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"We believe that the proposed merger of Favrille and MMR is consistentwith our objective of offering our creditors and stockholders the bestavailable outcome and will result in an organization that is uniquelypositioned to fulfill an unmet need at this time when so much of the attentionon healthcare costs in the U.S. is focused specifically on the burden ofadministrative costs and the widely-held belief that personal and electronichealth records are crucial to reducing those costs," said John P. Longenecker,President and CEO of Favrille, Inc.
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"Health information technology and the management of PHR's are at arevolutionary turning point," said Robert H. Lorsch, CEO and President ofMyMedicalRecords.com. "Giving consumers the ability to maintain their medicalrecords securely online leads to higher quality care at reduced costs. MMR'sproprietary technologies enable consumers and healthcare professionals tocreate and access a PHR anywhere in the world. We believe this transactionwith Favrille will give MMR broader access to the investment community, whichis essential to our sales and marketing strategy and continued expansion ofour customer base."
Details of the Proposed Transaction
Under the terms of the merger agreement, Favrille will acquire all of thecapital stock of MMR, in a stock for stock merger that would result in MMRbecoming a wholly-owned subsidiary of Favrille with the existing equityholders of MMR owning approximately 64% of the equity of the combined companyon a fully diluted basis. The existing common stockholders of Favrille wouldown approximately 29% of the combined company. Approximately 7% of Favrille'sequity would be newly issued in the form of warrants to purchase common stockto certain creditors as settlement for a portion of Favrille's outstandingdebt obligations. In connection with the execution of the Merger Agreement,Favrille extended MMR a bridge loan of $500,000 (in addition to the $100,000previously extended) that MMR will use to fund its operations and transactionexpenses until the closing of the Merger. MMR was founded in 2005, is in theearly stages of its business plan and has not yet achieved profitability. Themerger is intended to qualify for federal income tax purposes as a tax-freereorganization under the provisions of Section 368(a) of the U.S. InternalRevenue Code of 1986, as amended.
The merger agreement has been approved by the Boards of Directors of bothFavrille and MMR and will need to be approved by MMR's stockholders. Themerger is subject to customary closing conditions as well as conditionsrequiring Favrille to settle existing creditor claims, consistent with acreditor plan executed by the parties in connection with the merger agreement,Favrille meeting certain minimum cash requirements as of closing and thecompletion of audited financials for MMR. The merger is expected to close byyear end. It is anticipated that post merger, the combined company's commonstock will continue to be traded on the OTC Bulletin Boards.
About MyMedicalRecords.com, Inc. and Its Service
MMR offers a secure, easy-to-use, consumer-centric PHR that is availabledirect to consumers through its Web site www.mymedicalrecords.com. The productalso is used as a private label product by healthcare professionals andhospitals, as well as by companies as an employee benefit, and labor unions,insurers and affinity groups as a value-added benefit. In addition, thecombined company is planning to launch MMR Pro, introduced during the 2008annual convention of Healthcare Information and Management Systems Society(HIMSS), which uses MMR's technologies to offer a cost-effective alternativeto expensive electronic medical records systems in physician offices.
MMR believes it offers the only PHR that does not rely on any specificelectronic medical record platform to populate a user's account. Based on itsproprietary patent-pending technologies, the MMR system allows users and theirmedical providers to instantly fax paper records such as laboratory tests,radiology reports and physician's notes into a secure, password-protectedaccount through a unique, personal "Lifeline" telephone number where they canbe digitally stored, shared and displayed online. Scanned files and images canalso be easily uploaded from any Internet connected computer. Information iscompletely controlled by the user without any third party intervention toensure privacy and confidentiality.
In addition, the MMR service features a proprietary Emergency Login thatgives healthcare professionals immediate access to critical user medicalinformation in the event of an emergency. It also offers a suite of healthmanagement tools such as automatic prescription reminders, appointmentscheduling and an interactive Drug Reference that checks for interactionsbetween over 24,000 prescription and over-the-counter medications, potentiallypreventing one of the leading causes of medical errors and deaths in the U. S.
MMR leverages its technologies through additional brand extensions such asMyEsafeDepositBox.com, which serves as an emergency preparedness tool thatenables users to store all their important documents including insurancepolicies, financial statements, advanced directives, living wills and healthcare powers of attorney in addition to medical records. These documents andimages can be stored in virtual lockboxes with secondary passwords on each.
MMR markets its products and services to clients that include AFL-CIOunions, Alexian Brothers Hospital Network, Coverdell, MedicAlert, MidwestResearch Institute, Qvisory, and XN Financial. MMR also licenses its productsin several countries around the world.
Government studies confirm that as many as 97,000 deaths occur each yeardue to preventable medical errors and it is estimated that over $100 billionis wasted annually using paper-based records that cannot be easily accessed todeliver immediate and accurate care. A Rand Corporation study indicated thattotal efficiency gains from better use of health IT could be as much as $346billion a year.
The New England Journal of Medicine asked President-elect Barack Obama todescribe his plans for reforming health care, and he reaffirmed his commitmentto modernizing the system and calling for expenditures of $50 billion inhealth information technology. MMR believes that investing in health IT ispart of a cost-containment strategy that will contribute to lowering thehealth care system's overall cost by reducing medical errors and unnecessaryduplication of tests.
Headquarters, Management and Board of Directors
Following the closing, the merged Company's headquarters will be relocatedto Los Angeles, CA. Robert H. Lorsch, Chairman and CEO of MMR, will becomethe Chairman and CEO of the merged company. The combined company's Board ofDirectors will consist of five current MMR directors and two Directors to benamed by Favrille.
Additional Information about the Merger and Where to Find It
In connection with the proposed transaction described herein, Favrillewill file a Current Report on Form 8-k, with the definitive merger agreementand other related agreements as exhibits, with the SEC. Favrille and MMRstockholders will be able to obtain a copy of the Form 8-k, as well as otherfilings containing information about Favrille, without charge, at Favrille'swebsite (www.favrille.com) and the SEC's website (www.sec.gov).
Statements in this press release that are not strictly historical innature constitute "forward-looking statements." Such statements include, butare not limited to, statements regarding the proposed transaction, includingthe timing for closing, the potential value created by the proposed merger forFavrille's and MMR's stakeholders, the benefits provided by MMR's products,including cost reductions, improved care, and reduced medical errors anddeaths, proposed reforms to the U.S. healthcare system, the role of MMRproducts in lowering the health care system's overall cost, MMR's access tothe investment community and financing post-closing, conditions to closing themerger, including Favrille's ability to settle creditor claims, the continuedlisting or trading of the combined company's common stock on the OTC BulletinBoards and MMR's ability to obtain patent protection for its intellectualproperty. Such forward-looking statements involve known and unknown risks,uncertainties and other factors that may cause Favrille's actual results to bematerially different from historical results or from any results expressed orimplied by such forward-looking statements. These factors include, but are notlimited to, the risk that Favrille and MMR may not be able to complete theproposed transaction in a timely manner or at all, the risk MMR's products arenot adopted or viewed favorably by the healthcare community, the risk thatFavrille's cash at closing will be lower than currently anticipated, risksrelated to the current uncertainty and instability in financial and lendingmarkets, risks related to the listing status of Favrille's common stock on theOTC Bulletin Boards, risks relating to Favrille's ability to negotiatesettlements with its creditors, risks relating to the ability of Favrille andMMR to satisfy conditions to closing the proposed merger transaction andadditional risks discussed in Favrille's filings with the Securities andExchange Commission. The combined company will also be subject to a number ofrisk and uncertainties, including risks relating to the need to have access toadditional capital to finance the business until it can generate sufficientcash flow from operations and risks relating to the adoption of personalhealth care records and the development of a viable revenue generatingbusiness model. All forward-looking statements are qualified in their entiretyby this cautionary statement. Favrille is providing this information as of thedate of this release and, except as required by law, does not undertake anyobligation to update any forward-looking statements contained in this releaseas a result of new information, future events or otherwise.
SOURCE Favrille, Inc.
