Inspira Financial Inc.
TSX VENTURE : LND

June 29, 2016 08:00 ET

Inspira Financial Inc. Announces Increase in Shareholder Equity, Solid Balance Sheet in Year End Financials; Management Highlights Mental Health Industry Growth Strategy

SAN FRANCISCO, CALIFORNIA--(Marketwired - June 29, 2016) -

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Inspira Financial Inc. (TSX VENTURE:LND) ("Inspira") a company focused on providing revolving lines of credit to the highly fragmented U.S. mental health and addiction services market, posted its results from the fiscal year-end, ending February 29, 2016. At the time of its Qualifying Transaction, in July, 2015, Inspira had a net book value of approximately $28.4 million. As of the year-end financial statements, ending February 29, 2016, net book value rose almost 10% to over $29.3 million, which is reflected in the shareholder equity section of the financial statements.

Additionally, the company provided details on its growth strategy focusing on lending to companies in the mental health and addiction services market, as well as additional revenue expected from offering financial and billing software services to those clients.

Inspira closed its first revolving line of credit in October, 2014 and has created a cash flow positive loan business which has continually grown since. As a going forward strategy, and in conjunction with the planned acquisition of a mental healthcare billing software company, Inspira will focus on highly profitable revolving lines of credit up to $5 million primarily lending to companies in the mental health and substance abuse industry with an additional focus of selling billing and financial software and services to its clients.

"Our solid balance sheet, improved over the last year of lending operations, gives us the opportunity to enhance our offerings to include Software as a Service, or SaaS, in the area of billing and financial software," said Marc Hecksel, CEO of Inspira. "We will focus our energy on lending to mental health and addiction recovery businesses from here on out. Our revolving lines of credit client in the mental health space generates interest and fees of up to 18%. By layering on a software service solution, Inspira has an opportunity to significantly increase revenue per client without deploying further lending capital and has an opportunity to attract new lending clients with its software."

"In terms of the RBP acquisition, it will provide clients with contracts that generate revenue from billing operations and will give us a ready-made solution to offer our existing loan customers," continued Mr. Hecksel. "With existing expert technology developers already on staff, we can continually improve the development of the software at small incremental cost, with the aim of increasing profits immediately upon the acquisition."

"While our financial statements reflect an IFRS loss, we have increased our net book value by more than $950,000," said David Costine, Chairman of Inspira. "In light of this fact, I would call it a successful financial year. Simply put, we ended up with a higher net book value this year than last. This gives us a great financial platform from which to develop our book of business in the niche mental health market. Additionally, I want to point out that during the year there were several million dollars of set up fees we collected associated with certain loan facilities that, in the final analysis, are not recognized revenue following IFRS rules."

Inspira's 2016 fourth quarter and fiscal year-end financial statements and accompanying Management's Discussion & Analysis (MD&A) are available at www.sedar.com. All amounts are in Canadian dollars and are based on our consolidated financial statements and accompanying MD&A for the year ended February 29th, 2016 and related notes prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise noted. For specifics on revenue recognition and differences between the audited financial statement and unaudited quarters, see MD&A pages 3, 12, 23, and the table below:

IFRS recognized revenue $ 2,102,617
Reconciliation:
Facility fees charged on certain short-term loan receivables that were netted against the expense (see Note 16 in the audited annual consolidated financial statements)
881,618
Facility fees charged on certain short-term loan receivables that were subsequently reversed and considered null and void due to negative tax implications
1,567,320

About RBP Healthcare Technologies - Mental Health Billing and Practice Management Software

Due to the significant increase in demand for addiction treatment caused by health insurance coverage through the passage of the Parity Act, many growing addiction treatment companies now have difficulty with patient tracking, billing and collections from insurance companies. The large and permanently elevated volume of claims has led health insurers to implement more complex reimbursement requirements for the mental health sector, similar to those imposed upon service providers in the physical healthcare sector. Treatment centers tend to use several software applications and a non-automated billing company to document services provided and bill insurance companies. This cumbersome process slows down the tracking, billing and collection process as the customer's billings increase, and was not designed to handle the volume or level of detail now required for prompt payment.

The RBP process platform incorporates every aspect of the new insurance reimbursement process to admit, diagnose, track, bill, and collect revenue specific to patients in the addiction recovery market, RBP has existing contracts in place expected to generate up to $3 million in annualized revenue.

About Inspira Financial

The mental health and substance abuse market in the U.S. is a rapidly expanding industry, with current spending exceeding $35 billion. (1) Within this industry, thousands of businesses have annual revenues in the $1 million to $50 million range. Due to the significant increase in addiction treatment as a result of the Parity Act, the large and permanently elevated volumes of claims has led Payors to impose upon facilities in the mental health sector similarly complex reimbursement requirements as those imposed in the physical healthcare sector. Substance abuse facilities tend to use several software applications and a non-automated billing company to document services provided and bill insurance companies. This cumbersome process slows down the tracking, billing and collection process as the customer's billings increase, and were not designed to handle the volume, or level of detail, now required by Payors for prompt payment. As a result, across the mental health and substance abuse industry there are collection delays and consequently a need for capital.

Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking information" as such term is defined in applicable Canadian securities legislation. The words "may", "would", "could", "should", "potential", "will", "seek", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to Inspira, by layering on a SaaS service solution Inspira having the opportunity to significantly increase its revenue per client and attracting new lending clients, Inspira increasing profits immediately upon acquisition of RBP Healthcare Technologies, the future performance of the target, clients switching billing processes, as well asthe acquisition of RBP Healthcare Technologies generating up to $3 million in annualized revenue for Inspira, are intended to identify forward-looking information. All figures are in Canadian dollars. All statements other than statements of historical fact may be forward-looking information. Such statements reflect Inspira's current views and intentions with respect to future events, and current information available to Inspira, and are subject to certain risks, uncertainties and assumptions, including RBP's existing contracts, that RBP is profitable, the proposed acquisition closing as contemplated, Inspira achieving, sustaining and/or increasing profitability, Inspira being able to fund its operations with existing capital and/or raising additional capital to fund operations, the demand for addiction treatment continuing to increase, the new service line being complimentary to existing Inspira clients, Inspira expanding its revenue and profit because of the acquisition, and Inspira being successful in its integration of RBP Healthcare Technologies. Material factors or assumptions were applied in providing forward-looking information.
Many factors could cause the actual results, performance or achievements that may be expressed or implied by such forward-looking information to vary from those described herein should one or more of these risks or uncertainties materialize. These factors include changes in law, competition, the ability to implement business strategies and pursue business opportunities, state of the capital markets, the availability of funds and resources to pursue operations, dependence on debt markets and interest rates, demand for the lending products Inspira offers at interest rates higher than at which Inspira can borrow, a novel business model, granting of permits and licenses in a highly regulated business, difficulty integrating newly acquired businesses (including RBP Healthcare Technologies), risks of performance by the target, new technologies, risk of billing irregularities by borrowers, low profit market segments, as well as general economic, market and business conditions, as well as those risk factors discussed or referred to in Inspira's annual Management's Discussion and Analysis for the year ended February 29, 2016, filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. Should any factor affect Inspira in an unexpected manner, or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, Inspira does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in this press release is made as of the date of this press release and Inspira undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

(1) https://store.samhsa.gov/shin/content/SMA08-4326/SMA08-4326.pdf

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