Inspira Financial
TSX VENTURE : LND

November 01, 2016 09:00 ET

Inspira Financial Inc. Releases Second Quarter Results; Highlights Positive Cash Flow and Provides Quarterly Dividend Update; Completes Acquisition & Launches Co-Marketing Strategy

SAN FRANCISCO, CALIFORNIA--(Marketwired - Nov. 1, 2016) -

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Inspira Financial Inc. (TSX VENTURE:LND) ("Inspira") a company focused on providing revolving lines of credit, as well as financial software services to the highly fragmented U.S. mental health and addiction services market, released its unaudited condensed interim consolidated financial statements for the three months ended August 31, 2016.

Q2 Overview:

  • Net Income before stock based compensation(1) for the quarter was $196,859 from the lending operation.
  • Lending revenue for the quarter remained steady at $881,879 as management continued transitioning towards lending exclusively to the addiction services market and away from general healthcare.
  • Launched co-marketing web site (http://www.inspira-financial.com) in advance of billing company acquisition.

Completion of Previously Announced Acquisition

On May 31, 2016, Inspira announced it was improving its operational focus to lending and providing financial software services to the U.S. mental health and addiction services market. Today, Inspira announced the completion of the previously announced acquisition. The terms of the agreement were modified through the elimination of the cash component of the transaction. The updated terms of the transaction, consisting of a total of 8,347,481 common shares of Inspira to the shareholders of the acquisition target, replaced the previously announced terms of $2,125,000 in cash and 6,375,000 common shares. All approvals have been secured and closing is expected in the coming days once all relevant paperwork is processed.

Dividend Update

Due to the improving cash flow from the lending operation, the Board also announced today that it will issue its previously announced regular dividend in USD equal to US$161,810 this quarter distributed equally to all common shareholders as compared to US$147,099 last quarter. (2) The next quarterly common share dividend is payable on November 30, 2016, to shareholders of record at the close of business on November 16, 2016. Such quarterly dividends are only payable as and when declared by the Board and there is no entitlement to any dividend prior thereto.

"Our lending operations continue to generate positive cash flow, and we expect that to continue in the long run," stated Mr. Hecksel, CEO of Inspira. "Therefore we have decided to declare an increase of 10% to the regular quarterly dividend paid from the operational profits of the lending business. We believe this dividend demonstrates the value of Inspira's lending model. We are currently in an interest rate environment where 10-year U.S. treasuries yield less than 2%, and recent yields on long term high quality bonds of U.S. health insurers are below 3.5%.(3) Yet, by owning Inspira stock at yesterday's closing price, investors can achieve a much higher annualized yield from a business that lends primarily on short-term receivables payable by those same governmental or private insurance companies, with the vast majority of the eligible receivables being less than 90 days old. As we combine the power of the lending model with an end-to-end practice management and billing software system, we believe we can offer investors solid yield alongside strong equity growth."

"With the closing of the acquisition of the billing company, we can begin to offer billing and financial software services alongside our lending solutions," continued Mr. Hecksel. "We have a very strong balance sheet and are well positioned to be one of the few companies to offer a one-stop lending, software and billing solution to companies in the mental health and addiction services market. Now that we will have an established billing company, I believe we can generate strong revenue and profit growth from co-marketing to our existing pipeline of clients and prospective clients for both billing services and lending."

Inspira is strengthening its Board of Directors by adding Edward Brann, who will provide intensive oversight of financial lending and software services, while also focusing the Company on the need for improved shareholder communication. Mr. Brann has financial and investment banking expertise, having negotiated and structured mergers, acquisitions and financings. He has specific experience in U.S. healthcare finance, as well as the particular business challenges facing the U.S. mental health services industry. Mr. Brann will also serve as Interim CFO. He is a graduate of U.C.L.A with a degree in Business Economics.

Inspira's unaudited condensed interim consolidated financial statements for the three and six months ended August 31, 2016 and accompanying Management's Discussion & Analysis (MD&A) are available at www.sedar.com.

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. (4) Within this industry, thousands of businesses have annual revenues in the $1 million to $50 million range. (5) 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.

Non-GAAP Measures

Inspira uses a number of financial measures to assess its performance and are intended to provide additional information to investors concerning Inspira. Some of these measures, including operational profit and net assets per share are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS), are not defined by GAAP and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. These non-GAAP measures are used throughout this news release and are defined below:

(1) In calculating net income before stock based compensation, certain items are excluded including share-based compensation and certain non-recurring expenses associated with the decision to enter software services. A reconciliation of operational profit to net income is included below:

Quarter ended August 31, 2016
Net income $ (177,992 )
ADD Back: Share-based compensation 374,851
Net income before stock based compensation $ 196,859

(2) Inspira issues quarterly dividend in US dollars at the exchange rate on the record date November 16, 2016. Amount payable in US dollars per share pre-acquisition is $0.004. Amount payable in US dollars per share post-acquisition is $0.003.

(3) http://www.bloomberg.com/

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

(5) https://www.drugabuse.gov/publications/principles-drug-addiction-treatment-research-based-guide-third-edition/drug-addiction-treatment-in-united-states

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, Inspira achieving long-term positive cash flow from its lending operations, Inspira generating strong revenue and profit growth from co-marketing to our existing pipeline of clients and prospective clients for both billing services and lending and the closing of the RBP acquisition, 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, the continued existence of RBP's 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 co-marketing service line being complimentary to existing Inspira clients, Inspira generating positive cash flow from operations, Inspira expanding its revenue and profit because of the acquisition, and Inspira being successful in its integration of RBP. 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), 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.

All amounts herein are in Canadian dollars and are based on our interim consolidated financial statements and accompanying MD&A for the three months ended August 31, 2016 and related notes prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted.

Neither 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.

The securities referred to in this news release have not been, nor will they be, registered under the United States Securities Act of 1933 as amended, and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons absent U.S. registration or an applicable exemption from the U.S. registration requirements. This news release does not constitute an offer for sale of securities for sale, nor a solicitation for offers to buy any securities. 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.

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