EXHIBIT 99.1
FOR IMMEDIATE RELEASE
SOFTECH ANNOUNCES THIRD QUARTER RESULTS
BOARD OF DIRECTORS APPROVES DEBT CONVERSION; SETS ANNUAL MEETING DATE
TEWKSBURY, Mass. - April 14, 2004 - SofTech, Inc. (OTCBB:SOFT), a leading
provider of design-through-manufacturing productivity solutions, today announced
Q3 fiscal 2004 results. Revenue for Q3 FY 2004 was about $2.8 million as
compared to $3.2 million for the same period in fiscal 2003, a decrease of 12%.
The net loss for the current quarter was ($745,000) or ($.06) per share as
compared to ($494,000) or ($.04) per share for the same period in the prior
fiscal year.
Revenue for the nine months ended February 29, 2004 was about $9.0 million as
compared to about $7.1 million for the same period in fiscal 2003, an increase
of 27%. The net loss for the nine months ended February 29, 2004 was about
($1,469,000) or ($.12) per share as compared to a net loss of ($1,239,000) or
($.10) per share for the same period in the prior fiscal year.
Pro forma net income (loss), which excludes non-cash expenses related to
amortization of intangible assets, was $(135,000) for the current quarter as
compared to $141,000 for the same period in the prior fiscal year and $364,000
for the immediately preceding quarter. Free Cash Flow, defined as net loss
adjusted for non-cash expenses less capital expenditures, totaled $(127,000) for
the current quarter as compared to $182,000 for the same period in fiscal 2003
and $390,000 for the immediately preceding quarter. Pro forma net income for the
nine months ended February 29, 2004 was $366,000 as compared to $166,000 for the
same period in fiscal 2003. Free Cash Flow for the nine-month period ended
February 29, 2004 was $436,000 as compared to $381,000 for the same period in
fiscal 2003. It is management's view that these non-GAAP financial measures of
cash flow provide important information in understanding the Company's
performance. A reconciliation is provided on the attached Financial Summary.
"We were very disappointed with the Q3 results," said Joe Mullaney, President
and COO. "We have worked hard to generate positive Free Cash Flow over the last
two full fiscal years and during the first two quarters of fiscal 2004. Our
failure to continue that positive trend in Q3 was a set back. However, we are
very encouraged by the dramatic increase over the last several quarters in
pre-sale activity. Also encouraging is the fact that this activity is coming
from both new and existing customers. While the identified pre-sale activity has
definitely increased, the length of the sales cycle also has increased. There is
a hesitation on the part of companies to issue purchase orders thereby making it
all the more difficult to predict, with any precision, the timing of orders for
software licenses.
We have begun to see an increasing opportunity in the mechanical CAD marketplace
as AutoCAD users migrate to a solid modeling solution. In recent press releases
it appears that AutoDesk's 1.5 to 2.0 million AutoCAD users are upgrading to the
Inventor product (AutoDesk's solid modeling solution). The complexity of solid
modeling files greatly increases the need for users to employ technology to
assist them in managing that electronic product data. We believe our
ProductCenter solution is well positioned to serve the data management and
collaboration needs of these users," Mr. Mullaney added.
DEBT CONVERSION
The SofTech Board of Directors has approved a resolution to amend the Company's
Articles of Incorporation to authorize a class of Preferred Stock and to provide
the Board of Directors with the authority to issue Preferred Stock in an amount
and under such terms as deemed appropriate (the "Amendment"). This Amendment
requires the approval of the Stockholders of the Company at the upcoming Annual
Meeting.
The Board also approved the conversion of up to $14 million of outstanding debt
to Preferred Stock subject to the approval of the Amendment by the stockholders.
In addition, the Company has reached a tentative agreement with Greenleaf
Capital, Inc. whereby some or all of its debt would be converted to Preferred
Stock. The tentative agreement with Greenleaf Capital contemplates a dividend on
these Shares of approximately 10% per year.
There are numerous benefits to the Company and its common shareholders of
approving the Amendment and subsequently converting some or all of the debt to
equity. These benefits, which may not be all inclusive, are as follows:
- - This debt conversion will put an additional $14 million in stockholders
equity into the Company.
- - This conversion will improve the working capital by eliminating the $1.9
million of debt principal that would otherwise be due in the next
twelve-month period.
- - Approximately $1.4 million of annual interest expense and fees related to
debt service will be eliminated from the expenses on the Company's income
statement and will instead be categorized as dividend payments.
- - The cash flows from operations as presented on the Company's Statement of
Cash Flows will improve in that dividend payments are categorized as
financing activities while interest expense is categorized as operating
activities.
- - The Company will increase its opportunity to utilize income tax net
operating loss and tax credit carryforwards before they expire.
- - The Board of Directors will have the authority to quickly respond to
funding opportunities to bring additional capital into the Company.
- - The additional equity will improve the Company's chances of meeting the
listing requirements of the NASDAQ market and may allow it to file a
request to become listed on the Small Cap market.
"Over the last three years we have made great progress in repositioning the
Company as a viable entity serving the needs of the mechanical CAD users in a
growing area of the PLM market. We have generated positive Free Cash Flow for
the last two full fiscal years and for the first nine months of fiscal 2004.
Improving our financial position by attracting additional equity and paying down
debt is the next important step in our recovery. Over the next several months we
expect to pursue opportunities to raise additional capital assuming the
Amendment will be approved by the shareholders," commented Mr. Mullaney.
There can be no assurance that the common shareholders will approve the
Amendment at the Annual Meeting or at any subsequent meeting. In the event that
the Amendment is approved, there can be no assurance that the tentative
agreement with Greenleaf Capital can be finalized. There can be no assurance
that the Company will be successful in attracting other sources of capital from
third parties in the event whereby the Amendment is approved.
ANNUAL MEETING
The Company also announced that its Annual Meeting of Stockholders will be held
on June 30, 2004 beginning at 10:00 A.M. at its headquarters in Tewksbury,
Massachusetts. Stockholders of record at the close of business on the May 10,
2004 will be entitled to receive notice of and to vote at the meeting.
ABOUT SOFTECH
SofTech, Inc. provides design-through-manufacturing productivity solutions with
its computer-aided design (CAD), computer-aided manufacturing (CAM) and product
lifecycle management (PLM) products including CADRA, DesignGateway , Prospector
, and ProductCenter (through SofTech's Workgroup Technology Division).
SofTech's solutions optimize product lifecycle processes at the lowest cost by
fostering innovation, extended enterprise collaboration, product quality
improvements, and compressed time-to-market cycles.
SofTech has more than 100,000 users benefiting from its solutions, including
Boeing, FlightSafety International, General Electric Company, Goodrich Turbine
Fuel Technologies, Honeywell, Millipore Corporation, Siemens, Sikorsky Aircraft,
U.S. Army, and Whirlpool Corporation.
Headquartered in Tewksbury, Massachusetts, SofTech (www.softech.com) has
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locations and distribution partners throughout North America, Europe, and Asia.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements made above with respect to SofTech's outlook for fiscal 2004 and
beyond represent "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act
of 1934 and are subject to a number of risks and uncertainties. These include,
among other risks and uncertainties, general business and economic conditions,
generating sufficient cash flow from operations to fund working capital needs,
potential obsolescence of the Company's technologies, maintaining existing
relationships with the Company's lenders, successful introduction and market
acceptance of planned new products and the ability of the Company to attract and
retain qualified personnel both in our existing markets and in new territories.
Contact: Joseph P. Mullaney
President and COO
(781) 890-8373
SOFTECH, INC.
FINANCIAL SUMMARY
(in thousands, except per share data)
STATEMENTS OF OPERATIONS:
FOR THE THREE MONTH PERIODS ENDED
FEBRUARY 29, FEBRUARY 28,
2004 2003
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Revenue. . . . . . . . $ 2,768 $ 3,156
Income from operations (490) (180)
Net loss . . . . . . . (745) (494)
Loss per share . . . . (.06) (.04)
FOR THE NINE MONTH PERIODS ENDED
FEBRUARY 29, FEBRUARY 28,
2004 2003
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Revenue . . . . . . . . . . . . . . . $ 9,021 $ 7,103
Loss from operations. . . . . . . . . (712) (349)
Net loss. . . . . . . . . . . . . . . (1,469) (1,239)
Loss per share. . . . . . . . . . . . (.12) (.10)
RECONCILIATION OF NET LOSS TO PRO FORMA NET INCOME AND FREE CASH FLOW:
The net loss calculated in accordance with GAAP is adjusted below by non-cash
expenses related to amortization and depreciation and by capital expenditures.
It is management's view that these non-GAAP financial measures of cash flow
provide important information in understanding the Company's financial
performance.
FOR THE THREE MONTH PERIODS ENDED
FEBRUARY 29, FEBRUARY 28,
2004 2003
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Net loss . . . . . . . . . . $ (745) $ (494)
Plus: Non-cash amortization. 610 635
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Pro Forma net income (loss). (135) 141
Plus: Non-cash depreciation. 22 91
Less: Capital expenditures . (14) (50)
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Free Cash Flow . . . . . . . $ (127) $ 182
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FOR THE NINE MONTH PERIODS ENDED
FEBRUARY 29, FEBRUARY 28,
2004 2003
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Net loss . . . . . . . . . . . . $ (1,469) $ (1,239)
Plus: Non-cash amortization. . . 1,835 1,405
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Pro Forma net income . . . . . . 366 166
Plus: Non-cash depreciation. . . 108 298
Less: Capital expenditures . . . (38) (83)
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Free Cash Flow . . . . . . . . . $ 436 $ 381
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