Dr. Essam Hamza reports

CLOUDMD CLOSES ACQUISITION OF HUMANACARE, AN INDUSTRY LEADER IN EMPLOYEE HEALTH SERVICES, PROVIDING A TRANSFORMATIONAL PLATFORM THAT PROMOTES SHORT AND LONG-TERM HEALTH AND WELLNESS

CloudMD Software & Services Inc. has closed the previously announced acquisition of HumanaCare Organizational Resources Inc., an integrated employee assistance services (EAP) solution which provides compassionate, holistic, physical and mental health support for employees and their family members, by way of acquiring 100 per cent of the shares of HumanaCare's parent company, First Health Care Services of Canada Inc.

HumanaCare is an industry-leading EAP, financed by employers to provide access to mental and physical wellness support services. HumanaCare provides employee health services to over 5,000 corporate clients, one million employees and their family members, utilizing a clinical network of more than 3,500 clinicians. Currently, HumanaCare has multiyear agreements to service Fortune 500 clients, leading corporations and advisers. The solution uses nurse triage to support mental health and short-term incidental issues, including counselling, financial stress, nutrition, legal and elder care consultation. HumanaCare's programs include YourNurse, chronic disease management, elder care, medical second opinion and disability support services.

HumanaCare has more than 35 years of Canadian health care experience and has solidified its place as one of the top EAP providers in Canada. The EAP segment has shown significant year-over-year growth and is only increasing in importance as the mental and physical strain of remote working and social distancing become more evident. With a focus on innovation, a holistic approach to care and continuity of care centred around the patient, CloudMD believes HumanaCare will be a market leader.

Historically, EAPs have focused exclusively on short-term incidental care. This is a transformational acquisition, as HumanaCare, combined with CloudMD's enterprise platform, will not only provide short-term support, but now employees and family members will have access to a patient-focused approach to longer-term and chronic care management. CloudMD will be able to optimize and cross sell into HumanaCare's current client network by offering corporations and employers a more comprehensive solution which includes telemedicine, triaging, on-demand mental health support and educational health care resources. As a solution to the currently siloed health care system, the combined offerings will provide one centralized platform that breaks down the barriers to access by offering a team-based, longitudinal approach to employee well-being.

HumanaCare's current annualized revenue run rate is approximately $3.3-million with earnings before interest, taxes, depreciation and amortization (EBITDA) margins that are greater than 19 per cent. Upon closing, the acquisition of HumanaCare will be immediately accretive to CloudMD with synergies the company believes will drive further revenue and increased EBITDA margin through cost savings achieved through scaling of operations and by tapping into CloudMD's network of counsellors, nurses and other health care professionals.

Terms of acquisition

HumanaCare was acquired by way of the company's acquisition of 100 per cent of the issued and outstanding shares of First Health, which owns 100 per cent of the issued and outstanding shares in the capital of HumanaCare.

In consideration for the purchase of 100 per cent of the purchased shares, CloudMD has agreed to pay the sellers thereof an aggregate consideration of $17.5-million, payable as follows: (i) $6.3-million in cash, subject to a working capital adjustment; (ii) $6,825,000 in common shares of the company; and (iii) a performance-based earnout of $4,375,000, which is payable in common shares of the company in equal annual issuances over a period of two years. All common shares issued pursuant to the acquisition will be issued at a deemed price of $2.88 per share and are priced by calculating the 10-day volume-weighted average trading price of the company's common shares for the 10 trading days prior to the execution of the binding term sheet (press release dated Oct. 28, 2020). The common shares will be subject to certain contractual restrictions on trading for a period of 25 months from the date of issuance.

About CloudMD Software & Services Inc.

CloudMD is digitizing the delivery of health care by providing a patient-centric approach, with an emphasis on continuity of care. The company offers software-as-a-service-based health technology solutions to health care providers across North America and has developed proprietary technology that delivers quality health care through a holistic offering, including hybrid primary care clinics, specialist care, telemedicine, mental health support, educational resources and artificial intelligence. CloudMD currently services a combined ecosystem of over 500 clinics, almost 4,000 licensed practitioners and eight million patient charts across North America.

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