AI-Based Healthcare Company CloudMD to Acquire Re:Function’s Clinics

  • Re:Function Health Group is a leading integrated clinic network offering various rehabilitation services
  • 35 Specialists & Allied Professionals including: Occupational Therapists, Physiotherapists, Kinesiologists, Psychologists, Psychiatrists, and Counsellors
  • Cashflow positive business with $5.8 million in annual revenue and EBITDA margins north of 19%
  • This acquisition will provide CloudMD and Re:Function patients with a comprehensive, single stop for their healthcare needs
  • The acquisition will be immediately accretive given the existing CloudMD patient base will have access to the clinical services offered by Re:Function

CloudMD Software & Services Inc. (TSXV: DOC, OTCQB: DOCRF, Frankfurt: 6PH) (the “Company” or “CloudMD”), a telehealth company revolutionizing the delivery of healthcare to patients, is excited to announce that it has entered into a Binding Term Sheet (“Term Sheet”) to acquire Re:Function Health Group Inc. (“Re:Function”), a leading rehabilitation clinic network, with 7 clinics and 35 specialists and allied health professionals across British Columbia.  This acquisition represents a significant addition to the depth and spectrum of healthcare services provided by the CloudMD platform. With Re:Function, CloudMD’s network will include 14 clinics servicing approximately 500,000 patients.

Patients and payors (insurers and enterprise clients) are demanding a single, integrated solution for their healthcare needs and now CloudMD will offer exactly that. Continuity of care and a patient centric model can only be achieved if the entire care team (all healthcare professionals) are empowering the patient with a comprehensive view of their healthcare record and in order to do so, the fragmentation of data needs to be addressed.  CloudMD will introduce its suite of health technology solutions and integrated platform of telehealth and electronic medical records software to the Re:Function clinics in order to achieve this.

Re:Function is a state-of-the-art rehabilitation center built by like-minded health professionals offering superior patient focused care, with a longitudinal approach to healthcare delivery. The practice is made up of four key rehabilitation pillars, Re:Build (physio), Re:Think (counselling), Re:View (medlegal) and Re:Tool (occupational), and a team of specialists including: Occupational Therapists, Physiotherapists, Kinesiologists, Psychologists, Psychiatrists and Counsellors. Founders and the group’s leading Occupational Therapists, Ralph Cheesman and Mike Smith will be joining CloudMD to lead the continued expansion of allied health services across North America, and together will provide a multidisciplinary, team-based approach to treatment.  

The acquisition is mutually important in the shared vision to disrupt the current healthcare delivery system and to provide continuity of care across multiple verticals to ensure exceptional patient care. CloudMD will integrate its telemedicine solutions throughout the clinics, layering on additional allied health and specialist functions to the platform. CloudMD’s registered users will now have access to primary care Doctors, specialists, and a network of mental, occupational and physical health specialists. The Re:Function team also gives CloudMD’s network of primary care physicians options to give patients referrals to extended care.

The acquisition will be immediately accretive to CloudMD as the Re:Function group of clinics generated approximately $5.8 million in revenues with earnings before interest, taxes, depreciation and amortization (EBITDA) margins exceeding 19% over the last fiscal year ending January, 2020.

Essam Hamza, CEO of CloudMD commented, “I am thrilled with our acquisition of Re:Function which is synergistic across all aspects of our business. This acquisition continues to validate CloudMD’s approach of having a business built by healthcare professionals, providing longitudinal, patient centric care including primary care, chronic care, specialists and mental health support. Team based delivery of healthcare is the future and having Re:Function’s team of experts to help us continue to expand our telemedicine platform across North America is extremely valuable. We are excited to have Ralph and Mike join the team and feel that this is a transformational partnership for us. We look forward to working closely with them to provide better care for our combined rapidly growing network of patients.”

Ralph Cheesman, CEO of Re:Function commented, Re:Function Health Group has a mandate to provide cohesive multidisciplinary healthcare services to our clients/patients and customers.  We are excited to join and align with CloudMD’s vision of future healthcare delivery.  Our allied healthcare services assist clients/patients with chronic or comorbid impairments to effectively improve their health.  We are looking forward to work with CloudMD to provide efficient and comprehensive healthcare across North America.”

Terms of Agreement

In consideration for the purchase of 100% of the outstanding securities of Re:Function, CloudMD has agreed to pay shareholders aggregate consideration of C$8,000,000 payable as follows: (i) C$3,000,000 in cash, subject to a working capital adjustment; (ii) C$3,500,000 in shares of the Company; and (iii) a performance-based earnout of C$1,500,000 which is payable in shares of the Company in annual issuances over a period of three years. All shares issued pursuant to the acquisition are issued at a deemed price of C$0.885 per share and are priced by calculating the ten-day volume weighted average trading price of the Company’s shares for the 10 trading days prior to the execution of the binding term sheet.  The shares will be subject to certain contractual restrictions on trading for a period of thirty months from the date of issuance.

The acquisition is subject to customary closing conditions, including the execution of a definitive acquisition agreement and receipt of TSX Venture Exchange approval. The company anticipates a definitive agreement on or before September 18, 2020.

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