SofTech, Inc. today announced its third quarter fiscal year 2014 operating results. Revenue for the three months ended February 28, 2014 was approximately $1.34 million as compared to approximately $1.46 million for the same period in the prior fiscal year. The net loss for the current quarter was about ($275,000) or ($.31) per share compared to $(14,000) or $(.01) per share for the same period in the prior fiscal year. EBITDA for current quarter was about $(93,000) as compared to about $183,000 for the same period in fiscal year 2013.
Gross margins declined to 57.8% in the current quarter as compared to 77.3% in the comparative quarter in fiscal 2013. In connection with the sale of the CADRA product line in Q2 of fiscal 2014, the Company retained the right to distribute CADRA throughout Europe (except Germany) and to the largest U.S. customer for that technology at margins ranging from 30% to 40%. This reselling activity is responsible for the decline in gross margin in the current quarter. Approximately 39% of the revenue for the current quarter was derived from the CADRA product line as a reseller of that technology.
The increase in the net loss in the current quarter as compared to the same period in fiscal 2013 is primarily due to: 1) non-recurring expenses of approximately $116,000 of lenders and professional services fees related to the December 2013 loan amendment, and 2) reduced profitability earned when generating revenue from technologies of others as a reseller.
As previously announced, the Company amended its debt agreement during the current quarter in order to adjust for the sale of the CADRA product line. As part of that amendment, the Company paid down $1.7 million of its debt facility bringing the outstanding debt to its lowest level since 1997. The Company incurred expenses of approximately $116,000 related to lender and professional fees in connection with this amendment which were expensed as part of SG&A.
“The liquidity provided from the sale of the CADRA product line, as expected, has significantly improved our balance sheet as will the deferred payments of up to an additional $686,000 from Mentor Graphics not yet reflected as deferred payments on our balance sheet,” said Joe Mullaney, SofTech’s CEO. “Our challenge will be in identifying new opportunities that are compatible with the skill set of our employee group while protecting the value of our existing revenue streams. We are confident we can transform this business and continue to build shareholder value during that process,” he added.
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