DOC CloudMD Software & Services Inc

CloudMD Software & Services Inc. (TSXV: DOC, Frankfurt: 6PH) (the “Company” or “CloudMD”), an innovative health services company transforming the delivery of care, and CPS Capital (“CPS Capital”), an entrepreneurial investment firm partnering with businesses and teams to realize their growth goals, are pleased to announce that they have entered into an arrangement agreement (the “Arrangement Agreement”) pursuant to which CPS Capital (through an affiliate) (the “Purchaser”) has agreed to acquire all of the outstanding common shares (the “Shares”) of CloudMD for cash consideration of C$0.04 per Share (the “Transaction”).

The Transaction is the culmination of a strategic and liquidity review that the Special Committee (as defined below) has been engaged in since July 2023, with the assistance of INFOR Financial Inc. Such review was necessary to address the Company’s liquidity issues, which were largely the result of the number of acquisitions that the Company completed over the last four years. Although management of the Company was able to deliver on organic growth targets and strengthen the balance sheet (through cost reductions resulting in over C$20 million in cost savings) while creating an ecosystem of care, the Company’s forecasted liquidity issues impacted the Company’s ability to remain a going concern. This is the result of the Company being unable to generate positive cashflow to support the business while making scheduled debt repayments, along with limited refinancing opportunities on commercially reasonable terms without onerous covenants, restricted business operations and forecasted growth initiatives.

The Transaction provides the capital to support the Company’s business with specific consideration to all of the Company’s stakeholders and was the best alternative available to ensure the ongoing viability of the Company. If the Transaction is not completed, the Company does not expect that there will be an alternative that would provide any value to the holders of CloudMD’s equity securities.

Karen Adams, Chief Executive Officer of CloudMD, stated:

“We are happy to receive the support of CPS Capital, which will provide us with the ability to execute on our long-term plan, accelerate growth, and move forward on a strong financial footing. The Transaction will provide the Company with much-needed capital to execute on future initiatives to sustain and grow the business. The healthcare sector has large demand for outcome-based service providers who have the ecosystem of services.”

Mike Arblaster, Partner at CPS Capital, stated:

“We are excited to invest in CloudMD given its large and diverse customer base combined with its industry leading service offerings. The Transaction is especially exciting for CPS Capital given our experience in the employer healthcare space. We are confident that the Transaction will provide the required liquidity and support to enable CloudMD to achieve its strategic vision of advancing the role of healthcare navigation in managing health and wellbeing, creating value for its customers, individuals, employees, healthcare providers and partners. We look forward to partnering with the CloudMD team to build on the strength of their capabilities and create new opportunities for the Company and its employees to thrive and grow.”

CPS Capital is funding the Transaction through a combination of equity from its new flagship fund CPS Partners Fund V and its previous flagship fund CPS Partners Fund IV.

Transaction Summary

The Transaction will be completed pursuant to a court-approved plan of arrangement under the Business Corporations Act (British Columbia). The Transaction will be subject to the approval of at least: (i) 66⅔% of the votes cast by shareholders; (ii) 66⅔% of the votes cast by shareholders and optionholders voting as a single class; and (iii) 50% of the votes cast by disinterested shareholders at a special meeting of CloudMD securityholders expected to be held before the end of June 2024. In addition to securityholder approval, the Transaction is also subject to the receipt of certain regulatory, court and stock exchange approvals and other closing conditions customary in transactions of this nature.

The Arrangement Agreement includes, among other things, non-solicitation covenants on the part of the Company (subject to customary fiduciary out provisions) and a right for the Purchaser to match any competing offer that constitutes a superior proposal. Under certain circumstances, the Purchaser is entitled to a $3 million termination fee or an expense reimbursement to a maximum of $1.5 million, and CloudMD is entitled to a $1.75 million reverse termination fee.

The directors and executive officers of CloudMD, who collectively hold approximately 0.16% of the outstanding Shares and approximately 0.60% of the outstanding Shares and stock options collectively, entered into voting support agreements with the Purchaser to support the Transaction.

Following completion of the Transaction, the Shares will be delisted from the TSX Venture Exchange (the “TSXV”), and the Company will apply to cease to be a reporting issuer in applicable provinces in Canada.

CloudMD Board Recommendation

The Transaction has been unanimously approved by the Board of Directors of the Company following the unanimous recommendation of a special committee of independent directors of the Company (the “Special Committee”). INFOR Financial has provided an opinion to the Special Committee that, based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration offered to the CloudMD shareholders pursuant to the Transaction is fair, from a financial point of view, to the CloudMD shareholders.

Interim Financing

To support the Company’s liquidity needs during the period prior to closing the Transaction, CPS Capital (through an affiliate) has agreed to provide a $1 million secured bridge loan to the Company, and the Company’s secured lender under the Company’s existing credit facilities (the “Credit Facilities”) has agreed to extend an additional line of credit to the Company in the amount of $2 million, in addition to forbearance of the Credit Facilities during the period prior to closing of the Transaction.

Timing

Full details of the Transaction will be included in the Company’s management information circular, which is expected to be mailed to securityholders in June 2024 in connection with the securityholders meeting expected to be held before the end of June 2024. Securityholders are urged to read the information circular once available, as it will contain additional important information concerning the Transaction. The Arrangement Agreement will also be filed on the Company’s profile on SEDAR+ at www.sedarplus.ca.

Advisors

INFOR Financial is acting as the exclusive strategic and financial advisor to CloudMD and Cassels Brock & Blackwell LLP is acting as legal counsel to CloudMD in connection with the Transaction.

Owens Wright LLP is acting as legal counsel to CPS Capital in connection with the Transaction.

2023 Annual Financial Results

The Company will file its audited consolidated financial statements and accompanying management’s discussion and analysis for the fourth quarter and year end December 31, 2023 (the “Annual Financial Filings”) on May 15, 2024. There will not be a conference call to discuss the Company’s Q4 2024 results. The failure-to-file cease trade order that was issued by the Ontario Securities Commission on May 7, 2024, is expected to be revoked shortly following the filing of the Annual Financial Filings, with trading of the Shares on the TSXV expected to resume thereafter.

About CloudMD

CloudMD is an innovative North American healthcare service provider focused on empowering healthier living by combining leading edge technology with an exceptional national network of healthcare professionals. Every day, our employees and health care providers live our values of delivering excellence, collaboration, connected communication and accountability to solve complex health problems. CloudMD’s industry leading workplace health and wellbeing solution, Kii, supports members and their families with a personalized and connected healthcare experience across mental, physical and occupation health. Kii delivers superior clinical health outcomes, consistent high engagement, and measurable ROI for payers such as employers, educational institutions, associations, government, and insurers. CloudMD is also a market leader in workplace absence management through data-driven prevention, intervention and return to work programs.

In addition, the Company sells health and productivity tools to hospitals, clinics, and other healthcare service providers to empower them to deliver better care. Visit www.cloudmd.ca to learn more about the Company’s comprehensive healthcare offerings.

“Karen Adams”Chief Executive Officer

FOR ADDITIONAL INFORMATION, CONTACT:

Investor RelationsInvestors@cloudmd.ca1-647-484-1405

About CPS Capital

CPS Capital is a middle market private equity firm, based in Toronto, founded by owner-operators who look to partner with business owners to realize their growth and transition goals. CPS Capital is focused on North American opportunities to invest in exceptional businesses in growing industries with attractive characteristics. CPS Capital brings significant capability, expertise, and capital to provide business owners with an attractive option compared to traditional financial or strategic buyers.

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, including statements relating to the Transaction, including in respect of the impact of the Transaction, the anticipated meeting date and mailing of the information circular in respect of the meeting, timing for completion of the Transaction and receiving the required regulatory and court approvals, CloudMD’s expectations regarding liquidity and continuity of the Company’s business and operations, the availability of the bridge loan and line of credit and continued forbearance through the period until closing of the Transaction, the timing of the filing of the Annual Financial Filings, and the timing of the revocation of the failure-to-file cease trade order and resumption of trading on the TSXV. 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”, “projected”, “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 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.sedarplus.ca), 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.