|[June 26, 2014]
SofTech Receives $1.3M Strategic Investment
LOWELL, Mass. --(Business Wire)--
SofTech (News - Alert), 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 (News - Alert)
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
"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," saidJoe 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
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."
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 (News - Alert), AgustaWestland, Sikorsky
Aircraft and the U.S. Army. Headquartered in Lowell, Massachusetts,
has locations and distribution partners in North America, Europe, and
SofTech and ProductCenter are registered trademarks of SofTech, Inc. All
other products or company references are the property of their
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.
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