Inspira Financial Inc.
TSX VENTURE : LND

June 09, 2016 10:55 ET

Inspira Financial Inc. Appoints New Chief Executive Officer; Executes Definitive Purchase Agreement to Acquire RBP Healthcare Technologies

SAN FRANCISCO, CALIFORNIA--(Marketwired - June 9, 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. healthcare market of physician groups and healthcare service providers, today announced it has executed a definitive purchase agreement to acquire RBP Healthcare Technologies ("RBP") (www.rbphealth.com), a company with a technology platform specific to the mental health and addiction services industry that includes electronic health records, care coordination, automated admissions, and revenue cycle management. This new lucrative service line has high growth potential, is complimentary to existing Inspira clients operating in the addiction industry, and creates an opportunity for a substantial competitive advantage in Inspira's most rapidly growing sector.

Inspira also announced it has appointed Marc Hecksel as Chief Executive Officer. Dave Costine will remain as non- executive Chairman of the Board.

Appointment of Chief Executive Officer

With the acquisition of RBP, Inspira expands its revenue and profit potential in the underserved and inefficient mental healthcare sector across the US. The introduction of a Software-as-a-Service ("SaaS") platform is a natural next step and creates an environment for organic growth within its existing customer base.

As a result of this broader focus, the Inspira board of directors is pleased to announce it has appointed Marc Hecksel as Chief Executive Officer. Along with Mr. Hecksel's appointment, David Costine will transition to non-executive Chairman of the board.

"This is a tremendous opportunity for Inspira," stated Marc Hecksel, incoming CEO. "By adding a software platform to the already profitable lending business, Inspira will be better positioned for exponential growth. We look forward to being a dominate SaaS provider offering an end to end solution in this $34 billion mental health market.(1) This new service line is a natural complement to the existing business and, with higher margins and greater return on equity, will improve earnings per share."

About Marc Hecksel

Mr. Hecksel is a seasoned healthcare and technology systems expert, with decades of experience in both the development and implementation of start-up operations and successful expansion of existing services. During his career, he successfully transitioned from Executive Vice President to Chief Operating Officer of Aptium Oncology, a billion dollar division of AstraZeneca. Following this, Mr. Hecksel was appointed Chief Executive Officer of Bear Valley Community Healthcare District, with the responsibility of integrating disparate healthcare systems to improve revenue recognition and profitability. Most recently, Marc has been a strategic advisor to dynamic healthcare companies, providing M&A advice and assisting with post-acquisition consolidation of business processes and technology systems.

"Marc's rare combination of experience with a broad array of healthcare companies, healthcare finance engagements and technology systems was a natural fit with Inspira's vision," stated Dave Costine. "We are fortunate to have found a leader with experience that cuts across Inspira's service offerings."

Details of the Acquisition and Cross Selling Opportunities

With the acquisition of RBP, Inspira gains instant access to the lucrative mental health market, currently its most rapidly growing lending sector, with a SaaS platform as the foundation for an end -to-end revenue and collection management service. RBP's existing revenue generating contracts along with its process platform incorporating every aspect of the new insurance reimbursement process to admit, diagnose, track, bill, and collect revenue specific to patients in the addiction recovery market, is a natural complement to Inspira's existing cloud-based financial management portal and technology development expertise. Enhancing its existing technology with a SaaS-based platform will allow Inspira to offer an end-to-end revenue cycle management service able to predict and optimize a client's revenues, making for an even more profitable service offering.

The board of directors has identified this niche as an attractive revenue line, primarily as the result of inquiries made by several of Inspira's lending clients in the mental health and addiction treatment sector. As Inspira's lending systems became more and more integrated into these clients, it became clear that, in addition to inefficiencies in the payments of claims, there was a substantial technology gap in the submission of claims causing major obstacles to timely payment from insurance companies. Expanding technology beyond accounts receivable throughout the entire business should give Inspira even greater visibility into its client's financial performance, improving Inspira's ability to service its lending facilities at an even lower cost.

The acquisition, when closed, is expected to have a positive impact on revenues and earnings over time. RBP has contracts in place to generate in excess of $3 million in annualized revenue with operating margins in excess of 40% once fully ramped, before any cross-selling efforts. Inspira has initial interest from several clients and is currently in discussions with beta customers for this initial SaaS service. Management believes that, together with cross-selling to existing clients, it can achieve greater than $7 million in annualized revenue, more than double its current results.

Under the terms of the definitive purchase agreement, Inspira will acquire all of the stock of RBP Healthcare Technologies for total cash consideration of $2,125,000 and a total of 6,375,000 shares valued at $1.00 per share for total consideration valued at $8,500,000 paid at closing.

Closing of the acquisition will be subject to TSX Venture Exchange ("TSXV") approval, final due diligence, and other standard conditions.

Inspira is also pleased to report that it is adding additional healthcare expertise to its Board of Directors through the appointment of Jaime Gerber as a non-executive Director. Troy Shadian, Gary Mintz and Robert Munro are resigning as officers and directors of Inspira.

About Jaime Gerber

Dr. Gerber is a successful medical entrepreneur and physician executive creating medical management software solutions. He served as CMO at Medmatics, where he directed the development of software solutions for revenue and clinical management. His focus included the optimization of human interface with the software. At mdINR he brought these solutions further into the clinical arena establishing systems to support physician practices until mdINR was sold to Lincare in 2014. While being a Managing Partner of a large medical group he guided the deployment and development of revenue cycle solutions, EMR, scheduling, admissions, operations and practice management systems. Dr. Gerber received his MD with honors from the Mount Sinai School of Medicine in New York. His experience and expertise provides a unique perspective as Inspira growth accelerates.

The Inspira board of directors approved the issuance of 800,000 options to the newly appointed CEO Marc Hecksel and 60,000 options each to Directors Jaime Gerber and Marc Lavine. The options will have a strike price of $0.51 and will expire on June 8, 2021. Inspira will also issue to arms-length parties 600,000 shares associated with the RBP Healthcare Technologies transaction, included in the total purchase price. The foregoing issuances of shares is subject to TSXV approval.

About RBP Healthcare Technologies

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.

RBP is in advanced development of a process platform that 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.

About Inspira Financial

The healthcare market in the U.S. is a rapidly expanding industry, with spending expected to exceed $4.5 trillion by 2020.(2) Within this industry, over 1 million businesses have annual revenues in the $1 million to $50 million range. The emerging reimbursement trend towards more usage-based procedures, along with the fact that healthcare providers are being forced to increase patient volumes to maintain or grow profit levels, creates a need for increased efficiency and greater front-end investment in technology and larger staff sizes. These factors, as well as the realities that insurance providers are taking longer to pay than before and that patients are now bearing increased financial responsibility for medical bills, contribute to significant financial pressure and net working capital challenges for the average, smaller sized healthcare practice in the U.S.

Overall, traditional banks continue to reduce their risk profiles, term lenders require personal guarantees and first security over all assets, factoring lenders charge 25%+ annual interest and equipment providers have all but eliminated financing programs. The increasingly limited number of options for obtaining revolving lines of credit and loans for smaller healthcare providers creates a supply shortage in the market. This imbalance represents an opportunity for alternative lending companies catering to this demographic to capitalize upon. By targeting the 1 million+ healthcare providers in the U.S., Inspira believes it can generate high returns on government (Medicare/Medicaid) and large healthcare insurance receivables. Inspira plans to acquire debt and increase profitability through cross selling of financial services such as those provided through the acquisition of RBP Healthcare Technologies.

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, the future performance of the target, clients switching billing processes, the acquired technology providing Inspira with greater visibility into client performance, and improving loan servicing at a lower cost, Inspira enhancing its existing technology with a SaaS-based platform allowing it to offer an end-to-end revenue cycle management service able to predict and optimize a client's revenues, making for an even more profitable service offering, the new service line having high growth potential and creating a substantial competitive advantage for Inspira, the new service line improving earnings per share, as well as the approval of the acquisition by the TSXV, are intended to identify forward-looking information. 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 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 the Inspira's interim Management's Discussion and Analysis for the quarter ended November 30, 2015, 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.

The securities referred to in this news release have not been and will not be registered under the United States Securities Act of 1933, as amended, or any applicable state securities laws and may not be offered or sold in the United States absent such registration or an applicable exemption from such registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction. Any public offering of securities in the United States must be made by means of a prospectus containing detailed information about the company and management, as well as financial statements.

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

(2) http://money.cnn.com/2011/07/28/news/economy/healthcare_spending_forecast/

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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