Issues 110,000 Shares in Private Placement
at $5.00 per Share; Enters into $750,000 Term Note and Partnership
Agreement
SofTech, Inc. (OTCQB: SOFT), a proven provider of Product
Lifecycle Management (PLM) solutions today announced that it
received a total of $1.3 million in new capital from EssigPR, Inc.,
(“EssigPR”) a sister corporation of Essig Research, Inc., (“Essig”)
a global professional services company headquartered in Ohio and
its primary owner Joseph P. Daly. At May 31, 2014, prior to the
transactions described below, EssigPR and Mr. Daly together owned
approximately 9.6% of SofTech’s outstanding shares.
EssigPR and Mr. Daly, invested $1.3 million in SofTech under two
agreements entered into on June 20, 2014. As an individual, Mr.
Daly purchased 110,000 shares of SofTech common stock, par value
$0.10, at $5.00 per share in a private placement. Pursuant to a
Securities Purchase Agreement, Mr. Daly has the right to require
SofTech to repurchase some or all of those shares at $7.00 per
share during the ninety (90) day period beginning April 1, 2017.
The put right is non-transferrable and expires should Mr. Daly sell
the shares. Another term included in the Securities Purchase
Agreement provides Mr. Daly the right to cancel 10,000 of the
shares purchased in the transaction and have the corresponding
purchase price of $50,000 refunded to him if SofTech is unable to
conclude a separate buyback transaction, within a specified period,
of 101,411 SofTech common shares from Greenleaf Capital, a third
party entity.
Prior to Mr. Daly’s above described purchase of securities, Mr.
Daly exercised an existing put right from a previous private
placement transaction, which occurred in December 2012, and the
Company repurchased 25,000 SofTech common shares from him at $5.50
per share. Giving effect to the foregoing transactions, Mr. Daly
now owns approximately 17.4% of SofTech’s 960,135 shares
outstanding.
In addition, EssigPR entered into a three-year term note
(“Note”) as a lender, to SofTech, the borrower, in the amount of
$750,000. The Note carries interest at 9.5% paid quarterly in
arrears and is secured by the deferred payments of up to $1.02
million expected from Mentor Graphics Corporation (“Mentor”)
related to their prior acquisition of the CADRA product line. If
Mentor payments are insufficient for fully satisfying amounts due
under the Note, SofTech shall satisfy the remaining balance on
April 1, 2017. Payments from Mentor in excess of amounts due under
the Note shall revert to SofTech.
Lastly, SofTech and Essig entered into a Partnership Agreement
whereby the parties agreed to work together to market and deliver
certain of Essig’s specialized services to SofTech’s clients
throughout the United States and Europe, and to split the revenues
received from such co-marketing efforts, in a manner to be
negotiated as such opportunities arise.
“Essig is a world-class engineering services-only company that
has been delivering their solutions to some of the largest
manufacturing companies in the world for more than two decades,”
said Joe Mullaney, SofTech’s CEO. “To be able to team with them to
market and deliver those same solutions to our clients has the
potential to strengthen our position in those accounts and increase
our revenue and profitability.”
The Company expects that it will use the $1.3 million in new
capital raised under the private placement and the Note to: (i)
fund the repurchase of 50,000 shares of SofTech common stock issued
in 2012 that is subject to the put rights to five investors
(including the above described 25,000 shares purchased from Mr.
Daly); (ii) repurchase 101,411 restricted, unregistered shares of
SofTech common stock owned by Greenleaf Capital at an advantageous
price; and (iii) retire $1 million of short term debt from Prides
Crossing Capital, presently due on January 1, 2015 unless
extended.
In approving the above described transactions, the SofTech Board
identified, among other things, the following as significant
improvements over the Company’s current position:
- The borrowing cost on the debt
represents a reduction of nearly one-third as compared to the rate
for our current debt facility (9.5% compared to 14%). The effective
annual rate of return embedded in the repurchase rights on the
current private placement represents a reduction of nearly one-half
as compared to the repurchase rights on the 2012 private placement
(11.4% compared to 21.8%).
- The transactions provide additional
capital to allow us to repurchase the remaining, restricted,
unregistered Greenleaf Capital shares and to complete the Company’s
contractually-obligated repurchase of the SofTech common stock
issued in the 2012 private placement with put rights.
- The longer-term nature of the capital
without financial covenants or other restrictions allows for more
flexibility in management’s investment decision making for
long-term shareholder value creation.
- The opportunity to market and deliver
enhanced services capability to our clients can improve our revenue
and profitability while strengthening our existing client
relationships.
Based on management’s assessment, the share issuance activity
detailed above would not result in a change of ownership as defined
under Section 382 of the Internal Revenue Code and therefore would
not limit the availability of the Company’s net operating loss
carryforward asset. Therefore, the Board voted to designate the
2014 private placement as an Exempt Transaction as defined in the
Company’s Rights Agreement dated February 3, 2012.
Mullaney added: “These agreements provide us with lower cost,
long-term capital with no restrictions and an opportunity to
enhance our current operations by providing a broader range of
service offerings to our clients. Success in the marketplace can
also allow Essig and SofTech to work more closely in pursuing new
market opportunities. We look forward to getting started.”
About SofTech
SofTech, Inc. (OTCQB: SOFT) is a proven provider of product
lifecycle management (PLM) solutions, including its ProductCenter®
PLM solution and its Connector technology offering.
SofTech’s solutions accelerate productivity 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,
AgustaWestland, Sikorsky Aircraft and the U.S. Army. Headquartered
in Lowell, Massachusetts, SofTech (www.softech.com) has locations
and distribution partners in North America, Europe, and Asia.
SofTech and ProductCenter are registered trademarks of SofTech,
Inc. All other products or company references are the property of
their respective holders.
About Essig Research,
Inc.
Founded in 1993, Essig’s roots were in the development of
complex 3-D finite element models and providing thermal and
structural analysis of turbine airfoils to GE Aviation. Today,
Essig, together with its sister companies, has grown into a global
business providing a variety of technical and logistic services
with talented employees in several strategic locations in the U.S.,
Puerto Rico, Mexico and the Philippines.
Essig is a world-class, ISO 9001 registered, high-tech
engineering and manufacturing services company. We provide
professional services specialized in engineering design &
analysis, product definition, computer modeling, repair &
tooling development, project management, logistics support, and
advanced manufacturing techniques to customers worldwide. We
continually enhance our customers manufacturing capabilities by
providing the best in class engineering services available. We are
comprised of a talented team of professionals and subject matter
experts with solutions to a variety of advanced engineering
challenges. We have a proven record of strong partnerships with
leading industry companies. We continue to grow and expand into
global territories allowing us to become the #1 engineering
services provider in the world.
SofTech, Inc.Joseph P. Mullaney, 978-513-2700Chief Executive
Officer
SofTech (CE) (USOTC:SOFT)
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