CloudMD Software & Services Inc. (TSXV: DOC, OTCQX: DOCRF,
Frankfurt: 6PH) (the “
Company” or
“
CloudMD”), a healthcare technology and innovative
health services company transforming the delivery of care,
announces that it has entered into a settlement agreement (the
“
Settlement Agreement”) with the former owners of
VisionPros (the “
Sellers”) following the
previously announced review (the “
Review”) of the
Company’s acquisition of VisionPros, its online vision care
platform. The settlement reduces the purchase consideration paid
for VisionPros by $14.6 million and also removes any future earnout
payments.
Prior to reaching a settlement, management’s
concerns on issues with VisionPros resulted in the Audit Committee
undertaking the Review with the assistance of independent legal
counsel and financial advisors. As a result of that review,
recommendations were made to CloudMD’s Board of Directors that the
Company proceed with settlement negotiations with the Sellers. The
Settlement Agreement reached has been unanimously endorsed by
CloudMD’s Board of Directors.
Settlement Terms
Pursuant to the terms of the Settlement
Agreement, the holdback amounts of $3,000,000 and 1,090,909 common
shares of the Company that were held in escrow as part of the
original acquisition of VisionPros will be released to CloudMD
rather than the Sellers. Additionally, another 4,909,092 of the
common shares of the Company issued to the Sellers on the closing
of the acquisition will be returned to CloudMD. All common shares
returned to CloudMD will be cancelled upon receipt. Furthermore,
the Company will not be required to make any future performance
based earnout payments or other payments to the Sellers. The
Company also obtained confirmation that certain trade payables of
VisionPros in the approximate amount of $800,000 will now be the
responsibility of the Sellers, who have indemnified CloudMD for any
such payments. Finally, the Sellers have agreed to pay $350,000 in
cash to the Company. The reduction in the purchase price related to
the Settlement Agreement was $14.6 million.
No other payments will be made by either party
to the other in connection with the acquisition of VisionPros and
full releases will be exchanged by the parties.
In accordance with the acquisition agreement and
as set out in the Settlement Agreement, CloudMD has confirmed to
the Sellers that it will not proceed with the technology relating
to online eye exams and will assign the appropriate intellectual
property rights back to the Sellers, all in accordance with the
terms of the acquisition agreement and at no expense to, and no
future earnout payments from, CloudMD. The Company has integrated
VisionPros into its Kii platform offering and will provide
employers with important vision care options for their employees
and their family members. CloudMD continues to develop the
technology within Kii to meet the needs of its clients.
Finally, the Company is considering other
avenues of recovery in connection with the VisionPros
transaction.
VisionPros Platform
As previously announced (on June 15, 2022), the
Company initiated product sales on its vision care platform,
VisionPros, in the United States, for the first time since the
fourth quarter of 2021. Since learning of supplier issues while
VisionPros was being run by the Sellers, CloudMD has worked
diligently with its U.S. based suppliers to rectify all issues,
agree to new terms of distribution and sign new contracts. With
these new agreements in place, along with a new U.S. distribution
centre, VisionPros is now positioned to access the U.S. market in a
more efficient and compliant manner.
CloudMD was disappointed to learn of the
supplier issues and other management practices while VisionPros was
owned by the Sellers. This resulted in the Company being unable to
sell in the United States until recently, and necessistated the
negotiation and signing of new supplier agreements. In part as a
result of the issues discovered and their impact on the Company’s
financial projections, the Company expects to record a non-cash
goodwill and intangible asset impairment charge in the second
quarter of 2022 in the range of approximately $26 to $28 million.
The determination of the final amount of the impairment, which will
be recorded in the Company’s Q2 2022 financial statements, is
subject to a number of factors. The forecast will be reviewed by
valuation experts as part of the impairment charge being finalized.
The Company does not expect that the impairment charge will have
any impact on its liquidity or cash flows from operating
activities, but it will reduce earnings for the quarter. The
Company expects that the gross margins earned in the VisionPros
business will be slightly lower in the near term as a result of the
margin profile of U.S. sales under its new supplier agreements,
including changes in supplier rebates. The Company is focused on
operational improvements to increase VisionPros margins over
time.
The Company is pleased that its current
employees, including those at VisionPros, were able to address and
resolve these operational issues and are focused on the future. The
Company remains committed to the VisionPros business. In
particular, the Company will be focused on growing and expanding
the VisionPros e-commerce platform and realizing acquisition
synergies by integrating vision care into Kii, its Personalized and
Connected Care offering.
About CloudMD Software &
Services
CloudMD is transforming the delivery of
healthcare using technology and by providing a patient-centric
approach, with an emphasis on continuity of care. By leveraging
healthcare technology, the Company is building one, connected
platform that addresses all points of a patient’s healthcare
journey and provides better access to care and improved outcomes.
Through CloudMD’s proprietary technology, the Company delivers
quality healthcare through a holistic offering including hybrid
primary care clinics, specialist care, telemedicine, mental health
support, healthcare navigation, educational resources, and
artificial intelligence (AI). CloudMD’s business is separated into
three main divisions: Clinics and Pharmacies, Digital Solution and
Enterprise Health Solutions, the Company’s fastest growing
division. CloudMD’s Enterprise Health Solutions Division has built
a leading employer healthcare solutions, including its
Comprehensive Integrated Health Services Platform, which offers one
comprehensive, digitally connected platform for educational
institutions, corporations, insurers, and advisors to better manage
the health and wellness of their students, employees, and
customers.
CloudMD currently services a direct ecosystem of
over 5,700 clinicians including, 1,800+ mental health
practitioners, 1,600+ allied health professionals, 1,400+ doctors
and nurses and covers 12 million individual lives across North
America. For more information
visit: https://investors.cloudmd.ca.
ON BEHALF OF THE BOARD OF
DIRECTORS “Karen
Adams”Interim Chief Executive Officer
FOR ADDITIONAL INFORMATION, CONTACT:
Julia BeckerVP, Investor
Relations julia@cloudmd.ca(604) 785-0850
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Forward Looking Statements
This news release contains “forward-looking
statements” and “forward-looking information” within the meaning of
Canadian securities laws. These statements are based upon
information currently available to CloudMD’s management. All
information that is not clearly historical in nature may constitute
forward‐looking statements. In some cases, forward‐looking
statements may be identified by the use of terms such as
“forecast”, “assumption” and other similar expressions or future or
conditional terms such as “anticipate”, “believe”, “could”,
“estimate”, “expect”, “intend”, “may”, “plan”, “predict”,
“project”, “will”, “would”, and “should”. Forward-looking
statements contained in this news release include, without
limitation, statements regarding: the terms of the Settlement
Agreement; the asset impairment charge, its impact on the Company’s
liquidity and cash flows; and the gross margins earned in the
VisionPros platform. Such statements are based on certain factors
and assumptions made by management of CloudMD based on their
current expectations, estimates, projections, assumptions and
beliefs regarding their business and CloudMD does not provide any
assurance that actual results will meet management’s expectations.
While management considers these assumptions to be reasonable based
on information currently available to them, they may prove to be
incorrect. Such forward‐looking statements are not guarantees of
future events or performance and by their nature involve known and
unknown risks, uncertainties and other factors, including those
risks described in the Company’s MD&A (which is filed under the
Company’s issuer profile on SEDAR and can be accessed at
www.sedar.com), that may cause the actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by such
forward‐looking statements. Although CloudMD has attempted to
identify important factors that could cause actual actions, events
or results to differ materially from those described in
forward‐looking statements, other factors may cause actions, events
or results to be different than anticipated, estimated or intended.
There can be no assurance that such statements will prove to be
accurate as actual results and future events could vary or differ
materially from those anticipated in such forward‐looking
statements. Accordingly, readers should not place undue reliance on
forward‐looking information. CloudMD does not undertake to update
any forward-looking information, whether as a result of new
information or future events or otherwise, except as may be
required by applicable securities laws.
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