Inspira Financial Inc.

November 29, 2016 10:30 ET

Inspira Financial Publishes Letter to Shareholders

SAN FRANCISCO, CALIFORNIA--(Marketwired - Nov. 29, 2016) -


Inspira Financial Inc. (TSX VENTURE:LND) ("Inspira"), a company focused on providing a full range of financial solutions to the highly fragmented U.S. mental health and addiction services market, today issued the following letter to shareholders:

Dear Shareholders:

During recent weeks, some parties have attempted to divert shareholder attention away from Inspira's current business operations by inciting disagreements among shareholders and spreading false rumors about our recent acquisition. While many of the issues raised are irrelevant to our operations and future revenue growth and profit prospects, we have concluded that it is nevertheless important, and in the interest of our shareholders, to offer greater detail about the RBP Healthcare acquisition and our current, upgraded business plan.

Most of the chatter has revolved around the issue of whether insiders of Inspira were part of the recent acquisition. I can assure you that no insiders were involved in the acquisition. The TSX-V has reviewed this transaction in detail on three occasions and approved the purchase each time. In an attempt to paint a picture of "insider" involvement, much attention has been focused on Roger Greene and Michael Dalsin, and their respective roles in the acquisition.

Let's review what happened when Inspira was formed in May 2014. A Capital Pool Company (CPC) was searching for a qualifying transaction (QT), and was introduced to a private company focused upon healthcare lending, called Inspira. Messrs. Greene and Dalsin were among those who established the private company and helped raise capital for it in Canada. At the time the QT was being contemplated, in late 2014, the Directors of the CPC received feedback from the Canadian capital markets regarding Messrs. Greene and Dalsin. While the business plan was well received, the feedback included requests that Messrs. Greene and Dalsin should not run, manage or direct the company. The feedback ranged from (a) the suggestion that they were spread too thin on other private and public companies and should not be involved in running or managing another company, and (b) their presence and promotion of the company would not be helpful in the Canadian capital markets. Accordingly, Mr. Greene (October 2014) and Mr. Dalsin (December 2014) resigned as officers and directors of the private company well before the QT closed in July 2015.

Business operations were led by two board members at the time of listing: a long time Canadian resident who had organized many public companies and CPCs, and who served on several boards of TSX-V companies, and an American lawyer qualified to handle the business and legal issues facing a lending company. Two directors of the CPC continued along with me after the transaction closed. While Messrs. Greene and Dalsin certainly wanted Inspira to succeed, they did not manage or direct the operations of the company, and were never directors, officers or insiders. Nor did they own enough shares to exert control after the close. Nevertheless, they remained supportive of the Company and I understand that they continue to be shareholders.

Management and the Board worked hard to build a strong healthcare lending company, and Inspira made many highly profitable loans. Nevertheless, the progress made was not enough to satisfy the shareholders as a whole, which was reflected in the falling share price. The stock price may have also been impacted by general market conditions, falling perceived value of healthcare companies, dissatisfaction with the pace of growth and communications, and a lack of excitement and interest in lending as a growth business.

As the share price fell, we did get feedback from many current and potential shareholders. Most indicated that another 3-5 years of pursing the same plan at the same pace would not be supported in the short or long run, even if the loans were profitable. When approached, we listened to proposals about building upon, revising or even completely changing strategies. And some proposed liquidating everything and distributing cash.

Despite the lack of enthusiasm in the capital markets, we believe that the healthcare finance business is and will continue to be a strong and growing market for the foreseeable future. As we worked on the business, we also learned more about each market segment, and that there were special needs in the complex and growing U.S. mental health sector.

As a potential plan to increase growth without a need for significant capital, we considered a deal brought to us by a company with shareholders that included Messrs. Greene and Dalsin. The deal, to acquire RBP Healthcare, would help the Company extend its lending operations by combining it with a mental health focused SaaS (software as a Service) and billing operation. This proposal was attractive to the Board because it was a natural move forward using the Company's existing market strengths.

The business model was sound, and RBP Healthcare was an attractive business on its own merits, given its business, hard working team and intellectual property. We were also mindful of the fact that much larger capital market participants have placed substantial enterprise valuations on SaaS companies. Specifically, healthcare companies with software capabilities like AthenaHealth have been given valuations at times as high as 12 times sales. Another example is Brightree, which was purchased for cash by ResMed, a highly respected NYSE company, for more than 7 times sales. See The prospect of these valuations was certainly a plus in our evaluation of the acquisition.

After several months of review, the Board came to conclude, and continues to believe, that the acquisition is the best path forward to building shareholder value and achieving not only revenue and profit growth, but also a strong reception in the capital markets. And, as demonstrated by the Brightree example, the Board recognized that even a cool reception by the capital markets could be overcome by selling the business to a sophisticated healthcare company that recognized the value in the company. The shareholders of the SaaS and billing company did include Roger Greene and Michael Dalsin. This fact was fully disclosed to the TSX-V. While they were among the several original founders of Inspira, they have never been insiders of our public company.

The Board believed, and continues to believe, that the acquisition was an excellent strategic fit. The price paid by Inspira was well below the market multiple on revenues.

Most companies (public or private) don't disclose the names of the shareholders of the companies they purchase, and Inspira followed that common practice. Whatever the current view is of Messrs. Dalsin and Green in the capital markets, the fact remains that they have built fast growing and revenue generating US healthcare companies. They were central in taking Patient Home Monitoring from less than $4 million in annual sales to what is now $130 million. And until their resignations last year, they were key in building Convalo Health from no sales in 2015 to over $30 million in annual sales at the time of their departure. I do understand that some shareholders might not, for whatever reason, like Messrs. Greene and Dalsin, but my duty is not to make decisions based upon the popularity of the shareholders of an acquisition target, but rather to focus on the business itself and the valuation and structure of the acquisition - and ultimately on enhancing shareholder value.

While I don't think the background on Messrs. Greene and Dalsin matters to the current or future value of the company, I wanted to lay out all of the facts for the shareholders to clear up the continued rumors brought by certain shareholders. We seem to have a large shareholder who is intent on inventing rumors for what seems to be its own benefit, without regard for the truth. To be clear, every objective neutral party has agreed with our position and rejected their claims. They complained to the TSX-V, and the TSX-V reviewed the transaction three times and gave its approval. They went to court to seek an injunction based upon their contorted theory and the judge rejected it. They then said they would go to court a second time to try again. But when they received our response, they backed out of their court appearance at the last minute. So instead, they are issuing misleading and patently false press releases to try to influence public opinion.

Today, our new Board is active in working to highlight the value of the acquisition, and how it is building value in Inspira, regardless of who used to own RBP. As previously disclosed, RBP has expected revenue of more than $200,000 for the month of November, and a pipeline of potential new customers and intellectual property. We believe that the acquisition can build real value for our shareholders, and we are committed to communicating the value proposition in a rather complex market niche to our investor community.

I want to emphasize that by offering a broad suite of healthcare revenue cycle management products, including SaaS, Inspira is now on the threshold of creating substantial value for our shareholders and customers. With proper execution and communication, higher valuations can be achieved over time. Please see the new investor deck at Inspira expects to conduct investor presentations after the first of the year to more fully explain the exciting path forward to enhancing shareholder value.

Very truly yours,

Dave Costine, Non-Executive Director

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, expected revenue from RBP of over $200,000 for the month of November, the future prospects of Inspira, and the success of the acquisition and integration of RBP Healthcare, 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, attempts to reverse the Inspira's acquisition of RBP not being successful, 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 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, litigation, 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, risks associated with the declaration and payment of dividends, including the discretion of Inspira's Board of Directors to declare dividends, 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 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.

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.

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