Net Cash flows from operating activities also improved considerably during FY 2008, increasing from approximately $300,000 (FY 2007) to approximately $1 million (FY 2008), over a 200% increase. While the Company has incurred operating losses during each of the six fiscal years ended May 31, 2006, the Company had income from operations during the last two fiscal years and generated positive net cash flow from operating activities in five out of the last six years. The year the Company failed to generate positive cash flow, it was break even. The Consolidated Statement of Cash Flows for the fiscal years ended May 31, 2008 and 2007 is provided on the attached Financial Summary.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), a non-GAAP financial measure, also improved substantially during FY 2008, increasing from $1.7 million (FY 2007) to $2.4 million (FY 2008), a 42% increase. A reconciliation of EBITDA to Net Loss is provided on the attached Financial Summary.
The Company’s revenue is derived almost entirely from technology acquisitions completed between 1997 and 2002 and the Company’s operations are not capital intensive. As of May 31, 2008, approximately 63% of the Company’s assets represent intangible assets related to these historical acquisitions. The Company does not anticipate making further acquisitions in the foreseeable future. For FY 2008, amortization expense related to these intangible assets was approximately 13% of total expenses and total revenue. Further, the periods over which these intangible costs are expensed are highly judgmental.
The Company believes that EBITDA is useful supplemental information for investors when considered along with net income and other income statement data. The Company believes that EBITDA is useful because it provides investors with information concerning the potential longer term profitability of the Company’s technology assets (subsequent to full amortization of costs), as amortization of acquisition costs has been added back to net income in arriving at EBITDA. Further, management believes that EBITDA provides a useful financial metric by which the Company can be compared with other companies that have different capital structures (interest (a cost of capital) has been added back to net income in arriving at EBITDA). It is also management’s belief that this non-GAAP measure of performance continues to be used in the investment community as a financial metric for business valuation purposes.
However, the Company believes that EBITDA is not a substitute for cash flow from operating activities, which is disclosed above and in the Company’s financial statements. Investors should carefully review the financial statements of the Company in their entirety in order to obtain a complete understanding of the Company’s financial condition and results of operations.
SofTech, Inc. (OTCBB: SOFT) is a proven provider of product lifecycle management (PLM) solutions with its flagship ProductCenter™ PLM solution, and its computer-aided design and manufacturing (CAD/CAM) products, including CADRA™ and Prospector™.
SofTech's solutions accelerate products and profitability by fostering innovation, extended enterprise collaboration, product quality improvements, and compressed time-to-market cycles. SofTech excels in its sensible approach to delivering enterprise PLM solutions, with comprehensive out-of-the-box capabilities, to meet the needs of manufacturers of all sizes quickly and cost-effectively.
Over 100,000 users benefit from SofTech solutions, including General Electric Company, Goodrich, Honeywell, Siemens, Sikorsky Aircraft, U.S. Army, and Whirlpool Corporation. Headquartered in Lowell, Massachusetts, SofTech ( www.softech.com) has locations and distribution partners throughout North America, Europe, and Asia.
SofTech, CADRA, ProductCenter and Prospector are trademarks of SofTech, Inc. All other products or company references are the property of their respective holders.
Forward Looking Statements
The statements made herein may 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,
whether we will be able to generate sufficient cash flow from operations
to fund working capital needs, maintain the existing relationship with
our lender, successfully introduce and attain market acceptance of
planned new products, attract and retain qualified personnel, both in
our existing markets and in new territories, in an extremely competitive
environment, and the potential obsolescence of our technologies.