$2.7 Million in New Capital, 3-Year Term; Lower Borrowing Rate; Reduced Principal Repayment
LOWELL, Mass. — (BUSINESS WIRE) — May 16, 2013 — SofTech, Inc. (OTCQB: SOFT), a proven provider of Product Lifecycle Management (PLM) solutions today announced the completion of a new debt facility.
The new three year, $2.7 million debt facility replaces the Company’s current debt facilities that were to expire in February 2014. The new facility requires quarterly principal payments of $135,000 beginning on October 1, 2014. The funds will be used to retire existing debt and fund the Company’s growth initiatives.
“The new debt facility reduces our effective borrowing rate and debt service giving us the liquidity to continue to pursue our growth initiatives,” said Joe Mullaney, SofTech’s CEO. “The improved financial terms are a reflection of the significant improvement in the operations of the business since the March 2011 recapitalization transaction,” he added.
As reflected on the most recent balance sheet dated February 28, 2013, the Company’s old debt facilities that were entered into in March 2011 to partially fund the recapitalization transaction required balloon payments on February 28, 2014 and therefore were classified as current liabilities. This classification significantly weakened the liquidity of the balance sheet relative to prior periods.
A comparison of the February 28, 2013 Consolidated Condensed Balance Sheet as reported, adjusted on a pro forma basis as if the refinancing had taken place on the balance sheet date, shows the significant improvement in the Company’s liquidity as a direct result of this refinancing transaction. Specifically, the following measures the percentage improvement when comparing the February 28, 2013 balance sheet, as reported, to the pro forma balance sheet for two common measures of liquidity:
- Current ratio (current assets/current liabilities) improves by 135%
- Quick ratio (cash + receivables/current liabilities) improves by 182%
The improvement in these two measures of liquidity are even more significant when deferred maintenance revenue, a liability that is satisfied by providing support services rather than through the direct payment of cash, is excluded from current liabilities:
- Current ratio improves by 282%
- Quick ratio improves by 358%
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(000's) |
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| As Reported | Pro Forma | |||||||
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ASSETS |
February 28, | February 28, | ||||||
| 2013 | 2013 | |||||||
| Cash and cash equivalents | $ | 2 | $ | 1,030 | ||||
| Accounts receivable, net | 1,177 | 1,177 | ||||||
| Prepaid expenses and other assets | 531 | 463 | ||||||
| Total current assets | 1,710 | 2,670 | ||||||
| Property and equipment, net | 70 | 70 | ||||||
| Goodwill, net | 4,250 | 4,250 | ||||||
| Capitalized software costs, net | 331 | 331 | ||||||
| Capitalized patent costs | 88 | 88 | ||||||
| Debt Issuance Costs, net | 127 | 178 | ||||||
| Other assets | 136 | 136 | ||||||
| Total assets | $ | 6,712 | $ | 7,723 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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| Accounts payable | $ | 191 | $ | 191 | ||||
| Accrued expenses | 484 | 567 | ||||||
| Other accrued liabilities | 308 | 308 | ||||||
| Deferred maintenance revenue | 2,007 | 2,007 | ||||||
| Current portion of capital lease | 13 | 13 | ||||||
| Current portion of long-term debt | 1,645 | - | ||||||
| Total current liabilities | 4,648 | 3,086 | ||||||
| Capital lease, net of current portion | 42 | 42 | ||||||
| Other long term liabilities | 10 | 10 | ||||||
| Long term debt | - | 2,700 | ||||||
| Total liabilities | 4,700 | 5,838 | ||||||
| Temporary equity | 275 | 275 | ||||||
| Stockholders' equity | 1,737 | 1,610 | ||||||
| Total liabilities and stockholders' equity | $ | 6,712 | $ | 7,723 | ||||
