Published:
QMed, Inc. Announces $750,000 in Financing and Settlement with DAKOTACARE
EATONTOWN, N.J., March 20 /PRNewswire-FirstCall/ -- QMed, Inc.,
(Nasdaq: QMED) today announced that in order to have time to continue to
pursue a strategic alternative and to satisfy its need for working capital in
the immediate future, the Company has entered into an agreement with Michael
Cox, former CEO of QMed, John Gargana, a former director of QMed and Barry
Levine, to receive up to $750,000 in working capital for the Company. The
financing is structured to provide $375,000 to the Company at closing, with an
additional $375,000 to be deposited into an escrow account, which could be
released at the Company's request, in two stages, upon achieving certain
milestones in connection with the possible sale of the Company or its assets,
within certain specified time frames. Either the Company, on reaching the
milestones, or such investors, may require the release of such funds to the
Company. The loan proceeds plus interest, together with up to $620,000 in
severance obligations owed to Mr. Cox (as to which he has agreed to forbear,
as noted below), will be secured by substantially all assets of the Company,
other than securities and other investment property. As noted above, Mr. Cox
has agreed to forbear on his severance obligations of up to $620,000, until
the earlier of January 15, 2009 and the closing of either an asset or stock
sale.
At the closing of this financing, the Company will issue to the Investors
warrants to acquire up to 19.9% of the Company's common stock at an exercise
price of $.001 per share; of which, warrants to purchase up to 9.95% of the
Company's common stock will immediately be exercisable, with the balance
becoming exercisable in proportion to the remaining proceeds in the escrow
being released to the Company. The investors will be entitled, in the case of
a sale or exchange of all or, under certain circumstances, a majority of the
outstanding shares, or an issuance of new shares constituting a majority of
the outstanding shares, or a sale of all or substantially all of the Company's
assets, to receive, either from the Company or by virtue of the transaction
itself, the consideration payable in connection with the transaction on the
shares underlying their warrants, or if no consideration is payable with
respect to the shares in the transaction (such as in a new issuance of shares
or in certain asset sale transactions), the market value of the shares after
giving effect to the transaction, in each case net of the exercise price of
the warrants. Pursuant to the transaction, the Investors have the right to
have two observers present at Board Meetings.
The staff at Nasdaq has informed the Company orally that they are of the
opinion that, as Mr. Gargana was a director of QMed (Mr. Gargana resigned as a
director on March 18, 2008), this transaction would violate a NASDAQ rule
unless shareholder approval were obtained, because the issuance of warrants in
the transaction may be deemed compensation. Because of QMed's need for
working capital, and because the Company is already in receipt of delisting
letters from NASDAQ, QMed has decided to proceed with the transaction without
seeking shareholder approval. As a result, the Company's shares may be
delisted by Nasdaq. The Company has not yet determined whether it will appeal
Nasdaq's or its staff's determination.
This transaction does not involve the assets or operations of QMedCare of
New Jersey, Inc., and its HMO operations. The Company and QMedCare of New
Jersey, Inc. continue to work with the New Jersey Department of Banking and
Insurance on the orderly wind down of operations of the New Jersey HMO.
In an unrelated matter, the Company's LakeShore Captive Insurance
subsidiary received approval from the South Carolina Department of Insurance
to enter into and conclude a settlement with DAKOTACARE, resolving all
potential claims and liabilities to DAKOTACARE, including those related to the
South Dakota Special Needs Plan in which not only LakeShore, but also QMed and
certain QMed subsidiaries, including QMedCare Dakota LLC and QMedCare, Inc.,
had been involved. The settlement involves a payment of $750,000 to
DAKOTACARE, and the release by DAKOTACARE of claims against LakeShore, as well
as any claims against the Company and its subsidiaries. The Company
anticipates that, with this settlement and certain additional steps, it will
wind down the businesses of the subsidiaries involved in the South Dakota
project, specifically, QMedCare Dakota LLC, LakeShore and QMedCare, Inc.
LakeShore, the Company's captive insurance subsidiary, currently has
approximately $794,000, of which, LakeShore is in the process of obtaining
releases to fund this settlement obligation as well as certain costs
associated with the dissolution of this subsidiary. As a result of this
settlement, the Company will record in the fourth quarter of 2007, a non-cash
reversal in connection with previously recorded liabilities of approximately
$7.4 million, primarily related to its incurred but not reported medical
expenses. Additionally, since the Company is discontinuing its Special Needs
Insurance activities, it will record a charge in the fourth quarter of 2007
totaling approximately $900,000 related to the write-down of impaired assets.
"We are pleased that this matter has been resolved," said Jane Murray,
QMed's Chief Executive Officer.
"With the Investors' investment, and the settlement of the South Dakota
related liabilities, QMed will continue to pursue strategic alternatives with
its advisors while remaining singularly focused on its core disease management
and health informatics business," said Jane Murray, QMed's Chief Executive
Officer.
About QMed, Inc.
QMed has developed evidence-based clinical information management systems
for use by health plan customers. The QMed systems incorporate Disease
Management services to patients and decision support to physicians. The
Company's subsidiaries have specialized in serving high-risk populations of
Medicare beneficiaries.
Except for historical information contained herein, matters discussed in
this news release are forward-looking statements that involve risks and
uncertainties. They include but are not limited to those relating to the
timely implementation of programs, the impact of business and operational
conditions, competitive product introductions, acceptance and pricing, and
those risks detailed in the Company's filings with the Securities and Exchange
Commission (SEC). Actual results may differ materially from any forward-
looking statements due to these risks and uncertainties.
Contact: William Schmitt, QMed, Inc. - 732-544-5544 x1112
SOURCE QMed, Inc.
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