SofTech Provides Update, Announces Sale of AMT Product Line & Q3 FY2011 Operating Results

“We have made tremendous progress in the three months since the recapitalization transaction that improved our book value by nearly $8 million as the new team (management and directors) has focused on value creation for shareholders,” said Joe Mullaney, the CEO. “The public actions taken include the following:

• Finalized the fiscal year 2010 audit and released the operating results;
• Completed the fiscal year 2011 quarterly reviews for Q1, Q2 and Q3 and released the operating results;
• Sold the AMT product line, a niche technology offering with little synergy to the Company’s CADRA and ProductCenter offerings;
• Filed a Form S-1 resale registration with the SEC as the first major step towards regaining our public reporting status; and
• Held our Annual Meeting of Shareholders for fiscal year 2010 and received approval for, and implemented, a reverse stock split and the establishment of an equity incentive plan.

All of the above were positive steps aimed at creating value for our shareholders. In addition to the above, we have also been devoting much management attention towards profitable revenue growth. Several initiatives are underway as the new team works to stabilize and grow the revenues to reverse the decline experienced over the last several years,” said Mr. Mullaney.

“SofTech has a 40+ year technology history, a superb customer base, two decades of PLM experience and tax attributes of more than $20 million (pre-tax). We will continue to seek ways to leverage these Company assets to enhance shareholder value,” Mullaney added.

The proceeds from the sale of its AMT product line were $412,500. The AMT product line includes several CAD and CAM technologies specific to the tool & die industry. Revenue in fiscal years 2010 and 2011 was approximately $500,000.

The Form S-1 registration statement referred to above relates to the Company’s private placement in March 2011 as part of the recapitalization transaction. Pursuant to the registration rights agreement with the investors in the private placement, the Company is obligated to register the possible resale, from time to time, of the shares so purchased by the investors. Such resales cannot occur until after the registration statement is declared effective by the SEC and the Company will not receive any proceeds from any sales by the selling stockholders. In connection with the effectiveness of the Form S-1 registration statement, the Company expects to file a Form 8-A with the SEC registering its common stock under Securities Exchange Act of 1934 (the “Exchange Act”) and, at that point, will again be required to file periodic and other reports under the Exchange Act.

Mr. Mullaney added, “The filing of the Form S-1 registration statement is an important step for us as it marks our progress towards again being subject to the public reporting requirements of the Exchange Act, which we hope will lead to greater investor interest in SofTech and added liquidity for the market in our common shares.”

Q3 FY2011 Operating Results
Revenue for the third quarter ended February 28, 2011 was approximately $1.9 million, essentially unchanged compared to the same quarter in the prior fiscal year. Net income for the third quarter of fiscal 2011 was $73,000, again essentially unchanged from the same period in fiscal 2010.

The comparative income statements for the Q3 FY 2011 and Q3 FY 2010 are as follows (in thousands, except % and per share data):

• Adjusted for a 1 for 20 reverse stock split that was effective June 7, 2011.

Earnings before interest, taxes, depreciation and amortization expense (”EBITDA”), a non-GAAP financial measure, for fiscal year 2011’s third quarter was $227,000, down slightly from $265,000 of EBITDA generated in the third quarter of fiscal 2010. The third quarter fiscal 2011 net income and EBITDA were negatively impacted by legal and other spending of $144,000 related to the March 2011 recapitalization transaction previously announced. A reconciliation of EBITDA to GAAP Net Income is included hereunder.

The year to date comparative income statements for the nine month periods ended February 28, 2011 and 2010 are as follows (in thousands, except % and per share data):

• Adjusted for a 1 for 20 reverse stock split that was effective June 7, 2011.

During fiscal 2011, the Company incurred significant expenses related to its debt restructuring that ultimately resulted in the $7.6 million debt forgiveness in March 2011. The charges were primarily for legal services and totaled $488,000 for the nine month periods ended February 28, 2011. These charges reduced EBITDA and Net Income for fiscal 2011 as compared to 2010.

Reconciliation of Net Income to EBITDA
The reconciliation of Net income to Earnings before Interest, Taxes, Depreciation and Amortization, a non- GAAP financial measure, for the first nine months of fiscal year 2011 as compared to the same periods in the prior fiscal year is provided below (in thousands):

About SofTech

SofTech, Inc. (PK: SOFTD) is a proven provider of product lifecycle management (PLM) solutions, including its flagship ProductCenter® PLM solution and its computer-aided design product CADRA®. As of the date hereof, SofTech, Inc.’s common stock is quoted on the Pink Sheets and the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.

The Company’s shareholders approved a 1 for 20 reverse stock split that was effective as of June 7, 2011. For a period of 20 days following the effective date of the reverse stock split, the Company's common stock will be quoted as "SOFTD", with the fifth character “D” added to the end of the trading symbol to indicate the reverse stock split has occurred. Thereafter, the Company’s symbol will revert to its original symbol “SOFT”.

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 software solutions, including General Electric Company, Goodrich, Honeywell, Siemens, Sikorsky Aircraft and the U.S. Army. Headquartered in Lowell, Massachusetts, SofTech (www.softech.com) has locations and distribution partners throughout North America, Europe, and Asia.

SofTech, CADRA and ProductCenter are registered trademarks of SofTech, Inc. All other products or company references are the property of their respective holders.

Forward Looking Statements
Any statements made herein with respect to our outlook for fiscal year 2011 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, including but not limited to our ability to:

• generate sufficient cash flow from our operations or other sources to fund our working capital needs and growth initiatives
• maintain good relationships with our lender
• comply with the covenant requirements of the loan agreement
• successfully introduce and attain market acceptance of any new products and/or enhancements of existing products
• attract and retain qualified personnel
• prevent obsolescence of our technologies
• maintain agreements with our critical software vendors
• secure renewals of existing software maintenance contracts, as well as contracts with new maintenance customers
• secure new business, both from existing and new customers