CareCloud Proposes Amendment to the Terms of its Series A Preferred Stock

Rhea-AI Summary

CareCloud (Nasdaq: CCLD) announced an amendment proposal for its 11% Series A Cumulative Redeemable Perpetual Preferred Stock. The proposal seeks to align the terms of Series A Preferred Stock with those of the 8.75% Series B Preferred Stock. If approved, Series A stockholders would gain change of control protections, a reduced 8.75% dividend rate, and an optional exchange feature. The amendment requires a two-thirds majority approval from Series A shareholders. The Special Meeting is scheduled for August 23, 2024, with proxies being solicited starting July 8, 2024. These changes aim to better position shareholders for potential future transactions and enhance value.

Positive

• Proposed alignment of Series A dividend rate to 8.75%, potentially lowering company's dividend obligations.
• Addition of change of control protections for Series A stockholders, increasing security.
• Optional exchange feature for Series A stock into common stock, enhancing liquidity.

Negative

• Reduction in Series A dividend rate from 11% to 8.75%, lowering yield for existing Series A shareholders.

Financial Analyst

The proposed amendment to the terms of CareCloud’s Series A Preferred Stock represents a significant shift in the company’s financial structure. Aligning the dividends of Series A Preferred Stock with those of Series B at 8.75% annually, down from 11%, will reduce the company’s payout obligations. This change could be viewed positively from a cash flow perspective, potentially freeing up resources for other investments or reducing debt.

The introduction of the change of control provision and exchangeability features also brings Series A holders' protections in line with Series B holders. This equal treatment may make the stock more attractive to investors, as it decreases risk in the event of a takeover. However, it also means that Series A holders might face dilution if their shares are converted to common stock.

In the short term, this proposal could lead to some volatility in share prices as investors react to the changes, but it might also stabilize the preferred shares market by ensuring that all preferred shareholders have similar protections and benefits. For long-term stakeholders, it balances risk and reward more equitably across different classes of preferred shares.

Investors should consider these changes carefully, as they will affect dividend income and possibly the liquidity of the preferred shares. It’s also important to note the decrease in dividend rate, which might impact income-driven investors.

Legal Expert

The proposed amendments to the Series A Preferred Stock’s terms introduce several significant legal protections. The addition of change of control provisions ensures that Series A holders can exit their positions in the event of an acquisition. This eliminates the risk that an acquirer could leave the Series A shares outstanding without providing a redemption mechanism, which is a key protective measure for investors.

The exchangeability feature, allowing the company to convert Series A shares into common stock, adds flexibility to CareCloud’s capital structure. While this might be viewed as an added risk for preferred shareholders due to potential dilution, it also aligns with standard industry practices where companies seek such flexibility to manage their equity.

These legal adjustments are aimed at making the stock more attractive and securing shareholder interests. However, investors should understand the implications of these changes, including the potential for their shares to be converted into common stock at the company’s discretion, which could affect their return on investment.

SOMERSET, N.J., July 09, 2024 (GLOBE NEWSWIRE) -- CareCloud, Inc. (the “Company”) (Nasdaq: CCLD CCLDO, CCLDP), a leader in healthcare technology solutions for medical practices and health systems nationwide, today announced that it has begun soliciting proxies from the holders (the “Series A Preferred Shareholders”) of its 11% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) to approve an amendment to the Company’s Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Preferred Stock Proposal”). Under the Preferred Stock Proposal, holders of Series A Preferred Stock would receive similar change of control protections to those afforded to holders of the Company’s 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred Stock”). The future dividends of the Series A Preferred Stock would mirror that of the Series B Preferred Stock, and the Company would, going forward, have the right to exchange the shares of Series A Preferred Stock for shares of common stock at the liquidation preference value of $25 per share, plus any accrued and unpaid dividends.

Mahmud Haq, Founder and Executive Chairman of the Board of Directors of CareCloud, stated, “We are confident that the changes we have proposed to the terms of our Series A Preferred Stock are in the best interest of our company and all classes of shareholders. These changes would best position our shareholders for a future transaction, if any, and enable us to continue to add value as we grow CareCloud.”

The Proxy. On July 8, 2024, the Company filed a Definitive Proxy Statement (the “Proxy”) relative to a Special Meeting of Series A Preferred Shareholders (the “Special Meeting”). This Proxy, in turn, is the result of the capital structure analysis that was performed by Citizens JMP, which was prompted by the Board’s exercise of its fiduciary duty in response to an unsolicited indication of interest to acquire the Company (as more fully discussed in our press releases dated May 9 and May 13, 2024).

The Proxy seeks approval of the Preferred Stock Proposal which, if approved by holders of two-thirds (66 2/3%) of the Series A Preferred Stock, would modify the terms of the Series A Preferred Stock by:

	(i)	Change of Control Rights. Adding a change of control provision, as presently afforded to holders of Series B Preferred Stock, that would require an acquirer of a controlling interest in the Company’s common stock to redeem (if requested) the Series A Preferred Stock in exchange for shares of the Company’s common stock based on a $25 per share liquidation preference plus any accumulated and unpaid dividends (as opposed to the current terms which would permit an acquirer of the Company to leave the Series A Preferred Stock outstanding after a transaction as a security of a public reporting entity after paying any accumulated and unpaid dividends);
	(ii)	Equivalent Dividend Rate. Changing the dividend to 8.75% per annum (consistent with the dividend of the Series B Preferred Stock); and
	(iii)	Exchangeability. Introducing an exchange feature that would enable the Company, at its option, to cause the outstanding shares of the Series A Preferred Stock, at any time, to be automatically exchanged for a number of shares of common stock equal to the quotient obtained by dividing (1) the sum of (a) the $25.00 per share liquidation preference, and (b) the amount of any accumulated and unpaid dividends on such share of Series A Preferred Stock being exchanged by (2) the volume weighted average price of the shares of the Company’s common stock.

Ownership Interest of Directors and Named Officers. Directors and named executive officers of the Company beneficially owned the following percentages of the below listed classes of shares as of June 30, 2023 and 2024, respectively, and during this period, the ownership interests increased by the following percentages year-over-year:

Class	6/30/2023		6/30/2024		YoY % increase
Common Stock	34.7	%	38.3	%	10	%
Series A Preferred Stock	0	%	0	%	0	%
Series B Preferred Stock	1.8	%	2.7	%	50	%

Date and Timing. The Special Meeting date is August 23, 2024. This is consistent with the minimum timeline required by the Securities and Exchange Commission, while affording approximately 40 days for the solicitation of proxies.

About CareCloud

CareCloud brings disciplined innovation to the business of healthcare. Our suite of technology-enabled solutions helps clients increase financial and operational performance, streamline clinical workflows and improve the patient experience. More than 40,000 providers count on CareCloud to help them improve patient care while reducing administrative burdens and operating costs. Learn more about our products and services including revenue cycle management (RCM), practice management (PM), electronic health records (EHR), business intelligence, patient experience management (PXM) and digital health at www.carecloud.com.

Follow CareCloud on LinkedIn, Twitter and Facebook.

Important Additional Information and Where To Find It. CareCloud filed with the SEC a Definitive Proxy Statement on Schedule 14A on July 8, 2024, with respect to its future solicitation of proxies for the Special Meeting of Series A Preferred Shareholders (including any and all adjournments, postponements, continuations, and reschedulings thereof, the "Special Meeting"). The information contained in this press release is merely a summary of certain relevant portions of the Definitive Proxy Statement and it is important that Series A Preferred Shareholders review the entirety of the filing. SERIES A PREFERRED SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER AMENDMENTS OR SUPPLEMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT CARECLOUD'S FILING. Investors and security holders may obtain copies of these documents and other documents filed with the SEC by CareCloud free of charge through the website maintained by the SEC at www.sec.gov. The Notice of the Special Meeting of Series A Preferred Shareholders and our Definitive Proxy Statement for the Special Meeting, the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 are available at www.sec.gov.

Forward-Looking Statements
This press release contains various forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “shall,” “should,” “could”, “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology.

Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this press release include, without limitation, statements reflecting management's expectations for future financial performance and operating expenditures, expected growth, profitability and business outlook, the impact of pandemics on our financial performance and business activities, and the expected results from the integration of our acquisitions.

These forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to the Company’s ability to manage growth, migrate newly acquired customers and retain new and existing customers, maintain cost-effective global operations, increase operational efficiency and reduce operating costs, predict and properly adjust to changes in reimbursement and other industry regulations and trends, retain the services of key personnel, develop new technologies, upgrade and adapt legacy and acquired technologies to work with evolving industry standards, compete with other companies’ products and services competitive with ours, and other important risks and uncertainties referenced and discussed under the heading titled “Risk Factors” in the Company’s filings with the Securities and Exchange Commission.

The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

SOURCE CareCloud

Company Contact:
Norman Roth
Interim Chief Financial Officer and Corporate Controller
CareCloud, Inc.
nroth@carecloud.com

Investor Contact:
Bill Korn
CareCloud, Inc.
ir@carecloud.com

FAQ

What is CareCloud's proposal for the Series A Preferred Stock?

CareCloud proposes to amend the terms of its 11% Series A Cumulative Redeemable Perpetual Preferred Stock to include change of control protections, reduce the dividend rate to 8.75%, and introduce an optional exchange feature.

How will the Series A Preferred Stock dividend change under the new proposal?

Under the new proposal, the dividend rate for Series A Preferred Stock will be reduced from 11% to 8.75%, aligning with the Series B Preferred Stock.

What change of control protections are being added for Series A Preferred Stock holders?

The proposal includes a change of control provision requiring an acquirer to redeem Series A Preferred Stock for common stock at a $25 per share liquidation preference plus any accumulated dividends.

When is the Special Meeting for the Series A Preferred Stock amendment proposal?

The Special Meeting to vote on the proposal is scheduled for August 23, 2024.

How will the exchange feature affect Series A Preferred Stock holders?

The exchange feature allows CareCloud to convert Series A Preferred Stock into common stock at the liquidation preference value of $25 per share plus any accrued dividends, enhancing liquidity for shareholders.

What majority is needed for the approval of the Series A Preferred Stock amendment?

The amendment requires approval from two-thirds (66 2/3%) of the Series A Preferred Stock holders.