QHR signs letter agreement to acquire Open EC Technologies Inc.

KELOWNA, BC, June 11, 2012 /CNW/ - (TSX-V: QHR)  QHR Technologies Inc. ("QHR" or the "Company"), a leader in the Canadian Healthcare Information Technology sector, is pleased to announce that it has entered into a letter agreement ("Agreement") with Open EC Technologies, Inc. ("OEC"), pursuant to which QHR proposes to acquire all of the issued and outstanding securities of OEC in a business combination (the "Transaction") effected by way of a Plan of Arrangement (the "Arrangement").

  • Transaction marks QHR's entry into the US Healthcare market with a partner that has a solid and growing customer base
  • SaaS model business with broad client base of US physicians, billing service companies, software companies, insurance payors and 3rd party administrators
  • 88% recurring revenue (based on Open EC's last quarterly financials) in the US Healthcare software business complements QHR's leading and growing Canadian Healthcare position
  • Transaction expected to be accretive to QHR shareholders on a per share basis in Fiscal 2013
  • Significant cross-selling opportunities, particularly for QHR's EMR software into the US market

The Board of Directors of both companies have approved the Agreement and the Arrangement, but the Arrangement is subject to the negotiation and execution of a definitive agreement with comprehensive terms, as well as approval by the Supreme Court of British Columbia, the TSX Venture Exchange, and the affirmative vote of 66 and 2/3 percent of the OEC shareholders at a special AGM to be called by OEC.

The companies have agreed to work towards completing due diligence and the signing of a definitive agreement by July 15, 2012.  The Transaction is expected to be completed by October 31, 2012, following all necessary approvals. The Transaction remains subject to entering into the definitive agreement and the satisfaction of customary closing conditions, including any necessary regulatory approvals. There is no assurance that the Transaction will be completed, and the terms may change.

This Transaction, once completed, provides QHR with a strategic opportunity to enter the US Healthcare market with a vendor who has depth of experience and a growing customer base in all areas of billings, data transfers to and from the thousands of Healthcare providers, brokers and insurers, (which is a complex business for any EMR vendor), and the ability to generate revenues from the physician market in the US with future adoption of QHR's EMR software.

This Transaction, based on OEC's trailing revenues (88% of which were recurring in its latest fiscal quarter) and on current and public financials of OEC, should add approximately $3 million in recurring revenue to QHR's base annual business once the transition takes effect, plus the addition of any new market or synergistic sales opportunities.

QHR would also gain a unique set of qualified technical expertise in SaaS product development, which is vital to entering the US Healthcare market, a substantially different market than in Canada.

Background on Open EC and the US business

The core of Open EC's technology base is known as an Electronic Data Interchange ("EDI"), in which technology standards drive data transactions and interaction between systems.  Systems in this environment are SaaS product offerings, and clients typically have high recurring and long term revenue generation opportunities. SaaS product offerings require less staffing costs to implement than traditional software implementations.

In early 2009, OEC refocused its technology and marketing efforts on the US Healthcare space and now has 5,500 physicians on its SaaS billing system where Open EC manages the billings for physician and clinics. Open EC is specifically focused on the interface between EMR and billings vendors, more commonly known as Practice Management Software or Revenue Cycle Management Software vendors (as they interact with insurers, healthcare providers, and a multitude of state and local governments that are connected with healthcare).

The United States Healthcare information exchange systems for private and public insurance plans are very complex compared to the Canadian Healthcare systems.   The US model with its thousands of health insurance payors creates considerably more complex administration of the employee enrollment into health insurance plans, medical billings, payments and collections than in Canada, where each province has a single payor (a single government payment authority and plan in each province such as OHIP, MSP, etc.).

In 2011, OEC acquired iPlexus, a San Antonio, Texas-based company in the HealthCare Claims 'clearinghouse' business.  Clearinghouse technology companies are the go-between for all billings products, vendors and the multitude of state, insurance providers and other companies, both private and public.  There are approximately 500 EMR vendors in the US who may also have billings in their offering.  There are several thousand billings companies or groups that do billings for physicians and clinics.

In OEC's most recent quarter-ended March 2012, it generated revenues of $597,482, 88% of which was recurring in nature. Including the previous quarter's revenue of $661,606, OEC has an annualized run-rate of $2,518,176 and is near-EBITDA positive, particularly with public company costs and stock-based compensation removed.

Summary of the Transaction

In the proposed Arrangement, holders of OEC common shares ("OEC Shares") can elect to exchange their OEC Shares for common shares of QHR ("QHR Shares") at a ratio of twelve (12) OEC Shares for each QHR Share or sell their OEC shares for cash at a price of $0.04 per OEC Share.  Where no affirmative election is made, the OEC shareholder will be deemed to have made the election to receive cash.

Based on the $0.04 cash offer, OEC shareholders will receive a premium of approximately 20% to OEC's most recent 20-day weighted average share price.

Holders of OEC share purchase warrants and options will exchange their securities for QHR Shares at various rates depending on the class or series (some warrants will be exchanged at a ratio of 3.75 to 1, others at a ratio of 9.0 to 1, and options will be exchanged at a ratio of 10 to 1).  QHR expects approximately 700,000 QHR Shares to be issued in exchange for the share purchase warrants and approximately 500,000 QHR Shares to be issued for the Options.  The majority of these QHR Shares are going to existing OEC staff and management as part of a longer term US staff retention initiative, which is an important consideration to continue growing the US business.

QHR Shares issued in exchange for OEC Shares will be subject to a resale restriction for twelve months after the completion date, while QHR Shares issued in exchange for OEC warrants and options will be subject to an eighteen month resale restriction.

The Arrangement will provide for the repayment of OEC's existing secured debt over a period of time beginning on the completion date of the Arrangement and ending during April 2013 and a commitment to provide working capital of $500,000 as needed to the OEC business unit for fiscal year 2013.  In addition, within five business days of the date of the letter agreement, QHR has agreed to provide a secured bridge loan to OEC in the amount of $250,000.

Depending on the choices made by OEC shareholders, the cash component of the Transaction could range from $800,000 to approximately $1,500,000 for the purchase of OEC Shares, with the remaining portion (including all officers, directors and insiders of OEC) taking the share conversion option.

Officers, directors and insiders of OEC own approximately 20,000,000 OEC Shares or approximately 32% of OEC Shares outstanding.

The cash required to complete this transaction over the first 12 months will be at a multiple of approximately one times trailing revenues, including absorbing all liabilities and shareholder payments (approximately $2,500,000), depending on the final mix of cash purchases for OEC Shares vs. OEC Shares exchanged for QHR Shares.

QHR expects the Transaction to be accretive on a per share basis during fiscal 2013 and going forward.  While QHR believes there are exciting cross-selling opportunities between QHR and OEC, particularly through marketing its EMR systems to OEC's US physicians, QHR is judging the merits of this Transaction without such cross-selling opportunities included.

According to Mr. Al Hildebrandt, CEO and President of QHR, "QHR has been watching and analyzing the US Healthcare market for some time now, but we knew that it would be best for QHR if we could find a partner or an acquisition target who knew the complexities of the financial portion of Healthcare very well and already had a good portion of recurring revenue to fund the existing US business and augment that with QHR's own experiences and product offering.  We are delighted to have found such a partner company and to find many new advanced software products and technology skills available to us in the highly qualified staff working at OEC, especially for the development of the SaaS Healthcare market."

Mr. Martyn Armstrong, CEO and founder of OEC, states "This strategic transaction with QHR will provide Open EC shareholders a cash liquidity opportunity or an opportunity to continue as shareholders in QHR.   We believe the Open EC business growth opportunity will see a substantial benefit within the QHR group, with improved access to working capital, human resources, and sales and marketing for our US HealthCare expansion.   With improved business development support to build the Open EC business combined with QHR's market-leading position in the Canadian Electronic Medical Records (EMR) software sector, our shareholders who elect a share exchange will be in the position to participate in the business growth of both QHR and Open EC.  With the combined markets, solutions and management, both companies should benefit in growth in both the Canadian and US Health IT Market."

Versant Partners Inc. acted as financial advisor to QHR on the Transaction.

Conference Call Details: The Company executives will host a conference call at 11:00 AM EST (8:00 AM PST) today, Monday, June 11, 2012 to discuss this transaction. To join the conference call, please dial Toll Free 888-231-8192 or 647-427-7451 (Toronto).  Conference ID: 90384662

On behalf of the Board of Directors

Al Hildebrandt

About QHR Technologies Inc.

QHR operates two business units in distinct markets:

The Electronic Medical Records ("EMR") division offers a suite of medical software modules that provides computer-based medical records for family physicians, medical specialists, and surgeons, as well as administrative modules for billing and patient scheduling, that is a key component of the move throughout Canada to provide electronic healthcare records for all Canadians. The EMR division also provides on-site and off-site (ASP) hosting capabilities.

The Enterprise Management Software ("EMS") division specializes in workforce management software, which consists of integrated payroll, staff scheduling and human resource software, and in customized financial management software built on the Microsoft Dynamics GP platform. These products are targeted at complex healthcare, social services and public safety environments.

About Open EC

Open EC Technologies is an e-Business Information Technology company with our corporate head office, marketing and development in Vancouver, BC, main HealthCare IT Solutions Operations office in San Antonio, Texas and Medical Practise Billing Operations office in Spring Hill, Florida.  The company has software development and data center hosting operations in Maine, with Sales and Executive Management staff in Atlanta Georgia.

The Company's focus is to provide software solutions and transaction processing services to assist Physicians, Hospitals, Health Plans, Insurance Brokers and State Governments to exchange information for HIPAA EDI Health Plan Enrolment, Health Insurance Eligibility, Health Insurance Claims, Claim Payments and HealthCare Provider Collaboration of supporting patient referral and industry compliance/reporting documentation.

Additional product and solution information is available on the web at www.SoftCareHealthcare.com, www.iPlexus.net and www.softcare.com and additional public company information is available on the web at www.openec.com.  The Company's common shares trade on the TSX Venture Exchange under the symbol: OCE

Legal Notice Regarding Forward Looking Statements

This news release may contain "forward looking statements" within the meaning of applicable Canadian securities legislation. These statements are subject to risks that may cause the actual results to be materially different in future periods from those expressed or implied by such forward looking statements. Forward looking statements in this news release include those concerning the structure and potential of the proposed plan of arrangement with Open EC Technologies Inc., as well as the cost of the transaction and the potential synergies and profitability of the Open EC business.  Risks that may prevent, delay or frustrate our objectives expressed in any of these forward looking statements include the risks inherent in transactions of this nature, including the risks that the parties cannot reach a definitive agreement, that the regulatory authorities or the Open EC shareholders do not approve the transaction when asked to do so and the risk that the transaction does not complete for other reasons, including failure of a condition, lack of capital and similar risks. It is our policy not to update forward looking statements except to the extent required under applicable securities laws. Further information on the Company is available at www.sedar.com or at the Company's website, www.QHRtechnologies.com.

Neither the 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.

SOURCE QHR Technologies Inc.

For further information:

Al Hildebrandt, President & CEO    

Jerry Diener, Chief Financial Officer    

Organization Profile

QHR Technologies Inc.

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890