Dr. Alexander Dobranowski of Healwell reports

HEALWELL AI TO ACQUIRE INTRAHEALTH TO CREATE NEXT GENERATION AI POWERED EHR

Healwell AI Inc. has entered into an agreement to acquire Intrahealth Systems Ltd., a subsidiary of Well Health Technologies Corp., which is an insider of the company, pursuant to an arm's-length negotiated transaction for total consideration of approximately $24.2-million, a majority of which is expected to be paid in Healwell Class A subordinate voting shares. Intrahealth is an advanced software-as-a-service-based electronic health records management platform for small and medium enterprise health care organizations across Canada, Australia and New Zealand. Intrahealth's robust platform meets the demands of a wide range of clients from a single doctor's office to a multithousand user health institution. Founded in New Zealand and headquartered in Vancouver, B.C., Intrahealth was originally acquired by Well in April, 2021.

The independent directors of the company have unanimously approved the transaction, with the directors appointed by Well recusing themselves from voting. Grant Thornton LLP, as independent financial adviser, also provided an opinion to the directors that, as of today's date, and based on and subject to certain assumptions and limitations that it made, the consideration to be paid by the company to Well for the shares of Intrahealth is fair, from a financial point of view, to the company.

Dr. Alexander Dobranowski, chief executive officer of Healwell, commented on the acquisition: "Intrahealth is a highly respected global EHR with a rich history of supporting major health systems in three countries across two continents. Intrahealth will not only add mature SaaS and digital revenue, strong positive [earnings before interest, taxes, depreciation and amortization], and cash flows, but it will also serve as a platform to showcase the effectiveness of our industry-leading [artificial intelligence] solutions. Our firm belief is that the future of health care will be centred around AI enabled EHRs due to the enormous potential scope to positively impact health care providers and their patients. EHR systems that are not outfitted with AI capabilities either natively or through an AI powered clinical decision support system will not be able to retain their customers in the future. This presents an enormous market opportunity for companies such as Healwell who have the technology to drive this industry forward."

Hamed Shahbazi, founder and CEO of Well, stated: "When Intrahealth was acquired by Well nearly three years ago, the intent was to enable Intrahealth to grow and expand. We achieved that goal, and now Intrahealth enters the next stage of its development, which we feel will be best achieved through pairing it more deeply with the Healwell platform. We believe the combination of Healwell's best-in-class AI capabilities combined with Intrahealth's EHR platform will result in the creation of one of the industry's first AI powered EHR platform with next-generation clinical decision support capabilities that will provide patients and providers with powerful tools to drive better health outcomes at lower costs in a manner aligned with global value-based care trends. Given that we are a significant stakeholder in Healwell, we are excited about the value creation possibilities that will accrue as a result of Healwell and Intrahealth combining and effectively building the ultimate AI co-pilot for physicians."

Intrahealth supports approximately 15,000 health care professionals across its global network. In 2024, it is expected that Intrahealth will generate more than $12-million in revenues, achieve over 80-per-cent gross margins, and produce positive EBITDA and increased cash flows. Approximately 70 per cent of Intrahealth's revenue is generated in Canada, and over 80 per cent of its revenue is high-margin recurring revenue.

Dorian Prior, president of Intrahealth, commented: "Our talented multinational team at Intrahealth is thrilled to join Healwell at such an exciting time in their development as a company. We're looking forward to integrating Intrahealth's products with Healwell's cutting-edge AI technologies. The future of health care will unquestionably involve AI, and we feel fortunate to have an opportunity to be at the forefront of the future of our industry. This comes at a great time where we have never had a better pipeline of growth opportunities."

Intrahealth is engaged in the business of providing a suite of flexible software solutions to a wide variety of customers, including health authorities, hospitals, public health outpatient centres, community health, home care, ambulatory care and diverse health care professionals. Intrahealth provides highly configurable software solutions that also support mobile platforms and seamless access to virtual care/telehealth solutions. Intrahealth's solutions for hospitals include patient administration systems, bed management, waiting list management, enterprise-wide scheduling, case management, medication management, emergency room operations and ward management, among many other features.

Transaction description

Healwell is acquiring 100 per cent of the shares outstanding of Intrahealth from Well for total consideration of approximately $24.2-million, to be paid by Healwell as follows: (i) $3.6-million paid in cash on closing; (ii) $15-million in Class A subordinated voting shares of Healwell issued at closing at a deemed price of 69 cents per share based on the volume-weighted average price of the shares for the five trading days immediately preceding the date of this press release, which will result in the issuance of approximately 21.7 million shares; and (iii) $5-million to be paid out over the following 10 months in either cash or shares, at Well's discretion, which, if such amount were paid in shares at 50 cents, 70 cents or 90 cents per share, would result in the issuance of 10.0 million, 7.1 million or 5.6 million shares, respectively, to Well, representing approximately 8.4 per cent, 6.1 per cent or 4.9 per cent, respectively, of the issued and outstanding voting securities of Healwell after such issuance. Well will also pay an earnout to the prior owners of Intrahealth of approximately $600,000 due in May, 2024.

The transaction will also result in Well becoming a new control person of Healwell, which currently holds approximately 1.0 million shares, representing 1.1 per cent of the issued and outstanding voting securities of Healwell, holding between 22.7 million and 32.7 million shares based on the foregoing, representing 20.7 per cent and 27.3 per cent of the issued and outstanding voting securities of Healwell, respectively, after the transaction is completed. Dr. George Christodoulou and Dr. Sven Grail are also control persons of Healwell, holding 16.5 million and 15.6 million of the Class A shares, respectively, and 15.4 million and 15.6 million of the Class B voting shares of Healwell, respectively, representing 15.1 per cent and 14.2 per cent of the issued and outstanding voting securities of Healwell, respectively.

There is also no voting trust or similar agreement governing the issued and outstanding voting securities of Healwell. The transaction is expected to close on or about Feb. 1, 2024.

Shareholder approval and regulatory considerations

Under the rules of the Toronto Stock Exchange, the issuance of the shares to Well pursuant to the transaction requires the approval of a majority of holdings of voting securities of the company, excluding shares held by Well, which is an interested party in respect of the transaction, specifically, as the transaction is subject to the disinterested shareholder approval requirements of: (a) sections 604(a)(ii) and 611(b) of the Toronto Stock Exchange company manual as: (i) Well is a related party of the company; and (ii) the value of the consideration paid to Well for the purchase of the shares of Intrahealth will be greater than 10 per cent of the current market capitalization of the company, and the number of securities issued or issuable to insiders of the company as a group, together with any securities issued or made issuable to insiders as a group for acquisitions during the preceding six months, in payment of the purchase price for the transaction, exceeds 10 per cent of the number of securities of the company which are outstanding on a non-diluted basis, prior to the date of closing of the transaction; and (b) Section 611(c) of the TSX company manual as the number of securities issued or issuable in payment of the purchase price for the transaction may exceed 25 per cent of the number of securities of the company which are outstanding on a non-diluted basis. Shareholders representing a majority of the voting shares of the company have executed a written consent approving the transaction. The TSX has advised the company that it will be permitted to rely on that written consent of such shareholders as evidence of the required majority shareholder approval in accordance with Section 604(d) of the TSX company manual, and accordingly, that it will not be required to hold a formal special shareholder meeting to seek approval of the transaction.

Under Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions), the transaction constitutes a related-party transaction because Well holds more than 10 per cent of the outstanding Class A shares of the company. However, the transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 in reliance on the exemptions set forth in sections 5.5(e) and 5.7(1)(c) of MI 61-101, as the transaction is supported by a control person of the company in the circumstances described in Section 5.5(e) of MI 61-101.

About Healwell AI Inc.

Healwell is a health care technology company focused on AI and data science for preventative care. Its mission is to improve health care and save lives through early identification and detection of disease. As a physician-led organization with a proven management team of experienced executives, Healwell is executing a strategy centred around developing and acquiring technology and clinical science capabilities that complement the company's road map. Healwell is publicly traded on the TSX under the symbol AIDX and on the OTC Exchange under the symbol HWAIF.

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