SALE OF Digital Health Corp
Gerbsman Partners (http://gerbsmanpartners.com ) has been retained by Digital Health Corp, a Delaware Corporation (“DHC”, or “Company”) to solicit interest for the acquisition of the Company’s stock. The assets of DHC are outlined below. Please also see attached Mutual NDA and IP and Trademark list.
- $5.7M note, maturing in July 2023, receivable from Constant Therapy Health (https://constanttherapyhealth.com) secured by all Constant Therapy Health assets and IP. These include 2 Patents and 2 follow on filings of original patents, and 2 Trademarks.
- Quarterly, sales-based royalty stream from Constant Therapy Health (historically approximately $15k per quarter), payable through July 2025
- Federal net operating losses of approx. $61M (subject to IRC 382) of DHC
- Over 20 internet domain names, including digitalhealthcorp.com
- Corporate shell with no physical location, tangible assets, employees, material cash or debt
IMPORTANT LEGAL NOTICE:
The information in this memorandum does not constitute the whole or any part of an offer or a contract.
The information contained in this memorandum relating to the DHC Assets has been supplied by DHC and has not been independently investigated or verified by Gerbsman Partners or their respective agents.
Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners, DHC (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing (the “information”), as a statement, opinion, or representation of fact. Please further note that all information provided herein relating to the operations of DHC’s business and its market positions relates to periods on or prior to June 2020. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.
Gerbsman Partners, DHC and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Gerbsman Partners’ negligence or otherwise.
Any sale of DCH stock will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of, DHC or Gerbsman Partners. Without limiting the generality of the foregoing, Gerbsman Partners, DHC and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the DHC and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.
This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto in Exhibit A.
BACKGROUND
From its founding in 2017, DHC has been solely funded by the Gary and Mary West Health Investment Fund (“WHIF”), part of a consortium of not-for-profit entities focused on lowering the cost of health care in the US.
To date, DHC has taken in $58 million in capital from WHIF and has deployed that capital to make mission-aligned investments in the digital therapeutics space. At its formation, DHC acquired WHIF’s existing majority interest in Reflexion Health, a company developing a medical device used for remote physical therapy. Later, in May of 2017, DHC acquired Constant Therapy, a company providing app-based speech, language and cognitive therapy to patients recovering from stroke or traumatic brain injury, for $6.25 million. Constant Therapy was renamed The Learning Corp (“TLC.”)
Both companies were in the early commercialization phase and beginning to gain market traction; however, they were also experiencing significant recurring losses. In October of 2019, the board of DHC determined it was in the company’s best interest to pursue sales of both Reflexion Health and TLC. This resulted in the sale of substantially all of Reflexion Health’s assets to a large, global manufacturer of hip and knee implants, for cash and a 6-year, sales-based earn out, in July of 2020. Reflexion Health was renamed VirtualPT Holdings, Inc., and has since discontinued all operations.
In July of 2020, DHC sold TLC’s stock to its original founding member, for a $5.7M secured note and a 5-year royalty stream, and TLC was re-named Constant Therapy Health (www.constanttherapyhealth.com.) Constant Therapy Health is an operating company based in Newton, MA, that has enabled over 500 million users with its award-winning application, Constant Therapy®. Constant Therapy Health has obtained FDA Breakthrough Device Designation on its Speech Therapy App and has several published studies and randomized clinical trials, most recently a study demonstrating improved outcomes for post-stroke patients using its product. It has also been included in iTech Post’s list of “7 Best Mobile Apps for People With Dementia and Alzheimer’s Disease”. It’s patented NeuroPerformance Engine™ uses artificial intelligence to customize the application to each user’s needs.
Since the sales of both Reflexion Health and TLC in mid-2020, DHC has been in a non-operating status, and has ceased making additional investments. This is primarily due to a change in investment strategy at WHIF as well as the global Covid-19 pandemic. Currently, WHIF is seeking a buyer of DHC’s stock. This is a unique investment opportunity for the right buyer.
DHC’s assets are highlighted below:
- $5.7M note, maturing in July 2023, receivable from Constant Therapy Health (http://constanttherapyhealth.com) secured by all Constant Therapy Health assets and IP. These include 2 Patents and 2 follow on filings of original patents, and 2 Trademarks.
- Quarterly, sales-based royalty stream from Constant Therapy Health (historically approximately $15k per quarter), payable through July 2025
- Federal net operating losses of approx. $61M (subject to IRC 382) of DHC
- Over 20 internet domain names, including digitalhealthcorp.com
- Corporate shell with no physical location, tangible assets, employees, material cash or debt
About Constant Therapy Health (CT)
DHC currently holds a $5.7 M note receivable from Constant Therapy Health, accruing interest annually at 6%, and due in July 2023. As of September 30, 2022, $5.7M is outstanding on the note. DHC has a first priority security interest in all property of CT, including but not limited to all cash, inventory, equipment, and intellectual property, including the following patents and trademarks:
- Anantha, V; Advani, M; Dadgar-Kiani, E. Systems and Techniques for Personalized Learning and/or Assessment. US 10283006, 2019
- Anantha, V; Advani, M; Dadgar-Kiani, E. Systems and Techniques for Personalized Learning and/or Assessment. US 10909870, 2021
- Constant Therapy trademark, registered 9/8/2020
Constant Therapy Health (www.constanttherapyhealth.com) was launched in 2013 as Constant Therapy. It’s principal product, Constant Therapy®, provides evidence-based cognitive, language and speech therapy via a tablet/smartphone app in a subscription model, for about $30/month. Patients can work independently or with a clinician. Clinicians can assign therapy to their patients, view their performance and progress data, and update the EMR. Constant Therapy users have performed over 200 million exercises and receive five times as much therapy as patients getting only traditional analog methods of care. CT has amassed a wide body of research and clinical evidence to support outcomes v. standard of care. The application has also received Breakthrough Device Recognition from the FDA.
CT’s patented NeuroPerformance Engine™ is the technology backbone. The NeuroPerformance Engine uses application-generated data and artificial intelligence to assess each user’s specific needs, customize a treatment plan, and adjust as patients progress through the program. Patients receive the right care on demand, in the comfort and convenience of home.
Management of DHC
DHC has had limited operations over the last two years and has been managed by its former CFO and Treasurer, Gina Oster, CPA on a consulting basis. Gina was also the CFO of Reflexion Health (2015-2020) and the Treasurer of TLC (2017-2020). Gina has over 20 years’ experience in financial leadership and played critical roles in the strategic direction of the companies as well as the transactions described above.
DHC’s board of directors consists of Timothy A Lash, MBA and Jon Zifferblatt MD, MPH, MBA.
Mr. Lash is the President of West Health, the President and CEO of Gary and Mary West PACE, and the Chairman of the West Health Policy Center. He was previously on the Boards of Reflexion Health and The Learning Corp.
Mr. Zifferblatt is the Chief Strategy Officer and Executive Vice President of West Health.
Bidding Process for Interested Buyers
Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Attachment A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the DHC asset information and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners or DHC, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and DHC and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.
Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the DHC stock. Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, November 18, 2022 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Gerbsman Partners office, located at 211 Laurel Grove Avenue, Kentfield, CA 94904. Please also email steve@gerbsmanpartners.com with any bid.
Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (the refundable deposit will be held in DHC’s legal counsel trust account). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.
DHC reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.
DHC will require the successful bidder to close within a 7 day period. The stock of DHC will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.
All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the DHC stock shall be the sole responsibility of the successful bidder.
For additional information, please see below and/or contact:
Steven R. Gerbsman
Gerbsman Partners
Kenneth Hardesty
Gerbsman Partners
James Skelton
Gerbsman Partners
jim@jaskelton.com
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