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Subsequent Events
 9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
Management has determined that no material events or transactions have occurred subsequent to the balance sheet date, other than those events noted below, that require disclosure in our unaudited condensed consolidated financial statements.
As discussed in Note 1. Organization and Business, on November 16, 2023, we agreed to sell 100% of the outstanding equity interests of Cloudbreak, our wholly owned subsidiary, to Forest Buyer, LLC, a Delaware limited liability company and an affiliate of GTCR, pursuant to the Purchase Agreement. We will utilize the proceeds from the Sale for payment in full or in part of the 2026 Notes and 2025 Notes, as well as other expenses related to the Transactions. The Closing is expected in the first half of 2024, subject to obtaining customary regulatory and stockholder approval.
In connection and concurrently with the entry into the Purchase Agreement, we, Cloudbreak and Forest Buyer entered into Transaction Support Agreement, with the Consenting Senior Secured Noteholders, which are the holders of at least 69% of the 2025 Notes, and the Consenting Unsecured Noteholders, which are the holders of at least 88% of the 2026 Notes, pursuant to which the parties have agreed, among other things, to support the Purchase Agreement and the Transactions and to enter into and effect the Escrow Agreements, the Supplemental Indentures in connection with the Fundamental Change Repurchase Offer to be made by us and each other Definitive Document (as defined in the Transaction Support Agreement), in each case, subject to the terms and conditions set forth in the Transaction Support Agreement.
Motion Seeking Approval of Thrasys Transition Agreements and Related Matters
Thrasys, a Debtor in the Chapter 11 cases, operates an integrated care management business, which provides customers with highly customized digital products through its SyntraNetTM technology platform and applications. Because each of Thrasys’s customers have different source code configurations, the business does not have an easily scalable code base and the process of winning and onboarding new customers takes approximately 12 to 18 months. For years, Thrasys operated at almost break-even cash flow, with the majority of revenues coming from license fees paid up-front annually. Towards the end of 2022, Thrasys began to experience diminishing liquidity, and it became clear that its liquidity issues would not be easily resolved. The customized nature of the Thrasys’s business led to discussions with its customers regarding potential solutions. Following substantial negotiations with the customers of Thrasys and in consultation with its advisors, Thrasys has entered into three transition agreements with its customers, (i) Local Initiative Health Authority for Los Angeles County, a local public entity operating and doing business as L.A. Care Health Plan, (ii) EmpiRx Health LLC, a Delaware corporation and (iii) the County of Alameda, California, USA (each, a “Transition Agreement”), which provide for, among other things, the grant to each customer of a perpetual, non-exclusive license of the applicable source code
and related SyntraNetTM platform and the provision by Thrasys of certain transition services during the transition term provided under the applicable Transition Agreement. Pursuant to the applicable Transition Agreement, each of Thrasys’s customers will obtain its own source code and highly trained employees, and there is no obligation on Thrasys (or any other of the Debtors) to maintain or repair or update the code following the transition period under the Transition Agreements.
As a result of the transactions contemplated by the Transition Agreements, Thrasys will receive $3.8 million in cash from its customers. Pursuant to the Transition Agreements, Thrasys’s employees, with a few exceptions, will receive employment offers from Thrasys’s customers, provided that certain payments to be received by such employees are contingent upon their execution and delivery of a general release of claims in favor of the Debtors. As a condition to the willingness of such customers to enter into the Transition Agreements, the Transition Agreements also contemplate the assumption and assignment of associated contracts to the customers, which, in addition to the hiring of Thrasys’s existing employees, will result in substantial reduction of administrative expenses in respect of Thrasys. Except as otherwise provided in the Transition Agreements, Thrasys will continue to own all intellectual property, subject to such non-exclusive licenses. Upon the consummation of the transactions contemplated by the Transition Agreements, if approved by the Bankruptcy Court, Thrasys will no longer operate and will therefore have no use for the executory contracts previously utilized, the assumption and assignment of which is contemplated by the Transition Agreements.
The Transition Agreements shall only become effective on the date that the Bankruptcy Court enters an order approving the Transition Agreements. Upon termination of the Transition Agreements, (a) all fees and other amounts owed to Thrasys prior to such termination shall be immediately due and payable by the applicable customer and (b) in the case of a termination by Thrasys due to a material breach by the applicable customer of certain restrictions in respect of the SyntraNetTM source code, including with respect to the sale, transfer or assignment thereof and certain uses of open source software, or in the case of a material breach by such customer of its confidentiality obligations with respect to SyntraNetTM source code, such customer’s rights with respect to SyntraNetTM (including its license, use and ownership thereof, and modifications and enhancements thereto), shall terminate and such customer shall be obligated to return or destroy such source code, at Thrasys’s option, within 10 days of the effective date of termination. The Transition Agreements also provide for a mutual release of claims by the parties.
On November 16, 2023, the Debtors filed motion with the Bankruptcy Court seeking entry of an order (i) authorizing and approving the Debtors, including Thrasys, to enter into and perform under certain Transition Agreements (as defined below) with the customers of Thrasys, (ii) authorizing and approving the assumption and assignment of certain executory contracts related to the transactions contemplated thereby and (iii) granting related relief. The motion was presented to the Bankruptcy Court at a “second day hearing” held on November 17, 2023. We expect the Bankruptcy Court will enter its decision on the motion at a hearing currently scheduled on December 1, 2023.
In addition, on November 17, 2023, a motion to pay retention bonuses to Thrasys employees involved in the transition of the Integrated Care Management segment through year end was approved by the Bankruptcy Court.
Subsequent to September 30, 2023, 545,889 RSUs were canceled under the 2021 EIP and 160,000 RSUs were canceled under the 2023 IEIP due to the elimination of 20 positions at UpHealth, Inc. and 295,625 RSUs were accelerated in connection with the departure of our former Chief Executive Officer.