SoftNet Systems, Inc. (AMEX-SOF) (the Company) is engaged in the business of developing, marketing, installing and servicing telecommunication, electronic information and document management systems that allow customers to electronically request and receive information. The Company employs about 300 associates and operates through two divisions; telecommunications and document management.

The telecommunications division provides communication solutions through the design, implementation, maintenance and integration of voice, data and video communication equipment and service. The telecommunications division is comprised of the Company's wholly-owned subsidiaries, Communicate Direct, Inc. ("CDI") (which was acquired on October 31, 1994), Kansas Communications, Inc. and BT Services ("KCI") (which was acquired on September 15, 1995) and the direct office of Executone Information Systems, Inc. in Milwaukee, WI (Executone) (which was acquired on December 29, 1995). The Company's telecommunications products include telephone systems and call processing systems (including call centers, voice messaging, interactive voice response ("IVR") and computer telephone integration ("CTI")). These products are manufactured by third parties. Additionally, the Company develops software for IVR and CTI applications, sells and installs local and long distance network services, provides maintenance services for existing customers and provides cabling and data communications. The telecommunications division markets its products and services principally to customers with 25 or more telephones located in the midwest.

The document management division designs, develops, manufactures and integrates comprehensive, non-paper based systems and components that enable the Company to deliver to its customers cost-effective solutions for storage, indexing and/or distribution of high-volume computer generated or entered information. The document management division is operated through the Company's wholly owned subsidiary Micrographic Technology Corporation ("MTC") (which was acquired on September 15, 1995) and the Company's integrated solutions group. These systems, which include both hardware and software products, are based on industry standard client-server architecture providing flexibility to connect to a wide variety of information systems. The hardware manufactured by the Company includes a family of computer output microfilm ("COM") printers. The Company's software principally captures data and information from a variety of sources, intelligently indexes the data and outputs the information to a variety of storage media including optical disk, magnetic disk and tape, CD-ROM, microfilm and microfiche. The image source and storage media is transparent to the system user. In addition, the Company is an authorized distributor of software and hardware products developed and manufactured by IMNET Systems, Inc. ("IMNET"). IMNET's proprietary software systems allow electronic management of information including the electronic flow of information to achieve productivity increases. IMNET manufacturers a storage and retrieval device that provides electronic delivery of images stored on microfilm. Retrieval times for images stored on microfilm rival those of images stored in single drive optical disk jukeboxes. The Company's customer base includes paper intensive industries such as insurance companies, banks and other financial institutions, governmental agencies, educational institutions and service providers.