BUSINESS COMBINATIONS AND DISPOSITIONS

3 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Sale of American HealthTech, Inc.

On January 16, 2024, we entered into a Stock Purchase Agreement (the “Purchase Agreement”), by and among the Company, American HealthTech, Inc. a Mississippi corporation (“AHT”), and Healthland Inc., a Minnesota corporation and an indirect, wholly-owned subsidiary of the Company (“Healthland” and, together with the Company, the “Seller Parties”) and PointClickCare Technologies USA Corp., a Delaware corporation (“Buyer”). The Transaction (hereinafter defined) also closed on January 16, 2024. Under the Purchase Agreement, Buyer purchased from Healthland all of the issued and outstanding capital stock of AHT (the “Transaction”), with AHT becoming a wholly-owned subsidiary of Buyer. Prior to this transaction, results for AHT were reported within our EHR operating segment.

The Purchase Agreement provides for an aggregate purchase price (the “Purchase Price”) of $25 million (the “Base Cash Consideration”), subject to adjustments based on working capital, cash, indebtedness and transaction expenses of AHT. Additionally, pursuant to the Purchase Agreement, a total of approximately $3.75 million was withheld from the Base Cash Consideration at the closing and deposited by Buyer into various escrow accounts with an escrow agent, including $2.5 million as a general indemnity escrow and $1 million as a special indemnity escrow. Based upon the adjustments and the various escrow holdbacks, Buyer paid a net amount of approximately $21.41 million to Healthland at the closing. The Purchase Price was subject to a post-closing true-up. In connection with the closing of the Transaction, Buyer has provided offers of employment to certain key employees of the Company that primarily supported AHT’s business.

The Purchase Agreement contains customary representations, warranties and covenants. The representations and warranties made by the Seller Parties to Buyer cover a broad range of items related to, among other things, the business and financial condition of AHT. Subject to certain exceptions and limitations, the Seller Parties have agreed to indemnify Buyer for certain breaches of representations, warranties and covenants and certain other enumerated items. Such limitations on the Seller Parties’ indemnification obligations are subject to various exceptions for certain fundamental representations, tax representations, special representations, and fraud. Subject to certain exceptions and limitations, Buyer has likewise agreed to indemnify the Seller Parties for certain breaches of representations, warranties and covenants and certain other enumerated items.

As part of the divestiture, as of January 16, 2024 we entered into a transition services agreement with the buyer to assist them in the transition of certain functions, including, but not limited to, information technology, finance and accounting for the period of 18 months accordance with the terms of this agreement. Aside from these customary transition services, there will be no continuing involvement after the disposal.

The Company finalized the accounting for the sale during the three months ended March 31, 2024 and has recorded a $1.25 million gain on sale, which is reflected under the caption “Other income” in the condensed consolidated statements of operations.

The accompanying condensed consolidated balance sheet as of December 31, 2023 includes amounts related to this Transaction under the captions "Assets of held for sale disposal group" and "Liabilities of held for sale disposal group", the details of which are as follows as of December 31, 2023:


(In thousands)
Assets of held for sale disposal group
Accounts receivable, net	$	3,087
Financing receivables, net	37
Prepaid expenses	34
Software costs, net	3,386
Intangibles, net	11,739
Goodwill	7,694
Total	$	25,977

Liabilities of held for sale disposal group
Accounts payable	$	178
Other accrued liabilities	576
Deferred tax liability	223
Total	$	977

Acquisition of Viewgol, LLC

On October 16, 2023, we acquired all of the assets and liabilities of Viewgol, LLC (“Viewgol”), a Delaware limited liability company, pursuant to a Securities Purchase Agreement dated October 16, 2023. Based in Frisco, Texas, Viewgol is a provider of ambulatory RCM analytics and complementary outsourcing services with an extensive offshore presence we intend to leverage and grow to accommodate the growing demand for RCM services by our pre-existing acute care customers.

Consideration for the acquisition included cash (net of cash of the acquired entity) of $37.4 million (inclusive of seller's transaction expenses). Also included in the acquisition consideration were contingent earnout payments of (i) up to $21.5 million based on the Viewgol business achieving earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $6.0 million or more during fiscal year 2024 (the “EBITDA Earnout Amount”), and (ii) up to $10.0 million based on the number of productive agents the Viewgol business hires in India in fiscal year 2024 (the “Offshore Earnout Amount”); provided, however, that none of the Offshore Earnout Amounts may be earned if the EBITDA Earnout Amount’s minimum EBITDA threshold of $6.0 million is not achieved during fiscal 2024. During 2023, we incurred approximately $4.7 million of pre-tax acquisition expenses in our condensed consolidated statements of operations.

Our acquisition of Viewgol was treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. Our allocation of the purchase price was based on management's judgment after evaluating several factors, including a valuation assessment.

The preliminary estimated fair values of assets acquired and liabilities assumed as of December 31, 2023, and as updated through March 31, 2024, are as follows:


(In thousands)	Purchase Price Allocation as of December 31, 2023		Purchase Price Allocation as of March 31, 2024
Acquired cash	$	1,449	$	1,449
Accounts receivable	2,233		2,233
Prepaid expenses	132		132
Property and equipment	1,112		1,112
Intangible assets	17,720		17,720
Goodwill	17,263		17,927
Accounts payable and accrued liabilities	(711)		(711)
Contingent consideration	(1,044)		(1,044)
Net assets acquired	$	38,154	$	38,818

In March 2024, the Company estimates an additional $664,000 for working capital adjustments will be paid which is reflected under the caption “Goodwill” in the condensed consolidated balance sheet.

The intangible assets in the table above are being amortized on a straight-line basis over their estimated useful lives. The amortization is included under the caption “Amortization of acquisition-related intangibles” in our condensed consolidated statements of operations.

The fair value measurements of tangible and intangible assets and liabilities (including those related to contingent consideration) were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy (see Note 16 - Fair Value). Level 3 inputs included, among others, discount rates that we estimated would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, client attrition rates and market comparables.

Our condensed consolidated statement of operations as of March 31, 2024 includes net sales of $4.8 million, gross profit of $2.1 million, net income of $0.8 million and adjusted EBITDA of $1.0 million (see note 17 - Segment Reporting for more information regarding, and definition of, adjusted EBITDA) attributed to the Viewgol acquistion.