific patents already awarded that might enhance shareholder value. The consolidated financial statements of the Company include the accounts of SofTech, Inc. and its wholly-owned subsidiaries, Information Decisions, Inc., Workgroup Technology Corporation, HomeView, Inc., SofTech, GmbH (inactive since 2014) and SofTech, Srl. All significant intercompany accounts and transactions have been eliminated in consolidation. BASIS OF ACCOUNTING AND LIQUIDITY The consolidated financial statements have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s long-term viability is dependent on its ability to generate sufficient product revenue, net income and cash flows from operations to support its business as well as its ability to obtain additional capital. The Company has sustained net operating losses and negative cash flow from operations for fiscal year 2015 and fiscal 2016 as detailed in the table below (000’s): Fiscal Years Ended May 31, May 31, 2016 2015 Net loss $ (673) $ (1,319) Net cash used in operating activities $ (359) $ (1,287) The majority of the net losses and net cash used in operating activities detailed above relate to our Italian subsidiary and expenses we have incurred in launching our HomeView technology. As outlined further in these disclosures, the Company has debt obligations that are payable during October 2016 and common stock that is redeemable during the next twelve months. The Company’s ability to meet its obligations and continue as a going concern is dependent on the successful execution of its operating plans. Our Italian subsidiary, SofTech, Srl, was primarily focused on marketing and supporting the CADRA technology prior to the sale of that product line in fiscal 2014. Since that time, it has been offering CADRA under a Distributorship Agreement while developing new revenue streams. The losses diminished significantly in fiscal 2016 as compared to 2015 as a result of these new initiatives. In fiscal 2016, we were awarded a contract to implement a solution at our largest European customer to, among other things, automate their bill of materials using third party technologies and professional services. This project was substantially completed during the fiscal year and we are discussing expansion of that solution with this customer. We anticipate continued improvement in operating results. With regard to HomeView, we are continuing to develop the technology and expect multiple new releases for the foreseeable future. We began introducing this product to the market in January 2016. The Company expects that additional capital will be required to continue to introduce HomeView into the market effectively. As of July 31, 2016, approximately 350 HomeView accounts have been established tracking approximately 12,000 details about the things in the homes of those users. Through various marketing efforts we continue to attract new visitors to the HomeView website. As detailed in previous filings, one of the alternatives for obtaining the additional capital we need to continue the market introduction of HomeView and meet our near term capital needs is the sale of one or more of the Company’s existing revenue producing product lines. Subsequent to year end the Company entered into just such an agreement as described immediately hereunder. After pursuing other funding alternatives management determined that the sale was the most favorable alternative for shareholders. The transaction is subject to the approval of the Company’s shareholders and is expected to be completed by October 2016. The approval of two-thirds of the shares outstanding is required. Approximately 56% of outstanding shares are owned by Company Directors and the buyer. If completed, the liquidity provided will allow for the Company to repay all of its outstanding debt, repurchase Put shares that come due within the next twelve months and fund its working capital requirements for at least the next twelve months. On August 23, 2016, we entered into an Asset Purchase Agreement pursuant to which we agreed to sell our ProductCenter and Connector product lines to Essig Research, Inc. (“Essig”) for a total of $3.25 million plus contingent payments based on revenue targets for the two twelve-month periods immediately following the transaction date (the “PLM Sale”). Essig is an affiliate of EssigPR, Inc., which is owned by Joseph P. Daly, a related party of the Company whose beneficial ownership was approximately 19.4% of the Company’s outstanding common stock as of August 24, 2016. The assets to be acquired by Essig include the properties and assets used exclusively in the PLM operations which is composed of the ProducCenter and Connector product lines. Essig will assume the contractual liabilities associated with maintenance and subscription support services. Specifically excluded from the sale and retained by SofTech are cash, billed accounts receivable and all remaining assets and liabilities not specifically identified, including the operations of SofTech Srl and HomeView. Approximately $1.15 million of indebtedness as of August 24, 2016 owed by the Company to Essig under existing debt agreements would be repaid as part of this transaction, thereby reducing the cash paid to the Company at the closing. In addition, at the closing of the transaction, the Company has agreed to repurchase from Mr. Daly 110,000 shares of its common stock at approximately $6.50 per share. These shares are currently subject to a $7.00 put right that, absent such repurchase, would have been exercisable by Mr. Daly in fiscal 2018. The closing of the PLM Sale, which is subject to approval by the SofTech shareholders and the satisfaction of other customary closing conditions (including a holdback of a portion of the purchase price to secure any indemnification claims arising under the Asset Purchase Agreement), is expected to occur by October 2016. The transaction is not subject to any financing condition. The transaction is subject to the approval of the Company’s shareholders and is expected to be completed by October 2016. The approval of two-thirds of the shares outstanding is required. If completed, the liquidity provided will allow for the Company to repay all of its outstanding debt, repurchase Put shares that come due within the next twelve months and fund its working capital requirements for at least the next twelve months. There can be no assurance, however, that the sale will be completed 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. Through May 31, 2016 the Company has received a total of approximately $3.7 million from Mentor and could receive up to an additional $223,000 based upon the CADRA revenue generated by Mentor for the period from February 1, 2016 through October 31, 2016. In accordance with the terms of the Asset Purchase Agreement the final payment would be received on or before April 1, 2017. During fiscal year 2016 and 2015 the Company received earn out payments of $200,000 and $283,000, respectively, under the terms of the Asset Purchase Agreement. In conjunction with completing the CADRA Sale, the Company entered into a one-year, exclusive Distributorship Agreement with Mentor allowing us to market and support the CADRA technology as a reseller throughout Europe (except Germany) at a thirty percent (30%) gross margin. In March 2016 that arrangement was extended through March 24, 2017 on a non-exclusive basis. Under the new arrangement, gross margin on software remained at 30% and the gross margin on support contracts is 35%. RECLASSIFICATIONS Certain accounts in the financial statements for the fiscal year ended May 31, 2015 have been reclassified for presentation purposes and had no impact on net loss. Specifically, on the Statement of Cash Flows for the fiscal year ended May 31, 2015, the Proceeds from the earn-out and holdback payments of $604,000 which were previously classified under financing activities, have been reclassified as investing activities in these financial statements. In addition, on the Statement of Changes in Redeemable Common Stock and Shareholders’ Deficit for the fiscal year ended May 31, 2015 investor fees of $30,000 which were previously netted against the $850,000 in proceeds from the issuance of redeemable common stock were separately presented. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2016 | |
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 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. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash at certain financial institutions in amounts that at times, exceed Federal Deposit Insurance Corporation limits. Cash held in foreign bank accounts at May 31, 2016 totaled approximately $90,000. The Company does not believe it is exposed to significant credit risk related to cash and cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon management's assessment of the collectability of accounts receivable, which considers historical writeoff experience and any specific risks identified in customer collection matters. Bad debts are written off against the allowance when identified. The Company’s allowance for uncollectible accounts was approximately $18,000 at May 31, 2016 and 2015. CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and equivalents and accounts receivable. The Company maintains its cash and equivalents with high credit quality financial institutions. The Company believes it is not exposed to any significant losses due to credit risk on cash and equivalents. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Consequently, the Company believes that its exposure to losses due to credit risk on net accounts receivable is limited. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The Company provides for depreciation on a straight-line basis over the following estimated useful lives: Computer software and equipment 2-5 years Office furniture 5-10 years Automobiles 4-6 years Leasehold improvements Less of life of lease or estimated lease term Property and equipment was composed of the following at May 31 (000’s): 2016 2015 Computer Software $ 506 $ 473 Equipment 502 479 Office Furniture 116 116 Leasehold Improvements 31 31 1,155 1,099 Less Accumulated Depreciation (1,084) (1,042) $ 71 $ 57 Depreciation expense, including amortization of assets under capital lease, was approximately $40,000 for both fiscal years 2016 and 2015. Maintenance and repairs are charged to expense as incurred; betterments are capitalized. At the time property and equipment are retired, sold, or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts. Any resulting gain or loss on disposal is credited or charged to income. SOFTWARE DEVELOPMENT COSTS The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985-20, Software-Costs of Computer Software to Be Sold, Leased or Marketed ASC 350-40, Intangibles-Goodwill and Other- Internal Use-Software. Under ASC 985-20, costs that are incurred 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. Under ASC 350-40 there are three distinct stages associated with development software which include 1) preliminary project; 2) application development; and 3) post implementation-operation. Costs should be capitalized after each of the following has occurred: The preliminary project stage has been completed; Management with the relevant authority authorizes the project; Management with the relevant authority commits to fund the project; It is probable that the project will be completed; and It is probable that the software will be used for the intended purpose. Capitalization stops after the software is substantially complete. Capitalized 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 costs should begin to be capitalized under both standards as well as the technology’s economic life. During fiscal years 2016 and 2015, the Company capitalized approximately $438,000 and $202,000, respectively, of software development costs. Amortization expense related to capitalized software development costs for fiscal years 2016 and 2015 was approximately $36,000 and $98,000, 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 F. Total direct costs incurred in establishing this debt agreement were approximately $255,000 which were amortized over the term of the arrangement in accordance with ASC 470-50. Amortization expense related to debt issuance costs for fiscal year 2015 was approximately $149,000 and was fully amortized in that period. 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. The Company recognizes the tax benefit from an uncertain tax position only if it more-likely-than-not that the tax position will be sustained upon examination by taxing authorities, based on technical merits of the tax position. The evaluation of an uncertain tax position is based on factors that include, but are not limited to, changes in the tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, and changes in facts or circumstances related to a tax position. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact the Company’s tax provision in future periods. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. In accordance with the applicable statute of limitations, the Company’s tax returns could be audited by the Internal Revenue Service and various states for the fiscal years ended 2013 to 2015. REVENUE RECOGNITION The Company follows the provisions of ASC 985-605, Software – Revenue Recognition, 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 $4,000 and $3,000 for the years ending May 31, 2016 and 2015, respectively. ACCOUNTING FOR GOODWILL The Company accounts for goodwill pursuant to ASC 350, Intangibles – Goodwill and Other As of May 31, 2016, 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. 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 May 31, 2016 and 2015, the Company does not have any long-lived assets it considers to be impaired. FINANCIAL INSTRUMENTS The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, Earn-Out Payments, related party notes receivable, accounts payable, accrued expenses, deferred maintenance and subscription revenue, long-term debt and capital lease obligations. The Company’s estimate of the fair value of these financial instruments approximates their carrying amounts at May 31, 2016. 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 are the Earn-Out Payments associated with the Company’s sale of the CADRA product line. As of May 31, 2016, the maximum amount that could be received by the Company under the Asset Purchase Agreement totaled $223,000. The final Earn-Out Payment will be based on the CADRA revenue generated for the nine month period ended October 31, 2016. The average quarterly CADRA revenue for Mentor’s most recent fiscal year was approximately $500,000. The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of May 31, 2016: (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 $ 130 $ - $ - $ 130 Total assets at fair value $ 130 $ - $ - $ 130 The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of May 31, 2015: (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 $ 376 $ - $ - $ 376 Total assets at fair value $ 376 $ - $ - $ 376 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 years ended May 31, 2015 and 2016: (in thousands) Fair value at May 31, 2014 $ 895 Payments received (604) Change in fair value 85 Fair value at May 31, 2015 376 Change in fair value (46) Payments received (200) Fair value at May 31, 2016 $ 130 The fair value of the Earn-Out Payments expected to be collected within twelve months of the balance sheet date have been classified as current assets and the remainder as non-current assets in the accompanying consolidated balance sheets. The Company has estimated the fair value of the 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 Earn-Out Payments recognized in the Consolidated Statements of Operations for the year ended May 31, 2016 and 2015 was approximately $(46,000) and $85,000. 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 operations in fiscal year 2016 and 2015. In fiscal years 2016 and 2015, the Company recorded a net gain (loss) from foreign currency related transactions of approximately $5,000 and $(114,000), respectively, to Other (income) expense in the Consolidated Statements of Operations. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is a more inclusive reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). To date, the Company’s comprehensive income and expense items include only foreign translation adjustments. Comprehensive income (loss) has been included in the Consolidated Statements of Comprehensive Loss for all periods. RESEARCH AND DEVELOPMENT COSTS The Company expenses all research and development costs as incurred. NET INCOME (LOSS) PER COMMON SHARE For the fiscal years ended May 31, 2016 and 2015, 3,192 and 1,003 respectively, options to purchase shares of common stock 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 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 May 31, 2016, 149,500 options were outstanding. 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, 2014 129,500 1.88 9.74 20,825 Granted 30,000 1.30 10.00 - Exercised - - - - Forfeited or expired (12,500) 1.84 - - Outstanding options at May 31, 2015 147,000 1.77 8.54 2,625 Granted 2,500 1.00 10.00 - Exercised - - - - Forfeited or expired - - - - Outstanding options at May 31, 2016 149,500 $ 1.75 7.56 $ 4,325 Exercisable at May 31, 2016 143,653 $ 1.77 7.53 $ 4,269 The Company determined the volatility for options granted during the fiscal year ended May 31, 2016 and 2015 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 weighted-average fair value of each option granted in the fiscal year ended May 31, 2016 was estimated to be $1.10 on the date of grant using the Black-Scholes model with the following weighted average assumptions: Expected life 5.00 years Assumed annual dividend growth rate 0% Expected volatility 133% Risk free interest rate 1.63% For the years ended May 31, 2016 and 2015, the Company expensed approximately $108,000 and $115,000, respectively, of stock-based compensation. Unamortized stock based compensation as of May 31, 2016 was approximately $7,000. 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 fiscal 2015. During the fiscal quarter 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. In the event whereby the Company is unable to honor the agreement to repurchase the shares, in whole or in-part, the unpaid portion would revert into a loan obligation secured by all of the Company’s assets and bearing an annual interest rate of 20%. During the fiscal quarter 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 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. During the fiscal quarter ended November 30, 2015, the Company issued an additional 10,000 shares of the Common Stock at a purchase price of $5.00 per share to an accredited investor in private placement transactions for total proceeds of $50,000. This transaction was completed pursuant to a Securities Purchase Agreement entered into with the investor. In lieu of registration rights, the investor is entitled to a fee of $5,000 to be paid in eight equal quarterly installments during the twenty-four month period (the “Payment Period”) following the investment. The Securities Purchase Agreement also provides the investor with the right to require the Company to redeem the Common Stock held by such investor for $7.00 per share in cash for a 30 day period following the Payment Period. Upon completion of this transaction, the 10,000 shares of Common Stock issued pursuant to the Securities Purchase Agreement was recorded as redeemable common stock at its redemption value of $70,000 and accretion of $20,000 was recorded to additional paid in capital. As of May 31, 2016, the redeemable common stockholders of the Company have the right to redeem shares with an aggregate redemption value of $420,000 within twelve months of the balance sheet date. 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 Derivatives and Hedging, Classification and Measurement of Redeemable Securities RECENT ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU No. 2016-02, “Leases”. This ASU requires entities to recognize right-to-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the potential impact this standard will have on our financial statements and related disclosure. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, This ASU simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. In May 2015, the FASB issued ASU No. 2015-08, "Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115." The amendments in this ASU amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material impact on the Company's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer's accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The Company is currently assessing the impact that ASU 2015-05 will have on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, "Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." The amendments in this ASU are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity ("VIE"), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. ASU 2015-02 may be applied retrospectively in previously issued financial statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements. 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 is in the process of evaluating if 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 does not believe this guidance will have a material impact on its consolidated results of operations or financial position. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
May 31, 2016 | |
INCOME TAXES | |
INCOME TAXES | C. INCOME TAXES The provision for income taxes includes the following for the years ended May 31 (in thousands): 2016 2015 Federal $ - $ - Foreign - - State and local 2 2 Total current provision 2 2 Deferred provision 27 85 Valuation allowance (27) (85) Total deferred provision - - Total provision $ 2 $ 2 The domestic and foreign components of income (loss) before income taxes were as follows for the years ended May 31 (in thousands): 2016 2015 Domestic $ (503) $ (975) Foreign (168) (342) $ (671) $ (1,317) At May 31, 2016, the Company had Federal net operating loss carryforwards of $22 million that begin expiring in 2022, and are available to reduce future taxable income. The utilization of the remaining net operating loss carryforwards may be subject to limitation based on past and future changes in ownership of the Company pursuant to Internal Revenue Code Section 382. The Company also has an alternative minimum tax credit of approximately $200,000 that has no expiration date that was available as of May 31, 2016. The CompanyÂ’s effective income tax rates can be reconciled to the federal and state statutory income tax rate for the years ended May 31 as follows: 2016 2015 Federal statutory rate 34% 34% State - - Foreign - - Permanent items - - Valuation reserve (34) (34) Effective tax rate - - Deferred tax assets (liabilities) were comprised of the following at May 31 (in thousands): 2016 2015 Deferred tax assets Net operating loss carryforwards $ 7,597 $ 7,498 Tax credit carryforwards 254 254 Receivables allowances 7 7 Vacation pay accrual 5 4 Depreciation 42 35 Differences in book and tax basis of assets of acquired businesses (191) (56) Total gross deferred tax assets 7,714 7,742 Valuation allowance (7,714) (7,742) Net deferred tax asset $ - $ - Due to the uncertainties regarding the realization of certain favorable tax attributes in future tax returns, the Company has established a valuation reserve against the otherwise recognizable net deferred tax assets. |
EMPLOYEE RETIREMENT PLANS
EMPLOYEE RETIREMENT PLANS | 12 Months Ended |
May 31, 2016 | |
EMPLOYEE RETIREMENT PLANS | |
EMPLOYEE RETIREMENT PLANS | D. EMPLOYEE RETIREMENT PLANS The Company has an Internal Revenue Code Section 401(k) plan covering substantially all U.S. based employees and offers an employer match of a portion of an employeeÂ’s voluntary contributions. The aggregate expense related to this employer match for fiscal years 2016 and 2015 was approximately $31,000 and $52,000, respectively. |
GEOGRAPHICAL INFORMATION
GEOGRAPHICAL INFORMATION | 12 Months Ended |
May 31, 2016 | |
GEOGRAPHICAL INFORMATION | |
GEOGRAPHICAL INFORMATION | E . GEOGRAPHICAL INFORMATION The Company operates in one reportable segment and is engaged in the development, marketing, distribution and/or support of computer aided design and product data management and collaboration computer solutions. The CompanyÂ’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): Years Ended Revenue: May 31, 2016 May 31, 2015 North America $ 3,311 $ 3,223 Asia 12 7 Europe 919 767 Eliminations (66) (55) Consolidated Total $ 4,176 $ 3,942 Long-Lived Assets: As of May 31, 2016 As of May 31, 2015 North America $ 2,086 $ 1,797 Europe 40 41 Consolidated Total $ 2,126 $ 1,838 |
DEBT
DEBT | 12 Months Ended |
May 31, 2016 | |
DEBT | |
DEBT | F.D F.DEBT ESSIGP ESSIGPR On June 20, 2014, the Company entered into a promissory note agreement (the “Note”) with EssigPR, Inc. (“EssigPR”), a Puerto Rico corporation and related party of the Company. 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 was to 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. 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 was due in full on April 10, 2015. EssigPR was awarded 5,000 fully vested stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on October 1, 2024 if not exercised. The Short Term Note arrangement did not increase the total principal amount of debt owed to EssigPR. Rather, the arrangement had the effect of establishing new payoff terms for that portion of the debt owed to EssigPR under the Note. On April 2, 2015, the Short Term Note was amended to extend the due date by three months from April 10, 2015 to July 10, 2015. EssigPR was awarded 2,500 fully vested stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on April 2, 2025 if not exercised. During the three months ended August 31, 2015, the Short Term Note was amended to extend the due date to October 10, 2015 and to increase the borrowings by $200,000 in exchange for 2,500 fully vested stock options to purchase SofTech common stock at $1.00 per share. The stock options will expire on July 15, 2025 if not exercised. During the three months ended November 30, 2015, the Short Term Note was amended to extend the due date to January 10, 2016 and to increase the borrowings by $254,000. On January 8, 2016, the Short Term Note was amended to extend the due date to April 10, 2016. On April 11, 2016, the Short Term Note was amended to extend the due date to July 10, 2016. On August 12, 2016, the Short Term Note was amended to increase the borrowings by $250,000, to extend the due date to October 10, 2016 and to increase the collateral to include the PLM product lines. The following summary details the changes in principal amount owed under each of the debt agreements with Essig (in thousands): Note Short Term Note Total Balance at May 31, 2014 $ - $ - $ - Borrowings 450 300 750 Repayments (304) - (304) Balance at May 31, 2015 146 300 446 Borrowing - 578 578 Repayments - (124) (124) Balance at May 31, 2016 146 754 900 Interest expense was approximately $76,000 and $62,000 in fiscal years 2016 and 2015, respectively. On the occurrence and continuance of an event of default under the Note that is not cured after written notice from EssigPR, all or any part of the indebtedness under the Note may become immediately due at the option of EssigPR. Under the Note, events of default are (1) a default in the payment of any money owed by the Company to EssigPR under the Note or in any other transaction or (2) a default in the Company’s performance of any obligation to EssigPR under the Note or any other agreement between the two parties, whether such agreement is presently existing or entered into in the future. If the Company dissolves, becomes insolvent, or makes an assignment for the benefit of creditors, all such indebtedness under the Note shall become automatically due and payable. EssigPR is owned by Joseph P. Daly, a related party of the Company whose beneficial ownership was approximately 19.4% of the Company’s outstanding common stock as of May 31, 2016. SHORT TERM ADVANCES FROM RELATED PARTIES Robert Anthonyson, an Officer, Director and beneficial owner of 19.9% of the Company’s outstanding common stock as of May 31, 2016, loaned the Company $50,000 on July 29, 2015 which was repaid to Mr. Anthonyson during the second quarter of fiscal year 2016. Joseph Mullaney, an Officer, Director and beneficial owner of 11.7% of the Company’s outstanding common stock as of May 31, 2016, loaned the Company $19,300 on September 1, 2015 which was repaid during the second quarter of fiscal year 2016. There was no interest charged on these short term advances. BLUEVINE In September 2015, the Company arranged for a credit line of up to $80,000 with BlueVine Capital, Inc. (“BlueVine”). The borrowing arrangement with BlueVine as the lender allows the Company to receive an advance of 85% of the total value of specified invoices. During the fiscal year ended May 31, 2016, the Company received advances totaling approximately $55,000 against seven invoices from one customer. As of May 31, 2016 there were no outstanding borrowings under this debt facility. PRIDES CROSSING CAPITAL Prior to May 31, 2015, the Company had outstanding amounts owed under a former loan agreement with Prides Crossing Capital, L.P. and Prides Crossing Capital-A, L.P. (the “Lenders”). During the fiscal year ended May 31, 2015, the outstanding balance of $1,000,000 was paid in full and the agreement with the Lenders was terminated. |
LEASE COMMITMENTS
LEASE COMMITMENTS | 12 Months Ended |
May 31, 2016 | |
LEASE COMMITMENTS: | |
LEASE COMMITMENTS | G. G.LEASE COMMITMENTS OP OPERATING LEASES The Company conducts its operations in office facilities leased through December 2018. Rental expense for both fiscal years 2016 and 2015 was approximately $152,000. At May 31, 2016, minimum annual rental commitments under noncancellable leases were as follows (in thousands): 2017 $ 110 2018 133 2019 77 Total future minimum lease commitments $ 320 CAPITAL LEASES In fiscal years 2010, 2013, 2014 and 2016, the Company acquired capital equipment through capital lease agreements with financial institutions for terms of 48, 50 and 60 months, with a $1 purchase option. The assets are amortized over the life of the related lease or the asset if shorter and amortization of the assets is included in depreciation expense for fiscal years 2016 and 2015. The related leased assets had a cost basis of approximately $108,000 and $77,000, and accumulated depreciation of approximately $(69,000) and $(50,000) as of May 31, 2016 and 2015, respectively. Minimum annual future lease payments under the capital lease as of May 31, 2016 are as follows (in thousands): 2017 $ 35 2018 26 2019 17 2020 11 2021 2 Minimum lease payment 91 Amount representing interest (28) Present value of minimum lease payments $ 63 Current $ 24 Long Term $ 39 |
NOTE RECEIVABLE, RELATED PARTY
NOTE RECEIVABLE, RELATED PARTY | 12 Months Ended |
May 31, 2016 | |
NOTE RECEIVABLE, RELATED PARTY | |
NOTE RECEIVABLE, RELATED PARTY | H. NOTE RECEIVABLE, RELATED PARTY Joseph Mullaney, the CompanyÂ’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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
May 31, 2016 | |
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 issued. On August 12, 2016, the Company amended its Short Term Note with Essig to increase the maximum borrowings by $250,000, to extend the due date to October 10, 2016 and to increase the collateral to include the tangible and intangible assets of the PLM product lines. It is contemplated that this Short Term Note would be repaid in full upon completion of the transaction described below. On August 23, 2016, we entered into an Asset Purchase Agreement pursuant to which we agreed to sell our ProductCenter and Connector product lines to Essig for a total of $3.25 million plus contingent payments based on revenue targets for the two twelve-month periods immediately following the transaction date. Essig is an affiliate of EssigPR, Inc., which is owned by Joseph P. Daly, an affiliate of the Company whose beneficial ownership was approximately 19.4% of the CompanyÂ’s outstanding common stock as of August 24, 2016. The assets to be acquired by Essig include the properties and assets used exclusively in the PLM operations which is composed of the ProducCenter and Connector product lines. Essig will assume the contractual liabilities associated with maintenance and subscription support services. Specifically excluded from the sale and retained by SofTech are cash, billed accounts receivable and all remaining assets and liabilities not specifically identified, including the operations of SofTech Srl and HomeView. Approximately $1.15 million of indebtedness as of August 24, 2016 owed by the Company to Essig under existing debt agreements would be repaid as part of this transaction, thereby reducing the cash paid to the Company at the closing. In addition, at the closing of the transaction, the Company has agreed to repurchase from Mr. Daly 110,000 shares of its common stock at approximately $6.50 per share. These shares are currently subject to a $7.00 put right that, absent such repurchase, would have been exercisable by Mr. Daly in fiscal 2018. The closing of the PLM Sale, which is subject to approval by the SofTech shareholders and the satisfaction of other customary closing conditions (including a holdback of a portion of the purchase price to secure any indemnification claims arising under the Asset Purchase Agreement), is expected to occur by October 2016. The transaction is not subject to any financing condition. |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2016 | |
BUSINESS AND BASIS OF PRESENTATION | |
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 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. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash at certain financial institutions in amounts that at times, exceed Federal Deposit Insurance Corporation limits. Cash held in foreign bank accounts at May 31, 2016 totaled approximately $90,000. The Company does not believe it is exposed to significant credit risk related to cash and cash equivalents. |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon management's assessment of the collectability of accounts receivable, which considers historical writeoff experience and any specific risks identified in customer collection matters. Bad debts are written off against the allowance when identified. The CompanyÂ’s allowance for uncollectible accounts was approximately $18,000 at May 31, 2016 and 2015. |
CONCENTRATION OF CREDIT RISK | CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and equivalents and accounts receivable. The Company maintains its cash and equivalents with high credit quality financial institutions. The Company believes it is not exposed to any significant losses due to credit risk on cash and equivalents. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Consequently, the Company believes that its exposure to losses due to credit risk on net accounts receivable is limited |
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The Company provides for depreciation on a straight-line basis over the following estimated useful lives: Computer software and equipment 2-5 years Office furniture 5-10 years Automobiles 4-6 years Leasehold improvements Less of life of lease or estimated lease term Property and equipment was composed of the following at May 31 (000Â’s): 2016 2015 Computer Software $ 506 $ 473 Equipment 502 479 Office Furniture 116 116 Leasehold Improvements 31 31 1,155 1,099 Less Accumulated Depreciation (1,084) (1,042) $ 71 $ 57 Depreciation expense, including amortization of assets under capital lease, was approximately $40,000 for both fiscal years 2016 and 2015. Maintenance and repairs are charged to expense as incurred; betterments are capitalized. At the time property and equipment are retired, sold, or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts. Any resulting gain or loss on disposal is credited or charged to income. |
SOFTWARE DEVELOPMENT COSTS | SOFTWARE DEVELOPMENT COSTS The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985-20, Software-Costs of Computer Software to Be Sold, Leased or Marketed ASC 350-40, Intangibles-Goodwill and Other- Internal Use-Software. Under ASC 985-20, costs that are incurred 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. Under ASC 350-40 there are three distinct stages associated with development software which include 1) preliminary project; 2) application development; and 3) post implementation-operation. Costs should be capitalized after each of the following has occurred: The preliminary project stage has been completed; Management with the relevant authority authorizes the project; Management with the relevant authority commits to fund the project; It is probable that the project will be completed; and It is probable that the software will be used for the intended purpose. Capitalization stops after the software is substantially complete. Capitalized 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 costs should begin to be capitalized under both standards as well as the technology’s economic life. During fiscal years 2016 and 2015, the Company capitalized approximately $438,000 and $202,000, respectively, of software development costs. Amortization expense related to capitalized software development costs for fiscal years 2016 and 2015 was approximately $36,000 and $98,000, 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 F. Total direct costs incurred in establishing this debt agreement were approximately $255,000 which were amortized over the term of the arrangement in accordance with ASC 470-50. Amortization expense related to debt issuance costs for fiscal year 2015 was approximately $149,000 and was fully amortized in that period. |
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 CompanyÂ’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. The Company recognizes the tax benefit from an uncertain tax position only if it more-likely-than-not that the tax position will be sustained upon examination by taxing authorities, based on technical merits of the tax position. The evaluation of an uncertain tax position is based on factors that include, but are not limited to, changes in the tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, and changes in facts or circumstances related to a tax position. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact the CompanyÂ’s tax provision in future periods. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. In accordance with the applicable statute of limitations, the CompanyÂ’s tax returns could be audited by the Internal Revenue Service and various states for the fiscal years ended 2013 to 2015. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Company follows the provisions of ASC 985-605, Software – Revenue Recognition, |
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 $4,000 and $3,000 for the years ending May 31, 2016 and 2015, respectively. |
ACCOUNTING FOR GOODWILL | ACCOUNTING FOR GOODWILL The Company accounts for goodwill pursuant to ASC 350, Intangibles – Goodwill and Other As of May 31, 2016, 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. |
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 May 31, 2016 and 2015, the Company does not have any long-lived assets it considers to be impaired. |
FINANCIAL INSTRUMENTS | FINANCIAL INSTRUMENTS The CompanyÂ’s financial instruments consist of cash and cash equivalents, accounts receivable, Earn-Out Payments, related party notes receivable, accounts payable, accrued expenses, deferred maintenance and subscription revenue, long-term debt and capital lease obligations. The CompanyÂ’s estimate of the fair value of these financial instruments approximates their carrying amounts at May 31, 2016. |
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 are the Earn-Out Payments associated with the Company’s sale of the CADRA product line. As of May 31, 2016, the maximum amount that could be received by the Company under the Asset Purchase Agreement totaled $223,000. The final Earn-Out Payment will be based on the CADRA revenue generated for the nine month period ended October 31, 2016. The average quarterly CADRA revenue for Mentor’s most recent fiscal year was approximately $500,000. The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of May 31, 2016: (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 $ 130 $ - $ - $ 130 Total assets at fair value $ 130 $ - $ - $ 130 The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of May 31, 2015: (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 $ 376 $ - $ - $ 376 Total assets at fair value $ 376 $ - $ - $ 376 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 years ended May 31, 2015 and 2016: (in thousands) Fair value at May 31, 2014 $ 895 Payments received (604) Change in fair value 85 Fair value at May 31, 2015 376 Change in fair value (46) Payments received (200) Fair value at May 31, 2016 $ 130 The fair value of the Earn-Out Payments expected to be collected within twelve months of the balance sheet date have been classified as current assets and the remainder as non-current assets in the accompanying consolidated balance sheets. The Company has estimated the fair value of the 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 Earn-Out Payments recognized in the Consolidated Statements of Operations for the year ended May 31, 2016 and 2015 was approximately $(46,000) and $85,000. |
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION The functional currency of the CompanyÂ’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 operations in fiscal year 2016 and 2015. In fiscal years 2016 and 2015, the Company recorded a net gain (loss) from foreign currency related transactions of approximately $5,000 and $(114,000), respectively, to Other (income) expense in the Consolidated Statements of Operations. |
COMPREHENSIVE INCOME (LOSS) | COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is a more inclusive reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). To date, the CompanyÂ’s comprehensive income and expense items include only foreign translation adjustments. Comprehensive income (loss) has been included in the Consolidated Statements of Comprehensive Loss for all periods. |
RESEARCH AND DEVELOPMENT COSTS | RESEARCH AND DEVELOPMENT COSTS The Company expenses all research and development costs as incurred. |
NET (LOSS) INCOME PER COMMON SHARE | NET INCOME (LOSS) PER COMMON SHARE For the fiscal years ended May 31, 2016 and 2015, 3,192 and 1,003 respectively, options to purchase shares of common stock were anti-dilutive and were excluded from the basic and diluted earnings per share 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 May 31, 2016, 149,500 options were outstanding. 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, 2014 129,500 1.88 9.74 20,825 Granted 30,000 1.30 10.00 - Exercised - - - - Forfeited or expired (12,500) 1.84 - - Outstanding options at May 31, 2015 147,000 1.77 8.54 2,625 Granted 2,500 1.00 10.00 - Exercised - - - - Forfeited or expired - - - - Outstanding options at May 31, 2016 149,500 $ 1.75 7.56 $ 4,325 Exercisable at May 31, 2016 143,653 $ 1.77 7.53 $ 4,269 The Company determined the volatility for options granted during the fiscal year ended May 31, 2016 and 2015 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 weighted-average fair value of each option granted in the fiscal year ended May 31, 2016 was estimated to be $1.10 on the date of grant using the Black-Scholes model with the following weighted average assumptions: Expected life 5.00 years Assumed annual dividend growth rate 0% Expected volatility 133% Risk free interest rate 1.63% For the years ended May 31, 2016 and 2015, the Company expensed approximately $108,000 and $115,000, respectively, of stock-based compensation. Unamortized stock based compensation as of May 31, 2016 was approximately $7,000. |
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 fiscal 2015. During the fiscal quarter 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. In the event whereby the Company is unable to honor the agreement to repurchase the shares, in whole or in-part, the unpaid portion would revert into a loan obligation secured by all of the Company’s assets and bearing an annual interest rate of 20%. During the fiscal quarter 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 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. During the fiscal quarter ended November 30, 2015, the Company issued an additional 10,000 shares of the Common Stock at a purchase price of $5.00 per share to an accredited investor in private placement transactions for total proceeds of $50,000. This transaction was completed pursuant to a Securities Purchase Agreement entered into with the investor. In lieu of registration rights, the investor is entitled to a fee of $5,000 to be paid in eight equal quarterly installments during the twenty-four month period (the “Payment Period”) following the investment. The Securities Purchase Agreement also provides the investor with the right to require the Company to redeem the Common Stock held by such investor for $7.00 per share in cash for a 30 day period following the Payment Period. Upon completion of this transaction, the 10,000 shares of Common Stock issued pursuant to the Securities Purchase Agreement was recorded as redeemable common stock at its redemption value of $70,000 and accretion of $20,000 was recorded to additional paid in capital. As of May 31, 2016, the redeemable common stockholders of the Company have the right to redeem shares with an aggregate redemption value of $420,000 within twelve months of the balance sheet date. 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 Derivatives and Hedging, Classification and Measurement of Redeemable Securities |
RECENT ACCOUNTING PRONOUNCEMENTS, Policy | RECENT ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU No. 2016-02, “Leases”. This ASU requires entities to recognize right-to-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are currently evaluating the potential impact this standard will have on our financial statements and related disclosure. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, This ASU simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. In May 2015, the FASB issued ASU No. 2015-08, "Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115." The amendments in this ASU amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material impact on the Company's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer's accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The Company is currently assessing the impact that ASU 2015-05 will have on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, "Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." The amendments in this ASU are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity ("VIE"), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. ASU 2015-02 may be applied retrospectively in previously issued financial statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements. 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 is in the process of evaluating if 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 does not believe this guidance will have a material impact on its consolidated results of operations or financial position. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers |
DESCRIPTION OF THE BUSINESS A18
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Tables) | 12 Months Ended |
May 31, 2016 | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION {2} | |
Summary of net operating losses and negative cash flow from operations | The Company has sustained net operating losses and negative cash flow from operations for fiscal year 2015 and fiscal 2016 as detailed in the table below (000Â’s): Fiscal Years Ended May 31, May 31, 2016 2015 Net loss $ (673) $ (1,319) Net cash used in operating activities $ (359) $ (1,287) |
SCHEDULE OF PROPERTY AND EQUIPM
SCHEDULE OF PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
May 31, 2016 | |
SCHEDULE OF PROPERTY AND EQUIPMENT | |
SCHEDULE OF PROPERTY AND EQUIPMENT | Property and equipment is stated at cost. The Company provides for depreciation on a straight-line basis over the following estimated useful lives: Computer software and equipment 2-5 years Office furniture 5-10 years Automobiles 4-6 years Leasehold improvements Less of life of lease or estimated lease term Property and equipment was composed of the following at May 31 (000Â’s): 2016 2015 Computer Software $ 506 $ 473 Equipment 502 479 Office Furniture 116 116 Leasehold Improvements 31 31 1,155 1,099 Less Accumulated Depreciation (1,084) (1,042) $ 71 $ 57 |
SCHEDULE OF FAIR VALUE OF FINAN
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
May 31, 2016 | |
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 May 31, 2016: (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 $ 130 $ - $ - $ 130 Total assets at fair value $ 130 $ - $ - $ 130 The following table summarizes the valuation of the Company's assets and liabilities measured at fair value on a recurring basis as of May 31, 2015: (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 $ 376 $ - $ - $ 376 Total assets at fair value $ 376 $ - $ - $ 376 |
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 years ended May 31, 2015 and 2016: (in thousands) Fair value at May 31, 2014 $ 895 Payments received (604) Change in fair value 85 Fair value at May 31, 2015 376 Change in fair value (46) Payments received (200) Fair value at May 31, 2016 $ 130 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
May 31, 2016 | |
STOCK-BASED COMPENSATION (Tables) | |
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, 2014 129,500 1.88 9.74 20,825 Granted 30,000 1.30 10.00 - Exercised - - - - Forfeited or expired (12,500) 1.84 - - Outstanding options at May 31, 2015 147,000 1.77 8.54 2,625 Granted 2,500 1.00 10.00 - Exercised - - - - Forfeited or expired - - - - Outstanding options at May 31, 2016 149,500 $ 1.75 7.56 $ 4,325 Exercisable at May 31, 2016 143,653 $ 1.77 7.53 $ 4,269 |
SCHEDULE OF INCOME TAX EXPENSE
SCHEDULE OF INCOME TAX EXPENSE BENEFIT (Tables) | 12 Months Ended |
May 31, 2016 | |
SCHEDULE OF INCOME TAX EXPENSE BENEFIT (Tables): | |
SCHEDULE OF PROVISION FOR INCOME TAXES | The provision for income taxes includes the following for the years ended May 31 (in thousands): 2016 2015 Federal $ - $ - Foreign - - State and local 2 2 Total current provision 2 2 Deferred provision 27 85 Valuation allowance (27) (85) Total deferred provision - - Total provision $ 2 $ 2 |
SCHEDULE OF DOMESTIC AND FOREIGN COMPONENTS OF INCOME (LOSS) BEFORE INCOME TAXES | The domestic and foreign components of income (loss) before income taxes were as follows for the years ended May 31 (in thousands): 2016 2015 Domestic $ (503) $ (975) Foreign (168) (342) $ (671) $ (1,317) |
SCHEDULE OF EFFECTIVE INCOME TAX RATES CAN BE RECONCILED TO FEDERAL AND STATUTORY INCOME TAX RATE | The CompanyÂ’s effective income tax rates can be reconciled to the federal and state statutory income tax rate for the years ended May 31 as follows: 2016 2015 Federal statutory rate 34% 34% State - - Foreign - - Permanent items - - Valuation reserve (34) (34) Effective tax rate - % - % |
SCHEDULE OF DEFERRED TAX ASSETS (LIABILITIES) | Deferred tax assets (liabilities) were comprised of the following at May 31 (in thousands): 2016 2015 Deferred tax assets Net operating loss carryforwards $ 7,597 $ 7,498 Tax credit carryforwards 254 254 Receivables allowances 7 7 Vacation pay accrual 5 4 Depreciation 42 35 Differences in book and tax basis of assets of acquired businesses (191) (56) Total gross deferred tax assets 7,714 7,742 Valuation allowance (7,714) (7,742) Net deferred tax asset $ - $ - |
SCHEDULE OF GEOGRAPHICAL INFORM
SCHEDULE OF GEOGRAPHICAL INFORMATION (Tables) | 12 Months Ended |
May 31, 2016 | |
SCHEDULE OF GEOGRAPHICAL INFORMATION | |
SCHEDULE OF GEOGRAPHICAL 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): Years Ended Revenue: May 31, 2016 May 31, 2015 North America $ 3,311 $ 3,223 Asia 12 7 Europe 919 767 Eliminations (66) (55) Consolidated Total $ 4,176 $ 3,942 Long-Lived Assets: As of May 31, 2016 As of May 31, 2015 North America $ 2,086 $ 1,797 Europe 40 41 Consolidated Total $ 2,126 $ 1,838 |
Summary of the Changes in Princ
Summary of the Changes in Principal Amount of the Debt Agreements (Tables) | 12 Months Ended |
May 31, 2016 | |
Summary of the Changes in Principal Amount of the Debt Agreements: | |
Summary of the Changes in Principal Amount of the Debt Agreements: | The following summary details the changes in principal amount owed under each of the debt agreements with Essig (in thousands): Note Short Term Note Total Balance at May 31, 2014 $ - $ - $ - Borrowings 450 300 750 Repayments (304) - (304) Balance at May 31, 2015 146 300 446 Borrowing - 578 578 Repayments - (124) (124) Balance at May 31, 2016 146 754 900 |
SCHEDULE OF LEASE COMMITMENTS (
SCHEDULE OF LEASE COMMITMENTS (Tables) | 12 Months Ended |
May 31, 2016 | |
SCHEDULE OF LEASE COMMITMENTS | |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES | At May 31, 2016, minimum annual rental commitments under noncancellable leases were as follows (in thousands): 2017 $ 110 2018 133 2019 77 Total future minimum lease commitments $ 320 |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR CAPITAL LEASES | Minimum annual future lease payments under the capital lease as of May 31, 2016 are as follows (in thousands): 2017 $ 35 2018 26 2019 17 2020 11 2021 2 Minimum lease payment 91 Amount representing interest (28) Present value of minimum lease payments $ 63 Current $ 24 Long Term $ 39 |
DESCRIPTION OF THE BUSINESS A26
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($) | Aug. 23, 2016 | May 31, 2016 | May 31, 2015 | Aug. 30, 2013 |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION DETAILS | ||||
Total of contingent payments based on revenue targets | $ 3,250,000 | |||
Company beneficial ownership of the Company's outstanding common stock | 19.40% | |||
SofTech Srl and HomeView of indebtedness | $ 1,150,000 | |||
Company has agreed to repurchase from Mr. Daly shares of its common stock | $ 110,000 | |||
Company has agreed to repurchase from Mr. Daly shares of its common stock at per share | $ 6.50 | |||
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 | 3,700,000 | |||
CADRA revenue generated by Mentor | $ 223,000 | |||
Company received earn out payments | $ 200,000 | $ 283,000 | ||
Gross margin | 30.00% | |||
Gross margin on software | 30.00% | |||
Gross margin on support contracts | 35.00% |
NET OPERATING LOSSES AND NEGATI
NET OPERATING LOSSES AND NEGATIVE CASH FLOW OPERATIONS (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
NET OPERATING LOSSES AND NEGATIVE CASH FLOW OPERATIONS Details | ||
Net loss | $ (673) | $ (1,319) |
Net cash used in operating activities | $ (359) | $ (1,287) |
RECLASSIFICATIONS (DETAILS)
RECLASSIFICATIONS (DETAILS) | 12 Months Ended |
May 31, 2015USD ($) | |
RECLASSIFICATIONS DETAILS | |
Holdback payments received | $ 604,000 |
Investor fees | 30,000 |
Investor fees netted against in proceeds from the issuance of redeemable common stock | $ 850,000 |
CASH AND CASH EQUIVALENTS (DETA
CASH AND CASH EQUIVALENTS (DETAILS) | May 31, 2016USD ($) |
CASH AND CASH EQUIVALENTS DETAILS | |
Cash held in foreign bank accounts | $ 90,000 |
ACCOUNTS RECEIVABLE (DETAILS)
ACCOUNTS RECEIVABLE (DETAILS) - USD ($) | May 31, 2016 | May 31, 2015 |
ACCOUNTS RECEIVABLE DETAILS | ||
Allowance for uncollectible accounts | $ 18,000 | $ 18,000 |
PROPERTY AND EQUIPMENT (DETAILS
PROPERTY AND EQUIPMENT (DETAILS) | May 31, 2016 |
PROPERTY AND EQUIPMENT DETAILS | |
Computer software and equipment Minimum | 2 |
Computer software and equipment Maximum | 5 |
Office furniture Minimum | 5 |
Office furniture Maximum | 10 |
Automobiles Minimum | 4 |
Automobiles Maximum | 6 |
PROPERTY AND EQUIPMENT WAS COMP
PROPERTY AND EQUIPMENT WAS COMPOSED OF THE FOLLOWING (DETAILS) - USD ($) $ in Thousands | May 31, 2016 | May 31, 2015 |
PROPERTY AND EQUIPMENT WAS COMPOSED OF THE FOLLOWING DETAILS | ||
Computer Software | $ 506 | $ 473 |
Equipment | 502 | 479 |
Office Furniture | 116 | 116 |
Leasehold Improvements | 31 | 31 |
Property and equipment Net | 1,155 | 1,099 |
Less Accumulated Depreciation | (1,084) | (1,042) |
Property and equipment Total | $ 71 | $ 57 |
PROPERTY AND EQUIPMENT - DEPREC
PROPERTY AND EQUIPMENT - DEPRECIATION EXPENSE (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
DEPRECIATION EXPENSE DETAILS | ||
Depreciation expense, including amortization of assets | $ 40,000 | $ 40,000 |
SOFTWARE DEVELOPMENT COSTS (Det
SOFTWARE DEVELOPMENT COSTS (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
SOFTWARE DEVELOPMENT COSTS DURING: | ||
Capitalized software development costs amounted | $ 438,000 | $ 202,000 |
Amortization expense related to capitalized software development costs | $ 36,000 | $ 98,000 |
DEBT ISSUANCE COSTS (DETAILS)
DEBT ISSUANCE COSTS (DETAILS) - USD ($) | May 31, 2015 | May 31, 2013 |
DEBT ISSUANCE COSTS DETAILS | ||
Total direct costs incurred in establishing this debt agreement | $ 255,000 | |
Amortization expense related to debt issuance costs | $ 149,000 |
PATENT COSTS (Details)
PATENT COSTS (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
PATENT COSTS DETAILS | ||
Capitalized patent costs totaled | $ 4,000 | $ 3,000 |
ASSETS AND LIABILITIES MEASURED
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS (DETAILS) - USD ($) $ in Thousands | May 31, 2016 | May 31, 2015 |
Assets: | ||
Earn-Out Payments | $ 130 | $ 376 |
Total assets at fair value | 130 | 376 |
Assets: | ||
Earn-Out Payments | 0 | 0 |
Total assets at fair value | 0 | 0 |
Assets: | ||
Earn-Out Payments | 0 | 0 |
Total assets at fair value | 0 | 0 |
Assets: | ||
Earn-Out Payments | 130 | 376 |
Total assets at fair value | $ 130 | $ 376 |
SUMMARY OF THE CHANGES IN FAIR
SUMMARY OF THE CHANGES IN FAIR VALUE OF THE LEVEL 3 (Details) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Changes in fair value of the Level 3 classified Holdback Payment Earn-Out Payments asset | ||
Fair value at May 31, 2014 | $ 895 | $ 895 |
Payments received | (604) | (604) |
Change in fair value | 85 | 85 |
Fair value at May 31, 2015 | 376 | 376 |
Change in fair value | (46) | (46) |
Payments received | (200) | (200) |
Fair value at May 31, 2016 | $ 130 | $ 130 |
CHANGE IN FAIR VALUE OF THE EAR
CHANGE IN FAIR VALUE OF THE EARN - OUT PAYMENT (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
CHANGE IN FAIR VALUE OF THE EARN - OUT PAYMENT DETAILS | ||
Earn-Out Payments recognized in the Consolidated Statements of Operations | $ (46,000) | $ 85,000 |
FOREIGN CURRENCY TRANSLATION (D
FOREIGN CURRENCY TRANSLATION (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
FOREIGN CURRENCY TRANSLATION DETAILS | ||
Net (gain) loss from foreign currency related transactions | $ 5,000 | $ (114,000) |
NET (LOSS) INCOME PER COMMON SH
NET (LOSS) INCOME PER COMMON SHARE (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
NET (LOSS) INCOME PER COMMON SHARE DETAILS | ||
Options to purchase common shares were anti-dilutive | $ 3,192 | $ 1,003 |
STOCK-BASED COMPENSATION - 2011
STOCK-BASED COMPENSATION - 2011 EQUITY INCENTIVE PLAN (Details) - shares | May 31, 2016 | May 31, 2011 |
2011 EQUITY INCENTIVE PLAN DETAILS | ||
Shares of common stock are reserved for issuance | 150,000 | |
Options were awarded | 149,500 |
SUMMARIZES OPTION ACTIVITY UNDE
SUMMARIZES OPTION ACTIVITY UNDER 2011 STOCK OPTION PLAN (DETAILS) {Stockholders'Equity} | 12 Months Ended |
May 31, 2016shares | |
Number of Options | |
Outstanding options | 129,500 |
Granted | 30,000 |
Exercised | 0 |
Forfeited or expired | (12,500) |
Outstanding options | 147,000 |
Granted | 2,500 |
Exercised | 0 |
Forfeited or expired | 0 |
Outstanding options | 149,500 |
Exercisable | 143,653 |
Weighted Average Exercise Price Per Share | |
Outstanding options | 1.88 |
Granted | 1.3 |
Forfeited or expired | 1.84 |
Outstanding options | 1.77 |
Granted | 1 |
Outstanding options | 1.75 |
Exercisable | 1.77 |
Weighted-Average Remaining Life (in years) | |
Outstanding options | 9.74 |
Granted | 10 |
Outstanding options | 8.54 |
Granted | 10 |
Outstanding options | 7.56 |
Exercisable | 7.53 |
Aggregate Intrinsic Value | |
Outstanding options | 20,825 |
Outstanding options | 2,625 |
Outstanding options | 4,325 |
Exercisable | 4,269 |
FAIR VALUE OF OPTIONS ESIMATED
FAIR VALUE OF OPTIONS ESIMATED USING THE BLACK SCHOLES MODEL WITH WEIGHTED AVERAGE ASSUMPTIONS (DETAILS) | 12 Months Ended |
May 31, 2016 | |
WEIGHTED AVERAGE ASSUMPTIONS | |
Expected life in years | 5 |
Assumed annual dividend growth rate | 0.00% |
Expected volatility | 133.00% |
Risk free interest rate | 1.63% |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
STOCK-BASED COMPENSATION DETAILS | ||
Company expensed stock-based compensation | $ 108,000 | $ 115,000 |
Unamortized stock based compensation | $ 7,000 |
REEDEMABLE COMMON STOCK (Detail
REEDEMABLE COMMON STOCK (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Nov. 30, 2015 | Nov. 30, 2014 | Aug. 31, 2014 | May 31, 2013 | |
Reedemable common stock | ||||
Company issued common stock shares | 10,000 | 60,000 | 110,000 | 50,000 |
Par value of the share | $ 0.10 | |||
Purchase price of the share | $ 5 | $ 5 | $ 5 | $ 5 |
Private placement transactions for total proceeds | $ 50,000 | $ 300,000 | $ 550,000 | $ 250,000 |
Each investment entitled the investors in lieu of registrations | $ 5,000 | 50,000 | 25,000 | |
Investors fee | $ 5,000 | $ 6,000 | ||
Redemption price of the Common Stock per share (Put option) | $ 5.50 | |||
Put Option price per share | $ 5.50 | |||
Put Option price total | $ 275,000 | |||
New investor price | $ 7 | $ 7 | $ 7 | |
Common Stock recorded at its redemption value | 70,000 | 420,000 | 770,000 | |
Recorded accretion to additional paid in capital | $ 20,000 | $ 120,000 | $ 220,000 |
PROVISION FOR INCOME TAXES (DET
PROVISION FOR INCOME TAXES (DETAILS) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
PROVISION FOR INCOME TAXES DETAILS | ||
Federal | $ 0 | |
Foreign | $ 0 | |
State and local | 2 | 2 |
Total current provision | 2 | 2 |
Deferred provision | 27 | 85 |
Valuation allowance | (27) | (85) |
Total deferred provision | 0 | |
Total provision | $ 2 | $ 2 |
DOMESTIC AND FOREIGN COMPONENTS
DOMESTIC AND FOREIGN COMPONENTS OF INCOME (LOSS) BEFORE INCOME TAXES (DETAILS) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
DOMESTIC AND FOREIGN COMPONENTS OF INCOME (LOSS) BEFORE INCOME TAXES DETAILS | ||
Domestic | $ (503) | $ (975) |
Foreign | (168) | (342) |
Total Domestic and Foreign | $ (671) | $ (1,317) |
INCOME TAXES NARRATIVE (DETAILS
INCOME TAXES NARRATIVE (DETAILS) | May 31, 2016USD ($) |
INCOME TAXES NARRATIVE DETAILS | |
Federal net operating loss carryforwards | $ 22,000,000 |
Alternative minimum tax credit | $ 200,000 |
EFFECTIVE INCOME TAX RATE RECON
EFFECTIVE INCOME TAX RATE RECONCILED TO THE FEDERAL AND STATE STATUTORY INCOME TAX RATE (DETAILS) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
EFFECTIVE INCOME TAX RATE RECONCILED TO THE FEDERAL AND STATE STATUTORY INCOME TAX RATE DETAILS | ||
Federal statutory rate | 34.00% | 34.00% |
State | 0.00% | 0.00% |
Foreign | 0.00% | 0.00% |
Permanent items | 0.00% | 0.00% |
Valuation reserve | (34.00%) | (34.00%) |
Effective tax rate | 0.00% | 0.00% |
DEFERRED TAX ASSETS (LIABILITIE
DEFERRED TAX ASSETS (LIABILITIES) (DETAILS) - USD ($) $ in Thousands | May 31, 2016 | May 31, 2015 |
Deferred tax assets | ||
Net operating loss carryforwards | $ 7,597 | $ 7,498 |
Tax credit carryforwards | 254 | 254 |
Receivables allowances | 7 | 7 |
Vacation pay accrual | 5 | 4 |
Depreciation | 42 | 35 |
Differences in book and tax basis of assets of acquired businesses | (191) | (56) |
Total gross deferred tax assets | 7,714 | 7,742 |
Valuation allowance | $ (7,714) | (7,742) |
Net deferred tax asset | $ 0 |
EMPLOYEE RETIREMENT PLANS (DETA
EMPLOYEE RETIREMENT PLANS (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
EMPLOYEE RETIREMENT PLANS DETAILS | ||
Aggregate expense related to this employer match | $ 31,000 | $ 52,000 |
GEOGRAPHICAL INFORMATION - REVE
GEOGRAPHICAL INFORMATION - REVENUE (Details) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Revenues {1} | ||
North America | $ 3,311 | $ 3,223 |
Europe | 12 | 7 |
Asia | 919 | 767 |
Eliminations | (66) | (55) |
Consolidated Total | $ 4,176 | $ 3,942 |
GEOGRAPHICAL INFORMATION - LONG
GEOGRAPHICAL INFORMATION - LONG-LIVED ASSETS (Details) - USD ($) $ in Thousands | May 31, 2016 | May 31, 2015 |
Long-Lived Assets: | ||
North America | $ 2,086 | $ 1,797 |
Europe | 40 | 41 |
Consolidated Total | $ 2,126 | $ 1,838 |
DEBT - ESSIGPR (Details)
DEBT - ESSIGPR (Details) - USD ($) | Nov. 30, 2015 | Aug. 31, 2015 | Jul. 10, 2015 | Apr. 02, 2015 | Oct. 01, 2014 | Jun. 20, 2014 |
ESSIGPR DETAILS | ||||||
Note term loan maturing on April 1, 2017 | $ 750,000 | |||||
Note term loan maturing on April 1, 2017 accrues interest rate | 9.50% | |||||
Note borrowing arrangement in year | 3 | |||||
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 fully vested stock options to purchase SofTech common stock | 2,500 | 2,500 | 5,000 | |||
Purchase common stock at per share | $ 1 | $ 1 | $ 1 | |||
Additional amount borrowed | $ 254,000 | $ 200,000 | ||||
Fully vested stock options to purchase SofTech common stock | $ 2,500 | |||||
Fully vested stock options to purchase SofTech common stock per share | $ 1 | |||||
EssigPR is owned by Joseph P. Daly, an affiliate of the Company owns percent of Company's outstanding common stock | $ 0.1960 |
DEBT AGREEMENTS WITH ESSIG (DET
DEBT AGREEMENTS WITH ESSIG (DETAILS) {Stockholders'Equity} $ in Thousands | 12 Months Ended |
May 31, 2016USD ($) | |
Note | |
Balance | $ 0 |
Borrowings | 450 |
Repayments | (304) |
Balance | 146 |
Balance | 146 |
Short Term Note | |
Borrowings | 300 |
Balance | 300 |
Borrowing | 578 |
Repayments | (124) |
Balance | 754 |
Borrowings | 750 |
Repayments | (304) |
Balance | 446 |
Borrowing | 578 |
Repayments | (124) |
Balance | $ 900 |
INTEREST EXPENSE (DETAILS)
INTEREST EXPENSE (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
INTEREST EXPENSE DETAILS | ||
Interest expense | $ 76,000 | $ 62,000 |
SHORT TERM ADVANCES FROM RELATE
SHORT TERM ADVANCES FROM RELATED PARTIES(Details) - USD ($) | May 31, 2016 | Sep. 30, 2015 | Jul. 29, 2015 |
SHORT TERM ADVANCES FROM RELATED PARTIES details | |||
Robert Anthonyson, an Officer, Director and beneficial owner of the company common shares | 19.50% | ||
Robert Anthonyson loaned the company which was repaid to Mr. Anthonyson on September 17, 2015 | $ 50,000 | ||
Joseph Mullaney, an Officer, Director and beneficial owner of the company | 11.20% | ||
Joseph Mullaney, an Officer, loaned the company | $ 19,300 | ||
Company arranged for a credit line with BlueVine Capital, Inc | $ 80,000 | ||
Company to receive an advance of total value of specified invoices | 85.00% | ||
Company received advances totaling against three invoices | 55,000 | ||
Company received an advance from BlueVine | $ 1,000,000 |
OPERATING LEASES NARRATIVE (DET
OPERATING LEASES NARRATIVE (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
OPERATING LEASES NARRATIVE DETAILS | ||
Rental expense | $ 152,000 | $ 152,000 |
OPERATING LEASES (DETAILS)
OPERATING LEASES (DETAILS) $ in Thousands | May 31, 2016USD ($) |
OPERATING LEASES DETAILS | |
Minimum annual rental commitments 2017 | $ 110 |
Minimum annual rental commitments 2018 | 133 |
Minimum annual rental commitments 2019 | 77 |
Total future minimum lease commitments | $ 320 |
CAPITAL LEASES NARRATIVE (DETAI
CAPITAL LEASES NARRATIVE (DETAILS) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
CAPITAL LEASES NARRATIVE DETAILS | ||
Purchase option, value | $ 1 | $ 1 |
Related leased assets had a cost basis | 108,000 | 77,000 |
Accumulated depreciation | $ (69,000) | $ (50,000) |
CAPITAL LEASES (DETAILS)
CAPITAL LEASES (DETAILS) $ in Thousands | May 31, 2016USD ($) |
CAPITAL LEASES DETAILS | |
Minimum annual future lease payments 2017 | $ 35 |
Minimum annual future lease payments 2018 | 26 |
Minimum annual future lease payments 2019 | 17 |
Minimum annual future lease payments 2020 | 11 |
Minimum annual future lease payments 2021 | 2 |
Minimum lease payment | 91 |
Amount representing interest | (28) |
Present value of minimum lease payments | 63 |
Current | 24 |
Long Term | $ 39 |
NOTE RECEIVABLE, RELATED PARTY
NOTE RECEIVABLE, RELATED PARTY (Details) | May 31, 2016USD ($) |
NOTE RECEIVABLE, RELATED PARTY DETAILS | |
Non-interest bearing note in the amount related to a stock transaction | $ 134,000 |
SUBSEQUENT EVENTS (DETAILS)
SUBSEQUENT EVENTS (DETAILS) - USD ($) | Aug. 23, 2016 | Aug. 12, 2016 |
SUBSEQUENT EVENTS DETAILS | ||
Total of contingent payments based on revenue targets | $ 3,250,000 | |
Company beneficial ownership of the Company's outstanding common stock | 19.40% | |
SofTech Srl and HomeView of indebtedness | $ 1,150,000 | |
Company has agreed to repurchase from Mr. Daly shares of its common stock | $ 110,000 | |
Company has agreed to repurchase from Mr. Daly shares of its common stock at per share | $ 6.5 | |
Short Term Note with Essig to increase the maximum borrowings | $ 250,000 |