SofTech Enters into Agreement to Sell PLM Product Line to Essig Research Inc.

Purchase Price of $3.25 Million plus Contingent Payments;

SofTech to Focus on New Product Offering

LOWELL, Mass. — (BUSINESS WIRE) — August 24, 2016 — SofTech (OTCQB: SOFT) today announced that it has agreed to sell its Product Lifecycle Management (“PLM”) technologies, including it ProductCenter and Connector product lines, to Essig Research Inc. (“Essig”) in exchange for $3.25 million plus contingent payments based on revenue in the two years immediately following the closing of the transaction. The closing of this asset sale, which is subject to the approval of SofTech’s shareholders and other customary closing conditions, is expected to occur by October 2016. The transaction is not subject to any financing condition.

“In March 2011, the management team took a controlling equity stake in SofTech with a plan to implement operational improvements, develop new revenue streams, grow the revenue and reduce the debt while seeking opportunities to monetize the existing assets for the benefit of the shareholders,” said Joe Mullaney, SofTech’s CEO. “This transformative transaction will give the Company the liquidity we believe it needs to take advantage of a significant market opportunity with its newly released HomeView technology. We believe the transaction is beneficial to our shareholders, customers and employees alike and we look forward to a seamless transition,” he added.

The PLM product line will complement Essig’s long standing engineering services business, which includes major multinational clients. Joe Daly, Essig’s president, said that “We are very excited about the growth possibilities from this transaction. In the past two years, Essig and SofTech have already successfully provided solutions to each other’s existing clients. Going forward we expect to accelerate this introduction of solutions to each other’s historical client base.”

SofTech believes the benefits to its shareholders resulting from the sale of the PLM business will include the following:

Improved Liquidity:

  • Debt free for the first time in nearly twenty years
  • Projected cash per share of about $1.90 immediately following the transaction

Opportunity Focus:

  • HomeView market is large and growing rapidly
  • Potential partnerships with larger entities facilitated by focus

More Attractive to New Investors:

  • Allows for streamlined, focused business plan to potentially attract new investors;

Gain Sheltered from Taxation:

  • Federal and state net operating loss carryforwards (“NOLs”) expected to be used to shelter realized gain from transaction for taxation before NOLs begin to expire

“There are more than 130 million residential properties just in the U.S.,” said Bob Anthonyson, President and CEO of HomeView. “Whether homeowners are aging in place seniors, tech savvy millennials or somewhere in between, we believe that HomeView can simplify day-to-day home management and also help reduce overall expenses. Moreover, at the point of resale, this information helps prospective buyers: a) know what they are getting, b) assume maintenance responsibilities more easily, and c) anticipate needs more accurately, which can all help increase the sales price. We are very excited about aggressively growing this business. We envision a day when no residential property will change hands without providing the buyer with a full record of the things within the home and we want to position HomeView to be the go-to technology for that purpose,” Bob added.

If the transaction is completed, SofTech would receive approximately $1.3 million in cash at the closing and its outstanding short-term debt to Essig of $1,150,000 would be extinguished. In addition, SofTech would repurchase the 110,000 shares (“Put Shares”) of the Company’s common stock it sold to Joe Daly, Essig’s president and primary shareholder, in June 2014 in a private placement at a repurchase price of approximately $6. 50 per share, or an aggregate of $715,000. The Put Shares when sold gave Mr. Daly the right to require SofTech to repurchase some or all of the Put Shares at $7.00 per share at any time between June 24, 2017 and September 24, 2017. As a result of the repurchase, this right would be extinguished and the Put Shares would be retired.

Two additional contingent payments may be earned by SofTech over the two-year period immediately following the completion of the transaction. In the first twelve month period, if the revenue exceeds $3.2 million the contingent payment would equal $75,000 plus 12.5% of any amount in excess of $3.275 million. The same formula applies for the second year except the revenue threshold for that period is $3.75 million.

The transaction is subject to the approval of the Company’s shareholders. The Company intends to file a proxy statement with respect to a special meeting of the Company’s shareholders to seek shareholder approval for the transaction. The Company’s Board of Directors has unanimously approved the transaction and recommended that the Company’s shareholders vote in favor of the transaction. The affirmative vote of the holders of at least two-thirds of the Company’s outstanding common stock is required to approve the transaction. SofTech’s Board members collectively own 29.1% and Essig and Mr. Daly collectively own 18.5% of SofTech’s outstanding shares of common stock as of August 24, 2016.

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